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Exchange-Rate Dynamics

Author

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  • Martin D. D. Evans

Abstract

Variations in the foreign exchange market influence all aspects of the world economy, and understanding these dynamics is one of the great challenges of international economics. This book provides a new, comprehensive, and in-depth examination of the standard theories and latest research in exchange-rate economics. Covering a vast swath of theoretical and empirical work, the book explores established theories of exchange-rate determination using macroeconomic fundamentals, and presents unique microbased approaches that combine the insights of microstructure models with the macroeconomic forces driving currency trading. Macroeconomic models have long assumed that agents--households, firms, financial institutions, and central banks--all have the same information about the structure of the economy and therefore hold the same expectations and uncertainties regarding foreign currency returns. Microbased models, however, look at how heterogeneous information influences the trading decisions of agents and becomes embedded in exchange rates. Replicating key features of actual currency markets, these microbased models generate a rich array of empirical predictions concerning trading patterns and exchange-rate dynamics that are strongly supported by data. The models also show how changing macroeconomic conditions exert an influence on short-term exchange-rate dynamics via their impact on currency trading. Designed for graduate courses in international macroeconomics, international finance, and finance, and as a go-to reference for researchers in international economics, Exchange-Rate Dynamics guides readers through a range of literature on exchange-rate determination, offering fresh insights for further reading and research.

Suggested Citation

  • Martin D. D. Evans, 2011. "Exchange-Rate Dynamics," Economics Books, Princeton University Press, edition 1, number 9475, June.
  • Handle: RePEc:pup:pbooks:9475
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hans Jørgen Tranvåg & Dagfinn Rime, 2012. "The Flows of the Pacific: Asian foreign exchange markets through tranquility and turbulence," Working Paper Series 12412, Department of Economics, Norwegian University of Science and Technology.
    2. Osler, Carol L. & Mende, Alexander & Menkhoff, Lukas, 2011. "Price discovery in currency markets," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1696-1718.
    3. Christopher J. Neely, 2011. "A survey of announcement effects on foreign exchange volatility and jumps," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 361-385.
    4. Benjamin Cohen & Hyun Song Shin, 2002. "Positive feedback trading under stress: evidence from the US Treasury securities market," BIS Papers chapters,in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 148-180 Bank for International Settlements.
    5. Michael Melvin & Lukas Menkhoff & Maik Schmeling, 2008. "Automating Exchange Rate Target Zones: Intervention via an Electronic Limit Order Book," CESifo Working Paper Series 2221, CESifo Group Munich.
    6. Martin D. D. Evans, 2017. "Exchange-Rate Dark Matter," World Scientific Book Chapters,in: Studies in Foreign Exchange Economics, chapter 4, pages 101-185 World Scientific Publishing Co. Pte. Ltd..
    7. Martin D. D. Evans, 2017. "Order Flows and the Exchange Rate Disconnect Puzzle," World Scientific Book Chapters,in: Studies in Foreign Exchange Economics, chapter 15, pages 599-643 World Scientific Publishing Co. Pte. Ltd..
    8. King, Michael R. & Osler, Carol L. & Rime, Dagfinn, 2013. "The market microstructure approach to foreign exchange: Looking back and looking forward," Journal of International Money and Finance, Elsevier, vol. 38(C), pages 95-119.
    9. Vasilyev, Dmitry & Busygin, Vladimir & Busygin, Sergei, 2016. "Testing and Interpreting Uncovered Interest Parity in Russia," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 35-55, August.
    10. Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.

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