This study shows that order flow in a foreign exchange market only has permanent price impact if it comes from certain regions. These regions are as predicted by the local information hypothesis centers of political and financial decision making. It is revealing that orders from other regions...

This paper investigates the strategic incentives for vertical foreign investment by risk-neutral oligopolistic firms and the effect of exchange rate uncertainty on such investment. Firms competing in a domestic final good market meet their input requirements through import. They have the option...

In this paper, we analyze which currencies can be regarded as safe haven currencies. Our empirical approach allows us to distinguish between a low- and high stress regime, and to control for the impact of carry trade reversals and other fundamental determinants. We therefore address the question...

We study the relationship between foreign exchange trading activity and volatility on the USD/EUR foreign exchange market on the basis of a unique data set around the events of 09/11/2001. We find that volatility and bid-ask spreads are by far larger at that time, but the shock is not...