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The
Microstructure Approach to Exchange Rates
Richard K. Lyons
MIT Press, published December 2001 (333 pages)
Financial support from the National Science Foundation is gratefully
acknowledged
Haas School, U.C. Berkeley,
Berkeley, CA 94720-1900
Tel: 510-642-1059, Fax: 510-643-1420
lyons@haas.berkeley.edu
Click here to download
Chapter 1 in PDF
format.
Click here
for more information on the book from MIT Press
Click here for the location
of a few printer's errors that crept into the first printing.
For teaching purposes, please contact Jane Macdonald at
MIT Press for a desk copy (janem@MIT.EDU).
Preface
Chapter 1: Overview of the Microstructure Approach
1.1 Three Approaches to FX
1.2 Hallmarks of the Microstructure Approach
1.3 Overarching Themes
1.4 Applying Microstructure Tools to Exchange-Rate Puzzles
1.5 Spanning the Micro-Macro Divide
Chapter 2: The Economics of Order-Flow Information
2.1 Background
2.2 Empirical Evidence that Order Flow is Informative
2.3 Defining Private Information
2.4 Extending the Taxonomy of Information Types
Chapter 3: The Institutional Setting
3.1 Features of Spot FX Trading
3.2 Descriptive Statistics: The BIS Surveys
3.3 Transparency of Order Flow
3.4 Moving Beyond Institutions
Chapter 4: Theoretical Frameworks
4.1 An Implicit Auctioneer: Rational Expectations Models
4.2 An Explicit Auctioneer: Kyle Models
4.3 Single Dealer: Sequential Trade Models
4.4 Multiple Dealer: Simultaneous Trade Models
4.5 Appendix: A Tool Kit
Chapter 5: Empirical Frameworks
5.1 Data Sets
5.2 Structural Models and Time-Series Models
5.3 Findings: Informative Order Flow and Imperfect Risk
Sharing
5.4 Why is Volume so High in FX?
Chapter 6: Exchange Rate Models: Macro to
Microfoundations
6.1 FX Fundamentals
6.2 Macro Models
6.3 Microfoundations: Tastes and Technology
6.4 Microfoundations: Information and Institutions
6.5 A False Dichotomy: Micro Issues Versus Macro Issues
Chapter 7: Macro Issues: The Challenge for
Microstructure
7.1 The Determination Puzzle
7.2 The Flow Approach
7.3 The Excess Volatility Puzzle
7.4 The Forward Bias Puzzle
Chapter 8: Microstructure and Central Bank
Intervention
8.1 Macro Motivation for a Micro Approach
8.2 Microstructure Modeling of Intervention
8.3 The Price Impact of Secret Intervention
Chapter 9: Customers: Underlying Demand in the Economy
9.1 Background on Customers
9.2 A First Look at Customer Order Flow
9.3 Institution Types, Price Impact, and Information
Structure
9.4 Case Study: The Collapse of the Yen/$ rate, October 1998
Chapter 10: Looking Forward
10.1 What We Have Learned
10.2 Directions for Research
10.3 Policy Implications
10.4 Where FX is Going: Implications for this Book
References
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Correspondence
Professor Richard
K. Lyons
Haas School
of Business
U.C. Berkeley
Berkeley, CA
94720-1900
Tel: 510-642-1059, Fax: 510-642-4700
lyons@haas.berkeley.edu.
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