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Author: Takatoshi Ito Publisher: ISBN: Category : Wechselkurspolitik / Japan Languages : en Pages : 26
Book Description
This paper analyzes and estimates the reaction function of the Japanese monetary authorities in deciding when to intervene in the foreign exchange (forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. This paper is the first in estimating the reaction function of the monetary authorities in the forex market intervention with following new methods. First, a theoretical friction model is presented to describe the intervention as cost-minimizing behavior. Second, the ordered probit analysis, which is consistent with the theoretical model, was carried out to predict authorities' reaction function. The regime change from frequent, small-size intervention before June 1995 and infrequent, large-size intervention after June 1995 is established and estimations are conducted for two different regimes separately. Third, a noise-to-signal ratio is applied in selecting the optimal cutoff point in estimated ordered probit function to use the model for predicting interventions. Major findings are as follows: (1) There was a regime change in June 1995 from small-scale frequent interventions to large-scale infrequent interventions; (2) the first half of the sample period had lower friction costs than the second half of the sample period; (3) Judging from the model and data, the optimum cutoff was higher in the first half than the second half.
Author: Takatoshi Ito Publisher: ISBN: Category : Wechselkurspolitik / Japan Languages : en Pages : 26
Book Description
This paper analyzes and estimates the reaction function of the Japanese monetary authorities in deciding when to intervene in the foreign exchange (forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. This paper is the first in estimating the reaction function of the monetary authorities in the forex market intervention with following new methods. First, a theoretical friction model is presented to describe the intervention as cost-minimizing behavior. Second, the ordered probit analysis, which is consistent with the theoretical model, was carried out to predict authorities' reaction function. The regime change from frequent, small-size intervention before June 1995 and infrequent, large-size intervention after June 1995 is established and estimations are conducted for two different regimes separately. Third, a noise-to-signal ratio is applied in selecting the optimal cutoff point in estimated ordered probit function to use the model for predicting interventions. Major findings are as follows: (1) There was a regime change in June 1995 from small-scale frequent interventions to large-scale infrequent interventions; (2) the first half of the sample period had lower friction costs than the second half of the sample period; (3) Judging from the model and data, the optimum cutoff was higher in the first half than the second half.
Author: Takatoshi Itō Publisher: ISBN: Category : Monetary policy Languages : en Pages : 44
Book Description
"This paper analyzes and estimates the reaction function of the Japanese monetary authorities in deciding when to intervene in the foreign exchange (forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. This paper is the first in estimating the reaction function of the monetary authorities in the forex market intervention with following new methods. First, a theoretical friction model is presented to describe the intervention as cost-minimizing behavior. Second, the ordered probit analysis, which is consistent with the theoretical model, was carried out to predict authorities' reaction function. The regime change from frequent, small-size intervention before June 1995 and infrequent, large-size intervention after June 1995 is established and estimations are conducted for two different regimes separately. Third, a noise-to-signal ratio is applied in selecting the optimal cutoff point in estimated ordered probit function to use the model for predicting interventions. Major findings are as follows: (1) There was a regime change in June 1995 from small-scale frequent interventions to large-scale infrequent interventions; (2) the first half of the sample period had lower friction costs than the second half of the sample period; (3) Judging from the model and data, the optimum cutoff was higher in the first half than the second half"--NBER website
Author: Takatoshi Itō Publisher: ISBN: Category : Economics Languages : en Pages : 26
Book Description
This paper analyzes and estimates the reaction function of the Japanese monetary authorities in deciding when to intervene in the foreign exchange (forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. This paper is the first in estimating the reaction function of the monetary authorities in the forex market intervention with following new methods. First, a theoretical friction model is presented to describe the intervention as cost-minimizing behavior. Second, the ordered probit analysis, which is consistent with the theoretical model, was carried out to predict authorities' reaction function. The regime change from frequent, small-size intervention before June 1995 and infrequent, large-size intervention after June 1995 is established and estimations are conducted for two different regimes separately. Third, a noise-to-signal ratio is applied in selecting the optimal cutoff point in estimated ordered probit function to use the model for predicting interventions. Major findings are as follows: (1) There was a regime change in June 1995 from small-scale frequent interventions to large-scale infrequent interventions; (2) the first half of the sample period had lower friction costs than the second half of the sample period; (3) Judging from the model and data, the optimum cutoff was higher in the first half than the second half
Author: Romain Lafarguette Publisher: International Monetary Fund ISBN: 1513569406 Category : Business & Economics Languages : en Pages : 33
Book Description
This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Author: Mr.George S. Tavlas Publisher: International Monetary Fund ISBN: 1451930992 Category : Business & Economics Languages : en Pages : 61
Book Description
The role of the Japanese yen as an international currency is assessed. It is found that the determinants of international-currency use imply some increase for the yen’s use in international finance; however, the implications for the yen’s use in international trade are mixed. It is also shown that, despite Japan’s emergence as the world’s largest net creditor nation, Japan’s capital outflows have not significantly facilitated the yen’s internationalization. Data are presented showing that, although the yen’s use as an international currency has increased, it is still rather modest. Wider use of the yen as a regional currency in Asia has occurred, though a “yen-zone” does not appear to be emerging.
Author: Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Japan's intervention to slow the upward appreciation of the yen has raised concerns in the United States and brought charges that Tokyo is manipulating its exchange rate in order to gain unfair advantage in world trade. This coincides with similar charges being made with respect to the currencies of the People's Republic of China and South Korea. In the 109th Congress, S. 377 (Fair Currency Enforcement Act of 2005) would require negotiation and appropriate action with respect to certain countries that engage in currency manipulation. H.R. 3283 (United States Trade Rights Enforcement Act) would require the Secretary of the Treasury to provide to Congress a periodic assessment of countries -- including Japan -- that intervene to influence the value of their currency. Japan intervened (bought dollars and sold yen) extensively to counter the yen's appreciation in 1976-1978, 1985-1988, 1992-1996, and 1998-2004. Since March 2004, the Japanese government has not intervened significantly, although some claim that Tokyo continues to "talk down the value of the yen." This heavy buying of dollars has resulted in an accumulation of official foreign exchange reserves now exceeding a record $800 billion by Japan. The intervention, however, seems to have had little lasting effect. It may only have slowed the rise in value of the yen, since the yen rose from 296 yen per dollar in 1976 to 103 yen per dollar at the end of 2004. In late 2005, the exchange value of the yen had depreciated to about 115 yen per dollar. Japan's intervention, therefore, amounted to what is called "leaning against the wind" or intervening to smooth strong short-term trends rather than to reverse the direction of change. Estimates on the cumulative effect of the interventions range from an undervaluation of the yen of about 3 or 4 yen to as much as 20 yen per dollar. In March and November 2005, the U.S. Secretary of the Treasury indicated that it had not found currency manipulation by any country, including by Japan. An April 2005 report by the Government Accountability Office reported that Treasury had not found currency manipulation because it viewed "Japan's exchange rate interventions as part of a macroeconomic policy aimed at combating deflation..." In its August 2005 report on consultations with Japan, the International Monetary Fund, likewise, did not find currency manipulation by Japan. The criteria for finding currency manipulation, however, allows for considerable leeway by Treasury and the IMF. One problem with the focus on currency intervention to correct balance of trade deficits is that only about half of the increase in the value of a foreign currency is reflected in prices of imports into the United States. Periods of heaviest intervention also coincided with slower (not faster) economic growth rates for Japan. Major policy options for Congress include (1) let the market adjust (do nothing); (2) clarify the definition of currency manipulation; (3) require negotiations and reports; (4) require the President to certify which countries are manipulating their currencies and take remedial action if the manipulation is not halted; and (5) take the case to the World Trade Organization under the dispute settlement mechanism or appeal to the IMF. This report will be updated as circumstances require.
Author: Rasmus Fatum Publisher: ISBN: Category : Languages : en Pages : 39
Book Description
This paper examines the rationale behind the massive increase in Japanese foreign exchange market intervention operations in 2003-04, and evaluates its effectiveness both in limiting yen exchange rate appreciation and influencing the direction of monetary policy. The two main questions addressed in this study are: Was the intervention effective in slowing exchange rate appreciation compared to a counterfactual case with no intervention? And, has intervention on such a large scale authorized by the Ministry of Finance been able to directly influence liquidity creation or indirectly influence the stance of Bank of Japan policy?
Author: Takatoshi Ito
Author: Takatoshi Ito
Author: Takatoshi Itō
Author: Takatoshi Itō
Author: Michael Frenkel
Author: Romain Lafarguette
Author: Mr.George S. Tavlas
Author: Takatoshi Ito
Author: 
Author: Jeffrey A. Frankel
Author: Rasmus Fatum