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: In this paper, the West German Bundesbank's use of sterilization during the recent years of exchange-rate flexibility was investigated, and it was shown that the sterilized foreign exchange intervention had little if any influence on the exchange rate over that time span.
Abstract: When the goals of internal and external macroeconomic equilibrium are in conflict, sterilized intervention in the foreign exchange market may provide an independent policy instrument through which the central bank can resolve its dilemma in the short run. This paper is concerned with the West German Bundesbank's use of sterilization during the recent years of exchange- rate flexibility. The paper asks whether the Bundesbank pursued sterilization during the years 1995-1981, and whether sterilized foreign exchange intervention exerts a significant influence on the exchange rate in the German case. Estimation of a stylized Bundesbank reaction function suggests an affirmative answer to the first of these questions. To assess the efficacy of sterilized intervention, a structural portfolio balance model of German asset markets and prices is estimated. Dynamic perfect-foresight simulations of the empirical model are used to ascertain whether imperfect substitutability between foreign and domestic bonds is sufficient to allow the Bundesbank to attain independent internal and external goals over the short run of about a month. The model's verdict is that the Bundesbank has little if any power to influence the exchange rate over that time span without altering current or expected future money-market conditions.
126 citations
TL;DR: In this article, the authors introduce a distinction between two types of markets and market coordination: those based on social networks and flow architectures, which involve potentially global “scopic” reflex systems (GRSs) that project market reality while at the same time carrying it forward and allowing it to flow.
Abstract: This article introduces a distinction between two types of markets and market coordination: those based on social networks and those based on a flow architecture. Flow architectures involve potentially global “scopic” reflex systems (GRSs) that project market reality while at the same time carrying it forward and allowing it to flow. The argument is that some financial markets have undergone a transition from a pre-reflexive network market to a reflexively coordinated flow market manifest in the different organization of trading floors, changes in trading patterns and the emergence of a moving market that gets transferred from time-zone to time-zone with the sun. To understand these markets, temporal concepts are needed in addition to the social structural (relational) concepts with which we commonly work. Networks emerge from this analysis as historically specific, relationship-based forms of market coordination which in some markets are in the process of being replaced by more reflexive temporal forms o...
126 citations
TL;DR: In this paper, the authors examined the dynamic relationship among local stock returns, foreign exchange rates, interest differentials, and U.S. S&P 500 returns in BRICS countries, including Brazil, Russia, India, China, and South Africa.
126 citations
TL;DR: The choice of an appropriate exchange rate system for a country is of great importance to a country as it will have important implications for the conduct of its domestic and international economic policy as mentioned in this paper.
Abstract: THE BREAKDOWN OF THE BRETTON WOODS par value system resulted in the de facto adoption of a wide variety of exchange rate systems. Each country's freedom to choose the exchange rate arrangements best suited to its needs was subsequently codified in Article IV of the Second Amendment to the Articles of Agreement of the International Monetary Fund. The choice of an appropriate exchange rate system is of great importance to a country as it will have important implications for the conduct of its domestic and international economic policy. The choice of an exchange rate regime might be a relatively simple exercise if countries were faced only with the classical textbook dichotomy of floating and fixed exchange rates. It is well known that some countries with ostensibly floating exchange rates intervene regularly in the foreign exchange market to stabilize the rate, whereas others with pegged exchange rates avail themselves of such wide intervention margins that the currency's value is determined within very wide limits by market forces. The choice is further complicated by the wide variety of pegging arrangements that have been adopted by diSerent countries. Indeed, sometimes there exists a serious problem in defining unambiguously whether a country's currency is basically floating or pegged. For instance, the countries adhering to the European currency snake1 are referred to both as
125 citations
TL;DR: In this article, the authors used the Johansen-Juselius cointegration analysis and exclusion test to demonstrate that in a country where there is a black market for foreign currencies, it is the black market exchange rate and not the official rate that should enter into the formulation of the demand for money.
125 citations