A New Micro Model of Exchange Rate Dynamics

Richard Lyons () and Martin Evans

No 622, Econometric Society 2004 North American Winter Meetings from Econometric Society

Abstract: We present a new class of general equilibrium model to study exchange rate dynamics. Our model synthesizes the new micro and macro approaches by incorporating the micro foundations of asset market trading into a dynamic, two country general equilibrium setting. We use the model to study how dispersed information from the real economy is aggregated by trading, and embedded into exchange rates and interest rates. The presence of dispersed information generates a new factor that contributes to the foreign exchange risk premium and a new source of exchange rate dynamics. Our analysis also provides a general equilibrium explanation for the role of order flow in exchange rate determination.

Keywords: Exchange Rate Dynamics; Dispersed Information; FX Trading (search for similar items in EconPapers)
JEL-codes: F31 F42 (search for similar items in EconPapers)
Date: 2004-08-11
References: Add references at CitEc
Citations: View citations in EconPapers (45)

Downloads: (external link)
http://www.georgetown.edu/faculty/evansm1/wpapers_files/newmicro1.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.georgetown.edu/faculty/evansm1/wpapers_files/newmicro1.pdf [301 Moved Permanently]--> https://www.georgetown.edu/faculty/evansm1/wpapers_files/newmicro1.pdf [301 Moved Permanently]--> https://faculty.georgetown.edu/evansm1/wpapers_files/newmicro1.pdf)

Related works:
Working Paper: A New Micro Model of Exchange Rate Dynamics (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:nawm04:622

Access Statistics for this paper

More papers in Econometric Society 2004 North American Winter Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().