TY  - JOUR
AU  - Fatum,Rasmus
AU  - Hutchison,Michael
TI  - Effectiveness of Official Daily Foreign Exchange Market Intervention Operations in Japan
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9648
PY  - 2003
Y2  - April 2003
UR  - http://www.nber.org/papers/w9648
L1  - http://www.nber.org/papers/w9648.pdf
N1  - Author contact info:
Rasmus Fatum
University of Alberta
School of Business
Edmonton, Alberta
Canada T6G 2R6
E-Mail: rasmus.fatum@ualberta.ca

Michael M. Hutchison
Department of Economics
E2
University of California
Santa Cruz, CA  95064
Tel: 831-459-2600; hutch@.ucsc.edu
E-Mail: hutch@ucsc.edu
AB  - 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
ER  -