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on Market Microstructure |
| By: | Miguel Fuentes; Pablo Pincheira; Juan Manuel Julio; Hernán Rincón |
| Abstract: | This paper analyses the effects of sterilised, intraday foreign exchange market operations (non-discretionary and discretionary) on foreign exchange returns and volatility in four inflation targeting economies in Latin America. The distribution of exchange rates during intervention and non-intervention days are first compared, and then event study regressions are used to estimate the impact of intervention (and macro surprises) on exchange rate returns and exchange rate volatility as well as on foreign exchange market turnover (in Colombia). In general, the results suggest that the impact of both non-discretionary and discretionary operations is at times significant but transitory. However, an analysis of Chile’s experience suggests that the announcement effects of even non-discretionary programmes may be significant and persistent. |
| Keywords: | Exchange rate, central bank intervention, microstructure. |
| JEL: | E58 F31 G14 |
| Date: | 2014–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012258&r=mst |
| By: | Aleksander Berentsen; Samuel Huber; Alessandro Marchesiani |
| Abstract: | We investigate the positive and normative implications of a tax on financial market transactions in a dynamic general equilibrium model, where agents face idiosyncratic liquidity shocks and financial trading is essential. Our main finding is that agents' portfolio choices display a pecuniary externality which results in too much trading. We calibrate the model to U.S. data and find an optimal tax rate of 2.5 percent. Imposing this tax reduces trading in financial markets by 30 percent. |
| Keywords: | Tobin tax, financial transaction tax, OTC trading |
| JEL: | E44 E50 G18 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:176&r=mst |
| By: | Cheung, Yin-Wong (BOFIT); Rime , Dagfinn (BOFIT) |
| Abstract: | The offshore renminbi (CNH) exchange rate is the exchange rate of the Chinese currency transacted outside China. We study the CNH exchange rate dynamics and its links with onshore exchange rates. Using a specialized microstructure dataset, we find that CNH is significantly affected by its order flow and limit-order imbalance. The offshore CNH exchange rate has an increasing impact on the onshore rate, and significant predictive power for the official RMB central parity rate. The CNH order flow also affects the onshore RMB exchange rate and the central parity rate. The interactions between variables are likely to be time-varying. |
| Keywords: | foreign exchange market microstructure; order flow; limit-order imbalance; CNH; CNY; central parity rate |
| JEL: | F31 F33 G14 G15 G21 G28 |
| Date: | 2014–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2014_017&r=mst |