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Book The Dynamic Interaction of Order Flows and the CAD USD Exchange Rate

Download or read book The Dynamic Interaction of Order Flows and the CAD USD Exchange Rate written by Nikola Gradojevic and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "We explore the relationship between disaggregated order flow, the Canada/U.S. dollar (CAD/USD) market and U.S. macroeconomic announcements. Three types of CAD order flow and the CAD/USD are cointegrated. Financial order flow appears to contemporaneously drive the CAD/USD while commercial order flow seems to contemporaneously respond to exchange rate movements. Past order flow and lagged exchange rates strongly explain most types of order flow. Despite this predictability and the contemporaneous correlation of order flow with exchange rate returns, exchange rate returns are not predictable by either statistical or economic criteria (trading rule). This negative finding contrasts with that of Rime et al (2007), who use a different data set. There is strong evidence of structural breaks in the order-flow-exchange rate systems in 1994, 1996-1997 and 1999-2000"--Federal Reserve Bank of St. Louis web site.

Book Exchange Rate Dynamics

Download or read book Exchange Rate Dynamics written by Martin D. D. Evans and published by Princeton University Press. This book was released on 2011-03-14 with total page 561 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive and in-depth look at exchange-rate dynamics Variations in the foreign exchange market influence all aspects of the world economy, and understanding these dynamics is one of the great challenges of international economics. This book provides a new, comprehensive, and in-depth examination of the standard theories and latest research in exchange-rate economics. Covering a vast swath of theoretical and empirical work, the book explores established theories of exchange-rate determination using macroeconomic fundamentals, and presents unique microbased approaches that combine the insights of microstructure models with the macroeconomic forces driving currency trading. Macroeconomic models have long assumed that agents—households, firms, financial institutions, and central banks—all have the same information about the structure of the economy and therefore hold the same expectations and uncertainties regarding foreign currency returns. Microbased models, however, look at how heterogeneous information influences the trading decisions of agents and becomes embedded in exchange rates. Replicating key features of actual currency markets, these microbased models generate a rich array of empirical predictions concerning trading patterns and exchange-rate dynamics that are strongly supported by data. The models also show how changing macroeconomic conditions exert an influence on short-term exchange-rate dynamics via their impact on currency trading. Designed for graduate courses in international macroeconomics, international finance, and finance, and as a go-to reference for researchers in international economics, Exchange-Rate Dynamics guides readers through a range of literature on exchange-rate determination, offering fresh insights for further reading and research. Comprehensive and in-depth examination of the latest research in exchange-rate economics Outlines theoretical and empirical research across the spectrum of modeling approaches Presents new results on the importance of currency trading in exchange-rate determination Provides new perspectives on long-standing puzzles in exchange-rate economics End-of-chapter questions cement key ideas

Book The Dynamic Interaction of Exchange Rates and Trade Flows

Download or read book The Dynamic Interaction of Exchange Rates and Trade Flows written by William H. Branson and published by . This book was released on 1985 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the fifteen years since 1970, the theory of exchange-rate determination has been completely transformed. In the late 1960s, the standard model of the foreign exchange market had supply and demand as stable functions of exports and imports, with the expection that a floating rate would move gradually with relative price changes. However, the period of floating rates that began in the early 1970s has revealed that exchange rates exhibit the volatility of financial market prices.This experience, coupled with development of theory, led first to the"monetary" approach to exchange rate determination and then to the "asset market" approach. The monetary approach to exchange rate determination had essentially one-way causation from money to exchange rates, sometimes via purchasing power parity. The broader asset market approach assumes two-way causation.The exchange rate, in the asset-market view, is proximately determined by financial-market equilibrium conditions. It, in turn, influences the trade balance and the current account. The latter, in its turn, is the rate of accumulation of national claims on foreigners, and this feeds back into financial market equilibrium. Thus the asset market approach contains a dynamic feedback mechanism in foreign assets and exchange rates. This approach is called here a "fundamentals" model of exchange rate dynamics. Recent work on rational expectations adds a layer of expectations to the model. It is assumed that following an unexpected disturbance the market can anticipate where the fundamentals will move the system, and move the exchange rate in anticipation of that fundamentals path. This paper integrates the traditional elasticities and absorption approaches into the general equilibrium fundamentals model, and then add the expectations layer. The model is used to interpret recent shifts in U.S. fiscal policy and portfolio preferences for the dollar

Book Currencies  Capital Flows and Crises

Download or read book Currencies Capital Flows and Crises written by John T. Harvey and published by Routledge. This book was released on 2009-01-13 with total page 197 pages. Available in PDF, EPUB and Kindle. Book excerpt: Breaking from conventional wisdom, this book provides an explanation of exchange rates based on the premise that it is financial capital flows and not international trade that represents the driving force behind currency movements. John T. Harvey combines analyses rooted in the scholarly traditions of John Maynard Keynes and Thorstein Veblen with that of modern psychology to produce a set of new theories to explain international monetary economics, including not only exchange rates but also world financial crises. In the book, the traditional approach is reviewed and critiqued and the alternative is then built by studying the psychology of the market and balance of payments questions. The central model has at its core Keynes’ analysis of the macroeconomy and it assumes neither full employment nor balanced trade over the short or long run. Market participants’ mental model, which they use to forecast future exchange rate movements, is specified and integrated into the explanation. A separate but related discussion of currency crises shows that three distinct tension points emerge in booming economies, any one of which can break and signal the collapse. Each of the models is compared to post-Bretton Woods history and the reader is shown exactly how various shifts and adjustments on the graphs can explain the dollar’s ups and downs and the Mexican (1994) and Asian (1987) crises.

Book Asymmetric Price Impacts of Order Flow on Exchange Rate Dynamics

Download or read book Asymmetric Price Impacts of Order Flow on Exchange Rate Dynamics written by Viet Hoang Nguyen and published by . This book was released on 2011 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We generalize the portfolio shifts model advanced by Evans and Lyons (2002a; b), and develop the dynamic asymmetric portfolio shifts (DAPS) model by explicitly allowing for possible market under- and overreactions and for asymmetric pricing impacts of order flows. Using the Reuters D2000-1 daily trading data for eight currency markets over a four-month period from 1 May to 31 August 1996, we find strong evidence of a nonlinear cointegrating relationship between exchange rates and (cumulative) order flows: The price impact of negative order flows (selling pressure) is overwhelmingly stronger than that of the positive ones (buying pressure). Through the dynamic multiplier analysis, we find two typical patterns of the price discovery process. The markets following overreactions tend to display a delayed overshooting and a volatile but faster adjustment towards equilibrium whereas the market following underreactions are generally characterized by a gradual but persistent adjustment. In our model, these heterogeneous adjustment patterns reflect different liquidity provisions associated with different market conditions following under- and overreactions. In addition, the larger is the mispricing, the faster is the overall adjustment speed, a finding consistent with Abreu and Brunnermeier (2002) and Cai et al. (2011). We also find that underreactions are followed mostly by positive feedback trading while overreactions are characterized by delayed overshooting in the short run but corrected by negative feedback trading at longer horizons, the finding is consistent with Barberis et al. (1998) who show that positive short-run autocorrelations (momentum) signal underreaction while negative long-run autocorrelations (reversal) signal overreaction."--Abstract.

Book Exchange Rate Determination Puzzle

Download or read book Exchange Rate Determination Puzzle written by Falkmar Butgereit and published by Diplomica Verlag. This book was released on 2010 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: Still after more than thirty years of free floating exchange rates, large parts of exchange rate dynamics remain a puzzle. As this book shows, much progress has been made in explaining exchange rate movements over longer horizons. It also shows, however, that short-run movements are far more challenging to explain. The book is based upon a variety of papers, many of them released recently. A key aspiration of the literature has always been not only to explain past exchange rate behavior but also to forecast out of sample and to compare it to the simple random walk outcome. Here some development has been made after Meese and Rogoff's (1983) truculent verdict of the performance of common exchange rate models. By means of empirical analysis and descriptive statistics this book further supports the established long-run relationships between exchange rates and fundamentals such as expected productivity growth, real GDP growth, domestic investment, interest rates, inflation, government spending, and current account balances. It finds that these fundamentals affect the exchange rate to varying degrees over time. Turning to short-term exchange rate dynamics, it turns out that a different set of forces is at play. The key to explaining short-run movements is to be found in an extensive micro-foundation that factors in a pronounced heterogeneity among market participants and information asymmetries, as well as the possibility of sudden shifts in sentiment, beliefs, and the degree of risk aversion. Promising results have been obtained by order-flow analysis and high frequency data. Also, the consideration of chartism and speculators facilitates understanding for otherwise puzzling exchange rate movements. The last attempt to tackle the understanding of exchange rate behavior is the use of frequency domain analysis and in particular spectral analysis which tries to track down any cyclical patterns in the various moments of time series. And as we shall see forex indeed incorpor

Book The Dynamic Interaction of Exchange Rates and Trade Flows

Download or read book The Dynamic Interaction of Exchange Rates and Trade Flows written by and published by . This book was released on 1985 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Market Conditions  Order Flow and Exchange Rates Determination

Download or read book Market Conditions Order Flow and Exchange Rates Determination written by Jinhui Luo and published by . This book was released on 2002 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: In comparison to macroeconomic models of nominal exchange rates, the market microstructure approach performs better in explaining exchange rate changes over short time horizons. The microstructure approach implies that information in order flow drives the dynamic processes of price evolution. This paper studies the informativeness of order flow under different market conditions in the foreign exchange market. We find that order flow tends to be more informative when the market experiences large bid-ask spreads, high volatility or low trading volumes. We also identify nonlinearities in the relationship between order flow and foreign exchange rate changes and find that these nonlinearities can be captured by the Interaction model and the Logistic Smooth Transition Regression (LSTR) model.

Book Order Flow and Exchange Rate Dynamics

Download or read book Order Flow and Exchange Rate Dynamics written by Martin D. D. Evans and published by . This book was released on 1999 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a na‹ve random walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic determinants, the model includes a determinant from the field of microstructure-order flow. Order flow is the proximate determinant of price in all microstructure models. This is a radically different approach to exchange rate determination. It is also strikingly successful in accounting for realized rates. Our model of daily exchange-rate changes produces R2 statistics above 50 percent. Out of sample, our model produces significantly better short-horizon forecasts than a random walk. For the DM/$ spot market as a whole, we find that $1 billion of net dollar purchases increases the DM price of a dollar by about 1 pfennig.

Book Order Flow and Exchange Rate Co Movement

Download or read book Order Flow and Exchange Rate Co Movement written by Vincent Kleinbrod and published by . This book was released on 2017 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates how order flows drive dynamic co-movements of exchange rates. We allow for asymmetric correlation responses to positive/negative shocks, control for structural breaks, bid-ask spreads and volatility effect of order flows, employ alternative order flow measures, and consider different intraday frequencies. Order flow differences between five major currencies have significant negative effects on the co-movements of their exchange rates vis-à-vis the US dollar. There are two structural breaks in the correlation structures, due to the 2007 GFC and the 2010 EDC. Joint positive shocks are followed by greater comovements of the exchange rates studied than joint negative shocks.

Book End User Order Flow and Exchange Rate Dynamics

Download or read book End User Order Flow and Exchange Rate Dynamics written by Stefan Reitz and published by . This book was released on with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we provide evidence for Evans and Lyons' (2005b) model of an information aggregation process in FX markets, using a rich data base on a German bank's end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates over time, our empirical analysis does not support the widespread optimism in the market microstructure literature that customer order flow is a high-powered source of information easily exploitable for short-run speculation. Moreover, commercial customers' order flow produces negative coefficients in contemporaneous return regressions, stressing their role as liquidity providers.

Book Dynamic Interactions Between Trade Flows and Exchange Rates

Download or read book Dynamic Interactions Between Trade Flows and Exchange Rates written by Kazuo Ueda and published by . This book was released on 1980 with total page 254 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Common Factors  Order Flows  and Exchange Rate Dynamics

Download or read book Common Factors Order Flows and Exchange Rate Dynamics written by Valère Fourel and published by . This book was released on 2015 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: We built the largest dataset of high-frequency exchange rates so far. Our sample covers the spot prices and order flows of 19 currency pairs over the last 15 years measured on Reuters and EBS at the thirty-second frequency. We show that common, price-based factors describe exchange rate dynamics at high frequencies at least as well as the quantity-based order flows. The same price-based factors describe exchange rates over a large spectrum of frequencies, from 30 seconds to one month. While the descriptive power of order flows decreases when frequencies decrease, the descriptive power of common factors increases.

Book End User Order Flow and Exchange Rate Dynamics

Download or read book End User Order Flow and Exchange Rate Dynamics written by Stefan Reitz and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we provide evidence for Evans and Lyons' (2005b) model of an information aggregation process in FX markets using a German bank's end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates over time, our empirical analysis does not support the widespread optimism in the market microstructure literature that customer order flow is the high-powered source of information easily exploitable for short-run speculation. Moreover, commercial customers' order flow produces negative coefficients in contemporaneous return regressions, stressing their role as liquidity providers.

Book Order Flow Information and Spot Rate Dynamics

Download or read book Order Flow Information and Spot Rate Dynamics written by Martin D. D. Evans and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Essays on the dynamic interaction of trade and capital flows and exchange rates

Download or read book Essays on the dynamic interaction of trade and capital flows and exchange rates written by Nikolas Adam Muller-Plantenberg and published by . This book was released on 2005 with total page 422 pages. Available in PDF, EPUB and Kindle. Book excerpt: