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Macroeconomic models of equity returns perform poorly. The proportion of daily index returns that these models explain is essentially zero. Instead of relying on macroeconomic determinants, our model includes a concept from microstructure - order flow. Order flow is the proximate determinant of...
Persistent link: https://www.econbiz.de/10012706277
The flexible-price two-country monetary model is extended to include a consumption externality with habit persistence. The model is simulated using the artificial economy methodology. It successfully explains the high volatility of nominal exchange rates without recourse to sticky prices and...
Persistent link: https://www.econbiz.de/10012706282
The flexible-price two-country monetary model is extended to include a consumption externality with habit persistence. The model is simulated using the artificial economy methodology. It successfully explains (i) the high volatility of nominal and real exchange rates, (ii) the high correlation...
Persistent link: https://www.econbiz.de/10012706338
This paper addresses currency competition from an information perspective. Transactions in traditional models do not convey information, so transaction costs - the driver of competition outcomes - are driven by market size. In our model, transactions do convey information (consistent with recent...
Persistent link: https://www.econbiz.de/10012706268
This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid-ask spreads in the German mark (DM) prior to the creation of the currency union. This comes with a decrease in transaction volume in the euro rates relative to the previous DM rates....
Persistent link: https://www.econbiz.de/10012706360