Foreign Exchange Market Bid-Ask Spreads and the Market Price of Social Unrest

Michael Melvin and Kok-Hui Tan

Oxford Economic Papers, 1996, vol. 48, issue 2, 329-41

Abstract: Time-series evidence yields estimates of the increase in the spread on the South African rand on days when riots, demonstrations, armed attacks, and related deaths occur in South Africa. The cross-section evidence demonstrates how spreads vary across thirty-six industrial and developing countries as spot rate volatility and country risk vary. Both the changes in the spread over time for particular countries and the changes in the spread across the countries at a particular time appear to be significantly related to countries' risk differences and exchange-rate volatility. Copyright 1996 by Royal Economic Society.

Date: 1996
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