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...

We propose a novel heterogeneous interacting agents model in which traders are allowed to select endogenously between two different forecasting models and are moreover allowed to be short-term speculators or long-term investors. Within this model framework we study the effects of currency...

This paper investigates the effects of equity and bond portfolio inflows on exchange rate volatility, using monthly bilateral data for the US vis-a-vis eight Asian developing and emerging countries (India, Indonesia, South Korea, Pakistan, Hong Kong, Thailand, the Philippines, and Taiwan) over...

This paper investigates the effects of equity and bond portfolio in.ows on exchange rate volatility, using monthly bilateral data for the US vis-a-vis eight Asian developing and emerging countries (India, Indonesia, South Korea, Pakistan, Hong Kong, Thailand, the Philippines, and Taiwan) over...

This paper assesses the contemporaneous, leading and lagging indicator properties of financial market variables relative to movements in six major developed country currency pairs. As indicator variables changes in various relative asset prices, short-term portfolio flows and currency options...

We build a two-country model with imperfect financial intermediation. Banks face limits to arbitrage which lead to positive excess returns in the investment markets and a risk premium in the international credit market. Gross capital flows affect the exchange rate since banks are balance sheet...

In response to questions about the relative importance of different types of capital flow for international competitiveness, we develop a structural vector auto-regressive model of the real exchange rate and international capital flows. We reveal that innovations to speculative sentiment cause...

We propose a new channel through which exchange rates affect trade. Exploiting the heterogeneity in firms' foreign currency debt maturity structure around a large depreciation in Colombia, we show that debt revaluation compresses imports due to higher delinquencies and interest rates, while...

Many currencies, especially those of countries with negative net foreign assets, tend to depreciate during times of financial turbulence. Using a panel of 26 currencies over the period 1/1997 - 6/2016, I show that the composition of net foreign assets matter for the exchange rate sensitivity to...

This paper investigates the effects of equity and bond portfolio inflows on exchange rate volatility, using monthly bilateral data for the US vis-a-vis eight Asian developing and emerging countries (India, Indonesia, South Korea, Pakistan, Hong Kong, Thailand, the Philippines, and Taiwan) over...