Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market
This article presents empirical test results of Malaysian foreign exchange market microstructure assessment of exchange rate dynamics. We apply vector autoregressive (VAR) model to estimate the influential role of currency order flow in the determination of the currency exchange rate for the Malaysi...
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| Format: | Article |
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SAGE Publications
2018
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| _version_ | 1825721878562471936 |
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| author | Anifowose, Abolaji Daniel Ismail, Izlin Sukor, Mohd Edil Abd |
| author_facet | Anifowose, Abolaji Daniel Ismail, Izlin Sukor, Mohd Edil Abd |
| author_sort | Anifowose, Abolaji Daniel |
| collection | UM |
| description | This article presents empirical test results of Malaysian foreign exchange market microstructure assessment of exchange rate dynamics. We apply vector autoregressive (VAR) model to estimate the influential role of currency order flow in the determination of the currency exchange rate for the Malaysian ringgit (MYR) against the US dollar (USD). We investigate whether currency order flow captures the movements of exchange rate of MYR against USD, and how the long-term and short-term components impact the relative estimation of MYR in the international market. We, construct a measure of order flow in the Malaysian foreign exchange market to reflect the pressure of currency excess demand. Our focus is on the cumulative currency order flow and the exchange rate relationship of MYR and USD. A hybrid model of order flow and exchange rate dynamics proposed by Evans and Lyons (2002a) is applied to the Malaysian foreign exchange market (MYR/USD) to analyse a dataset of every 15-minute currency order flow and exchange rate movements from January 2010 to December 2015. Our dataset has unique features in terms of the quality of the data, extensive period and precise high frequency. Our results show that currency order flow explains an important portion of the movements in the MYR–USD exchange rate. |
| first_indexed | 2024-03-06T05:57:04Z |
| format | Article |
| id | um.eprints-22471 |
| institution | Universiti Malaya |
| last_indexed | 2024-03-06T05:57:04Z |
| publishDate | 2018 |
| publisher | SAGE Publications |
| record_format | dspace |
| spelling | um.eprints-224712019-09-20T03:46:29Z http://eprints.um.edu.my/22471/ Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market Anifowose, Abolaji Daniel Ismail, Izlin Sukor, Mohd Edil Abd HG Finance Foreign exchange. International finance. This article presents empirical test results of Malaysian foreign exchange market microstructure assessment of exchange rate dynamics. We apply vector autoregressive (VAR) model to estimate the influential role of currency order flow in the determination of the currency exchange rate for the Malaysian ringgit (MYR) against the US dollar (USD). We investigate whether currency order flow captures the movements of exchange rate of MYR against USD, and how the long-term and short-term components impact the relative estimation of MYR in the international market. We, construct a measure of order flow in the Malaysian foreign exchange market to reflect the pressure of currency excess demand. Our focus is on the cumulative currency order flow and the exchange rate relationship of MYR and USD. A hybrid model of order flow and exchange rate dynamics proposed by Evans and Lyons (2002a) is applied to the Malaysian foreign exchange market (MYR/USD) to analyse a dataset of every 15-minute currency order flow and exchange rate movements from January 2010 to December 2015. Our dataset has unique features in terms of the quality of the data, extensive period and precise high frequency. Our results show that currency order flow explains an important portion of the movements in the MYR–USD exchange rate. SAGE Publications 2018 Article PeerReviewed Anifowose, Abolaji Daniel and Ismail, Izlin and Sukor, Mohd Edil Abd (2018) Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market. Global Business Review, 19 (4). pp. 902-920. ISSN 0972-1509, DOI https://doi.org/10.1177/0972150918772925 <https://doi.org/10.1177/0972150918772925>. https://doi.org/10.1177/0972150918772925 doi:10.1177/0972150918772925 |
| spellingShingle | HG Finance Foreign exchange. International finance. Anifowose, Abolaji Daniel Ismail, Izlin Sukor, Mohd Edil Abd Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market |
| title | Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market |
| title_full | Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market |
| title_fullStr | Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market |
| title_full_unstemmed | Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market |
| title_short | Currency Order Flow and Exchange Rate Determination: Empirical Evidence from the Malaysian Foreign Exchange Market |
| title_sort | currency order flow and exchange rate determination empirical evidence from the malaysian foreign exchange market |
| topic | HG Finance Foreign exchange. International finance. |
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