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

Yoshihiro Kitamura ()

Research in International Business and Finance, 2016, vol. 36, issue C, 436-446

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.

Keywords: Exchange rates; High frequency data; Intervention; Markov-switching model; Microstructure (search for similar items in EconPapers)
JEL-codes: F31 G14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:36:y:2016:i:c:p:436-446

DOI: 10.1016/j.ribaf.2015.10.007

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