Private Information, Capital Flows, and Exchange Rates

 
Author/Editor: Gyntelberg, Jacob ; Loretan, Mico ; Tientip, Subhanij
 
Publication Date: August 01, 2012
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: We demonstrate empirically that not all capital flows influence exchange rates equally: Capital flows induced by foreign investors’ stock market transactions have both an economically significant and a permanent impact on exchange rates, whereas capital flows induced by foreign investors’ transactions in government bond markets do not. We relate these differences in the price impact of capital flows to differences in the amounts of private information conveyed by these flows. Our empirical findings are based on novel, daily-frequency datasets on prices and quantities of all transactions of foreign investors in the stock, bond, and onshore FX markets of Thailand.
 
Series: Working Paper No. 12/213
Subject(s): Capital flows | Exchange rates | Foreign investment | Exchange markets | Stock markets | Bond markets | Economic models | Thailand

Author's Keyword(s): Order flow | private information | exchange rate models | market microstructure.
 
English
Publication Date: August 01, 2012
Format: Paper
Stock No: WPIEA2012213 Pages: 27
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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