Working Paper
Market structure and inefficiency in the foreign exchange market
Abstract: This paper investigates the intradaily operational efficiency of the U. S. foreign exchange market by conducting computer simulation experiments with market structure (the numbers of market?makers, brokers and customers). The results indicate significant operational inefficiencies which can be explained by temporary inventory imbalances inherent in a decentralized market. The results also suggest that much of this inefficiency could be alleviated through a centralization of price information.
Keywords: Foreign exchange;
Status: Published in Journal of International Money and Finance, v. 13, no. 2 (April 1994) pages 131-158
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Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 1993
Number: 1991-001