Large versus Small Foreign Exchange Interventions

37 Pages Posted: 1 Apr 2014 Last revised: 8 Apr 2015

See all articles by Rasmus Fatum

Rasmus Fatum

University of Alberta - Department of Marketing, Business Economics & Law

Yohei Yamamoto

Hitotsubashi University; Tokyo Center for Economic Research (TCER)

Date Written: March 11, 2014

Abstract

We use non-temporal threshold analysis to investigate the exchange rate effects of large versus small interventions. More than two decades of official daily data on intervention in the JPY/USD market facilitate our analysis. We find no evidence that small interventions exert a discernible influence on the exchange rate while large interventions significantly influence the exchange rate in the theoretically consistent manner. We conclude that small interventions may not be considered a determinant of the exchange rate while large interventions constitute an important element in our understanding, and modelling, of the exchange rate.

Keywords: foreign exchange market intervention, intervention amount

JEL Classification: E52, F31, G14

Suggested Citation

Fatum, Rasmus and Yamamoto, Yohei, Large versus Small Foreign Exchange Interventions (March 11, 2014). Journal of Banking and Finance, Volume 43, 2014; University of Alberta School of Business Research Paper No. 2014-02. Available at SSRN: https://ssrn.com/abstract=2407714

Rasmus Fatum (Contact Author)

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-3951 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.bus.ualberta.ca/rfatum

Yohei Yamamoto

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

Tokyo Center for Economic Research (TCER) ( email )

Sankyo Building
Room 703, Main Building
Chiyoda-ku, Tokyo, 1-7-10
Japan

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