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Identifier to cite or link to this item: https://hdl.handle.net/10086/16871

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Title
A New Method for Identifying the Effects of Central Bank Interventions
Creator
Creator Name
Chen, Chih-nan Chen, Chih-nan
Affiliation
Affiliation Name
Harvard University
Creator Name
Watanabe, Tsutomu Watanabe, Tsutomu
渡辺, 努 渡辺, 努
ワタナベ, ツトム ワタナベ, ツトム
Affiliation
Affiliation Name
Hitotsubashi University
Creator Name
Yabu, Tomoyoshi Yabu, Tomoyoshi
藪, 友良 藪, 友良
Affiliation
Affiliation Name
University of Tsukuba
Editor
Contributor Name
日本経済の物価変動ダイナミクスの解明 = Understanding Inflation Dynamics of the Japanese Economy
Key Word
foreign exchange intervention
intraday data
Markov-chain Monte Carlo method
endogeneity problem
temporal aggregation
JEL
C11
C22
F31
F37
Abstract
Central banks react even to intraday changes in the exchange rate; however, in most cases, intervention data is available only at a daily frequency. This temporal aggregation makes it difficult to identify the effects of interventions on the exchange rate. We propose a new method based on Markov Chain Monte Carlo simulations to cope with this endogeneity problem: We use "data augmentation" to obtain intraday intervention amounts and then estimate the efficacy of interventions using the augmented data. Applying this method to Japanese data, we find that an intervention of one trillion yen moves the yen/dollar rate by 1.7 percent, which is more than twice as large as the magnitude reported in previous studies applying OLS to daily observations.This shows the quantitative importance of the endogeneity problem due to temporal aggregation.
Publisher
Research Center for Price Dynamics, Institute of Economic Research, Hitotsubashi University
Issued Date
2009-01-19
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Working Paper Series ; No. 30
Relation
Related Identifier
URI
  http://www.ier.hit-u.ac.jp/~ifd/
Number of Pages
24
Sponsorship
日本学術振興会・科学研究費補助金（学術創成研究費） = JSPS Grant-in-Aid for Creative Scientific Research
Appears in Collections
Working Paper Series / Understanding Inflation Dynamics of the Japanese Economy
URL
https://hdl.handle.net/10086/16871