A large volatility reflects dispersed opinions among market participants. Even when an FX intervention moves the level of the FX rate in its intending direction, this movement is transient unless the intervention mitigates the volatility and dissolves the dispersion among market participants. I adopt pulse and step functions to examine the short-run dynamic effects of four recent Japanese FX interventions on the level and volatility of the yen/dollar rate. The four interventions are large and public, and these are important factors in the effectiveness of the intervention. I find that the two recent interventions are successful in terms of persistent depreciation and mitigating volatility. The two successful interventions are characterized by their size effect. In turn, although the third intervention caused the yen to depreciate, this is short-lived because of increasing volatility.

I propose a new methodology to assess the effect of foreign exchange (FX) intervention, based on the probability of an FX rate reaching. The variable is the probability of an FX rate reaching a particular threshold before reaching another. Importantly, the probability depends on not only the level, but also the trend and volatility of a current FX rate. When an intervention changes the probability in a desired direction, the intervention is effective. The notable feature of the probability is that it considers both the level and volatility of an FX rate comprehensively, while previous studies have examined these effects of FX intervention separately. Empirical results based on regression and nearest neighbor analyses applied to Japanese data indicate that publicity and size are significant in the effectiveness of intervention. (C) 2017 Elsevier Ltd. All rights reserved.

Previous studies on the stock market consider the degree of market efficiency to be an inverse of the predictive power of order flow. Following this notion, I propose simple market efficiency measures in foreign exchange (FX) markets. The first measure considers the market to be inefficient when positive (negative) order flows predict the appreciation (depreciation) of a base currency. The second measure considers whether predictions using order flow result in tangible gains. These measures are related to liquidity levels and information factors in FX markets, unlike the measures in previous studies. (C) 2016 Elsevier B.V. All rights reserved.

I examine whether the volume-synchronized probability of informed trading (VPIN) can predict a flash crash in the yen/dollar foreign exchange market. The results show that VPIN using bulk volume classification predicted a recent event. However, VPIN using order flows, which are the amount of the ask-side transaction minus those of bid-side, does not.

Contemporaneous and positive correlation between order flow and exchange rate is a stylized fact. I postulate that the order flow driven by informed trading has a significant price impact. I also do that little price reversal occurs in the subsequent period. The Markov-switching model provides probabilities of a significant price impact and little price reversal. I apply these probabilities to measure the probability of informed trading. The measure explains a greater share of the random walk component of price compared to other measures offered by previous studies. (C) 2016 Elsevier B.V. All rights reserved.

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.

This study adopts a microstructural approach to examine the effect of Japanese official intervention in the yen/dollar foreign exchange market. Our empirical results show that the number of informed traders after the series of interventions is significantly larger and the degree of the market maker's reaction to the order flow and the cost of informed trading in the post-intervention period are significantly smaller than those in the pre-intervention one. This finding implies that frequent and intense intervention promotes competition among the informed traders. We interpret these data to conclude that this competition lowers the degree of information asymmetry in the market. JEL Classification: D82; E58; F31 © 2013 Nova Science Publishers, Inc. All rights reserved.

This paper examines the effect of realized exchange rate returns on the volatility spill-over between the euro-US dollar and US dollar-yen currency pairs across the five trading regions: Asia. Asia-Europe overlap, Europe, Europe-America overlap and America. Modelling the interaction between returns and volatility in an autoregressive five-equation system, we find evidence that depreciation of the US dollar against the yen has a greater impact on the US dollar-yen volatility spill-over than appreciation in the subprime crisis period. Appreciation and depreciation of the US dollar against the euro does not appear to have an asymmetric effect on the euro-US dollar volatility spill-over. Our results support the notion that the yen may have been preferred to the euro as a 'safe-haven' currency relative to the US dollar during the subprime crisis period. (C) 2012 Elsevier B.V. All rights reserved.

This paper examines the effect of realized exchange rate returns on the volatility spill-over between the euro-US dollar and US dollar-yen currency pairs across the five trading regions: Asia. Asia-Europe overlap, Europe, Europe-America overlap and America. Modelling the interaction between returns and volatility in an autoregressive five-equation system, we find evidence that depreciation of the US dollar against the yen has a greater impact on the US dollar-yen volatility spill-over than appreciation in the subprime crisis period. Appreciation and depreciation of the US dollar against the euro does not appear to have an asymmetric effect on the euro-US dollar volatility spill-over. Our results support the notion that the yen may have been preferred to the euro as a 'safe-haven' currency relative to the US dollar during the subprime crisis period. (C) 2012 Elsevier B.V. All rights reserved.

Using high-frequency data on the Euro, Yen and Swiss franc, this paper examines whether the permanent (informational) component of one currency's variance explains the variances of the other currencies as well. Previous studies have not considered this interdependency among currencies. A variance decomposition shows that trade-correlated news on the Euro effectively contributes to the variance of the Swiss franc. In addition, for these two currencies, non-trade-correlated news on one currency reciprocally affects the other. The findings suggest that prior studies may have overestimated the impact of trade-correlated news about a currency on its own permanent variance. © 2011 Elsevier B.V.

Using high-frequency data on the Euro, Yen and Swiss franc, this paper examines whether the permanent (informational) component of one currency's variance explains the variances of the other currencies as well. Previous studies have not considered this interdependency among currencies. A variance decomposition shows that trade-correlated news on the Euro effectively contributes to the variance of the Swiss franc. In addition, for these two currencies, non-trade-correlated news on one currency reciprocally affects the other. The findings suggest that prior studies may have overestimated the impact of trade-correlated news about a currency on its own permanent variance. (C) 2011 Elsevier B.V. All rights reserved.

Using the copula function, I propose a new econometric method to measure the state-dependent impact of order flows on returns in foreign exchange markets and examine whether this impact is affected by the number of informed traders. My results indicate that the impact of the order flow decreases as trading becomes more informed. This finding suggests an especially important theoretical implication: that the effect of competition among informed traders tends to dominate that of the adverse selection problem faced by uninformed traders in the euro/dollar and yen/dollar markets. © 2010 Springer Science+Business Media, LLC.

To examine intraday interdependence and volatility spillover among the euro, the pound and the Swiss franc, we employ the varying-correlation model of multivariate generalized autoregressive conditional heteroskedasticity. Our main findings are (1) return volatility in the euro spills into the pound and the Swiss franc
and (2) these markets are highly integrated with the euro, and the degree of interdependence is state-dependent: euro news has a simultaneous impact on the pound and the Swiss franc, and co-movements of these currencies and the euro become much higher in proportion to the arrival of news of the euro. © 2009 Elsevier B.V. All rights reserved.

In this paper, I use stock return data to test an intertemporal model of the current account. I find that the model performs well in three countries: the U.K., Canada, and Japan. Hall [Hall, R.E., 1978. Stochastic implication of the life cycle-permanent income hypothesis: theory and evidence. J. Polit. Econ. 86 (6), 971-987] points out that because stock price predicts the future state of the economy, it predicts consumption. Assuming that consumption depends on permanent income, my empirical finding indicates that a representative agent smoothes consumption based on stock market information. In other words, stock market returns yield information about permanent income. © 2008 Elsevier B.V. All rights reserved.

The informational efficiency of the yen/dollar exchange rate is investigated in five market segments within each business day from 1987 to 2007. Among the results, we first find that the daily exchange rate has a cointegrating relationship with the cumulative price change of the segment for which the London and New York (NY) markets are both open, but not with that of any other segments. Second, the cumulative price change of the London/NY segment is the most persistent among the five market segments in the medium and long run. These results suggest that the greatest concentration of informed traders is in the London/NY segment, where intraday transactions are the highest. This is consistent with the theoretical prediction by Admati and Pfleiderer (1988) that prices are more informative when trading volume is heavier.

This paper examines the welfare comparisons between a freely floating, a managed floating, and a pegged exchange rate regime. We compare the expected loss under these regimes by modifying and generalizing Hamada's (2002) model to accommodate intervention policy. We consider the de jure and de facto classifications, where the former is defined by the officially stated intentions of the monetary authorities, while the latter is based on the actually observed behavior of the nominal exchange rate. We first examine the exchange rate regimes from the central bank's policy stance and the actual exchange rate policy. Next we assume that the regime which the private sector perceives according to an official announcement may be different from the one adopted actually by the central bank. We examine nine combinations of the de jure and de facto regimes. We interpret that, whenever they are different, there is informational friction between the central bank and the private sector. We show that the welfare level of a small country under freely floating is no less than that under other regimes, and that with some restrictive conditions, the de facto pegged or de facto managed floating is close to freely floating. This partly explains 'Fear of floating' and 'Fear of pegging'. © Springer-Verlag 2009.

This paper examines the effects of interest rate differentials as inflowing information into the forex market on the yen/dollar exchange rate and unexpected trading volume by a structural VAR model. The impulse responses show that the short-term interest rate differential affects the exchange rate through (a) UIP with little change in unexpected trading volume, and (b) different expectation revisions at different points in time with a high transaction volume. The effects of long-term interest rate differential on the exchange rate appear instantaneous with high trading volume, reflecting instantaneous reshuffling in international portfolio holdings of long-term assets. (c) 2004 Elsevier B.V. All rights reserved.

This paper examines empirically which of the first or the second generation models is more convincing in accounting for the Asian currency crisis. We construct a regression model with both fundamentals and changes in expectations by news together. We found that, in Thailand, Korea and Indonesia, a growth rate of domestic credit, as a proxy for deterioration of fundamentals, and the "news", as a proxy for a shift in expectations, has a reasonably convincing explanatory power for the currency crisis. On the other hand, in the rest of our sample countries, the latter is reasonably convincing in explaining the crisis.