Topic
Foreign exchange market
About: Foreign exchange market is a research topic. Over the lifetime, 6661 publications have been published within this topic receiving 153384 citations. The topic is also known as: forex & FX.
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TL;DR: The authors examined whether the Philippine stock market prices exchange rate risk during the period 1992-2001; specifically, before and after the onset of the Asian financial crisis and found that stock returns did not react significantly to foreign exchange rate fluctuations before the period of the crisis.
Abstract: This paper examines whether the Philippine stock market prices exchange rate risk during the period 1992–2001; specifically, before and after the onset of the Asian financial crisis. Using a two-factor arbitrage pricing theory model, the evidence presented in the paper suggests that stock returns did not react significantly to foreign exchange rate fluctuations before the period of the crisis. After the onset of the crisis, however, Philippine firms started to exhibit cross-sectional differences in their reaction to exchange rate movements. Furthermore, during the post-crisis period, investors began to expect a risk premium on their investments for their perceived added exposure to exchange rate risk. In the larger, macroeconomic sense, this implies market inefficiencies in the foreign exchange or stock market or both and inadequate hedging by local firms for foreign exchange risk.
35 citations
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TL;DR: In this article, the authors show that foreign exchange turnover evolves in a predictable fashion with increasing income, as income per capita rises, currency trading cuts loose from underlying current account transactions, and an increasing share of trading in the currency takes place outside the home country.
Abstract: Foreign exchange turnover evolves in a predictable fashion with increasing income. As income per capita rises, currency trading cuts loose from underlying current account transactions. In parallel, an increasing share of trading in the currency takes place outside the home country. At given income levels, moreover, currencies with either high or very low yields attract more trading, consistent with their role as target and funding currencies in carry trades.
35 citations
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TL;DR: In this paper, the authors assess the extent to which the capital controls were effective in delivering the outcomes that motivated their inception in the first place and conclude that in two of the three cases (Brazil and Thailand), the controls did not deliver much of what was intended.
Abstract: While high interest rates and foreign exchange sales are the most common way of dealing with a speculative attack in the foreign exchange market, several countries resorted to capital controls during recent periods of currency market turbulence. The purpose of this study is to use daily financial data to examine four of these capital controls episodes--Brazil, 1999, Malaysia 1998, Spain 1992, and Thailand 1997. We aim to assess the extent to which the capital controls were effective in delivering the outcomes that motivated their inception in the first place. We conclude that in two of the three cases (Brazil and Thailand), the controls did not deliver much of what was intended--although, one does not observe the counterfactual. By contrast, in the case of Malaysia the controls did align closely with the priors of what controls are intended to achieve: greater interest rate and exchange rate stability and more policy autonomy.
35 citations
TL;DR: In this paper, the empirical validity of $b;PPP$eb; as a long-run constraint between India and the US is examined in the preesence of foreign exchange black markets.
Abstract: The empirical validity of $b;PPP$eb; as a long-run constraint between India and the US is examined in the preesence of foreign exchange black markets. In a triariate model, the official exchange rate is found to be coinergrated with both the price ratio and the black market exchange rate. Both the official exchange rate and price ratio respond to correct short-run departures from $b;PPP$eb;. Also, both the official and the black market exchange rates respond to correct departures from their own equilibrium relation. The two sources of endogeneity in the official rate follow rate follow as Indian authorities aimed to stabilize domestic prices and reduce uncertainty about the dollar price of rupees.
35 citations
TL;DR: This article examined the reaction of the foreign exchange market to the announcement of changes in the business environment of a country and found that sampled political risk news conveys important information about a country's investment climate and causes its currency's exchange rate to vary.
Abstract: This paper examines the reaction of the foreign exchange market to the announcement of changes in the business environment of a country. Our results suggest that sampled political risk news conveys important information about a country's investment climate and causes its currency's exchange rate to vary. It appears, however, that the reaction of the foreign exchange market is more dramatic for unfavorable events than for favorable events. The evidence presented is also consistent with the hypothesis that the foreign exchange market is efficient in interpreting the type of event considered in this study.
35 citations