ARNOLD KLING
August 14, 2011
The Top Political Contributors
August 11, 2011
Gender and the New Commanding Heights
August 11, 2011
Jamie Galbraith Makes an Assumption
August 11, 2011
Macroeconometrics: The Science of Hubris
August 10, 2011
Real and Nominal Bond Yields
BRYAN CAPLAN
August 14, 2011
The Effect of Thumb Sucking on Income
August 12, 2011
The Voice of Cold, Hard Truth to All Would-Be Educators
August 12, 2011
Ability, Morality, and Prosperity: A Paper and a Report
August 11, 2011
The Theory of Time and Frittering
August 10, 2011
Male Variance and the Remnants of the Gender Gap
DAVID HENDERSON
August 9, 2011
Hayek in "Unbroken", Part Two
August 8, 2011
Hayek in "Unbroken"
August 5, 2011
James Bovard on the Peace Corps
August 4, 2011
Summers Way Off on FDR and 1941
August 3, 2011
The "Amazon" Tax
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Portfolio balance theory looks a lot better than you give it credit for. The story you linked to fails to mention that all three currency interventions were sterilized - central banks offset the sale of domestic currency by selling domestic bonds. The net effect on the portfolio held by the public is to reduce the quantity of foreign currency, increase the quantity of domestic bonds, and have no net effect on the quantity of domestic currency. Portfolio balance theory predicts minimal effects on the price of domestic currency, which is what happened.
Links talking about sterilization in the three interventions discussed in the linked article:
Switzerland: http://www.scribd.com/JP-Morgan-Lessons-from-SNB-Currency-Intervention/d/34723707
Japan: http://business.financialpost.com/2010/09/16/japans-unsterilized-yen-intervention-raises-odds-of-success/
(This link talks about sterilization in the 2004 intervention - your article talks about Japan's interventions 1977-2007 without narrowing it any further).
Brazil: http://www.globalpost.com/webblog/commerce/brazils-brand-new-bag-swf-currency-intervention
Maybe a statement issued by the central bank that it is willing to weaken its curerncy works against this objective, since it is at the same time an official acknowledgement that the currency is "safter/more stable" compared to other currencies.