International cooperation in exchange‐rate management: Coordination of U.S. and Japanese intervention, 1977–1990

What are the determinants of international cooperation in exchange‐rate management? To answer this question, coordination of foreign exchange intervention by the United States and Japan from 1977 to 1990 is analyzed. An examination of the data raises two empirical puzzles: (1) Why do the periods of active intervention and high cooperation coincide?; (2) Why does Japan intervene unilaterally more often than the United States? Some hypotheses drawn from various theories of cooperation are tested, but none of them receive strong support. Instead, intervention volume and learning by U.S. administrations account for the variance in coordination. These findings resolve the two puzzles: (1) The periods of active intervention are the time of high need for cooperation; (2) Japan is obliged to intervene unilaterally while the United States is learning to cooperate.

Keywords:

• international cooperation
• coordination
• exchange rate policy
• foreign exchange intervention
• the United States
• Japan