Martin D. D. Evans

Learn More
Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a naïve random walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic determinants, the model includes a determinant from the field of(More)
Using a new dataset consisting of six years of real-time exchange rate quotations, macroeconomic expectations, and macroeconomic realizations (announcements), we characterize the conditional means of U.S. dollar spot exchange rates versus German Mark, British Pound, Japanese Yen, Swiss Franc, and the Euro. In particular, we find that announcement surprises(More)
I examine the sources of exchange rate dynamics by focusing on the information structure of FX trading. This structure permits the existence of an equilibrium distribution of transaction prices at a point in time. I develop and estimate a model of the price distribution using data from the Deutsche mark0dollar market that produces two striking results: ~1!(More)
This paper develops a simple approximation method for computing equilibrium portfolios in dynamic general equilibrium open economy macro models. The method is widely applicable, simple to implement, and gives analytical solutions for equilibrium portfolio positions in any combination or types of asset. It can be used in models with any number of assets,(More)
This paper tests whether macroeconomic news is transmitted to exchange rates via induced transactions, and if so, what share occurs via transactions versus traditional direct adjustment of price. We identify the link between order flow and macro news using a heteroskedasticity-based approach. This involves jointly testing (1) whether macro news flow(More)
This paper develops a model for understanding end-user order ‡ow in the FX market. The model addresses several puzzling …ndings. First, the estimated price–impact of ‡ow from di¤erent end–user segments is, dollar–for–dollar, quite di¤erent. Second, order ‡ow from segments traditionally thought to be liquidity– motivated actually has power to forecast(More)
International Portfolio Equilibrium and the Current Account* This paper analyses the determinants of international asset portfolios, using a neoclassical dynamic general equilibrium model with home bias in consumption. For plausible parameter values, the model explains the fact that typical investors hold most of their wealth in domestic assets (portfolio(More)
This paper tests the portfolio-balance approach to exchange rate determination in a new way. Past work on portfolio balance in foreign exchange falls into two groups: (1) tests using measures of asset supply and (2) tests using measures of central-bank asset demand. We address the demand side, but we use a broad measure of public demand, rather than(More)