THE SPREAD COMPONENT OF THE EXCHANGE RATE: THE INDONESIAN CASE
Abstract
Paper ini menganalisa perilaku trader yang merupakan isu utama didalam market microstucture, karena perilaku ini dapat mempengaruhi inefisiensi pasar. Perilaku ini menetukan bid-ask spread yang komponennya terdiri dari order-processing cost, adverse selection cost dan inventory holding cost. Dengan mengetahui perilaku trader dalam menentukan spread, kita akan mengetahui perilaku perubahan nilai tukar dalam jangka pendek, dimana hal ini sangat penting bagi pelaku pasar didalam menjalankan bisnisnya.
Dengan menggunakan nilai tukar Rupiah terhadap US dollar, diketahui bahwa order processing cost adalah komponen spread yang paling kecil. Hal ini tidak mengejutkan karena pasar valuta asing merupakan pasar yang sangat kompetitif. Sedangkan porsi terbesar dari komponen spread adalah inventory holding cost, hal ini disebabkan karena adanya opportunity cost dan resiko perubahan kurs. Adverse selection cost adalah komponen spread terpenting kedua. Hal ini dikarenakan Bank Indonesia melakukan intervensi secara diam-diam terhadap pasar valuta asing, jika tidak maka trader akan mendapatkan informasi yang sama tentang kebijakan pemerintah atau perilaku dari makro ekonomi sebuah negara.
Keywords: Foreign exchange, spread, order-processing cost, adverse selection cost, inventory holding cost.
JEL Classification: F31Downloads
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References
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Ito, T. “The Intradaily Exchange Rate Dynamics and Monetary Policies after the Group of Five Agreement”, Journal of the Japanese and International Economies,1987, 1, 275-298.
Ito, T., R.K. Lyons, and M.T. Melvin, “Is There Private Information in the FX Market? The Tokyo Experiment”, Journal of Finance,1998, 33, 3, 1111-1130.
Lee, T. “Spread and Volatility in Spot and Forward Exchange Rates”, Journal of International Money and Finance,1994, 13, 3, 375-383.
Lee, C. and M.J. Ready, “Inferring Trade Direction from Intraday Data”, Journal of Finance, June 1991, XLVI, 2, 733-746.
Lyons, R., “Tests of Microstructural Hypotheses in the Foreign Exchange Market”, September 1993, NBER Working Paper No. 4471.
Lyons, R., “Foreign Exchange Volume: Sound and Fury Signifying Nothing?”, January 1995, NBER Working Paper No.4984.
Lyons, R., “Optimal Transparency in a Dealership Market with an Application to Foreign Exchange”, September 1993, NBER Working Paper No.4467.
Lyons, R., “A Simultaneous Trade Model of the Foreign Exchange Hot Potato∆, Journal of
International Economics”,1997, 42, 275-298.
MacDonald, R. and M.P. Taylor, “Exchange Rate Economics: A survey”, Staff Papers, International Monetary Fund, 39, 1-57, cited in Almekinders, G.J, Foreign Exchange Intervention: Theory and Evidence,Vermont: Edward Elgar Publishing Limited, 1995.
MacDonald, R and I. W Marsh, “Currency Forecasters are Heterogeneous: Confirmation and Consequences”, Journal of International Money and Finance, 1996, 15, 5, 665-685.
Melvin, M and X. Yin, “Public Information Arrival, Exchange Rate Volatility, and Quote Frequency”, Research Paper, June 1996, Department of Economics, Arizona State University, 1-19.
Norusis, M.J., SPSS for Windows: Base System User»s Guide, Release 6.0, SPSS Inc.
Stoll, H., “Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests”, Journal of Finance, March 1989, 44, 1, 115-134.
Stoll, H., “The Supply of Dealer Services in Securities Markets”, The Journal of Finance, 1978, 33, 4, 1133-1151.
Suvanto, A., comment in Hsieh, David. A and Kleidon, Allan W, “Bid-Ask Spreads in Foreign Exchange Markets: Implications for Model of Asymmetric Information”, in Frankel, J., Galli,G. And Giovannini Eds. “The Microstructure of Foreign Exchange Market”, NBER, 1996.
Wei, S.J., “Anticipations of Foreign Exchange Volatility and Bid-Ask Spreads”, May 1994, NBER Working Paper No. 4737.
Baillie, T. and Bollerslev, “Intra-Day and Inter-Market Volatility in Foreign Exchange Rates”, Review of Economic Studies, 1990, 58, 565-585.
Bank for International Settlements, “Foreign exchange Intervention and Policy: Bank Indonesia Experiences”, paper no.24, May, 2005
Bessembinder, H., “Bid-ask Spreads in the Interbank Foreign Exchange Markets”, Journal of Financial Economics, 1994, 35, 317-348.
Black, S., “Transactions Costs and Vehicle Currencies”, Journal of International Money and Finance, 1991, 10, 512-526.
Bollerslev, T. and I. Domowitz, “Trading Patterns and Prices in the Interbank Foreign Exchange Market”, The Journal of Finance, September 1993, XLVIII, 1421-1443.
Boothe, P., “Exchange Rate Risk and the Bid-Ask Spread: a Seven Country Comparison”, Economic Inquiry, July 1988, XXVI, 485-492.
Bossaerts, P. and P. Hillion, “Market Microstructure Effects of Government Intervention in the Foreign Exchange Market”, The Review of Financial Studies, 1991, 4, 3, p.513-541.
Branch, B. and D. Echevarria, “Market Microstructure Empirical Regulaties: Behavior of the BidAsk Spread and Closing Prices”, Financial Review, August 1995, 30, 3, 541-565.
Chung, Kee H. and C. Charoenwong, “Insider Trading and the Bid-Ask Spread”, The Financial Review,1998, 33, 1-20.
Cohen, J., S. Maier, R. Schwartz, and D. Whitcomb, “Transaction Costs, Order Placement Strategy, and Existence of the Bid-Ask Spread”, Journal of Political Economy,1981, 89, 287-305.
De Grauwe, P., International Money: Post-War Trends and Theories, New York: Oxford University Press, 1989.
Dominguez, K.M., “Market Responses to Coordinated Central Bank Intervention”, CarniegeRochester Conference Series On Public Policy,1990, 32, 121-164.
Dominguez, K.M., “Does Central Bank Intervention Increase the Volatility of Foreign Exchange Rates?”, November 1993, NBER Working Paper No.4532.
Dominguez, K.M., “The Informational Role of Official Foreign Exchange Intervention Operations: An Empirical Investigation”, Harvard University, Working Paper, November 1988, cited in
Osterberg William P, “Intervention and the Bid-Ask Spread in G-3 Foreign Exchange Rates”,
Economic Review, Federal Reserve Bank of Cleveland, 1992, 28, 2, 2-13.
Evans, Martin D., “The Microstructure of Foreign Exchange Dynamics”, mimeo, 1998,Department of Economics, Georgetown University.
Eviews User’s Guide, Quantitative Micro Software, California: Irvine, 1995.
Federal Reserve Bank of New York Fedpoints 44: U.S. Foreign Exchange Intervention.(online). Available:http://www.ny.frb.org/pihome/fedpoint/fed44.html (1996, Nov. 10).
Flood, M., “Microstructure Theory and the Foreign Exchange Market”, Federal Reserve Bank of ST. Louis, November/December 1991, 52-70.
Flood, M., “Market Structure and Inefficiency in the Foreign Exchange Market”, Journal of International Money and Finance,1994, 13, 2, 131-158.
Glassman, D., “Exchange Rate Risk and Transactions Costs: Evidence from Bid-Ask Spreads”, Journal of International Money and Finance,1987, 6, 479-490.
Glosten, L., and P. Milgrom, “Bid, Ask and Transaction Prices in a Specialist Market with heterogenously Informed Traders”, Journal of Financial Economics, 1985, 14, 71-100.
Glosten, L., “Components of the Bid-Ask Spread and the Statistical Properties of Transaction Prices”, Journal of Finance, 1987, 42, 5, 1293-1307.
Glosten, L. and L. Harris, “Estimating the Components of the Bid/Ask Spread”, Journal of Financial Economics,1988, 21, 123-142.
Goodhart, C., “The Foreign Exchange Market: A Random Walk with a Dragging Anchor”, Economica,1988, 55, 437-460.
Goodhart, C.A.E. and R.G. Payne, “Microstructural Dynamics in a Foreign Exchange Electronic Broking System”, Journal of International Money and Finance,1996, 15, 6, 829-852.
Goodhart, C.A.E. and L. Figliuoli, “Every Minute Counts in Financial Markets”, Journal of International Money and Finance, 1991, 10, 23-52.
Goodhart, C.A.E. and T. Hesse, “Central Bank Forex Intervention Assessed in Continuous Time”, Journal of International Money and Finance,1993, 12, 368-389.
Gujarati, D.N., Basic Econometrics, McGraw-Hill, Inc, third edition, 1995.
Hakkio, G.S. and D.K. Pearce, “The Reaction of Exchange Rates to Economic News”, Economic Inquiry,October 1985, 23, 621-636.
Hogan, K.C and M. Melvin, “Sources of Meteor Showers and Heat Waves in the Foreign Exchange Market”, Journal of International Economics,1994, 37,239-247.
Hsieh, D.A., and A.W. Kleidon, “Bid-Ask Spreads in Foreign Exchange Markets Implications for Model of Asymmetric Information”, in Frankel, J., Galli, G. and Giovannini Eds. The Microstructure of Foreign Exchange Market, NBER, 1996.
Hung, J.H, “Intervention Strategies and Exchange Rate Volatility: a Noise Trading Perspective”, Journal of International Money and Finance, 1997, 16, 5, p.779-793.
Hung, J.H, “Noise Trading and the Effectiveness of Sterilized Foreign Exchange Intervention”, 1991a, Research Paper, Federal Reserve Bank of New York, no.9118, cited in Almekinders, G.J, Foreign Exchange Intervention: Theory and Evidence, Vermont: Edward Elgar Publishing Limited, 1995.
Ito, T., “Foreign Exchange Rate Expectations: Micro Survey Data”, The American Economic Review, June 1990, 80, 2, 131-158.
Ito, T. “The Intradaily Exchange Rate Dynamics and Monetary Policies after the Group of Five Agreement”, Journal of the Japanese and International Economies,1987, 1, 275-298.
Ito, T., R.K. Lyons, and M.T. Melvin, “Is There Private Information in the FX Market? The Tokyo Experiment”, Journal of Finance,1998, 33, 3, 1111-1130.
Lee, T. “Spread and Volatility in Spot and Forward Exchange Rates”, Journal of International Money and Finance,1994, 13, 3, 375-383.
Lee, C. and M.J. Ready, “Inferring Trade Direction from Intraday Data”, Journal of Finance, June 1991, XLVI, 2, 733-746.
Lyons, R., “Tests of Microstructural Hypotheses in the Foreign Exchange Market”, September 1993, NBER Working Paper No. 4471.
Lyons, R., “Foreign Exchange Volume: Sound and Fury Signifying Nothing?”, January 1995, NBER Working Paper No.4984.
Lyons, R., “Optimal Transparency in a Dealership Market with an Application to Foreign Exchange”, September 1993, NBER Working Paper No.4467.
Lyons, R., “A Simultaneous Trade Model of the Foreign Exchange Hot Potato∆, Journal of
International Economics”,1997, 42, 275-298.
MacDonald, R. and M.P. Taylor, “Exchange Rate Economics: A survey”, Staff Papers, International Monetary Fund, 39, 1-57, cited in Almekinders, G.J, Foreign Exchange Intervention: Theory and Evidence,Vermont: Edward Elgar Publishing Limited, 1995.
MacDonald, R and I. W Marsh, “Currency Forecasters are Heterogeneous: Confirmation and Consequences”, Journal of International Money and Finance, 1996, 15, 5, 665-685.
Melvin, M and X. Yin, “Public Information Arrival, Exchange Rate Volatility, and Quote Frequency”, Research Paper, June 1996, Department of Economics, Arizona State University, 1-19.
Norusis, M.J., SPSS for Windows: Base System User»s Guide, Release 6.0, SPSS Inc.
Stoll, H., “Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests”, Journal of Finance, March 1989, 44, 1, 115-134.
Stoll, H., “The Supply of Dealer Services in Securities Markets”, The Journal of Finance, 1978, 33, 4, 1133-1151.
Suvanto, A., comment in Hsieh, David. A and Kleidon, Allan W, “Bid-Ask Spreads in Foreign Exchange Markets: Implications for Model of Asymmetric Information”, in Frankel, J., Galli,G. And Giovannini Eds. “The Microstructure of Foreign Exchange Market”, NBER, 1996.
Wei, S.J., “Anticipations of Foreign Exchange Volatility and Bid-Ask Spreads”, May 1994, NBER Working Paper No. 4737.
Published
2007-10-31
How to Cite
Danila, N., & Aryani, D. (2007). THE SPREAD COMPONENT OF THE EXCHANGE RATE: THE INDONESIAN CASE. Buletin Ekonomi Moneter Dan Perbankan, 10(2), 149 -. https://doi.org/10.21098/bemp.v10i2.222
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
