Exchange Rate Forecasting, Order Flow and Macroeconomic Information

Equity order flow and exchange rate dynamics

Article history: Received 13 November 2011 Received in revised form 28 February 2012 Accepted 1 March 2012 Available online 8 March 2012 This paper contributes to the literature on international portfolio choice in several ways. First, I generalize the model of Dunne et al. (2010) and derive order flow as the result of correlated belief changes by heterogeneous investors. This strategy delivers...

eal exchange rate targeting and macroeconomic instability * ́

Using an optimizing model of a small open economy, this paper studies the macroeconomic effects of PPP rules whereby the government increases the devaluation rate when the real exchange rate—defined as the price of tradables in terms of nontradables—is below its long-run level and reduces the devaluation rate when the real exchange rate is above its long-run level. The paper shows that the mere...

End-user order flow and exchange rate dynamics

In this paper we provide evidence for Evans and Lyons’ (2005b) model of an information aggregation process in FX markets using a German bank’s end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates over time, our empirical analysis does not support the widespread optimism in the market microstructur...

Effects of Financial Liberalization on Macroeconomic Volatilities: Applications to Economic Growth, Exchange Rate and Exchange Rate Pass-Through

Market sentiment and exchange rate directional forecasting

The microstructural approach to the exchange rate market claims that order flows on a currency can accurately reflect the short-run dynamics its exchange rate. In this paper, instead of focusing on order flows analysis we employ an alternative microstructural approach: we focus on investors’ sentiment on a given exchange rate as a possible predictor of its future evolution. As a proxy of invest...