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Essential hybridity: A money view of FX

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  • Mehrling, Perry

Abstract

Economics and finance typically analyze the exchange rate as the relative price of goods and assets, respectively. By contrast, this paper explores a “money view” which understands the exchange rate as the relative price of money, a price that is determined in dealer markets by the order flow facing profit-seeking dealers. The economics of the FX dealer are analyzed using an extension of Treynor’s model of security dealers; central banks are analyzed as FX dealers of last resort.

Suggested Citation

  • Mehrling, Perry, 2013. "Essential hybridity: A money view of FX," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 355-363.
    • Handle: RePEc:eee:jcecon:v:41:y:2013:i:2:p:355-363
    DOI: 10.1016/j.jce.2013.03.007
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    References listed on IDEAS

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    1. Naohiko Baba & Frank Packer & Teppei Nagano, 2008. "The spillover of money market turbulence to FX swap and cross-currency swap markets," BIS Quarterly Review, Bank for International Settlements, March.
    2. Hyman P. Minsky, 1957. "Central Banking and Money Market Changes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 71(2), pages 171-187.
    3. Perry Mehrling & Neil T. Skaggs, 2010. "Monetary Policy Implementation: A Microstructure Approach," Palgrave Macmillan Books, in: Robert Leeson (ed.), David Laidler’s Contributions to Economics, chapter 10, pages 212-234, Palgrave Macmillan.
    4. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
    5. Michael R King & Dagfinn Rime, 2011. "The $4 trillion question: what explains FX growth since the 2007 survey?," BIS Quarterly Review, Bank for International Settlements, March.
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    Citations

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    Cited by:

    1. Perry Mehrling, 2014. "Why central banking should be re-imagined," BIS Papers chapters, in: Bank for International Settlements (ed.), Re-thinking the lender of last resort, volume 79, pages 108-118, Bank for International Settlements.
    2. Saeidinezhad, Elham & Hovhannisyan, Tatev, 2019. "Can the Hybridity of Law and Finance Save Central Banking in a Zero-Lower Bound Recession? A Money and Legal View," MPRA Paper 97719, University Library of Munich, Germany.
    3. Perry Mehrling, 2015. "Elasticity and Discipline in the Global Swap Network," Working Papers Series 27, Institute for New Economic Thinking.
    4. Schclarek, Alfredo & Xu, Jiajun & Amuchastegui, Pedro, 2022. "Panda bond financing of the Belt and Road Initiative: An analysis of monetary mechanisms and financial risks," Research in International Business and Finance, Elsevier, vol. 61(C).
    5. Alfredo SCHCLAREK & Jiajun XU, 2020. "Risques de change et risque lié à la balance des paiements dans l’architecture mondiale du financement du développement," Working Paper 15b03057-1f7f-44dc-93fa-5, Agence française de développement.
    6. Alfredo Schclarek & Jiajun Xu, 2021. "Panda Bond Financing of the Belt & Road Initiative: An Analysis of Monetary Mechanisms and Financial Risks," Asociación Argentina de Economía Política: Working Papers 4519, Asociación Argentina de Economía Política.
    7. Pistor, Katharina, 2013. "Law in Finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 311-314.
    8. Alfredo SCHCLAREK & Jiajun XU, 2020. "Exchange rate and balance of payment risks in the global development finance architecture," Working Paper 15b03057-1f7f-44dc-93fa-5, Agence française de développement.
    9. Ramaa Vasudevan, 2018. "The internationalization of the Renminbi and the evolution of China’s monetary policy," Working Papers 1810, New School for Social Research, Department of Economics.
    10. Schclarek, Alfredo & Xu, Jiajun, 2022. "Exchange rate and balance of payment crisis risks in the global development finance architecture," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    11. Olk, Christopher, 2023. "Liquidity premia: the PPP puzzle's missing piece?," SocArXiv exnf6, Center for Open Science.
    12. Pistor, Katharina, 2013. "A legal theory of finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 315-330.

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    More about this item

    Keywords

    F31; G20; Exchange rate; Dealer; Treynor model; Money view; Hierarchy of money;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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