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Currency Intervention and the Global Portfolio Balance Effect: Japanese Lessons

17 Pages Posted: 26 Oct 2012  

Petra Gerlach-Kristen

Swiss National Bank

Robert N. McCauley

Bank for International Settlements (BIS)

Kazuo Ueda

University of Tokyo - Faculty of Economics

Date Written: October 1, 2012

Abstract

This paper shows that the Japanese foreign exchange interventions in 2003/04 seem to have lowered long-term interest rates in a wide range of countries, including Japan. It seems that this decline was triggered by the investment of the intervention proceeds in US bonds and that a global portfolio balance effect spread the resulting decline in US yields to other bond markets, thus easing global monetary conditions.

Keywords: Intervention, portfolio balance effect, Japan

JEL Classification: E5, G12, O24

Suggested Citation

Gerlach-Kristen, Petra and McCauley, Robert N. and Ueda, Kazuo, Currency Intervention and the Global Portfolio Balance Effect: Japanese Lessons (October 1, 2012). BIS Working Paper No. 389. Available at SSRN: https://ssrn.com/abstract=2155645

Petra Gerlach-Kristen (Contact Author)

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland

Robert N. McCauley

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Kazuo Ueda

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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