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

See all articles by Michael Frenkel

Michael Frenkel

WHU Otto Beisheim Graduate School of Management

Christian Pierdzioch

Saarland University - Department of Economics and Statistics

Georg Stadtmann

WHU Otto Beisheim School of Management

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

Frenkel, Michael and Pierdzioch, Christian and Stadtmann, Georg, Bank of Japan and Federal Reserve Interventions in the Yen/ U.S. Dollar Market: Estimating the Central Banks' Reaction Functions (February 2002). Available at SSRN: https://ssrn.com/abstract=309930 or http://dx.doi.org/10.2139/ssrn.309930

Michael Frenkel

WHU Otto Beisheim Graduate School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany
0049 261 6509281 (Phone)
0049 261 6509279 (Fax)

Christian Pierdzioch

Saarland University - Department of Economics and Statistics ( email )

P.O. Box 151150
D-66041 Saarbruecken
Germany
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+49 681 302 58193 (Fax)

Georg Stadtmann (Contact Author)

WHU Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar
Germany
+49 261 6509 273 (Phone)
+49 261 6509 279 (Fax)