Econometric models in foreign exchange market

Klongkratoke, Pittaya (2016) Econometric models in foreign exchange market. PhD thesis, University of Glasgow.

Abstract

According to the significance of the econometric models in foreign exchange market, the purpose of this research is to give a closer examination on some important issues in this area. The research covers exchange rate pass-through into import prices, liquidity risk and expected returns in the currency market, and the common risk factors in currency markets. Firstly, with the significant of the exchange rate pass-through in financial economics, the first empirical chapter studies on the degree of exchange rate pass-through into import in emerging economies and developed countries in panel evidences for comparison covering the time period of 1970-2009. The pooled mean group estimation (PMGE) is used for the estimation to investigate the short run coefficients and error variance. In general, the results present that the import prices are affected positively, though incompletely, by the exchange rate. Secondly, the following study addresses the question whether there is a relationship between cross-sectional differences in foreign exchange returns and the sensitivities of the returns to fluctuations in liquidity, known as liquidity beta, by using a unique dataset of weekly order flow. Finally, the last study is in keeping with the study of Lustig, Roussanov and Verdelhan (2011), which shows that the large co-movement among exchange rates of different currencies can explain a risk-based view of exchange rate determination. The exploration on identifying a slope factor in exchange rate changes is brought up. The study initially constructs monthly portfolios of currencies, which are sorted on the basis of their forward discounts. The lowest interest rate currencies are contained in the first portfolio and the highest interest rate currencies are in the last. The results performs that portfolios with higher forward discounts incline to contain higher real interest rates in overall by considering the first portfolio and the last portfolio though the fluctuation occurs.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Keywords: exchange rate pass-through, liquidity risk, expected returns.
• Subjects: H Social Sciences > HG Finance
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Economics
• Supervisor's Name: Mario, Professor Cerrato and Gabriel, Professor Talmain
• Date of Award: 2016
• Depositing User: Miss Pittaya Klongkratoke
• Unique ID: glathesis:2016-7333
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 25 May 2016 15:22
• Last Modified: 14 Jun 2016 09:47
• URI: https://theses.gla.ac.uk/id/eprint/7333