FX intervention in the Yen-US dollar market: A coordination channel perspective

Stefan Reitz; Mark P. Taylor

doi:10.1007/s10368-012-0208-5

FX intervention in the Yen-US dollar market: A coordination channel perspective

Stefan Reitz
, Mark P. Taylor

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (Eur Econ Rev 52(1), 55-76 2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.

Original language	English
Pages (from-to)	111-128
Number of pages	18
Journal	International Economics and Economic Policy
Volume	9
Issue number	2
DOIs	https://doi.org/10.1007/s10368-012-0208-5
State	Published - Jun 2012

Keywords

Coordination channel
Foreign exchange intervention
Market microstructure
Nonlinear mean reversion

Access to Document

10.1007/s10368-012-0208-5

Cite this

@article{e4acfbef74314758a7b1275016a69c27,

title = "FX intervention in the Yen-US dollar market: A coordination channel perspective",

abstract = "The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (Eur Econ Rev 52(1), 55-76 2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.",

keywords = "Coordination channel, Foreign exchange intervention, Market microstructure, Nonlinear mean reversion",

author = "Stefan Reitz and Taylor, \{Mark P.\}",

year = "2012",

month = jun,

doi = "10.1007/s10368-012-0208-5",

language = "English",

volume = "9",

pages = "111--128",

journal = "International Economics and Economic Policy",

issn = "1612-4804",

number = "2",

}

TY - JOUR

T1 - FX intervention in the Yen-US dollar market

T2 - A coordination channel perspective

AU - Reitz, Stefan

AU - Taylor, Mark P.

PY - 2012/6

Y1 - 2012/6

N2 - The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (Eur Econ Rev 52(1), 55-76 2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.

AB - The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (Eur Econ Rev 52(1), 55-76 2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.

KW - Coordination channel

KW - Foreign exchange intervention

KW - Market microstructure

KW - Nonlinear mean reversion

UR - https://www.scopus.com/pages/publications/84862129552

U2 - 10.1007/s10368-012-0208-5

DO - 10.1007/s10368-012-0208-5

M3 - Article

AN - SCOPUS:84862129552

SN - 1612-4804

VL - 9

SP - 111

EP - 128

JO - International Economics and Economic Policy

JF - International Economics and Economic Policy

IS - 2

ER -

FX intervention in the Yen-US dollar market: A coordination channel perspective

Abstract

Keywords

Access to Document

Other files and links

Fingerprint

Cite this