TY  - JOUR
AU  - Ito,Takatoshi
AU  - Engle,Robert F.
AU  - Lin,Wen-Ling
TI  - Where Does the Meteor Shower Come From?  The Role of Stochastic Policy  Coordination
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3504
PY  - 1992
Y2  - September 1992
UR  - http://www.nber.org/papers/w3504
L1  - http://www.nber.org/papers/w3504.pdf
N1  - Author contact info:
Takatoshi Ito
Graduate School of Economics
University of Tokyo
7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
JAPAN
Tel: 81-3-5841-5608
Fax: 81-3-5841-5521
E-Mail: tito@e.u-tokyo.ac.jp

Robert F. Engle, III
Department of Finance, Stern School of Business
New York University, Salomon Center
44 West 4th Street, Suite 9-160
New York, NY  10012-1126
Tel: 212/998-0710
Fax: 212/995-4220
E-Mail: rengle@stern.nyu.edu
AB  - The purpose of this paper is to examine the intra-daily volatility of the yen/dollar exchange rate over three different regimes from 1979 to 1988 which correspond to different degrees of international policy coordination. In each regime we test for heat wave vs. meteor shower effects. The heat wave hypothesis assumes that volatility has only country specific autocorrelations, while the meteor shower hypothesis allows volatility spillovers from one market to the next. Meteor showers can be caused by stochastic policy coordination, by gradual release of private information, or by market failures such as fads, bubbles or bandwagons. The rejection of the heat wave model over the first half of the 1980s discredits the stochastic policy coordination interpretation because there was little policy coordination among industrial countries prior to the Plaza Agreement in 1985.
ER  -