Figure 2 - uploaded by Richard K. Lyons
Content may be subject to copyright.
Source publication
Similar publications
Auch in Deutschland kam es in den letzten Jahren vermehrt zu Hochwasserereignissen mit erheblichen ökonomischen Schäden. Die privaten Haushalte sind auf derartige Katastrophen oft schlecht vorbereitet, da ihnen gar nicht bekannt ist, dass ihre Wohngebäude- oder Hausratversicherung in solchen Fällen nicht greift. Meist tritt der Staat dann ad hoc ei...
Der Staat hat in den vergangenen Jahrzehnten derart viele neue Aufgaben übernommen, dass Regelungsanspruch und Regelungsmittel zunehmend auseinanderdriften. Es ist deshalb nicht grundsätzlich zu beanstanden, wenn die Staatsanwaltschaft eine private Vereinbarung mit Exit trifft, die der Prävention dient und zu der die Strafverfolger fachlich befähig...
We study self-referential games in which players have the ability to commit to a code of conduct—a complete description of how they play and their opponents should play. Each player receives a private signal about each others’ code of conduct and their codes of conduct specify how to react to these signals. When only some players receive informativ...
The objective of this paper is to analyze the economic-management educational programs based on the international reputation of the leading business schools. We analyze the variables of the educational offer in a sample of 276 business schools, both public and private, included in the EDUNIVERSAL ranking. The findings highlight that although intern...
Citations
... The OLS regression is adopted to analyze the data, based on the literature (Evans and Lyons, 2003;Chaboud and Humpage, 2005;Girardin andLyons, 2006 andMarsh, 2011). ...
... Hence, ASEAN-5 countries' foreign exchange markets are sensitive to market intervention. These results are consistent with other empirical studies, such as Girardin and Lyons (2007), Chaboud and Humpage (2005) and Marsh (2011). ...
The Article is about foreign exchange market intervention in an Emerging economy-Evidence form the ASEAN-5 Foreign exchange markets
... Theoretical market microstructure models such as that of Vitale (1999) and Killeen, Lyons and Moore (2006), have highlighted that sterilized interventions should affect the price impact of private trades. The study of Girardin and Lyons (2008), which was based on data obtained from Citibank, confirmed this hypothesis of an indirect 1 This problem of reverse causality plagues for instance many popular GARCH estimations that are based on daily data. 2 intervening. This compares to required sales of 5.5 bn USD on days in which the Central Bank was present in the market. ...
... Finally, we find that order flows coming from outside of the financial sector have a (considerably) stronger effect on the exchange rate than those coming from financial customers. Using the terminology of Girardin and Lyons (2008), intervention by the Brazilian monetary authority can therefore be considered effective as there is evidence that it "damps the price impact of a given-sized private trade". Our findings therefore corroborate the notion advanced by those authors that intervention may be working indirectly, by inducing changes in private pricing. ...
... We interpret this evidence of an indirect damping channel (as in Girardin and Lyons (2008)) as an indication that the monetary authority could have a coordinating role to play in price setting. Furthermore, we find stronger effects of intervention than those reported in studies of advanced economies. ...
This study presents indirect evidence of the effectiveness of sterilized interventions in Brazil based on the complete records of daily customer order flow data reported by Brazilian dealers as well as foreign exchange intervention data over a time span of 10 years (2002-2011). We find that the effect of USD sales by end-users on the BRL/USD was much stronger on days in which the BCB did not intervene in the spot foreign exchange market. The regressions suggest that a 1% appreciation of the Real would have required the sale of 2.0 bn USD by final customers on days in which the Central Bank refrained from intervening. This compares to required sales of 5.5 bn USD on days in which the Central Bank was present in the market. This large effect, in spite of the fact that the median intervention amounted to only 140 mn USD, can be interpreted as evidence for the indirect damping channel. Furthermore, we find that order flows coming from outside of the financial sector have a (considerably) stronger effect on the BRL/USD exchange rate than those coming from financial customers. We argue that some studies may have failed to find significant effects of BCB interventions due to a problem of reverse causality, as in a regime of discretionary interventions the decision to intervene is often taken during trading hours.
... Consistent with the coordination channel of intervention the speed of mean reversion of the exchange rate does indeed slow as the exchange rate deviates from its equilibrium value and speed up when the Federal Reserve intervened in the foreign exchange market. Using a unique dataset of end-user order flow from 1995 to 2004 Girardin and Lyons (2008) find evidence in favor of the coordination channel of FX intervention. The authors show that over the period of aggressive Japanese intervention in 2003 -2004 the trades of Citibank's customers shifted significantly in the intervention direction. ...
The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. It is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (Eur Econ Rev 52(1), 55–76 2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.
... This intervention, being unsterilized, could help monetary authorities to gain credibility, sending a signal that the main objective remains the price level. Moreover, Girardin and Lyons (2008) show that the intervention of the BOJ, even thought it is fully sterilized through the issue of bonds, works through indirect channels. By means of a microstructure-based intervention model they document that BOJ interventions worked indirectly both by coordinating private trades in the same direction and damping the price impact of private traders. ...
The current financial crisis has now led most major central banks to rely on quantitative easing. The unique Japanese experience of quantitative easing is the only experience which enables us to judge this therapy's effectiveness and the timing of the exit strategy. In this paper, we provide a new empirical framework to examine the effectiveness of Japanese monetary policy during the "lost†decade and quantify the effect of quantitative easing on Japan's activity and prices. We combine advantages of Markov-switching VAR methodology with those of factor analysis to establish two major findings. First, we show that the decisive change in regime occurred in two steps: it crept out from late 1995 and established itself durably in February 1999. Second, we show for the first time that quantitative easing was able not only to prevent further recession and deflation but also to provide considerable stimulation to both output and prices. This positive effect is reached through the interest rate factor. These results remain valid even when fiscal policy is simultaneously taken into account in the analysis. If Japanese experience is any guide the quantitative easing policy must be seen as a symptomatic treatment; it must be accompanied with a dramatic restructuring in the financial framework. The exit from quantitative easing must be postponed and decided within a clear program and according to clear numerical objectives.
... In contrast, the linear specification with no break is dominant for the Philippines, Singapore–Brunei Darussalam, 4 On the basis of these results, across specifications, five categories of countries are notable.Figure 4). In the case of Japan, the first occurrence of this other regime corresponded to a period of well-documented heavy intervention by Japanese authorities (Girardin and Lyons 2008). Cambodia belongs to both the first and second groups since it showed evidence of temporary regime change in both 2003 and in 2005, as well as a reemergence of the second regime at the end of the sample (Figure 5). ...
Pegging in a coordinated way to a regional basket currency is considered by many as optimal for east-Asian countries. By contrast, according to existing empirical studies, these countries have most often relied on noncooperative United States dollar or G3 pegs. We show for the first time that by the late 1990s, with some reversals, a majority of east-Asian countries had already moved, de facto, away from the dollar peg and started targeting a basket, including east-Asian currencies (an “Asian Currency Unit”). Common-shock or market-based interpretations of such moves are ruled out since we document that, with few exceptions, countries in the region have in reality stuck to fixed exchange rates. We obtain such results using a Markov-switching estimation benchmarked against Bai-Perron structural break tests for the synthesis model of Frankel and Wei (2007), which augments the inference about currency weights in a basket with the weight on exchange-market pressure. In order to measure the latter, the forward positions of central banks in the foreign exchange market are taken into account.
... 15 We note that for the daily-horizon rolling regressions, the lowest coefficient estimate in dollar-yen is for a one-year window ending in March 2004, precisely at the end of the 14-month-long episode of massive foreign exchange intervention by Japan's Ministry of Finance. In contrast, Giradin and Lyons (2006), using daily customer order flow data from Citibank, do not detect a significant change in the return/order flow slope coefficients during Japanese intervention. correlations of order flow and exchange rates, both at one-minute and at daily frequencies, tend to be greater when market liquidity is lower. ...
We analyze the association between order flow and exchange rates using a new dataset representing a majority of global interdealer transactions in the two most-traded currency pairs at the one minute frequency over a six-year time period. This long span of high-frequency data allows us to gain new insights about the joint behavior of these series. We first confirm the presence of a substantial association between interdealer order flow and exchange rate returns at horizons ranging from 1 min to two weeks, but find that the association is substantially weaker at longer horizons. We study the time-variation of the association between exchange rate returns and order flow both intradaily and over the long term, and show that the relationship appears to be stronger when market liquidity is lower. Overall, our study supports the view that liquidity effects play an important role in the relationship between order flow and exchange rate changes. This by no means rules out a role for order flow as a channel by which fundamental information is transmitted to the market, as we show that our findings are quite consistent with a recent model by Bacchetta and Van Wincoop (2006: Can information heterogeneity explain the exchange rate determination puzzle? American Economic Review, 96, pp. 552–576.) that combines both liquidity and information effects.
... Consistent with the coordination channel of intervention the speed of mean reversion of the exchange rate does indeed slow as the exchange rate deviates from its equilibrium value and speed up when the Federal Reserve intervened in the foreign exchange market. Using a unique dataset of end-user order flow from 1995 to 2004 Girardin and Lyons (2008) In this paper we apply the Reitz and Taylor (2008) framework to yen-US dollar exchange rates, Federal Reserve and Japanese Ministry of Finance (MoF) operations to further investigate the nonlinear effectiveness of intervention. Statistically significant parameter estimates of meaningful magnitude provide support for the coordination channel. ...
The coordination channel has recently been established as an additional means by which foreign exchange market intervention may be effective. In Sarno and Taylor (2001) it is conjectured that strong and persistent misalignments of the exchange rate are caused by a coordination failure among fundamentals-based traders. In such situations official intervention may act as a coordinating signal, encouraging traders to engage in stabilizing speculation. We apply the framework developed in Reitz and Taylor (2008) to daily data on the yen-US dollar exchange rate and on Federal Reserve and Japanese Ministry of Finance intervention operations. The results provide further support for the coordination channel of intervention effectiveness.
... 15 We note that for the daily-horizon rolling regressions, the lowest coefficient estimate in dollar-yen is for a one-year window ending in March 2004, precisely at the end of the 14-month-long episode of massive foreign exchange intervention by Japan's Ministry of Finance. In contrast, Giradin and Lyons (2006), using daily customer order flow data from Citibank, do not detect a significant change in the return/order flow slope coefficients during Japanese intervention. ...
... The cointegrating regression is estimated by the fully modified least squares estimator ofPhillips and Hansen (1990), in order to eliminate second order asymptotic bias. 11 The Monte-Carlo simulations inGonzalo and Lee (1998) find that the Johansen test can find cointegration where none is in fact present (spurious cointegration). ...
We study the association between order flow and exchange rate returns in five years of high-frequency intraday data from the leading interdealer electronic broking system, EBS. While the association between order flow and exchange rate returns has been studied in several previous papers, these have mostly used relatively short spans of daily data from older bilateral dealing systems and, usually, transaction counts instead of actual trading volume. Using a substantially longer span of recent high-frequency data and measuring order flow as actual signed trading volume, we find a strong positive association between order flow and exchange rate returns at frequencies ranging from one minute to one day, and a more modest but still sizeable association at the monthly frequency. We find, however, no evidence that order flow has predictive power for future exchange rate movements beyond, possibly, the next minute. Focusing on the behavior of order flow and exchange rates at the time of scheduled U.S. economic data releases, we find that the surprise components of these announcements are associated with order flow at high frequency immediately after the data releases. This finding seems inconsistent with a simple efficient markets view of how a public news announcement is incorporated into prices.
... However, Ito and Mishkin (2006) and Ito and Yabu (2007) argue that this channel can work if the BOJ neither sterilizes the intervention in the foreign exchange market ordained by the Ministry of Finance, nor announces an exchange rate target, sending a signal that the main objective remains the price level. On the other hand, Girardin and Lyons (2008) show some effects of this channel even though the BOJ/MOF intervention is technically fully sterilized. ...
Interest rates in several countries have recently been decreased to exceptionally low levels and a Quantitative Easing Monetary Policy (QEMP) has been adopted by most major central banks. In this context this paper is very actual, as it sheds some light on the effectiveness of the Japanese use of QEMP, which is the only experience we can learn from. This paper employs a Time Varying Parameters Factor-Augmented VAR (TVP-FAVAR) model to analyse monetary policy shocks in Japan. This model allows us to explore the effect of QEMP on a large number of variables. Our analysis delivers four main results. First, unsurprisingly, our results suggest that the best model to specify the Japanese monetary policy during the two last decades is a model where all of parameters vary over time. Second, the effect of QEMP on activity and prices is stronger than previously found. In particular, we find a significant price reaction to a monetary policy shock. Third, in contrast to previous work, there is a detectable efficiency of the portfolio-rebalancing channel, which could have a role in transmitting the monetary policy shocks. Fourth, while the policy commitment succeeds in controlling private and business expectations, these effects are not transmitted to the long-end of the yield curve.
Despite the adoption of a market-oriented regime, Reserve Bank of India explicitly practices sterilized intervention to normalize unfavourable developments in the market. This study seeks to find empirical evidence on the intensity to which the monetary authority was able to achieve its policy objective of directing exchange rate in the anticipated trail. The study employed an Autoregressive Distributed Lag (ARDL) model to estimate the central bank reaction function in this regard. It was found that 1% purchase of foreign exchange reserve (net intervention) depreciated Indian Rupee by 0.255% for long-term. Whereas in short-term, intervention followed “leaning against the wind” policy to curb market vagueness. The findings of the study recommend that there should be more coordinated approach between official intervention policy and monetary policy formulation in consonance with the economic fundamentals for increasing the effectiveness and sustainability of the intervention operations.
