INTRADAY EFFECTS OF FOREIGN-EXCHANGE INTERVENTION BY THE BANK-OF-JAPAN

We examine the effects of intervention by the Bank of Japan using intr aday data from Oct. 1, 1992 to Sept. 30, 1993. News related to the Ban k of Japan's intervention in the JPY/$ market was retrieved from Reute rs' headlines. We find that JPY/$ volatility varies significantly diff erently across periods from 1 h before to 1 h after Reuters' intervent ion reports. Results from ARCH models show that intervention by the Ba nk of Japan has a positive and significant impact on JPY/$ volatility, particularly at high frequencies (5- and 10-min intervals). We also f ind that our intervention proxy has the largest effect upon high frequ ency volatility 30 to 45 min prior to Reuters' reports. (C) 1998 Elsev ier Science Ltd. All rights reserved.