On The Impact Of Fundamentals, Liquidity, And Coordination On Market Stability
AbstractWe develop a coordination game to model interactions between fundamentals and liquidity during unstable periods in financial markets. We then propose a flexible econometric framework for estimation of the model and analysis of its quantitative implications. The specific empirical application is carry trades in the yenâdollar market, including the turmoil of 1998. We find a generally very deep market, with low information disparities amongst agents. We observe occasionally episodes of market fragility, or turmoil with up by the escalator, down by the elevator patterns in prices. The key role of strategic behavior in the econometric model is also confirmed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 52 (2011)
Issue (Month): 3 (08)
Contact details of provider:
Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
Other versions of this item:
- Francisco Penaranda & Jon Danielsson, 2007. "On the Impact of Fundamentals, Liquidity and Coordination on Market Stability," FMG Discussion Papers dp586, Financial Markets Group.
- Francisco Peñaranda & Jón Daníelsson, 2007. "On the impact of fundamentals, liquidity and coordination on market stability," Economics Working Papers 1003, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2010.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G - Financial Economics
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin D. D. Evans & Richard K. Lyons, 2002.
"Order Flow and Exchange Rate Dynamics,"
Journal of Political Economy,
University of Chicago Press, vol. 110(1), pages 170-180, February.
- Evans, Martin D. & Lyons, Richard K., 1999. "Order Flow and Exchange Rate Dynamics," Research Program in Finance, Working Paper Series qt0dh1c16w, Research Program in Finance, Institute for Business and Economic Research, UC Berkeley.
- Martin D.D. Evans & Richard K. Lyons, 1999. "Order Flow and Exchange Rate Dynamics," NBER Working Papers 7317, National Bureau of Economic Research, Inc.
- Martin D. D. Evans and Richard K. Lyons., 1999. "Order Flow and Exchange Rate Dynamics," Research Program in Finance Working Papers RPF-288, University of California at Berkeley.
- M. Sbracia & Alessandro Prati, 2002.
"Currency Crises and Uncertainty About Fundamentals,"
IMF Working Papers
02/3, International Monetary Fund.
- Alessandro Prati & Massimo Sbracia, 2002. "Currency crises and uncertainty about fundamentals," Temi di discussione (Economic working papers) 446, Bank of Italy, Economic Research and International Relations Area.
- Tauchen, George E. & Gallant, A. Ronald, 1995.
"Which Moments to Match,"
95-20, Duke University, Department of Economics.
- Jeanne, Olivier & Masson, Paul R, 1998.
"Currency Crises, Sunspots and Markov-Switching Regimes,"
CEPR Discussion Papers
1990, C.E.P.R. Discussion Papers.
- Jeanne, Olivier & Masson, Paul, 2000. "Currency crises, sunspots and Markov-switching regimes," Journal of International Economics, Elsevier, vol. 50(2), pages 327-350, April.
- Morris, Stephen & Shin, Hyun Song, 1998.
"Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks,"
American Economic Review,
American Economic Association, vol. 88(3), pages 587-97, June.
- Morris, Stephen & Shin, Hyun Song, 1997. "Unique Equilibrium in a Model of Self-fulfilling Currency Attacks," CEPR Discussion Papers 1687, C.E.P.R. Discussion Papers.
- Morris, S & Song Shin, H, 1996. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," Economics Papers 126, Economics Group, Nuffield College, University of Oxford.
- Dasgupta, Amil, 2007. "Coordination and delay in global games," Journal of Economic Theory, Elsevier, vol. 134(1), pages 195-225, May.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Pástor, Luboš & Stambaugh, Robert F, 2002.
"Liquidity Risk and Expected Stock Returns,"
CEPR Discussion Papers
3494, C.E.P.R. Discussion Papers.
- Luboš Pástor & Robert F. Stambaugh, . "Liquidity Risk and Expected Stock Returns," CRSP working papers 531, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Lubos Pastor & Robert F. Stambaugh, 2001. "Liquidity Risk and Expected Stock Returns," NBER Working Papers 8462, National Bureau of Economic Research, Inc.
- Stephen Morris & Hyun Song Shin, 2004.
"Liquidity Black Holes,"
Yale School of Management Working Papers
ysm425, Yale School of Management.
- Hyun Song Shin & Stephen Morris, 2004. "Liquidity Black Holes," Econometric Society 2004 North American Winter Meetings 644, Econometric Society.
- Stephen Morris & Hyun Song Shin, 2003. "Liquidity Black Holes," Cowles Foundation Discussion Papers 1434, Cowles Foundation for Research in Economics, Yale University.
- Hyun Song Shin & Stephen Morris, 2004. "Liquidity Black Holes," Econometric Society 2004 North American Winter Meetings 620, Econometric Society.
- Grossman, S.J. & Miller, M.H., 1988.
"Liquidity And Market Structure,"
88, Princeton, Department of Economics - Financial Research Center.
- Nikola A. Tarashev, 2003. "Currency Crises and the Informational Role of Interest Rates," BIS Working Papers 135, Bank for International Settlements.
- Gallant, A. Ronald & Tauchen, George, 2002. "Simulated Score Methods and Indirect Inference for Continuous-time Models," Working Papers 02-09, Duke University, Department of Economics.
- repec:cup:etheor:v:12:y:1996:i:4:p:657-81 is not listed on IDEAS
- Obstfeld, Maurice, 1986.
"Rational and Self-fulfilling Balance-of-Payments Crises,"
American Economic Review,
American Economic Association, vol. 76(1), pages 72-81, March.
- Maurice Obstfeld, 1986. "Rational and Self-Fulfilling Balance-of-Payments Crises," NBER Working Papers 1486, National Bureau of Economic Research, Inc.
- Foster, F Douglas & Viswanathan, S, 1995. "Can Speculative Trading Explain the Volume-Volatility Relation?," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 379-96, October.
- Aleh Tsyvinski & Arijit Mukherji & Christian Hellwig, 2006.
"Self-Fulfilling Currency Crises: The Role of Interest Rates,"
American Economic Review,
American Economic Association, vol. 96(5), pages 1769-1787, December.
- Christian Hellwig & Arijit Mukherji & Aleh Tsyvinski, 2005. "Self-Fulfilling Currency Crises: The Role of Interest Rates," NBER Working Papers 11191, National Bureau of Economic Research, Inc.
- Itay Goldstein & Ady Pauzner, 2005. "Demand-Deposit Contracts and the Probability of Bank Runs," Journal of Finance, American Finance Association, vol. 60(3), pages 1293-1327, 06.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.