Microstructure of Foreign Exchange Markets

31 Pages Posted: 13 Mar 2019

See all articles by Martin D.D. Evans

Martin D.D. Evans

Georgetown University - Department of Economics

Dagfinn Rime

BI Norwegian Business School

Date Written: February 2019

Abstract

This article presents an overview of research on the Microstructure of Foreign Exchange Markets. We begin by summarizing the institutional features of FX trading and describe how they have evolved since the 1980s. We then explain how these features are represented in microstructure models of FX trading. Next, we describe the links between microstructure and traditional macro exchange-rate models and summarize how these links have been explored in recent empirical research. Finally, we provide a microstructure perspective on two recent areas of interest in exchange-rate economics: the behavior of returns on currency portfolios, and questions of competition and regulation.

Keywords: Exchange-Rate Dynamics, Microstructure, Order Flows, Liquidity, Electronic trading

JEL Classification: F3, F4, G1

Suggested Citation

Evans, Martin D.D. and Rime, Dagfinn, Microstructure of Foreign Exchange Markets (February 2019). Available at SSRN: https://ssrn.com/abstract=3345289 or http://dx.doi.org/10.2139/ssrn.3345289

Martin D.D. Evans (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-1570 (Phone)
202-687-6102 (Fax)

Dagfinn Rime

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
+47-46410507 (Phone)

HOME PAGE: http://home.bi.no/dagfinn.rime/

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