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Weak economy and strong currency: The origins of the strong yen in the 1990's

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  • Schnabl, Gunther
Abstract
During the 1990's the Japanese yen proved astonishingly strong despite the persisting recession. This paper tracks the origins of the high yen. It analyses the influence of interest rates, prices and foreign exchange policy on the yen-dollar exchange rate. It comes to the conclusion that real interest differentials can only explain shortterm exchange rate changes. Since prices have been exe rting their influence on the Japanese currency in the long run, the high yen is explained with deflation. The massive foreign exchange interventions of the 1990's were only able to stop the appreciation temporarily, if they were unsterilized, but they had no lasting effects.

Suggested Citation

  • Schnabl, Gunther, 2001. "Weak economy and strong currency: The origins of the strong yen in the 1990's," Tübinger Diskussionsbeiträge 218, University of Tübingen, School of Business and Economics.
    • Handle: RePEc:zbw:tuedps:218
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    More about this item

    Keywords

    Yen; Yen/Dollar Exchange Rate; Foreign Exchange Intervention; Japan;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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