TY - JOUR
T1 - Information arrival, interest rate differentials, and yen/dollar exchange rate
AU - Kitamura, Yoshihiro
AU - Akiba, Hiroya
PY - 2006/1
Y1 - 2006/1
N2 - This paper examines the effects of interest rate differentials as inflowing information into the forex market on the yen/dollar exchange rate and unexpected trading volume by a structural VAR model. The impulse responses show that the short-term interest rate differential affects the exchange rate through (a) UIP with little change in unexpected trading volume, and (b) different expectation revisions at different points in time with a high transaction volume. The effects of long-term interest rate differential on the exchange rate appear instantaneous with high trading volume, reflecting instantaneous reshuffling in international portfolio holdings of long-term assets.
AB - This paper examines the effects of interest rate differentials as inflowing information into the forex market on the yen/dollar exchange rate and unexpected trading volume by a structural VAR model. The impulse responses show that the short-term interest rate differential affects the exchange rate through (a) UIP with little change in unexpected trading volume, and (b) different expectation revisions at different points in time with a high transaction volume. The effects of long-term interest rate differential on the exchange rate appear instantaneous with high trading volume, reflecting instantaneous reshuffling in international portfolio holdings of long-term assets.
KW - Information
KW - Interest rate differentials
KW - Yen/dollar exchange rate
UR - http://www.scopus.com/inward/record.url?scp=29444441618&partnerID=8YFLogxK
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U2 - 10.1016/j.japwor.2004.05.004
DO - 10.1016/j.japwor.2004.05.004
M3 - Article
AN - SCOPUS:29444441618
SN - 0922-1425
VL - 18
SP - 108
EP - 119
JO - Japan and the World Economy
JF - Japan and the World Economy
IS - 1
ER -