Working Paper: NBER ID: w26644
Authors: Takatoshi Ito; Tomoyoshi Yabu
Abstract: We analyze the history of Japanese foreign exchange interventions from 1971 to 2018. First, we provide the best proxy for monthly interventions for the period from 1971 to 1990, when the intervention timings and amounts were not officially disclosed. The accuracy of the proxy is tested for the period when the statistics were disclosed after 1991. The proxy explains 99.8% of actual settlement-based interventions. Second, we examine conditions under which the Japanese monetary authorities are likely to intervene by estimating a policy reaction function, using the long-term data, spanning the period when intervention data have been officially disclosed and the period where our proxy is available. Third, we analyze intervention timings and amounts for Japan, the US, and Germany. Fourth, we present the episode of international coordination represented by the Plaza and Louvre agreements as a case study of notable interventions during the period.
Keywords: Foreign Exchange Interventions; Japan; Reaction Function; Monetary Policy
JEL Codes: E52; E58; F31; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| best proxy for monthly interventions (I14) | actual settlement-based interventions (J65) |
| exchange rate volatility (F31) | intervention frequency (C41) |
| changes in leadership (M54) | intervention patterns (F55) |
| yen-selling interventions (F31) | depreciation of the yen (F31) |
| structural breaks (L16) | change in policy responsiveness (D78) |