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Hideki Nishigaki
''Relationship between the yen carry trade and the related financial variables''
( 2007, Vol. 13 No.2 )
Recently, the yen carry trade has been focused on the international financial market. However, there are few empirical studies on the yen carry trade. This paper investigates the relationship between the yen carry trade and the related financial variables in the US and Japan by the structural vector autoregression (SVAR) model. Our estimation results show that the US stock price has a dominant impact on the activity of the speculative yen carry trade. On the other hand, we found that the interest rate differential between Japan and the US does not have a significant impact on the movement of the carry trade. This result shows that the Bank of Japanfs (BOJ) raising the key rate may not make the yen carry trade less attractive. Our results also indicate that if the carry trade unwinds, the depreciation of the dollar against the yen will take place.
JEL: M2 - Business Economics: General
F3 - International Finance: General
Manuscript Received : Mar 31 2007 Manuscript Accepted : May 14 2007

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