The effects of Japanese interventions on FX-forecast heterogeneity

Abstract

This paper investigates the determinants of forecast heterogeneity in the Yen-US dollar market using a panel data set from Consensus Economics. Regardless of the particular model specification and consideration of control variables we find that exchange rate misalignments increase forecast dispersion, while foreign exchange intervention of the Japanese Ministry of Finance dampens expectation heterogeneity.JEL classification: F31, D84, C33

Herding behavior and loss functions of exchange rate forecasters over interventions and financial crises

“…Market intervention reduces the incentives of the forecasters to extremely overpredict the forecast. This finding is consistent with the finding of Reitz et al (2010). Furthermore, this study provides evidence that forecasters' behaviors do not differ by their characteristics.…”

“…Beine, Bènassy-Quéré, and MacDonald (2007) found that interventions had no impact on forecast heterogeneity between 1992 and 1994, while the impacts between 1996 and 2001 were statistically significant but ambiguously signed. Reitz, Stadtmann, and Taylor (2010) extended the sample period to the end of 2007, to consider the intervention that took place between 2002 and 2004, and they found that the interventions reduced expectation heterogeneity.…”

Exchange-rate forecasts and asymmetric loss: empirical evidence for the yen/dollar exchange rate

“…MacDonald and Marsh, 1996;Benassy-Quere et al, 2003;Reitz et al, 2010). Note: J (0.5) denotes the J-test for a symmetric loss function.…”

Sterilised Interventions within a Heterogeneous Expectation Exchange Rate Model: Evidence from the Reserve Bank of Australia

“…The fundamentalists’ behaviour tends to stabilise the market, while the presence of chartists may cause destabilisation. In contrast to these last findings, Reitz, Stadtmann and Taylor (2010), using panel data provided by Consensus Economics, showed that the Bank of Japan's interventions reduce dispersion among foreign exchange forecasts.…”