The signalling channel of Central Bank interventions: modelling the Yen/US dollar exchange rate

Yu-Fu Chen (Lead / Corresponding author), Michael Funke, Nicole Glannemann

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    Abstract

    This paper presents a theoretical framework analysing the signalling channel of exchange rate interventions as an informational trigger. We develop an implicit target zone framework with learning in order to model the signalling channel. The theoretical premise of the model is that interventions convey signals that communicate information about the exchange rate objectives of the central bank. The model is used to analyse the impact of Japanese FX interventions during the period 1999–2011 on the yen/US dollar dynamics.
    Original languageEnglish
    Pages (from-to)311-336
    Number of pages26
    JournalOpen Economies Review
    Volume25
    Issue number2
    Early online date9 Jul 2013
    DOIs
    Publication statusPublished - Apr 2014

    Keywords

    • Exchange rates
    • Interventions
    • Japan

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