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Currency bid-ask spread dynamics and the Asian crisis: Evidence across currency regimes

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  • Koutmos, Gregory
  • Martin, Anna D.
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    Abstract

    Using a sample of 21 emerging and developed country currencies, we evaluate the impact of the Asian crisis on bid-ask spreads. While the crisis had widespread and uniform volatility effects, the spread effects were not uniform across emerging and developed country currencies. For Asian emerging markets, spreads widened and spread volatility increased significantly during the crisis, while developed markets spreads narrowed and spread volatility decreased significantly. We investigate the impact of more flexible and less flexible exchange rate regimes on bid-ask spreads using panel data. In general, countries with tightly-managed regimes have significantly lower spreads than countries with more freely-floating regimes, while controlling for the influence of other factors such as volatility. Asian developing market spreads are higher than spreads of the other countries, again, after controlling for the influence of other factors.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 30 (2011)
    Issue (Month): 1 (February)
    Pages: 62-73

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    Handle: RePEc:eee:jimfin:v:30:y:2011:i:1:p:62-73

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Currency spreads Bid-ask spreads Asian crisis Exchange rate regimes Spread volatility Panel data analysis;

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    Cited by:
    1. Carol Osler & Thang Nguyen & Tanseli Savaser, 2011. "Asymmetric Information and the Foreign-Exchange Trades of Global Custody Banks," Department of Economics Working Papers 2011-09, Department of Economics, Williams College.
    2. repec:ntu:ntugeo:vol1-iss1s-13-174 is not listed on IDEAS
    3. Enn Listra, 2013. "International Business Of Banking: The Pricing Example Of Retail Currency Spreads," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 1(1), pages 174-186, May.

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