Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210035 
Year of Publication: 
2013
Series/Report no.: 
Working Paper No. 2013/12
Publisher: 
Norges Bank, Oslo
Abstract: 
Research on foreign exchange market microstructure stresses the importance of order flow, heterogeneity among agents, and private information as crucial determinants of short-run exchange rate dynamics. Microstructure researchers have produced empirically-driven models that fit the data surprisingly well. But FX markets are evolving rapidly in response to new electronic trading technologies. Transparency has risen, trading costs have tumbled, and transaction speed has accelerated as new players have entered the market and existing players have modified their behavior. These changes will have profound effects on exchange rate dynamics. Looking forward, we highlight fundamental yet unanswered questions on the nature of private information, the impact on market liquidity, and the changing process of price discovery. We also outline potential microstructure explanations for long-standing exchange rate puzzles.
Subjects: 
exchange rates
market microstructure
order flow
information
liquidity
electronic trading
JEL: 
F31
G12
G15
C42
C82
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-751-3
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.