Gnabo, Jean-Yves

Teiletche, Jérôme

This study extends the traditional set of central bank's interventions to include offial announcements in order to provide empirical evidence on two pivotal questions: i) are FX authorities able to influence market expectations with dierent instruments? ii) how should interventions be designed to have the greatest impact? Using Japanese data over 1992-2004 and an event-study approach, we estimate the effect of different strategies on the USD/JPY exchange rate risk neutral density. Overall, transparent policies (public and oral interventions) appear to be the most effective. Moreover, the eect is greater when policies involve a financial cost (risk) suggesting that simple announcements can only imperfectly substitute for actual intervention

Foreign-Exchange Intervention Strategies and Market Expectations: Insights from Japan

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