Abstract

This present article aims at explaining the exchange rate movements in the Pakistani foreign exchange market using the market micro structure approach, which has not been applied to date due to the unavailability of high-frequency data on the order flow for Pakistan. The novelty of the present article is that it uses publicly unavailable micro data obtained from the State Bank of Pakistan and that it employs ARCH/GARCH regression methods in addition to the OLS technique suggested by the existing literature. Strong evidence emerged suggesting that order flow is a key variable that explains the movements in exchange rate over a short term in the case of Pakistan.

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Additional Information

ISSN
1548-2278
Print ISSN
0022-037X
Pages
pp. 255-265
Launched on MUSE
2010-06-12
Open Access
N
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