Private information, capital flows, and exchange rates

Jacob Gyntelberg, Mico Loretan, and Tientip Subhanij

We demonstrate empirically that not all capital flows influence exchange rates equally: Capital flows induced by foreign investors' stock market transactions have both an economically significant and a permanent impact on exchange rates, whereas capital flows induced by foreign investors' transactions in government bond markets do not. We relate these differences in the price impact of capital flows to differences in the amounts of private information conveyed by these flows. Our empirical findings are based on novel, daily-frequency datasets on prices and quantities of all transactions of for

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Year of publication:	2012
Authors:	Gyntelberg, Jacob ; Loretan, Mico ; Subhanij, Tientip
Publisher:	Washington, DC : Internat. Monetary Fund
Subject:	Kapitalmobilität \| Capital mobility \| Wechselkurs \| Exchange rate \| Asymmetrische Information \| Asymmetric information \| Marktmikrostruktur \| Market microstructure

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Extent:	Online-Ressource (PDF-Datei: 27 S., 903 KB) graph. Darst.
Series:	IMF working papers. - Washington, DC : IMF, ZDB-ID 2108494-4. - Vol. 12/213 IMF Working Papers
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Includes bibliographical references Systemvoraussetzungen: Acrobat Reader Cover; Contents; I. Introduction; II. The Markets and the Data; A. Sample Period and Foreign Investor Definition; B. The Onshore FX Market; C. The Equity Market; D. The Bond Market; III. Private Information and FX Markets; Tables; 1. Autocorrelations in foreign investors' net daily order flow; IV. Empirical Results; 2. Variable mnemonics and descriptions; A. FX Order Flow Induced by Stock and Bond Market Transactions; 3. Influence of stock and bond market variables on FX flows; B. Order Flow Regression; 4. FX order flow regression C. Longer-Run Impact of Portions of FX Order Flow on the Exchange RateFigure; 1. Short and longer-term THB/USD exchange rate responses to FX order flow shocks; D. Possible Alternative Explanations; 1. Hedging Activity; 5. Determinants of FX swap order flow; 2. Carry Trade Activity; V. Concluding Remarks; References Electronic reproduction; Available via World Wide Web
ISBN:	978-1-4755-0563-4 ; 978-1-4755-4777-1 ; 978-1-4755-0563-4
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10009621637