Question A:
It seems likely that Japanese authorities intervened in the foreign exchange market recently to prop up the yen – see, for example: https://www.ft.com/content/455784ec-0465-46ee-8c73-fc5ce3e31c37. In such circumstances, intervention refers to purchases or sales of domestic or foreign currency without changing the monetary policy stance.
Large-scale intervention by public authorities in currency markets can move exchange rates substantially.
Responses
Responses weighted by each expert's confidence
Question B:
The effectiveness of foreign exchange interventions can last beyond one month.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 John Campbell |
Harvard | Bio/Vote History | ||
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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It depends what kind of intervention. A country can peg its exchange rate, if it commits to unlimited buying and selling, and to tax as necessary to back the peg. Whatever it takes. Tentative quantity limited interventions can invite contrary speculative attack.
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 Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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 Wenxin Du |
Columbia | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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FX arbitrageurs have limited short-run capital (e.g. Gabaix-Maggiori). Significant FX purchases by central banks, as with Japan, cause a large demand shock, with some credibility. of more to follow. The currency price can therefore rise substantially, at least in the short term.
-see background information here |
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 Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Eugene Fama |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Modern models and empirical work find FX markets to be medium-run inelastic. See also successful interventions by Israel and Switzerland during the financial crisis (buying ~20-40% worth of GDP of foreign currency).
-see background information here -see background information here |
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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 Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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 Wei Jiang |
Emory Goizueta | Did Not Answer | Bio/Vote History | |
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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can is important, does not necessarily always happen
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 Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Intervention has an impact via financial frictions on exchange rate markets. The more constrained the risk bearing capacity of the private market, the more intervention (for given size) moves the exchange rate
-see background information here -see background information here -see background information here |
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 Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Tobias Moskowitz |
Yale School of Management | Did Not Answer | Bio/Vote History | |
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Recent empirical evidence suggests effectiveness, under some conditions
-see background information here |
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Countries can control the international value of their own currency because they can control the supply and the interest rate earned by foreign (short-term) investors. A country can be unable to support its currency if it has insufficient fiscal capacity.
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 Christine Parlour |
Berkeley Haas | Did Not Answer | Bio/Vote History | |
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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 Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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 Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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If there is a movement it would be only temporary.
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Official FX intervention may move the exchange rate in the short run, but the exchange rate reflects underlying differences in fundamentals that make intervention unlikely to succeed in the longer run. Sterilised intervention is less effective.
-see background information here |
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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John Campbell |
Harvard | Bio/Vote History | ||
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Longer-run effects are always hard to demonstrate with statistical confidence.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Again, "interventions" come in many flavors. A firm peg can last a long time. A tentative one time purchase blaming "fragmentation" or "dysfunction" less so. Asset pricing is all about expectations, monetary policy all about rules and commitments, not one time actions.
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Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Wenxin Du |
Columbia | Bio/Vote History | ||
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If the country has abundant amount of FX reserves, effectiveness of FX interventions can last for a while.
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Investors can interpret significant purchases by a deep-pocketed central bank as a signal of an intent to purchase as needed to maintain prices and punish shorters, for a period that could be longer than a month. FX managers are known to have persistent macro-monetary objectives.
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Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Eugene Fama |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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Wei Jiang |
Emory Goizueta | Did Not Answer | Bio/Vote History | |
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Over a month horizon, it would be clear that the monetary policy stance has not changed, hard to see how the intervention would have a durable effect.
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Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Clean empirical evidence is hard to find. Intervention is endogenous and so far we do not have papers credibly identifying the effects. My judgement comes from combining theory and existing evidence, so uncertainty is high, but on balance more positive than negative on effects.
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Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Tobias Moskowitz |
Yale School of Management | Did Not Answer | Bio/Vote History | |
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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See the example of a fixed exchange rate, which is a situation where a country uses intervention in the exchange market to maintain an exact value for its currency over many years (until it doesn't any more).
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Christine Parlour |
Berkeley Haas | Did Not Answer | Bio/Vote History | |
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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The answer depends on the circumstances but it will be short term
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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