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Michael M Hutchison - One of the best experts on this subject based on the ideXlab platform.
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evaluating foreign exchange Market Intervention self selection counterfactuals and average treatment effects
Social Science Research Network, 2008Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract:Estimating the effect of official foreign exchange Market Intervention is complicated by the fact that Intervention at any point entails a self-selection choice made by the authorities and that no counterfactual is observed. To address these issues, we estimate the counterfactual exchange rate movement in the absence of Intervention by introducing the method of propensity score matching to estimate the average treatment effect (ATE) of Intervention. To derive the propensity scores we introduce a new Intervention reaction function that includes the difference between Market expectations and official announcements of macroeconomic developments that can influence the decision to intervene. We estimate the ATE for daily official Intervention in Japan 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 and ineffective (or possibly counterproductive) during 2003 and 2004. These results hold up to a variety of robustness tests. Only sporadic and relatively infrequent Intervention appears to be effective.
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evaluating foreign exchange Market Intervention self selection counterfactuals and average treatment effects
Research Papers in Economics, 2006Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract: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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effectiveness of official daily foreign exchange Market Intervention operations in japan
Journal of International Money and Finance, 2006Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract: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 event study methodology. The event study better fits the stochastic properties of Intervention and 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 systemically affects the exchange rate in the short-run (less than one month). This result holds even when Intervention is not associated with (simultaneous) interest rate changes, whether or not Intervention is "secret" (in the sense of no official reports or rumors of Intervention reported over the newswires), and against other robustness checks. Large-scale (amounts over $1 billion) Intervention, coordinated with the Bank of Japan and the Federal Reserve working in unison, give the highest success rate. During the period that the Bank of Japan has reduced interbank rates to 0.5 percent and below (from September 1995), however, only one Intervention operation has been coordinated with the Fed and the success rate has been correspondingly low.
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is sterilised foreign exchange Intervention effective after all an event study approach
The Economic Journal, 2003Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract:This study provides evidence supporting the effectiveness of sterilised foreign exchange Market Intervention by central banks using an event study approach. An event study framework is better suited to the study of sporadic and intense periods of official Intervention, juxtaposed with continuously changing exchange rates, than standard time-series studies. Focusing on daily Bundesbank and US official Intervention operations, we identify separate Intervention ‘episodes’ and analyse the subsequent effect on the exchange rate. Using the non-parametric sign test and matched-sample test, we find strong evidence that sterilised Intervention systemically affects the exchange rate in the short run. This result is robust to changes in event window definitions over the short run and to controlling for central bank interest rate changes during events.
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is Intervention a signal of future monetary policy evidence from the federal funds futures Market
Journal of Money Credit and Banking, 1999Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract:Sterilized foreign exchange Market intervelltioll may affect the exchange rate if it signals future monetary policy actions. Sigllaling will be effective if the celltral bank backs up interventioll with predictable changes in the stance of molletary policy and, in turn, affects currellt expectations. We investigate whether illtervention operations in the United States are lelated to changes in expectatiolls over the stance of future monetary policy, whele expectations are proxied by ifederal funds futures rates. This relatively new futures Market instrument has proved to be all efficiellt and ullbiased predictor of the future spot federal funds rate. Estimates obtained from a GARCH time-series model over the l 989-93 period using daily data do not suppol1 the signalillg hypothesis: dollar-suppolt Intervention is not related to a rise in expected future short-term interest ates (monetary tightening). However, Intervention appears to significantly increase the conditional variance of federal funds futures rates, suggesting that it adds considerable noise to the Market alld possibly increasing the degree of uncertainty ovet the future course of molletary policy. THE EFFECT OF FOREIGN EXCHANGE Market Intervention on exchange rates is a subject of continuing controversy. Few doubt that unsterilized Intervention may affect nominal exchange rates by changing interest rates and monetary aggregates. However, the effect of sterilized Intervention on exchange rates is less clear. The "portfolio balance" channel, through which sterilized Intervention changes the currency denomination of relative asset supplies and thereby the exchange risk premium if assets are imperfect substitutes, has received little empirical support (for example, Rogoff 1984; Humpage 1991; Edison 1993; Sweelaey 1995,
Rasmus Fatum - One of the best experts on this subject based on the ideXlab platform.
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evaluating foreign exchange Market Intervention self selection counterfactuals and average treatment effects
Social Science Research Network, 2008Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract:Estimating the effect of official foreign exchange Market Intervention is complicated by the fact that Intervention at any point entails a self-selection choice made by the authorities and that no counterfactual is observed. To address these issues, we estimate the counterfactual exchange rate movement in the absence of Intervention by introducing the method of propensity score matching to estimate the average treatment effect (ATE) of Intervention. To derive the propensity scores we introduce a new Intervention reaction function that includes the difference between Market expectations and official announcements of macroeconomic developments that can influence the decision to intervene. We estimate the ATE for daily official Intervention in Japan 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 and ineffective (or possibly counterproductive) during 2003 and 2004. These results hold up to a variety of robustness tests. Only sporadic and relatively infrequent Intervention appears to be effective.
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evaluating foreign exchange Market Intervention self selection counterfactuals and average treatment effects
Research Papers in Economics, 2006Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract: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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effectiveness of official daily foreign exchange Market Intervention operations in japan
Journal of International Money and Finance, 2006Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract: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 event study methodology. The event study better fits the stochastic properties of Intervention and 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 systemically affects the exchange rate in the short-run (less than one month). This result holds even when Intervention is not associated with (simultaneous) interest rate changes, whether or not Intervention is "secret" (in the sense of no official reports or rumors of Intervention reported over the newswires), and against other robustness checks. Large-scale (amounts over $1 billion) Intervention, coordinated with the Bank of Japan and the Federal Reserve working in unison, give the highest success rate. During the period that the Bank of Japan has reduced interbank rates to 0.5 percent and below (from September 1995), however, only one Intervention operation has been coordinated with the Fed and the success rate has been correspondingly low.
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is sterilised foreign exchange Intervention effective after all an event study approach
The Economic Journal, 2003Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract:This study provides evidence supporting the effectiveness of sterilised foreign exchange Market Intervention by central banks using an event study approach. An event study framework is better suited to the study of sporadic and intense periods of official Intervention, juxtaposed with continuously changing exchange rates, than standard time-series studies. Focusing on daily Bundesbank and US official Intervention operations, we identify separate Intervention ‘episodes’ and analyse the subsequent effect on the exchange rate. Using the non-parametric sign test and matched-sample test, we find strong evidence that sterilised Intervention systemically affects the exchange rate in the short run. This result is robust to changes in event window definitions over the short run and to controlling for central bank interest rate changes during events.
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is Intervention a signal of future monetary policy evidence from the federal funds futures Market
Journal of Money Credit and Banking, 1999Co-Authors: Rasmus Fatum, Michael M HutchisonAbstract:Sterilized foreign exchange Market intervelltioll may affect the exchange rate if it signals future monetary policy actions. Sigllaling will be effective if the celltral bank backs up interventioll with predictable changes in the stance of molletary policy and, in turn, affects currellt expectations. We investigate whether illtervention operations in the United States are lelated to changes in expectatiolls over the stance of future monetary policy, whele expectations are proxied by ifederal funds futures rates. This relatively new futures Market instrument has proved to be all efficiellt and ullbiased predictor of the future spot federal funds rate. Estimates obtained from a GARCH time-series model over the l 989-93 period using daily data do not suppol1 the signalillg hypothesis: dollar-suppolt Intervention is not related to a rise in expected future short-term interest ates (monetary tightening). However, Intervention appears to significantly increase the conditional variance of federal funds futures rates, suggesting that it adds considerable noise to the Market alld possibly increasing the degree of uncertainty ovet the future course of molletary policy. THE EFFECT OF FOREIGN EXCHANGE Market Intervention on exchange rates is a subject of continuing controversy. Few doubt that unsterilized Intervention may affect nominal exchange rates by changing interest rates and monetary aggregates. However, the effect of sterilized Intervention on exchange rates is less clear. The "portfolio balance" channel, through which sterilized Intervention changes the currency denomination of relative asset supplies and thereby the exchange risk premium if assets are imperfect substitutes, has received little empirical support (for example, Rogoff 1984; Humpage 1991; Edison 1993; Sweelaey 1995,
Guillermo A Calvo - One of the best experts on this subject based on the ideXlab platform.
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interest rate rules inflation stabilization and imperfect credibility the small open economy case
Social Science Research Network, 2007Co-Authors: Guillermo A CalvoAbstract:The paper examines the robustness of Interest Rate Rules, IRRs, in the context of an imperfectly credible stabilization program, closely following the format of much of the literature in open-economy models, e.g., Calvo and Vegh (1993 and 1999). A basic result is that IRRs, like Exchange Rate Based Stabilization, ERBS, programs, could give rise to macroeconomic distortion, e.g., underutilization of capacity and real exchange rate misalignment. However, while under imperfect credibility EBRS is associated with overheating and current account deficits, IRRs give rise to opposite results. Moreover, the paper shows that popular policies to counteract misalignment, like Strategic Foreign Exchange Market Intervention or Controls on International Capital Mobility may not be effective or could even become counterproductive. The bottom line is that the greater exchange rate flexibility granted by IRRs is by far not a sure shot against the macroeconomic costs infringed by imperfect credibility.
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interest rate rules inflation stabilization and imperfect credibility the small open economy case
Research Papers in Economics, 2007Co-Authors: Guillermo A CalvoAbstract:The paper examines the robustness of Interest Rate Rules, IRRs, in the context of an imperfectly credible stabilization program, closely following the format of much of the literature in open-economy models, e.g., Calvo and Vegh (1993 and 1999). A basic result is that IRRs, like Exchange Rate Based Stabilization, ERBS, programs, could give rise to macroeconomic distortion, e.g., underutilization of capacity and real exchange rate misalignment. However, while under imperfect credibility EBRS is associated with overheating and current account deficits, IRRs give rise to somewhat opposite results. Moreover, the paper shows that popular policies to counteract misalignment, like Strategic Foreign Exchange Market Intervention or Controls on International Capital Mobility may not be effective or could even become counterproductive. The bottom line is that the greater exchange rate flexibility granted by IRRs is by far not a sure shot against the macroeconomic costs infringed by imperfect credibility.
Nicholas Corsaro - One of the best experts on this subject based on the ideXlab platform.
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the high point drug Market Intervention examining impact across target areas and offense types
Victims & Offenders, 2013Co-Authors: Nicholas CorsaroAbstract:Abstract The High Point Police Department in North Carolina was the first law enforcement agency to implement a series of “pulling levers” Interventions in specific neighborhoods in order to reduce crime problems associated with street-level drug Markets. The High Point Drug Market Intervention (DMI) has since received considerable attention among practitioner and researcher audiences given the promise of the strategy seen in prior research. However, no study to date has examined the relative impacts across the different target neighborhood contexts as well as among crime outcomes within High Point. A series of interrupted time series models indicates the initial neighborhood (West End) experienced the greatest offense reductions between the preIntervention and postIntervention period. The second site (Daniel Brooks) showed more modest crime declines, and the latter two sites (Southside and East Central) did not demonstrate significant crime changes. Potential explanations and directions for future studie...
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are suppression and deterrence mechanisms enough examining the pulling levers drug Market Intervention strategy in peoria illinois usa
International Journal of Drug Policy, 2013Co-Authors: Nicholas Corsaro, Rodney K BrunsonAbstract:Abstract Background Police agencies across the globe enforce laws that prohibit drug transportation, distribution, and use with varying degrees of effectiveness. Within the United States, law enforcement strategies that rely on partnerships between criminal justice officials, neighbourhood residents, and social service providers (i.e., collaborative implementation) have shown considerable promise for reducing crime and disorder associated with open-air drug Markets. The current study examines a comprehensive police enforcement strategy conducted in Peoria, Illinois (USA) designed to reduce patterns of crime and violence associated with an open-air drug Market in a specific neighbourhood. Methods Change in neighbourhood crime was assessed using Autoregressive Integrated Moving Average (ARIMA) interrupted time series analysis. Further, target area residents were surveyed to gauge their awareness of the police Intervention as well as perceived changes in local crime patterns. Results Analyses indicate that the Intervention did not produce significant changes in neighbourhood crime offense rates between pre- and post-Intervention periods. In addition, the majority of surveyed residents within the target area did not demonstrate an awareness of the Intervention nor did they report perceived changes in local crime patterns. Conclusions Study findings suggest that police-led approaches in the absence of high levels of community awareness and involvement may have less capacity to generate crime-control when focusing on open-air drug Markets. We propose that police agencies adopting this strategy invest considerable resources toward achieving community awareness and participation in order to increase the potential for attaining significant and substantive programmatic impact.
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the impact of drug Market pulling levers policing on neighborhood violence an evaluation of the high point drug Market Intervention
Criminology and public policy, 2012Co-Authors: Nicholas Corsaro, Eleazer D Hunt, Natalie Kroovand Hipple, Edmund F McgarrellAbstract:Research Summary Pulling levers policing draws upon the focused deterrence framework, which has shown considerable promise when directed at youth, gun, and gang offenders. However, much less is known about the viability of pulling levers when applied to different contexts as well as to diverse groups of offenders. We examine the High Point (North Carolina) Drug Market Intervention (DMI), the first site to use pulling levers as a place-based policing approach to disrupt a series of open-air drug Markets across the city. Eleven years of longitudinal data are analyzed by using difference-in-difference panel regression analyses combined with finite mixture estimation as a means to test for divergence in violent crime patterns. Several key, although inconsistent, findings are presented. First, we found a statistically significant reduction in violent offenses in specific high-crime places (i.e., high-trajectory census blocks) located across the different targeted neighborhoods compared with the remainder of High Point, and relative to comparable nontargeted areas. Second, the citywide violent crime rate actually increased after a series of Interventions unfolded, which may suggest limitations with the approach. Finally, trend analyses indicated the strategy had different levels of violent crime impact throughout unique geographic contexts. Policy Implications Rather than arresting every offender identified as having participated in illicit drug trafficking across various geographic contexts within the city, officials in High Point decided to invite low-risk drug offenders to community notification sessions in order to change their perceived risk of punishment as well as to mobilize community members across the different targeted neighborhoods. The suggestive evidence of potential, although limited, violent crime impact illustrates that this type of policing strategy may hold considerable promise. This interpretation gains credence when considered with prior evaluations of the DMI approach that illustrated the potential for reducing drug-related crime and in light of reports of improved police–community relations. The inconsistent findings across all locations and the overall city increase in violent crime toward the end of the study period, however, raise several concerns when interpreting study results. Additionally, our findings suggest that further replications should include systematic problem-identification, process measures, and more precise research designs.
Anna J Schwartz - One of the best experts on this subject based on the ideXlab platform.
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on the evolution of u s foreign exchange Market Intervention thesis theory and institutions
NBER Chapters, 2016Co-Authors: Michael D Bordo, Owen F Humpage, Anna J SchwartzAbstract:Attitudes about foreign-exchange-Market Intervention in the United States evolved in tandem with views about monetary policy as policy makers grappled with the perennial problem of having more economic objectives than independent instruments with which to achieve them. This paper?the introductory chapter to our history of U.S. foreign exchange Market Intervention?explains this thesis and summarizes our conclusion: The Federal Reserve abandoned frequent foreign-exchange-Market Intervention because, rather than providing a solution to the instruments-versus-objectives problem, it interfered with the Federal Reserve?s ability to credibly commit to low and stable inflation. This chapter also provides a theoretical discussion of Intervention, background on U.S. institutions for conducting Intervention, and a roadmap to the remainder of our book. (This abstract was borrowed from another version of this item.)
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on the evolution of u s foreign exchange Market Intervention thesis theory and institutions
Research Papers in Economics, 2011Co-Authors: Michael D Bordo, Owen F Humpage, Anna J SchwartzAbstract:Attitudes about foreign-exchange-Market Intervention in the United States evolved in tandem with views about monetary policy as policy makers grappled with the perennial problem of having more economic objectives than independent instruments with which to achieve them. This paper—the introductory chapter to our history of U.S. foreign exchange Market Intervention—explains this thesis and summarizes our conclusion: The Federal Reserve abandoned frequent foreign-exchange-Market Intervention because, rather than providing a solution to the instruments-versus-objectives problem, it interfered with the Federal Reserve’s ability to credibly commit to low and stable inflation. This chapter also provides a theoretical discussion of Intervention, background on U.S. institutions for conducting Intervention, and a roadmap to the remainder of our book.
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u s foreign exchange Market Intervention during the volcker greenspan era
National Bureau of Economic Research, 2010Co-Authors: Michael D Bordo, Owen F Humpage, Anna J SchwartzAbstract:The Federal Reserve abandoned foreign-exchange-Market Intervention because it conflicted with the System's commitment to price stability. By the early 1980s, economists generally concluded that, absent a portfolio-balance channel, sterilized foreign-exchange-Market Intervention did not provide central banks with a mechanism for systematically influencing exchange rates independent of their monetary policies. If Intervention were to have anything other than a fleeting, hit-or-miss, effect on exchange rates, monetary policy had to support it. Exchange rates, however, often responded to U.S. monetary-policy initiatives, so Intervention to offset or reverse those exchange-rate responses can seem a contrary policy move and can create uncertainty about the strength of the System's commitment to price stability. That the U.S. Treasury maintained primary responsibility for foreign-exchange Intervention only compounded this uncertainty. In addition, many FOMC participants feared that swap drawings and warehousing could contravene the Congressional appropriations process and, therefore, potentially pose a threat to System independence, a necessary condition for monetary-policy credibility.
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the rise and fall of foreign exchange Market Intervention
National Bureau of Economic Research, 2000Co-Authors: Anna J SchwartzAbstract:The premise of the paper is that the fervor for foreign exchange Market Intervention by U.S, and European monetary authorities has ebbed in recent years. A pattern of initial belief in the effectiveness of foreign exchange Market Intervention has recently been eroded, as is revealed by the absence of Intervention in circumstances that in earlier times would have invoked it. Only the Bank of Japan among central banks of the developed world has not thusfar abandoned its faith that Intervention can change the relative value of the yen as determined by Market forces to conform with its notion of what that value should be. To explain why U.S. and European monetary authorities no longer believe that Intervention is a tool that works, I review the equivocal record of past episodes, the inconclusive results of empirical research, and the problems of implementation that Intervention advocates ignore.