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Private Information, Capital Flows, and Exchange Rates
Author:
Mr. Jacob Gyntelberg null

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Mr. Subhanij Tientip null

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Mr. Mico Loretan
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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 213
Language:
English
Publication Date:
01 Aug 2012
DOI:
https://doi.org/10.5089/9781475505634.001
ISBN:
9781475505634
ISSN:
1018-5941
Pages:
28
Keywords:
WP; FX order flow; FX transaction; FX dealer; Thai baht; bond order flow; bond order flow series; component FX order flow; customer order flow; FX order flow shock; FX risk; FX swap order flow; swap transaction; Order flow; private information; exchange rate models; market microstructure; exchange rate fluctuation; responses to FX order flow shock; FX order flow regression; flow series; Citibank customer order flow; Stock markets; Currency markets; Securities markets; Exchange rates; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We demonstrate empirically that not all capital flows influence exchange rates equally: Capital flows induced by foreign investors’ stock market transactions have both an economically significant and a permanent impact on exchange rates, whereas capital flows induced by foreign investors’ transactions in government bond markets do not. We relate these differences in the price impact of capital flows to differences in the amounts of private information conveyed by these flows. Our empirical findings are based on novel, daily-frequency datasets on prices and quantities of all transactions of foreign investors in the stock, bond, and onshore FX markets of Thailand.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund