After the Meese & Rogoff 1983-results, researchers have searched with torch for macroeconomic variables with predictive power on horizons shorter than 6 months. Recently, several papers have showed that order flows influence exchange rates intradaily. Maybe order flow may be of importance also for lower frequencies than intraday, like the weekly frequency? In this paper I test a trading model where order flow may be informative due to the existence of private information, and where there are important macroeconomic public information as well. Using weekly data for spot and options trading in the U.S., the model is tested for five exchange rates against US Dollar. For three of the exchange rates, DEM/USD, GBP/USD and CHF/USD, I find that order flow is an important variable for explaining weekly changes in exchange rates. The coefficients are both statistically and economically significant, and have intuitive sign. When U.S. banks sell foreign currency, the foreign currency depreciates.
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
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Length: 33 pages Date of creation: 15 Dec 2001 Date of revision: Handle: RePEc:hhs:sifrwp:0004
Contact details of provider: Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden Phone: +46-8-728-5120 Fax: +46-8-728-5130 Email: Web page: http://www.sifr.org/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Anki Helmer).
Cited by: (explanations, 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.)