scholarly journals Macroeconomic News, Order Flows, and Exchange Rates

2008 ◽  
Vol 43 (2) ◽  
pp. 467-488 ◽  
Author(s):  
Ryan Love ◽  
Richard Payne
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Public Information ◽  
Relevant Information ◽  
Order Flow ◽  
Macroeconomic News ◽  
Market Participants ◽  
Macroeconomic Announcements ◽  
Information Assimilation ◽  
Micro Level

AbstractIn textbook models of exchange rate determination, the news contained in public information announcements is directly impounded into prices with there being no role for trading in this process of information assimilation. This paper directly tests this theoretical result using transaction level exchange rate return and trading data and a sample of scheduled macroeconomic announcements. The main result of the paper is that even information that is publicly and simultaneously released to all market participants is partially impounded into prices via the key micro level price determinant—order flow. We quantify the role that order flow plays and find that approximately one third of price-relevant information is incorporated via the trading process.

scholarly journals Entropic Dynamics of Exchange Rates and Options

Entropy ◽  
2019 ◽  
Vol 21 (6) ◽  
pp. 586 ◽  
Author(s):  
Mohammad Abedi ◽  
Daniel Bartolomeo
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Inductive Inference ◽  
Relevant Information ◽  
Scale Transformation ◽  
European Options ◽  
No Arbitrage ◽  
Model Dynamics ◽  
The Exchange Rate ◽  
Entropic Dynamics

An Entropic Dynamics of exchange rates is laid down to model the dynamics of foreign exchange rates, FX, and European Options on FX. The main objective is to represent an alternative framework to model dynamics. Entropic inference is an inductive inference framework equipped with proper tools to handle situations where incomplete information is available. Entropic Dynamics is an application of entropic inference, which is equipped with the entropic notion of time to model dynamics. The scale invariance is a symmetry of the dynamics of exchange rates, which is manifested in our formalism. To make the formalism manifestly invariant under this symmetry, we arrive at choosing the logarithm of the exchange rate as the proper variable to model. By taking into account the relevant information about the exchange rates, we derive the Geometric Brownian Motion, GBM, of the exchange rate, which is manifestly invariant under the scale transformation. Securities should be valued such that there is no arbitrage opportunity. To this end, we derive a risk-neutral measure to value European Options on FX. The resulting model is the celebrated Garman–Kohlhagen model.

Macroeconomic News and Exchange Rates: Exploring the Role of Order Flow

2021 ◽  
pp. 097491012110401
Author(s):  
Munazza Jabeen ◽  
Abdul Rashid
Keyword(s):  
Exchange Rates ◽  
Private Information ◽  
Foreign Exchange Market ◽  
Order Flow ◽  
Time Data ◽  
Macroeconomic News ◽  
Public And Private ◽  
Market Makers ◽  
News Announcements

This article studies the effects of macroeconomic news announcements and order flow on exchange rates in Pakistan by considering both direct and indirect information channels during news announcements periods. For this purpose, it employs GARCH models by using real-time data on macroeconomic news, order flow, and exchange rates. The findings reveal that macroeconomic news directly, and indirectly affect Pak Rupee exchange rates. The results also show that the order flow drives fluctuations in Pak Rupee exchange rates indicating the role of trade signals and trading strategies of currency traders in the exchange rate determination. Hence, as part of an aggregated economic component and means of public and private information, macroeconomic news and order flow impact Pak Rupee exchange rates as an integrated determinant. When macroeconomic news strikes the foreign exchange market, it affects the decisions of market makers, influencing order flow, and then exchange rates.

Modeling Global Wine Markets to 2018: Exchange Rates, Taste Changes, and China's Import Growth

2013 ◽  
Vol 8 (2) ◽  
pp. 131-158 ◽  
Author(s):  
Kym Anderson ◽  
Glyn Wittwer
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Import Demand ◽  
The Other ◽  
Market Participants ◽  
Taste Changes ◽  
Major Development ◽  
Jel Classifications ◽  
Wine Markets

AbstractIn this paper, we use a revised, expanded, and updated version of a global model first developed by Wittwer et al. (2003) to project the wine markets of its 44 countries plus seven residual country groups to 2018. Because real exchange rate (RER) changes have played a key role in the fortunes of wine market participants in some countries in recent years, we use the model to analyze their impact, first retrospectively during 2007–11 and then prospectively during the period to 2018 under two alternative sets of RERs: no change, and a halfway return to 2009 rates. In both scenarios, we assume a return to the gradual trend toward premium wines and away from nonpremium wines. The other major development expected to affect the world's wine trade is growth in China's import demand. Alternative simulations provide a range of possibilities, but even the low-growth scenario suggests that China's place in global wine markets is likely to become increasingly prominent. (JEL Classifications: C53, F11, F17, Q13).

The nexus between the exchange rates and interest rates: evidence from BRIICS economies during the COVID-19 pandemic

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bhavesh Garg ◽  
K.P. Prabheesh
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Relevant Information ◽  
Content Type ◽  
Outbreak Period ◽  
Short Run ◽  
The Interest Rate ◽  
Interest Rate Differentials

Purpose This paper aims to investigate whether the interest rate differentials Granger cause expected change in the exchange rate during the COVID-19 period. The study examines if the investors in the international assets and exchange rate markets take advantages of the relevant information obtained during the COVID-19 pandemic. Design/methodology/approach This paper used daily data ranging from January 31, 2020 to June 30, 2020 and considered BRIICS economies. The study implemented the Toda–Yamamoto’s Granger causality approach to identify the causality between interest rate differentials and exchange rates. For robustness checks, the study used ARLD short-run dynamics to infer causal relations. Findings Overall, the results indicate that the interest rate differentials improve the predictability of subsequent exchange rate changes in all six BRIICS economies during the COVID-19 period wherein investors are forward-looking. The empirical results pass the robustness checks. Originality/value There is a lack of studies exploring the relationship between interest rate differentials and exchange rates in the presence of an unanticipated event such as the current pandemic. To the best of the authors’ knowledge, this is the first study to explore the causal linkages between interest rate differentials and expected change in exchange rates, focusing on the COVID-19 outbreak period.

Information content of order flows in the FX market: importance of nonfundamental factors

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yacine Hammami ◽  
Sabrine Kharrat
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Information Content ◽  
Explanatory Power ◽  
Empirical Work ◽  
Order Flow ◽  
Content Type ◽  
Exchange Rate Dynamics ◽  
Fx Market

PurposeThe purpose of the paper is to show that order flows determine exchange rate dynamics because they carry information about nonfundamental factors besides macroeconomic fundamentals.Design/methodology/approachTo understand the role of nonfundamental factors in driving order flows, this study uses two approaches. Initially, Evans and Rime (2016) VAR framework is followed to study the incremental information transmitted by order flow compared to macroeconomic variables. Then, the study uses the settings in which Rime et al. (2010) conduct their empirical work, which gives the researcher more latitude in specifying the identity of the factors that drive order flows.FindingsThe findings evidence that order flows explain the dynamics of the TND/USD exchange rate. The results highlight that order flows convey information about technical strategies, the currency systematic factors and political risk. This study also documents the presence of a Ramadan effect in exchange rates and order flows.Originality/valueThis study makes four contributions to the literature. First, it complements the literature on the FX microstructure of emerging markets. The study investigates the information content carried by order flows, while the previous literature has focused solely on examining the explanatory power of order flows to explain exchange rates in emerging countries. The second contribution is that the study demonstrates formally that order flows determine exchange rates because they transmit information about nonfundamental factors. Third, this study is the first to examine whether order flows convey information about technical analysis. Four, the study relates order flow to nontraditional factors that are relevant to the Tunisian FX market.

Fear of Free Floating or Forced Exchange Rate Fixing

2004 ◽  
pp. 112-122
Author(s):  
O. Osipova
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Float Exchange Rate ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate Arrangements ◽  
Pass Through

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

ANALISIS EKSPOSUR EKONOMI DAN FAKTOR-FAKTOR YANG MEMPENGARUHINYA PADA PERUSAHAAN ROKOK YANG TERCATAT DI BEI

Wahana ◽  
2019 ◽  
Vol 21 (2) ◽  
pp. 98-109
Author(s):  
Ida Musdafia Ibrahim ◽  
Arif Haryono
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Cash Flow ◽  
Firm Value ◽  
Tobacco Industry ◽  
Cash Flows ◽  
Least Square ◽  
Exchange Rate Risk ◽  
Positive Effects ◽  
Rate Risk

This study aims to analyze economic exposures and its factors namely exchange rates and inflation, that influence firm value as reflected through firm cash flow. Analytical method used Ordinary Least Square and eviews as analytical tool. This study used secondary data and cigarette industry companies listed on the Indonesia Stock Exchange as samples along 2008 to 2017. Samples choosing method used purposive sampling based on determined criterias. The results showed that partially economic exposure had positive effects on firm value but insignificant. These could be seen from the economic exposure factors influncenced namely exchange rates and inflations.The exchange rate risk has low influenced cash flow was caused of the tobacco industry has low level of export/import.Enhance,inflation also had low effect on cash flow was caused of the tendency of cigarette consumers will continue to buy cigarettes even though its price increases. In short, economic exposure in the tobacco industry has low influence toward firms value. Hence, simultaneously changes in exchange rates and inflation which are economic exposure indicators have a significant effect on cash flows.  Keywords: Economic Exposure, Exchange Rate Risk, Inflation Risk, Firms Value, Cash Flow

Exchange Rates as Exchange Rate Common Factors

2012 ◽  
Author(s):  
Ryan Greenaway ◽  
Nelson C. Mark ◽  
Donggyu Sul ◽  
Jyh-Lin Wu
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Common Factors
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