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The Signalling Channel of Central Bank Interventions: Modelling the Yen/US Dollar Exchange Rate |
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| Authors: | Yu-Fu Chen Michael Funke Nicole Glanemann |
| Affiliation: | 1. Economic Studies, School of Business, University of Dundee, Dundee, DD1 4HN, UK 2. Department of Economics, Hamburg University, and CESifo, Munich, Germany 3. Department of Economics, Hamburg University, Hamburg, Germany |
| Abstract: | This paper presents a theoretical framework analysing the signalling channel of exchange rate interventions as an informational trigger. We develop an implicit target zone framework with learning in order to model the signalling channel. The theoretical premise of the model is that interventions convey signals that communicate information about the exchange rate objectives of the central bank. The model is used to analyse the impact of Japanese FX interventions during the period 1999–2011 on the yen/US dollar dynamics. |
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