NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Effectiveness of Official Daily Foreign Exchange Market Intervention Operations in Japan

Rasmus Fatum, Michael Hutchison

NBER Working Paper No. 9648
Issued in April 2003
NBER Program(s):   IFM

Japanese official intervention in the foreign exchange market is of by far the largest magnitude in the world, despite little or no evidence that it is effective in moving exchange rates. This paper investigates the effectiveness of intervention using recently published Japanese official daily data and an event study methodology. Focusing on daily Japanese and US official intervention operations, we identify separate intervention episodes' and analyze the subsequent effect on the exchange rate. Using the non-parametric sign test and matched-sample test, we find strong evidence that sterilized intervention systemically affects the exchange rate in the short-run (less than one month). This result holds even when intervention is not associated with (simultaneous) interest rate changes, whether or not intervention is secret' (in the sense of no official reports or rumors of intervention reported over the newswires), and against other robustness checks. Large-scale (amounts over $1 billion) intervention, coordinated with the Bank of Japan and the Federal Reserve working in unison, give the highest success rate

download in pdf format
   (905 K)

email paper

A non-technical summary of this paper is available in the December 2003 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (905 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9648

Published:

Users who downloaded this paper also downloaded these:
Ito w8914 Is Foreign Exchange Intervention Effective?: The Japanese Experiences in the 1990s
Bordo, Humpage, and Schwartz w16345 U.S. Foreign-Exchange-Market Intervention during the Volcker-Greenspan Era
Bordo, Humpage, and Schwartz w16647 U.S. Foreign-Exchange-Market Intervention and the Early Dollar Float: 1973 - 1981
Kuznets Suggestions for an Inquiry Into the Economic Growth of Nations
Ito and Yabu w10456 What Prompts Japan to Intervene in the Forex Market? A New Approach to a Reaction Function
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us