Bank of Japan and Federal Reserve Interventions in the Yen/ U.S. Dollar Market: Estimating the Central Banks' Reaction Functions
31 Pages Posted: 17 May 2002
Date Written: February 2002
Abstract
This paper uses recently released official data on the foreign exchange market interventions of the Bank of Japan (BoJ) in the yen/U.S. dollar market during the period 1991-2001 in order to examine the motivation for the intervention policy of the BoJ. We also compare the intervention policy of the BoJ and the Federal Reserve. Our results suggest that the BoJ regularly responded to deviations of the yen/U.S. dollar exchange rate from a short-term and a long-term exchange rate target. By contrast, the Fed intervened only occasionally and seemed to have merely reinforced BoJ interventions.
Keywords: Exchange rates, Central bank intervention policy, Reaction function
JEL Classification: F31, F33, G14, G15
Suggested Citation: Suggested Citation
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