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Order flow and the monetary model of exchange rates: evidence from a novel data set
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Chinn, Menzie David and Moore, Michael J. (2011) Order flow and the monetary model of exchange rates: evidence from a novel data set. Journal of Money, Credit and Banking, Volume 43 (Number 8). pp. 1599-1624. doi:10.1111/j.1538-4616.2011.00460.x ISSN 00222879.
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Official URL: http://dx.doi.org/10.1111/j.1538-4616.2011.00460.x
Abstract
We propose an exchange rate model that is a hybrid of the conventional specification with monetary fundamentals and the Evans–Lyons microstructure approach. We estimate a model augmented with order flow variables, using a unique data set: almost 100 monthly observations on interdealer order flow on dollar/euro and dollar/yen. The augmented macroeconomic, or “hybrid,” model exhibits greater in-sample stability and out of sample forecasting improvement vis-à-vis the basic macroeconomic and random walk specifications.
Item Type: | Journal Article | ||||||
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Journal or Publication Title: | Journal of Money, Credit and Banking | ||||||
Publisher: | Wiley-Blackwell Publishing, Inc. | ||||||
ISSN: | 00222879 | ||||||
Official Date: | December 2011 | ||||||
Dates: |
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Volume: | Volume 43 | ||||||
Number: | Number 8 | ||||||
Number of Pages: | 25 | ||||||
Page Range: | pp. 1599-1624 | ||||||
DOI: | 10.1111/j.1538-4616.2011.00460.x | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Access rights to Published version: | Restricted or Subscription Access |
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