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Does the simple microstructure model tell the time of the FX intervention? A one day analysis of the Japanese FX intervention

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  • Kitamura, Yoshihiro

Abstract

Using tick data of the USD/JPY rate, I propose the method to detect the time of the FX intervention. I use the simple microstructure model and assume that the FX intervention causes regime-switching in the microstructure of the USD/JPY market, changes in adverse selection, and inventory effect. The time of the intervention is estimated endogenously by the Markov-switching model, and the actual starting time is well estimated. I also find that no market orders, except a large U.S. dollar purchase, convey any private information during the period of the intervention.

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  • Kitamura, Yoshihiro, 2016. "Does the simple microstructure model tell the time of the FX intervention? A one day analysis of the Japanese FX intervention," Research in International Business and Finance, Elsevier, vol. 36(C), pages 436-446.
    • Handle: RePEc:eee:riibaf:v:36:y:2016:i:c:p:436-446
    DOI: 10.1016/j.ribaf.2015.10.007
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    Cited by:

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    2. Wenbo Wang & Dieu Thanh Le & Hail Park, 2020. "Is Foreign Exchange Intervention a Panacea in Diversified Circumstances? The Perspectives of Asymmetric Effects," Sustainability, MDPI, vol. 12(7), pages 1-20, April.

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    More about this item

    Keywords

    Exchange rates; High frequency data; Intervention; Markov-switching model; Microstructure;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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