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

Listed author(s):
  • Kitamura, Yoshihiro

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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0275531915300489
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Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 36 (2016)
Issue (Month): C ()
Pages: 436-446

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Handle: RePEc:eee:riibaf:v:36:y:2016:i:c:p:436-446
DOI: 10.1016/j.ribaf.2015.10.007
Contact details of provider: Web page: http://www.elsevier.com/locate/ribaf

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  1. Chen, Shyh-Wei & Lin, Shih-Mo, 2014. "Non-linear dynamics in international resource markets: Evidence from regime switching approach," Research in International Business and Finance, Elsevier, vol. 30(C), pages 233-247.
  2. Chkili, Walid & Nguyen, Duc Khuong, 2014. "Exchange rate movements and stock market returns in a regime-switching environment: Evidence for BRICS countries," Research in International Business and Finance, Elsevier, vol. 31(C), pages 46-56.
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