This paper examines the market-wide effects of front-running and information-sharing by dealers in a quantitative microstructure model of Forex trading. Recent investigations by government regulators and court proceedings reveal that there has been widespread sharing of information among Forex...

Since 2013 regulators have been investigating the activities of some of the world's largest banks around the setting of daily benchmarks for forex prices. These benchmarks are a key linchpin of world financial markets, providing standardize prices used to value global equity and bond portfolios,...

This paper examines the persistent deterioration in the international external position of the U.S. over the past 60 years. I develop a model without Ponzi schemes and arbitrage opportunities that accounts for both the secular rise and the cyclical variations in the U.S. international debt...

This paper examines why order flows are empirically important drivers of spot exchange rate dynamics. We consider a decomposition for the depreciation rate that must hold in any model and show that order flows will appear as important proximate drivers when they convey significant incremental...

This paper studies the behavior of international capital flows driven by the portfolio reallocation decisions of international investors; so-called hot money. I develop an open economy model with endowment and preference shocks that can account for the empirical behavior of real exchange rates,...

This paper tests the portfolio-balance approach to exchange rate determination in a new way. Past work on portfolio balance in foreign exchange falls into two groups: (1) tests using measures of asset supply and (2) tests using measures of central-bank asset demand. We address the demand side,...

This paper provides new perspective on the poor performance of exchange rate models by focusing on the information structure of FX trading. I present a new theoretical model of FX trading that emphasizes the role of incomplete and heterogeneous information. The model shows how an equilibrium...

Macroeconomic models of nominal exchange rates perform poorly. The propor-tion of monthly exchange rate changes that these models can explain is essen-tially zero. This paper presents a model of a new kind. Instead of relying exclu-sively on macroeconomic determinants, the model includes a...

This paper examines the extent to which swings in stock prices can be related to variations in the discounted value of expected future dividends when investors face uncertainty about their future behavior. First, I present evidence of instability in time series behavior of dividends and discount...

This paper provides a new analysis of index-linked debt in the U.K.. I begin by clarifying the theoretical links between the observed prices of conventional and index-linked debt, and the term structure of real interest rates. Based on this analysis, I then describe a new empirical methodology...