The aim of this paper is to test if the price setting strategy of a Tunisian trader on the foreign exchange market can be adequately described by the microstructural model developed by Madhavan and Smidt (1991) and Lyons (1995). We test for informational and inventory effects. The dataset used involves intraday quotes of a medium size bank on the USDTND and EURTND exchange rates, from the 1st January 2002 to the 27th November 2003. Our results confirm an inventory effect and an informational effect from the transactions with the Central Bank of Tunisia, but only for the USDTND exchange rate. The microstructure approach does not help to explain the EURTND quotes. The management of Tunisia exchange rate regime could offer an explanation for these mitigated results. Our results also show that, despite the financial liberalization politics followed by Tunisia for two decades, the Central Bank of Tunisia interventions still strongly act on both USDTND and EURTND quotes.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number
2006-14.
References listed on IDEAS 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.: