News and the Dollar/Yen Exchange Rate, 1931-1933: The End of the Gold Standard, Imperialism, and the Great Depression / Takatoshi Ito, Kunio Okina, Juro Teranishi.

By:

Ito, Takatoshi

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w2683.Publication details: Cambridge, Mass. National Bureau of Economic Research 1988.Description: 1 online resource: illustrations (black and white)Subject(s):

F - International Economics

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Abstract: According to the efficient market hypothesis, news in Tokyo is responsible for the exchange rate changes during the Tokyo market hours, while the U.S. news is responsible for changes in the New York hours. The intra-daily dynamics of the $/yen exchange rate from December 1931 to November 1933 is analyzed. Japan's decision to go off gold in December 1931 depreciated yen by 30% in a month, mostly in the Tokyo market. During 1932, the yen depreciated another 30%, mainly due to Japan's aggression in China and resulting diplomatic isolation. In 1933, the yen appreciated against the dollar, mainly in the New York market, due to the U.S. decision to go off gold. However, exchange rate volatility and its sensitivity to news declined over the two year period, because of increasing capital controls. Changes in the interest rate differential was found insignificant for the changes in the exchange rate. Political regime changes, such as a decision to go off gold, most influenced the exchange rate for the period considered. There were no policy decisions by Japan to cause yen depreciation to promote export and limit import in 1931-33.

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Working Paper	Biblioteca Digital	Colección NBER	nber w2683 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w26827 The Structure of Multinational Firms' International Activities /	nber w26828 Market Fragmentation /	nber w26829 Convex Supply Curves /	nber w2683 News and the Dollar/Yen Exchange Rate, 1931-1933: The End of the Gold Standard, Imperialism, and the Great Depression /	nber w26830 A Quantitative Analysis of Distortions in Managerial Forecasts /	nber w26831 When a Master Dies: Speculation and Asset Float /	nber w26832 Mandated Sick Pay: Coverage, Utilization, and Welfare Effects /	Next

August 1988.

According to the efficient market hypothesis, news in Tokyo is responsible for the exchange rate changes during the Tokyo market hours, while the U.S. news is responsible for changes in the New York hours. The intra-daily dynamics of the $/yen exchange rate from December 1931 to November 1933 is analyzed. Japan's decision to go off gold in December 1931 depreciated yen by 30% in a month, mostly in the Tokyo market. During 1932, the yen depreciated another 30%, mainly due to Japan's aggression in China and resulting diplomatic isolation. In 1933, the yen appreciated against the dollar, mainly in the New York market, due to the U.S. decision to go off gold. However, exchange rate volatility and its sensitivity to news declined over the two year period, because of increasing capital controls. Changes in the interest rate differential was found insignificant for the changes in the exchange rate. Political regime changes, such as a decision to go off gold, most influenced the exchange rate for the period considered. There were no policy decisions by Japan to cause yen depreciation to promote export and limit import in 1931-33.