Order Flow Information and Spot Rate Dynamics

Martin Evans and Dagfinn Rime

Working Papers from Georgetown University, Department of Economics

Abstract: This paper examines why order flows are empirically important drivers of spot exchange rate dynamics. We consider a decomposition for the depreciation rate that must hold in any model and show that order flows will appear as important proximate drivers when they convey significant incremental information about future interest rate differentials, risk premiums and/or long-run exchange rate levels (i.e., information that cannot be inferred from publicly observed variables). We estimate the importance of these incremental information flows for the EURNOK spot exchange rate using eight years of high- quality, disaggregated, end-user order flow data collected by the Norges Bank.

Keywords: exchange rate dynamics; microstructure; order flow. (search for similar items in EconPapers)
JEL-codes: F3 F4 G1 (search for similar items in EconPapers)
Pages: 50
Date: 2015-04-21
New Economics Papers: this item is included in nep-mst and nep-opm
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://faculty.georgetown.edu/evansm1/wpapers_files/JIMF_draft1.pdf Full text (application/pdf)
None

Related works:
Chapter: Order Flow Information and Spot Rate Dynamics (2017)
Journal Article: Order flow information and spot rate dynamics (2016)
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:geo:guwopa:gueconwpa~15-15-02

Ordering information: This working paper can be ordered from
Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
http://econ.georgetown.edu/

Access Statistics for this paper

More papers in Working Papers from Georgetown University, Department of Economics Georgetown University Department of Economics Washington, DC 20057-1036.
Bibliographic data for series maintained by Marcia Suss ( this e-mail address is bad, please contact ).