- Bhanumurthy, N. R. (2000): Microstructures in the Indian Foreign Exchange Market, Institute of Economic Growth, University of Delhi Enclave, http://iegindia.org/workbhanu250.pdf.
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Bjønnes, G. H., D. Rime and O. A. Solheim: Volume and volatility in the FX market: Does it matter who you are?, Norges Bank Working Paper 2003/7.
- C 2.40E–05 2.32E–05 1.034518 0.3009 D(VOLUME_NP–DEP) –0.000282 4.79E–05 –5.889019 0.0000 D(VOLUME_NP_CASH) 0.000236 8.18E–05 2.891277 0.0038 D(VOLUME_LEGAL_PERS) –0.000190 2.55E–05 –7.447640 0.0000 INTERVENTION_DUMMY –0.001345 0.000437 –3.080044 0.0021 AR(1) 0.137399 0.032551 4.221046 0.0000 AR(2) 0.121645 0.030584 3.977457 0.0001 MA(1) –0.959062 0.009461 –101.3728 0.0000 Variance equation C 9.30E–07 9.81E–07 0.948899 0.3427 RESID(–1)^2 0.015646 0.010591 1.477348 0.1396 GARCH(–1) 0.969884 0.022493 43.11982 0.0000 R-squared 0.563261 Mean dependent var –5.56E–05 Adjusted R-squared 0.559276 S.D. dependent var 0.012485 S.E. of regression 0.008288 Akaike info criterion –6.755954 Sum squared resid 0.075289 Schwarz criterion –6.706177 Log likelihood 3750.421 F-statistic 141.3506 Durbin-Watson stat 1.991689 Prob(F-statistic) 0.000000 Inverted AR roots .42 –.29 Inverted MA roots .96 Source: CNB.
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- C –3.99E–05 1.79E–05 –2.236125 0.0253 D(VOLUME_EXP) –5.12E–05 1.99E–05 –2.573051 0.0101 D(VOLUME_UNEXP) –7.81E–05 4.65E–06 –16.80760 0.0000 AR(1) 0.099164 0.033499 2.960247 0.0031 AR(2) 0.115644 0.032162 3.595628 0.0003 MA(1) –0.949085 0.009398 –100.9833 0.0000 Variance equation C 4.50E–07 3.59E–07 1.251987 0.2106 0RESID(–1)^2 0.018920 0.006357 2.976330 0.0029 GARCH(–1) 0.974592 0.009116 106.9115 0.0000 R-squared 0.494302 Mean dependent var –5.51E–05 Adjusted R-squared 0.490600 S.D. dependent var 0.012485 S.E. of regression 0.008911 Akaike info criterion –6.629794 Sum squared resid 0.086783 Schwarz criterion –6.588919 Log likelihood 3662.016 F-statistic 133.5460 Durbin-Watson stat 1.965704 Prob(F-statistic) 0.000000 Inverted AR roots .39 –.29 Inverted MA roots .95 Source: CNB.
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- C –5.85E–05 6.10E–05 –0.958979 0.3376 AR(1) –0.038828 0.035359 –1.098128 0.2721 AR(2) 0.271815 0.029596 9.184111 0.0000 AR(3) 0.099765 0.032623 3.058158 0.0022 Variance equation C 3.60E–08 1.70E–08 2.120755 0.0339 RESID(–1)^2 0.235491 0.049918 4.717588 0.0000 RESID(–2)^2 –0.168718 0.049657 –3.397674 0.0007 GARCH(–1) 0.919913 0.019345 47.55340 0.0000 R-squared 0.094382 Mean dependent var –1.84E–05 Adjusted R-squared 0.088608 S.D. dependent var 0.001632 S.E. of regression 0.001558 Akaike info criterion –10.21249 Sum squared resid 0.002664 Schwarz criterion –10.17626 Log likelihood 5655.507 F-statistic 16.34737 Durbin-Watson stat 1.880034 Prob(F-statistic) 0.000000 Inverted AR roots .64 –.34–.21i –.34+.21i Source: CNB.
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De Medeiros, O. R.: Order Flow and Exchange Rate Dynamics in Brazil, Universidade de Brasilia, Working Paper. Evans, M. D. and R. K. Lyons (1999): Order Flow and Exchange Rate Dynamics, Institute of Business and Economic Research, University of California, Berkley, Working Paper.
Evans, M. D.: Foreign Exchange Market Microstructure, Georgtown University and NBER, Working Paper. Galati, G. (2000): Trading Volumes, Volatility and Spreads in Foreign Exchange Markets: Evidence from Emerging Markets Countries, Bank for International Settlement, www.bis.org.
Hartmann, P. (1999): Trading Volumes and Transaction Costs in the Foreign Exchange Market: Evidence from Daily Dollar-Yen Spot Data, Journal of Banking and Finance, 23, No. 5.
- How Competitive Is Croatia's Banking System? 25 Table 2 Decomposition of Exchange Rate Volatility Dependent variable: DLOG(CNB_RATE) Method: ML – ARCH Date: 21/08/06 Time: 13:53 Sample (adjusted): 8/01/2002 31/05/2006 Included observations: 1106 after adjustments Convergence achieved after 18 iterations Variance backcast: ON GARCH = C(5) + C(6)*RESID(–1)^2 + C(7)*RESID(–2)^2 + C(8) *GARCH(–1) Coefficient Std. error Z-statistic Prob.
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- In further steps towards the liberalization of FX transactions in Croatia, a new Foreign Exchange Act was passed in 2003. The purpose of this act was to further reconcile the domestic law and the regulation and practices of the EU. The act regulates three main areas: business between resident and non-resident persons in foreign currency and in kuna, business between resident persons in foreign currency, and the unilateral assignment of assets from Croatia and into Croatia that does not have the characteristic of a business deal between a resident and a non-resident. The act allows non-resident persons to hold kuna and FX deposits in foreign banks. Thus long-term capital flow liberalization was almost completed in 2003. In the same year, the government announced a gradual liberalization of short-term capital flows.
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- In the same year, Croatia signed the Stabilisation and Association Agreement with the EU that demanded further liberalization of some segments of the country’s capital account within four years after the contract took effect. It also obliged Croatia to ensure the complete liberalization of the capital account before becoming a full member of the EU (say, until 2009).
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- Kouki, I. (2003): Trading Volume, Volatility, Order Flow and Spread: Evidence of Tunisian Daler, Universite Jean-Moulin Lyon III, Working Paper.
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- Lyons, R. K. (2001): The Microstructure Approach to Exchange Rates, Massachusetts Institute of Technology.
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- Microstructure of Foreign Exchange Market in Croatia 29 Table 4b Trading Volume and the Bid-Ask Spread Dependent variable: D(SPREAD) Method: ML – ARCH Date: 21/08/06 Time: 13:20 Sample (adjusted): 14/01/2002 31/05/2006 Included observations: 1102 after adjustments Convergence achieved after 14 iterations MA backcast: 1/01/2002, Variance backcast: ON GARCH = C(7) + C(8)*RESID(–1)^2 + C(9)*GARCH(–1) Coefficient Std. error Z-statistic Prob.
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- Microstructure of Foreign Exchange Market in Croatia 39 trades. Since January 2005, licensed exchange offices are obliged to use one of the CNB-licensed and secured computer programs. Each exchange office must conclude an agreement with a bank which defines the frequency of emptying the exchange office’s cash box, that is, the number of times in a month (one time at least) that the exchange office will take the money to the bank for a repurchase.
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- Microstructure of Foreign Exchange Market in Croatia 41 Thus the Zagreb Money Market company was unsuccessful in organizing an FX exchange, as was the Zagreb Stock Exchange in introducing FX term instruments and an FX futures market. Moreover, the Croatian banks did not exercise an option offered by the law between 1993 and 1999 to organize an FX exchange. However, the FX market liberalization has definitely contributed to a growth in trading volumes and a reduction in bid-ask spreads, and the Croatian FX market continues to develop in a favourable macroeconomic situation and without substantial FX rate volatility.
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- Sarno, L. and M. P. Taylor (2001): The Microstructure of the Foreign-Exchange Market: A Selective Survey of the Literature, Princeton Studies in International Economics N'89, May.
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- ST DLOG_ST DLOG_ST_SQR DLOG_ST_ABS 2a) CNB middle rate – “log-differences (dlogs)†1a) CNB middle rate 2b) CNB middle rate squared “log-difference†– histogram 2c) CNB middle rate absolute “log-difference†– histogram 2/1/02 2/1/02 2/1/02 2/1/02 2/5/02 2/5/02 2/5/02 2/5/02 2/9/02 2/9/02 2/9/02 2/9/02 2/1/03 2/1/03 2/1/03 2/1/03 2/5/03 2/5/03 2/5/03 2/5/03 2/9/03 2/9/03 2/9/03 2/9/03 2/1/04 2/1/04 2/1/04 2/1/04 2/5/04 2/5/04 2/5/04 2/5/04 2/9/04 2/9/04 2/9/04 2/9/04 2/1/05 2/1/05 2/1/05 2/1/05 2/5/05 2/5/05 2/5/05 2/5/05 2/9/05 2/9/05 2/9/05 2/9/05 2/1/06 2/1/06 2/1/06 2/1/06 2/5/06 2/5/06 2/5/06 2/5/06 7,0000 7,1000 7,2000 7,3000 7,4000 7,5000 7,6000 7,7000 7,8000 –0,010 –0,008 –0,006 –0,004 –0,002 0,000 0,002 0,004 0,006 0,008 0 0,00001 0,00002 0,00003 0,00004 0,00005 0,00006 0,00007 0,00008 0,000 0,001 0,002 0,003 0,004 0,005 0,006 0,007 0,008 0,009 Table 4 Exchange Rate Volatility, in kuna units per 1 euro Source: CNB.
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- Stu~ka, T. (2001): Turnover and Exchange Rates in the Croatian Foreign Exchange Market, Croatian National Bank Survey, S-8, September.
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- The most significant change for the role of legal persons in the Croatian FX market took place in April 2001. Until then, they were allowed to buy foreign currency only to make foreign payments for goods and services purchased abroad. After that date, legal persons are allowed to buy foreign currency for payments abroad, for capital transactions (allowed by the law) and also for asset allocation.
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- This meant that, up to 2001, Croatian legal persons could not control their FX risk. After that date, however, the largest Croatian companies started to form their own FX desks in their treasuries and started to actively protect themselves from FX risk.
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- Vu~kovi}, V. (2005): The Microstructure of Foreign Exchange Rate and Foreign Exchange rate Formation, Faculty of Economics, Belgrade, Working Paper.
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- Walker, A. (2002): The Microstructure of the Jamaican Foreign Exchange Market: Volumes, Volatility and Spreads, Bank of Jamaica Working Paper, February.
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