AN OVER-THE-COUNTER APPROACH TO THE FOREX MARKET

• 成果类型: Article
• 署名作者: Geromichalos, Athanasios; Jung, Kuk Mo
• 署名单位: University of California System; University of California Davis; Hanyang University
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12290
• 发表日期: 2018
• 页码: 859-905
• 关键词: exchange-rate dynamics; international currency; liquidity; search; prices; money; middlemen; MODEL; INFORMATION; POLICY

摘要

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.