Running title: Central Bank Independence and the Signaling Effect of Interventio

Okada, Hiroki

Takagi, Shinji

Running title: Central Bank Independence and the Signaling Effect of InterventionThis note explores the signaling effect of foreign exchange market intervention in countries, such as Japan, the United Kingdom and the United States, where separate agencies are responsible for intervention and monetary policy. An important part of the signaling effect operates when an entity conducting intervention makes a credible commitment to a change in future monetary policy, suggesting that its effectiveness hinges upon whether the central bank is independent of government oversight. We test this conjecture by comparing the consistency of intervention and future monetary policy in Japan before and after April 1998, when central bank independence was established by the new Bank of Japan Law. As expected, the signaling effect of intervention weakened afterthe central bank became independent

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Central Bank Independence and the Signaling Effect of Intervention : A Preliminary Exploration

http://www2.econ.osaka-u.ac.jp/library/global/dp/1304.pdf

Central Bank Independence and the Signaling Effect of Intervention : A Preliminary Exploration

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Osaka University Knowledge Archive