Auction-based tests of inventory control and private information in a centralized interdealer FX market

JOURNAL OF FINANCIAL MARKETS
DOI: 
https://doi.org/10.1016/j.finmar.2025.100981
Published: 
Authors:
Jean Pietro Bonaldi-Varóne,
Mauricio Villamizar-Villegasa
Classification JEL: 
D44, F31, G15
Download document

The most recent

Impact of Closures on the Bogotá–Villavicencio Road on Food Prices in Colombia
Jhorland Ayala-García, Yesica Tatiana Lara-Silva, Alejandro Alberto Vargas-Villamil, Lina Romero-Chaparro
Macroeconomic and fiscal impact of demographic change
Jesús Alonso Botero-García, Ligia Alba Melo-Becerra, Cristian Castrillón Gaviria, Daniela Gallo
Revista Ensayos Sobre Política Económica - Exploring gender gaps in Colombia
María Teresa Ramírez-Giraldo, Karina Acosta, Olga Lucia Acosta Navarro, Lucia Arango-Lozano, Fernando Arias-Rodríguez, Oscar Iván Ávila-Montealegre, Oscar Reinaldo Becerra Camargo, Leonardo Bonilla-Mejía, Grey Yuliet Ceballos-Garcia, Luz Adriana Flórez, Juan Miguel Gallego-Acevedo, Luis Armando Galvis-Aponte, Luis M. García-Pulgarín, Andrés Felipe García-Suaza, Anderson Grajales, Daniela Gualtero-Briceño, Didier Hermida-Giraldo, Ana María Iregui-Bohórquez, Juliana Jaramillo-Echeverri, Karen Laguna-Ballesteros, Francisco Javier Lasso-Valderrama, Daniel Márquez, Carlos Alberto Medina-Durango, Ligia Alba Melo-Becerra, María Fernanda Meneses-González, Juan José Ospina-Tejeiro, Andrea Sofía Otero-Cortés, Daniel Parra-Amado, Juana Piñeros-Ruiz, Christian Manuel Posso-Suárez, Natalia Ramírez-Bustamante, Mario Andrés Ramos-Veloza, Jorge Leonardo Rodríguez-Arenas, Alejandro Sarasti-Sierra, Bibiana Taboada-Arango, Ana María Tribín-Uribe, Juanita Villaveces

This study examines how inventory control and private information affect trading prices and volumes in a centralized interdealer foreign exchange (FX) market. Using exogenous variation from FX auctions conducted by the Colombian Central Bank (2008–2014), we analyze settlement data from the COP/USD spot market before and after each auction. Comparing dealers with differing inventory and information shocks, we find that those with reduced inventories increase net USD purchases and pay higher prices post-auction.