The Impact of the Japanese Banking Crisis on the Intraday FX Market

Yuko Hashimoto

No 679, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: Using the tick-by-tick yen/dollar exchange rate, this paper examines the effect of Japanese banking crisis in late 1997 on the foreign exchange market. By high-frequency methodology, GARCH estimation and variance-ratio tests, the existence of a structural break in the foreign exchange market at the onset of the crisis is detected. We show a reversed pattern in return volatility after the series of bankruptcies. From the microstructure analysis, it is found that the change in exchange rate dynamics can be attributed to a change in strategic foreign exchange trade behavior. The result provides new insights into the trading activities of market makers at the onset of bank failures

Keywords: Intraday exchange rate; Banking crisis; GARCH; microstructure (search for similar items in EconPapers)
JEL-codes: C32 F31 G14 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:679

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