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Exchange rate variability, market activity and heterogeneity

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  • Sucarrat, Genaro
  • Rime, Dagfinn

Abstract

We study the role played by geographic and bank-size heterogeneity in the relation between exchange rate variability and market activity. We find some support for the hypothesis that increases in short-term global interbank market activity, which can be interpreted as due to variation in information arrival, increase variability. However, our results do not suggest that local short-term activity increases variability. With respect to long-term market activity, which can be interpreted as a measure of liquidity, we find that large and small banks have opposite effects. Specifically, our results suggest that the local group of large banks' liquidity increases variability, whereas the local group of small banks' liquidity reduces variability.

Suggested Citation

  • Sucarrat, Genaro & Rime, Dagfinn, 2007. "Exchange rate variability, market activity and heterogeneity," UC3M Working papers. Economics we077039, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we077039
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    References listed on IDEAS

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    Cited by:

    1. Escribano, Álvaro & Sucarrat, Genaro, 2010. "The power log-GARCH model," UC3M Working papers. Economics we1013, Universidad Carlos III de Madrid. Departamento de Economía.

    More about this item

    Keywords

    Exchange rate variability;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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