The liquidity effects of foreign exchange intervention

Ho, Wai-Ming

doi:10.1016/s0022-1996(03)00041-2

Cited by 7 publications

(8 citation statements)

References 12 publications

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“…Lastly, the theoretical model in Ho (2004) has an interesting implication of potential relevance to our findings. Ho (2004) …”

Section: Discussionmentioning

confidence: 76%

Evaluating Foreign Exchange Market Intervention: Self-Selection, Counterfactuals and Average Treatment Effects

Fatum¹,

Hutchison²

2008

SSRN Journal

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Abstract:Studies of central bank intervention are complicated by the fact that we typically observe intervention only during periods of turbulent exchange markets. Furthermore, entering the market during these particular periods is a conscious "self-selection" choice made by the intervening central bank. We estimate the "counterfactual" exchange rate movements that allow us to determine what would have occurred in the absence of intervention and we introduce the method of propensity score matching to the intervention literature in order to estimate the "average treatment effect" (ATE) of intervention. Specifically, we estimate the ATE for daily Bank of Japan intervention over the January 1999 to March 2004 period. This sample encompasses a remarkable variation in intervention frequencies as well as unprecedented frequent intervention towards the latter part of the period. We find that the effects of intervention vary dramatically and inversely with the frequency of intervention: Intervention is effective over the 1999 to 2002 period, ineffective during 2003 and counterproductive during the first quarter of 2004.

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“…Lastly, the theoretical model in Ho (2004) has an interesting implication of potential relevance to our findings. Ho (2004) …”

Section: Discussionmentioning

confidence: 76%

Evaluating Foreign Exchange Market Intervention: Self-Selection, Counterfactuals and Average Treatment Effects

Fatum¹,

Hutchison²

2008

SSRN Journal

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“…To introduce money to the world economy, transactions in all markets are 5 It remains that the households cannot adjust their deposit decisions after the productivity shocks and the corresponding policy actions are revealed. 6 The model used is a simplified version of the model in Ho (2004). For simplicity, the intratemporal elasticity of substitution in consumption between the two goods is assumed to be one, and the fiscal spendings of the governments are ignored.…”

Section: The Modelmentioning

confidence: 99%

“…Although sterilized intervention has been viewed as having effects on exchange rates through either the portfolio-balance channel or the signaling channel, the evidence on the effectiveness of intervention via the two channels is inconclusive. Ho (2004) presents an alternative channel of influence of foreign exchange intervention that emphasizes the role of international financial markets in allocating liquidity across market participants. By using a two-country, two-currency, general equilibrium model with limited participation in the financial markets and cash-in-advance restrictions on all transactions, the paper studies the liquidity effects induced by official intervention.…”

Section: Introductionmentioning

confidence: 99%

“…These liquidity shocks to the asset markets affect the real activity of market participants. It is therefore natural to extend the analysis of Ho (2004) to study the welfare consequences of the liquidity shocks induced by official intervention.…”

Section: Introductionmentioning

confidence: 99%

“…The open-economy models allowing for liquidity effects of monetary injections have been studied by Grilli and Roubini (1992), Ho (1993), and Schlagenhauf and Wrase (1995a,b). Ho (2004) follows this approach to examining the liquidity effects of foreign exchange intervention. 3 Both the portfolio-balance channel and the signaling channel are absent in the model.…”

Section: Introductionmentioning

confidence: 99%

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The welfare implications of foreign exchange intervention

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Exchange Rates and Interest Parity

Engel¹

2014

Handbook of International Economics

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This essay is to appear as a chapter in the Handbook of International Economics, vol. 4 (Elsevier), edited by Gita Gopinath, Elhanan Helpman, and Kenneth Rogoff. I thank Philippe Bacchetta and Fabio Ghironi, as well as Gita Gopinath and Ken Rogoff for helpful comments. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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The liquidity effects of foreign exchange intervention

Cited by 7 publications

References 12 publications

Evaluating Foreign Exchange Market Intervention: Self-Selection, Counterfactuals and Average Treatment Effects

Evaluating Foreign Exchange Market Intervention: Self-Selection, Counterfactuals and Average Treatment Effects

The welfare implications of foreign exchange intervention

Exchange Rates and Interest Parity

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