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Foreign Exchange Intervention Policy: With or Without Transparency? The Case of Japan

Author

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  • Jean-Yves Gnabo
  • Christelle Lecourt
Abstract
This paper examines different aspects of transparency in the foreign exchange policy. More precisely, it analyses how transparency evolved over the last decades in Japan and how market participants reacted to the changes in transparency. For this, we create a dataset capturing the main features of the central bank policy and market perception from 1991 to 2004. Our results suggest that Japanese authorities adopted several changes in their policy, sometimes practicing transparency and sometimes ambiguity. These changes had contrasted impact on market perception: frequent statements revealing the preferences of the central bank regarding the exchange rate level confused the markets, while those designed to confirm an actual intervention reduced uncertainty. These results suggest that, in general, actual interventions should still be considered, provided that the authorities talk to the market and intervene in an appropriate way.

Suggested Citation

  • Jean-Yves Gnabo & Christelle Lecourt, 2008. "Foreign Exchange Intervention Policy: With or Without Transparency? The Case of Japan," Economie Internationale, CEPII research center, issue 113, pages 5-34.
    • Handle: RePEc:cii:cepiei:2008-1ta
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    File URL: http://www.cepii.fr/IE/rev113/ei113a.htm
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign exchange market; central bank interventions; transparency; rumours;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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