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AN OVER-THE-COUNTER APPROACH TO THE FOREX MARKET

Title
AN OVER-THE-COUNTER APPROACH TO THE FOREX MARKET
Author
정국모
Keywords
EXCHANGE-RATE DYNAMICS; INTERNATIONAL CURRENCY; LIQUIDITY; SEARCH; PRICES; MONEY; MIDDLEMEN; MODEL; INFORMATION; POLICY
Issue Date
2018-05
Publisher
WILEY
Citation
INTERNATIONAL ECONOMIC REVIEW, v. 59, no. 2, page. 859-905
Abstract
The foreign exchange (FOREX) market is an over-the-counter market characterized by intermediation and significant bid-ask spreads. However, most of the existing international macroeconomics literature models the FOREX as a standard Walrasian market. This article constructs a dynamic general equilibrium model of intermediation in the FOREX market. We use our framework to compute standard measures of FOREX liquidity, such as bid-ask spreads and trade volume, and study how they are affected by macroeconomic fundamentals and market microstructure. We also study how FOREX market microstructure affects the volume of international trade and, consequently, welfare. Our empirical exercise offers support to the models' main predictions.
URI
https://onlinelibrary.wiley.com/doi/abs/10.1111/iere.12290http://repository.hanyang.ac.kr/handle/20.500.11754/118602
ISSN
0020-6598; 1468-2354
DOI
10.1111/iere.12290
Appears in Collections:
COLLEGE OF INTERNATIONAL STUDIES[S](국제학부) > INTERNATIONAL STUDIES(국제학부) > Articles
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