Product DescriptionThis digital document is a journal article from Journal of International Money and Finance, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon. com Media Library immediately after purchase. You can view it with any web browser. Description: This paper estimates and analyzes the reaction function of Japanese intervention in the foreign exchange (Forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. A theoretical friction model is adopted to describe the intervention as cost-minimizing behavior. An ordered probit model, consistent with the theoretical model, is employed to estimate authorities’ reaction function. A noise-to-signal ratio is applied in selecting the optimal cutoff point in estimated ordered probit function. Major findings are as follows: (1) A regime change in June 1995 from small-scale frequent interventions to large-scale infrequent interventions is detected; (2) the optimum cutoff is higher in the first half than the second half.
What prompts Japan to intervene in the Forex market? A new approach to a reaction function
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