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.

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.

Public and Private Partner Selection in Battle of Sexes

2015 ◽  
Vol 6 (2) ◽  
pp. 47-64
Author(s):  
Pedro Mariano ◽  
Davide Nunes ◽  
Luís Correia
Keyword(s):  
Private Information ◽  
Public Information ◽  
Partner Selection ◽  
Population Diversity ◽  
Minor Role ◽  
Public And Private ◽  
Is Strategy ◽  
Opinion Model ◽  
A Minor

In this paper the authors investigate what factors can promote population diversity. They compare different partner selection models and strategy mobility on the Battle of Sexes game. This is a game with a coordination dilemma where players must decide which event to attend given that each one has its preferred event but they prefer going together. They investigate two types of partner selection: one based in private information and another based on public information, which is based on an opinion model. The authors analyze two variants of the opinion model. Experimental analysis shows that partner selection plays a minor role of favoring population diversity. One of the most important factors is strategy mobility either implicitly through mutation or explicitly when an offspring is placed in a different location.

scholarly journals O Conteúdo Informacional das Transações no Mercado Futuro de Câmbio: uma investigação do caso brasileiro

2016 ◽  
Vol 14 (1) ◽  
pp. 7
Author(s):  
Vanessa Neumann Sulzbach ◽  
João Mergulhão ◽  
Pedro L. Valls Pereira
Keyword(s):  
Asymmetric Information ◽  
Exchange Rates ◽  
Private Information ◽  
Market Liquidity ◽  
Structural Var ◽  
Order Flow ◽  
Trading Costs ◽  
Price Variation ◽  
Efficient Price ◽  
Fx Market

The microstructure approach to exchange rates have received special attention in recent years, particularly because it highlights the existence of asymmetric information in this market. The Brazilian future FX market data provided from BM&F was used to test the private information effects of trading on prices. The structural VAR results confirm the existence of asymmetric information in this market, indicating that roughly 50% of all efficient price variation is due to the private information of the order flow. Additionally, the order flow observation allows the informed and uninformed arrival rates estimation, which we use to calculate the probability of information-based trade (PIN). High PIN value leads to wide spreads, which reduces the market liquidity. The PIN results about 1.53% indicate the liquidity of Brazilian future FX market is quite high, what impound fewer trading costs for the uninformed agents.

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.

Public and Private Net Savings in Developing Countries: Some Empirical Tests for the Period 1972-88 (Distinguishedl Lecture)

1992 ◽  
Vol 31 (4I) ◽  
pp. 431-447
Author(s):  
Peter A. Cornelisse ◽  
Elma Van De Mortel
Keyword(s):  
Public Debt ◽  
World Economy ◽  
Socioeconomic Development ◽  
Critical Size ◽  
Public And Private ◽  
Critical Dimensions ◽  
The Public ◽  
Empirical Tests ◽  
Financial Issues

The severe shocks that rocked the world economy in the 1970s and the ensuing efforts to adjust and to renew economic growth have had a profound effect on the economic literature. Especially the external and public debt problems which reached critical dimensions in many countries attracted much attention. Thus, in the field of macroeconomics financial issues have gained more prominence over the last two decades. Studies relating to the fiscal deficit have been particularly numerous. The critical size of national public debts, the contribution of the public debt to external debt, the reduced confidence in the state as the guide in socioeconomic development and the role of fiscal policy in adjustment processes are among the main reasons for this increased interest.

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