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Pension Fund Managers Behavior In The Foreign Exchange Market

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  • Hernando Vargas
  • Rocío Betnacourt

Abstract

The effects of the Pension Fund Managers (PFMs) behavior on the foreign exchange market may be important, given the increasing size of their portfolio and their possible market power. Some authors argue that when big investors like PFMs trade large volumes in the foreign exchange market, they may influence other agents’ decisions, increasing the impact of the PFMs’ actions on the exchange rate. However, when PFMs have market power, they will take into account their influence on the exchange rate and will moderate their trading volume. Hence, there might be a mitigating effect that reduces the pressure on the exchange rate. This paper seeks to demonstrate the existence of this effect under different theoretical foreign exchange market structures.

Suggested Citation

  • Hernando Vargas & Rocío Betnacourt, 2006. "Pension Fund Managers Behavior In The Foreign Exchange Market," Borradores de Economia 391, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:391
    DOI: 10.32468/be.391
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    Cited by:

    1. Carolina Gómez Restrepo & Diego Jara Pinzón & Andrés Murcia Pabón, 2006. "Impacto De Las Operaciones De Los Fondos De Pensiones Obligatorias En Los Mercados Financieros Colombianos," Borradores de Economia 2806, Banco de la Republica.
    2. Alejandro Reveiz & Carlos León & Freddy H. Castro & Gabriel Piraquive, 2009. "Modelo de simulación del valor de la pensión de un trabajador en Colombia," Borradores de Economia 5387, Banco de la Republica.
    3. Alejandro Reveiz & Carlos León & Freddy H. Castro & Gabriel piraquive, 2009. "Modelo de simulación del valor de la pensión de un trabajador en Colombia," Borradores de Economia 553, Banco de la Republica de Colombia.
    4. Bank for International Settlements, 2017. "Foreign exchange liquidity in the Americas," BIS Papers, Bank for International Settlements, number 90.
    5. Mr. Jorge Roldos, 2007. "Pension Reform and Macroeconomic Stability in Latin America," IMF Working Papers 2007/108, International Monetary Fund.

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    More about this item

    Keywords

    pension funds; foreign exchange market; market power.;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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