We extend the model by DeGrauwe and Grimaldi (2006, EER) by currency transaction taxes. This model explains the exchange rate behavior by the interaction of heterogeneous traders who display either trend chasing behavior or rely on a return of the exchange rate back to its arbitrage free...

A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...

We examine the association between the foreign exchange rate of the US dollar and US presidential cycles. Results show that Republican presidencies tend to start with a strong dollar, which then depreciates over the course of the presidency. In contrast, Democratic presidencies tend to begin...

Foreign exchange (FX) trading volume is a key factor in exchange rate volatility. Given the important role of volatility in economic growth and stability, this paper investigates the dynamic nature of exchange trading volume on exchange rate volatility using hourly high-frequency data. The...

Measures of U.S. government policy approval, such as U.S. Presidential or Congressional ratings, are strongly related to persistent fluctuations in the dollar exchange rates. Contemporaneous correlations between approval ratings and the dollar value reach 50% against the advanced economy...

The Euro and the RMB are both relatively new currencies traded on the global foreign exchange market. While the Euro was introduced in 2001, China started cross-border settlement in RMB in 2009. We analyse the evolution of Euro trading based on data from the BIS triennial survey and compare the...

We document the exchange rate hedging channel that connects country-level measures of net external financial imbalances with exchange rates. In times of market distress, countries with large positive external imbalances (e.g. Japan) experience domestic currency appreciation, and crucially,...

This research study examines the behavior of currency rate, long memory features, and longterm stability in the returns of thirteen Asia-Pacific currencies (AUD, CNY, HKD, INR, IDR, JPY, KRW, MYR, NZD, PHP, SGD, TWD, and THB) against USD over a period of fourteen years (from 2nd January 2001 to...

We investigate RMB pricing differentials for onshore and offshore trading. Testing for long memory, we find strong persistence in the pricing differential. Hence, the Chinese FX market in its bipolarstructure still lacks basic conditions for perfectly integrated markets

This study analyzed the over-or-undervaluation of the Chinese Yuan (renminbi) against the USD, JPY and EUR using relative PPP method. We found that the Yuan is undervalued in its real terms against the USD by 21.3% and against the EUR by 17.4% between July 2005 and June 2010. We used the export...