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Exchange rate variability, market activity and heterogeneity

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  • Dagfinn Rime

    ()

  • Genaro Sucarrat

    ()

Abstract

We study the role played by geographic and bank-size heterogeneity in the relation between exchange rate variability and market activity. We find some support for the hypothesis that increases in short-term global interbank market activity, which can be interpreted as due to variation in information arrival, increase variability. However, our results do not suggest that local short-term activity increases variability. With respect to long-term market activity, which can be interpreted as a measure of liquidity, we find that large and small banks have opposite effects. Specifically, our results suggest that the local group of large banks' liquidity increases variability, whereas the local group of small banks' liquidity reduces variability.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we077039.

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Date of creation: Oct 2007
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Handle: RePEc:cte:werepe:we077039

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  14. Luc Bauwens & Dagfinn Rime & Genaro Sucarrat, 2006. "Exchange rate volatility and the mixture of distribution hypothesis," Empirical Economics, Springer, Springer, vol. 30(4), pages 889-911, January.
  15. Geir Hoidal Bjonnes & Dagfinn Rime & Haakon O. Aa. Solheim, 2003. "Volume and Volatility in the FX Market: Does it matter who you are?," Working Paper, Norges Bank 2003/7, Norges Bank.
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Cited by:
  1. Genaro Sucarrat & Alvaro Escribano, 2010. "The power log-GARCH model," Economics Working Papers we1013, Universidad Carlos III, Departamento de Economía.

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