Private information, capital flows, and exchange rates

Jacob Gyntelberg, Mico Loretan and Tientip Subhanij

No 2015-12, Working Papers from Swiss National Bank

Abstract: We demonstrate empirically that not all international capital flows influence exchange rates equally. Capital flows induced by foreign investors' transactions in local stock markets have an impact on exchange rates that is both economically significant and permanent, whereas capital flows induced by foreign investors' transactions in the local government bond market do not. We relate the differences in the price impacts 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 undertaken by foreign investors in the stock, bond, and onshore FX markets of Thailand.

Keywords: Order flow; private information; exchange rate models; market microstructure; emerging markets (search for similar items in EconPapers)
JEL-codes: C22 E58 F31 F37 G14 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015
New Economics Papers: this item is included in nep-opm and nep-sea
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Private information, capital flows, and exchange rates (2018)
Working Paper: Private Information, Capital Flows, and Exchange Rates (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2015-12

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