ECB Foreign Exchange Intervention and the Euro: Institutional Framework, News and Intervention.

Using a unique intervention "news" data set, this paper investigates the impact of ECB intervention and intervention-related "news" (newswire reports) on the euro exchange rate. A time-series study of "news" generated by ECB officials and market participants regarding intervention and the value of the euro as well as an event study of firm reports of ECB intervention is conducted. Both studies find significant short-run effects on the euro value, while only "negative" statements (official statements denying past intervention or ruling out future intervention) appear to have persistent effects.

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

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.foreign exchange intervention; Bank of Japan; self-selection, matching methods

Foreign Exchange Intervention and Monetary Policy in Japan, 2003-04

This article examines the rationale behind the massive increase in Japanese foreign exchange market intervention operations in 2003-04, and evaluates its effectiveness both in limiting yen exchange rate appreciation and influencing the direction of monetary policy. The two main questions addressed in this study are: Was the intervention effective in slowing exchange rate appreciation compared to a counterfactual case with no intervention? And, has intervention on such a large scale authorized by the Ministry of Finance been able to directly influence liquidity creation or indirectly influence the stance of Bank of Japan policy?foreign exchange intervention; Japanese monetary policy

Is Foreign Exchange Market Intervention an Alternative to Monetary Policy? Evidence from Japan.

Japanese official intervention in the foreign exchange market is of by far the largest magnitude in the world, despite little or no evidence that it is effective in moving exchange rates. Up until recently, however, official data on intervention has not been available for Japan. This paper investigates the effectiveness of intervention using recently published official daily data and an exchange rate data, i.e. intense and sporadic bursts of intervention activity juxtaposed against a yen/dollar rate continuously changing, than standard time-series approaches. Focusing on daily Japanese and US official intervention operations, we identify separate intervention "episodes" and analyze the subsequent effect on the exchange rate. Using the non-parametric sign test and matched-sample test, we find strong evidence that sterilized intervention systematically affects the exchange rate in the short-run. This result holds even when intervention is not associated with (simultaneous) interest rate changes and regardless of whether or not intervention is "secret" (in the sense of no official reports or rumors of intervention reported over the newswires). To some extent intervention might be a useful policy instrument during the zero-interest rate policy period in Japan, effectively depreciating the value of the yen exchange rate (the "foolproof" policy proposed by Svensson, 2001), but the effects are likely to be short-term in nature.

IceCube Neutrinos from Hadronically Powered Gamma-Ray Galaxies

In this work we use a multi-messenger approach to determine if the high energy diffuse neutrino flux observed by the IceCube Observatory can originate from $\gamma$-ray sources powered by Cosmic Rays interactions with gas. Typical representatives of such sources are Starburst and Ultra-Luminous Infrared Galaxies. Using the three most recent calculations of the non-blazar contribution to the extragalactic $\gamma$-ray background measured by the Fermi-LAT collaboration, we find that a hard power-law spectrum with spectral index $\alpha \leq 2.12$ is compatible with all the estimations for the allowed contribution from non-blazar sources, within 1$\sigma$. Using such a spectrum we are able to interpret the IceCube results, showing that various classes of hadronically powered $\gamma$-ray galaxies can provide the dominant contribution to the astrophysical signal above 100 TeV and about half of the contribution to the energy flux between 10-100 TeV. With the addition of neutrinos from the Galactic plane, it is possible to saturate the IceCube signal at high energy. Our result shows that these sources are still well motivated candidates.Comment: Accepted for publication on JCA