| Budget Amount *help |
¥4,160,000 (Direct Cost: ¥3,200,000、Indirect Cost: ¥960,000)
Fiscal Year 2010: ¥1,040,000 (Direct Cost: ¥800,000、Indirect Cost: ¥240,000)
Fiscal Year 2009: ¥1,170,000 (Direct Cost: ¥900,000、Indirect Cost: ¥270,000)
Fiscal Year 2008: ¥1,950,000 (Direct Cost: ¥1,500,000、Indirect Cost: ¥450,000)
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| Research 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 apply the Bayesian MCMC approach to this endogeneity problem. We use "data augmentation" to obtain intraday intervention amounts and estimate the efficacy of interventions using the augmented data. Applying this new 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 much 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.
From the beginning of 2003 to the spring of 2004, Japan's monetary authorities conducted large-scale yen-selling/dollar-buying foreign exchange operations in what Taylor (2006) has labeled the "Grea
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t Intervention." The purpose of the present paper is to empirically examine the relationship between this "Great Intervention" and the quantitative easing policy the Bank of Japan (BOJ) was pursuing at that time. Using daily data of the amount of foreign exchange interventions and current account balances at the BOJ, our analysis arrives at the following conclusions. First, while about 60 percent of the yen funds supplied to the market by yen-selling interventions were immediately offset by the BOJ's monetary operations, the remaining 40 percent were not offset and remained in the market for some time ; this is in contrast with the preceding period, when almost 100 percent were offset. Second, comparing foreign exchange interventions and other government payments, the extent to which the funds were offset by the BOJ were much smaller in the case of foreign exchange interventions, and the funds also remained in the market longer. This finding suggests that the BOJ differentiated between and responded differently to foreign exchange interventions and other government payments. Third, the majority of financing bills issued to cover intervention funds were purchased by the BOJ from the market immediately after they were issued. For that reason, no substantial decrease in current account balances linked with the issuance of FBs could be observed. These three findings indicate that it is highly likely that the BOJ, in order to implement its policy target of maintaining current account balances at a high level, intentionally did not sterilize yen-selling/dollar-buying interventions. Less
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