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Great earthquakes, exchange rate volatility and government interventions

Author

Listed:
  • Mariko Hatase

    (Bank of Japan)

  • Mototsugu Shintani

    (Deaprtment of Economics, Vanderbilt University)

  • Tomoyoshi Yabu

    (Faculty of Business and Commerce, Keio University)

Abstract

The Great East Japan Earthquake in 2011, as well as the Great Hanshin-Awaji Earthquake in 1995 and the Great Kanto Earthquake in 1923, resulted in disorderly movements of yen in the foreign exchange market. This paper investigates the exchange rate volatility shift after these three great earthquakes in Japan and examines if similar excess volatility after major earthquakes can also be observed in other countries. In addition, using a unique daily data set from the Great Kanto Earthquake period, the episode with the largest increased volatility among all three great earthquakes, we estimate a reaction function of foreign exchange market intervention, and evaluate the role of government intervention in stabilizing the foreign exchange market during the time of increased uncertainty caused by a large unexpected negative shock in the economy.

Suggested Citation

  • Mariko Hatase & Mototsugu Shintani & Tomoyoshi Yabu, 2013. "Great earthquakes, exchange rate volatility and government interventions," Vanderbilt University Department of Economics Working Papers 13-00007, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:vuecon-sub-13-00007
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    References listed on IDEAS

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    1. Mariko Hatase, 2023. "How Do People Form the Perception of a Link between Foreign Exchange Rates and Exports? The Experience of Japan in the 1920s," IMES Discussion Paper Series 23-E-08, Institute for Monetary and Economic Studies, Bank of Japan.

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    More about this item

    Keywords

    foreign exchange intervention; natural disasters; propensity score;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance

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