اثربخشی عملیات مداخله در بازار ارز در روز رسمی در ژاپن

This paper investigates the effectiveness of intervention in the JPY/USD exchange rate market using recently published official daily data on Bank of Japan intervention and an event study methodology. 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.

The effectiveness of sterilized foreign exchange intervention has been the focus of an ongoing and unresolved controversy since the Jurgensen (1983) report was published by G-10 central banks almost 20 years ago. In theory, sterilized intervention may be effective, working through portfolio balance, signaling and noise trading channels. However, empirical support for the effectiveness of intervention, usually based on Bundesbank and Fed interventions, is mixed (see Dominguez and Frankel, 1993 and Sarno and Taylor, 2001, for a recent survey of the literature). Nonetheless, policy makers – judging from their actions – view sterilized intervention as an instrument for policy. Reviewing the empirical evidence, Obstfeld and Rogoff (1996, p. 595) conclude: “In any event, governments plainly believe that sterilized intervention has its uses, for they continue to practice it despite the lack of any hard evidence that it is consistently and predictably effective”. Empirical studies to date, however, have not analyzed Japanese official intervention data since the Ministry of Finance (MoF) did not make this publicly available until July 2001. The MoF now discloses, with a 1–3 month delay, the day of intervention, the amount of yen intervention (bought and sold by its agent, the Bank of Japan (BoJ)) and the currency of intervention. Whether or not sterilized intervention is effective in Japan is particularly important at the present juncture since, in the current zero-interest rate environment, there is seemingly no room for additional monetary policy stimulus to support foreign exchange operations. More broadly, this is an important omission in our understanding over the effectiveness of intervention since Japan is by far the largest participant among governments in the foreign exchange market. As Table 1 shows, over the April 1991–December 2000 period, the BoJ bought (sold) US dollars on 168 (33) occasions for a cumulative amount of $304 billion ($38 billion). This dwarfs all other official intervention in the foreign exchange market. For example, Japanese intervention was greater than US intervention over the same period by a factor of more than 30 and is also much greater than the Bundesbank intervention operations (when Bundesbank was responsible for exchange rate policy in Germany). Table 1. Fed and BoJ interventions in the USD/JPY exchange rate market Number of days Cumulated amount Bank of Japan intervention, April 1, 1991–December 31, 2000 Purchases of USD (million USD) >5000a 13 100,435 >1000b 37 144,825 >500c 30 28,618 >100d 79 22,948 >0e 9 713 Total purchases 168 303,985 Sales of USD (million USD) >5000a 2 −25,757 >1000b 3 −5390 >500c 4 −2295 >100d 20 −4043 >0e 4 −273 Total sales 33 −37,758 Fed intervention, April 1, 1991–December 31, 2000 Purchases of USD (million USD) >5000a 0 0 >1000b 0 0 >500c 3 2160 >100d 15 5184 >0e 0 0 Total purchases 18 7344 Sales of USD (million USD) >5000a 0 0 >1000b 0 0 >500c 1 −833 >100d 0 0 >0e 3 −200 Total sales 4 −1033 a Daily intervention operations of USD 5000 million or greater. b Daily intervention operations of USD 1000 million or greater, but less than USD 5000 million. c Daily intervention operations of USD 500 million or greater, but less than USD 1000 million. d Daily intervention operations of USD 100 million or greater, but less than USD 500 million. e Daily intervention operations of less than USD 100 million. Table options Previous studies of Japanese intervention have relied on monthly/quarterly changes in foreign exchange reserves and data on foreign exchange transactions from the supply and demand for funds in Japanese money markets (e.g. Glick and Hutchison, 1994, Glick and Hutchison, 2000 and Watanabe, 1994) or, for daily data, newspaper reports of intervention activity (Ito and Roley, 1987, Galati and Melick, 1999 and Ramaswamy and Samiei, 2000). As is well known, however, changes in reserves and newspaper reports are unreliable measures and therefore poor proxies for official intervention operations. Another early paper using the newly available Japanese intervention data is a study by Ito (2002). He investigates the profitability of intervention, the authorities reaction function, and intervention effectiveness within the context of a GARCH time-series model. The objective of this paper is to explore the effectiveness of official Japanese intervention operations in moving the exchange rate and whether intervention might be viewed as a useful policy instrument, especially in a period of interest rate inflexibility (e.g. zero-interest rates). In order to address the issue of effectiveness, the methodological starting point of this paper follows Fatum and Hutchison (2003) by recognizing that standard time-series techniques are not well suited to the analysis of intervention vis-à-vis the behavior of exchange rates. Exchange rates are typically highly volatile on a day-to-day basis while, on the other hand, intervention tends to come in sporadic clusters – viewed in this light it is perhaps not surprising that time-series based studies tend not to find strong evidence for a systematic link between exchange rate movements and intervention operations. Although standard time-series techniques are somewhat problematic when dealing with data on exchange rates and intervention, the event study approach used in the finance literature fits very well. Specifically, a cluster of intervention operations constitutes a natural candidate for identification as a single event (e.g. the $11 billion purchases of USD by the BoJ on November 29 and 30, 1999).2 In this paper we apply and extend the event study methodology developed by Fatum and Hutchison (and applied to Fed and Bundesbank intervention operations in the DM/USD market) to data on Japanese and US interventions in the USD/JPY exchange rate market over the April 1, 1991 to December 31, 2000 period when Japanese data are available. (This defines the period of analysis.) By construction, an event study is a very general test of a specific hypothesis and does not have to rely on a structural model of exchange rate determination. This is a desirable feature given the lack of consensus over the appropriate structural exchange rate model, but the drawback is that the particular channel of transmission (if intervention is effective) is not identified. Using the non-parametric sign test and the matched-sample test, evidence in favor of short-term effectiveness is presented.3 Moreover, intervention is effective whether or not it is supported by interest rate changes (monetary policy) and whether or not it is “secret” or reported in the newswires. The results are also robust to alternative criteria for “successful” intervention, event definitions and event window lengths. We also find that intervention is most likely to succeed when it is both coordinated (BoJ and Fed) and large-scale (over $1 billion) in magnitude. In the period of near-zero-interest rates in Japan (since September 1995), however, intervention operations have not been coordinated and the success rate has declined. The rest of the paper is organized as follows. The next section discusses the data and the methodology. Section 3 presents the baseline event study results. Section 4 analyzes the effectiveness of intervention when not accompanied by policy interest rate changes and “news” (public announcements and newswire reports of intervention). Section 5 considers the effectiveness of large-scale versus small-scale intervention, coordinated versus uncoordinated intervention, and also changes the baseline event definition in order to perform robustness checks and address the issue of long-run effects of intervention. Section 6 concludes the paper.

Japanese official intervention in the foreign exchange market is by far the largest magnitude in the world, despite little or no evidence that it is effective in moving exchange rates. Up until recently, however, official data on intervention have not been available for Japan. This paper investigates the effectiveness of intervention using recently published official daily data and an event study methodology. The event study better fits the stochastic properties of intervention and exchange rate data, i.e. intense and sporadic bursts of intervention activity juxtaposed against a yen/dollar rate continuously changing, than standard time-series approaches. 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. This result holds even when intervention is not associated with (simultaneous) interest rate changes and regardless of whether or not intervention is “secret” (in the sense of no official reports or rumors of intervention reported over the newswires). Controlling for endogenity (when the central bank intervenes for multiple days during a single event) also does not affect the results. Large-scale intervention operations characterized by the simultaneous presence in the foreign exchange market by both the Bank of Japan and the Federal Reserve gave by far the highest likelihood of success. Over 90% of the interventions of this form (large-scale and coordinated) were successful in our data sample. Intervention was also found to be effective even if not accompanied by supporting interest rate changes. This is relevant for present circumstances in Japan where the Bank of Japan is following a zero-interest rate policy and there is no room to lower interest rates further. This result suggests that the Bank of Japan could indeed engineer exchange rate depreciation (thereby counteracting deflation and recession) even though interest rates cannot be moved further downwards. However, only one of the 15 BoJ intervention episodes has been coordinated with the Fed since September 1995 (when Japanese interest rates reached 0.50% and subsequently fell to zero). This may explain why the success rate for intervention events has not been high during this period (only nine successful intervention events for a success rate of 60%). Under these circumstances, it would appear that only persistent, large-scale and coordinated intervention (Bank of Bank and the Federal Reserve) would produce a sustained movement in the exchange rate. In interpreting the results two caveats should be noted. First, we only find support for short-run effectiveness of intervention. The baseline results found intervention events to be effective over a period of 2–5 days, and an extension of the framework showed effects lasting for up to two weeks. This is not direct evidence against longer-term effects, but reflects a limitation of the event study methodology. Second, the event study methodology does not allow identification of the particular channel through which intervention works. Our findings are consistent, however, with recent literature interpreting intervention as a means to “signal” not only future policy but also the central bank's views on the fundamental/equilibrium value of the exchange rate.