A first step in the 'big bang' markets was the deregulation of the foreign exchange market on April 1, 1998. This paper examines how the bid-ask spread and conditional volatility in the yen/dollar foreign exchange market changed around the time of the deregulation. Intra-day data are analyzed with the following results: (1) Holding constant the effects of volume and volatility, the deregulation was associated with a convergence of Japanese quoted spreads toward those of other banks. (2) Modeling the persistence in volatility reveals that deregulation lowered conditional volatility.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
7247.
Length: Date of creation: Jul 1999 Date of revision: Handle: RePEc:nbr:nberwo:7247
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