A DYNAMIC FRAMEWORK FOR THE RELATIONS BETWEEN FOREIGN EXCHANGE RATES, SAVINGS AND INVESTMENTS

The Meese-Rogoff forecasting puzzle states that foreign exchange (FX) rates are unpredictable. Since one country’s macroeconomic conditions could affect the price of its national currency, we study the dynamic relations between the FX rates and some macroeconomic accounts. Our research tests whether the predictability of the FX rates could be improved through the advanced econometrics. Improving the predictability of the FX rates has important implications for various groups including investors, business entities and the government. The present thesis examines the dynamic relations between the FX rates, savings and investments for a sample of 25 countries from the Organization for Economic Cooperation and Development. We apply quarterly data of FX rates, macroeconomic indices and accounts including the savings and the investments over three decades. Through preliminary Augmented Dickey-Fuller unit root tests and Johansen cointegration tests, we found that the savings rate and the investment rate are cointegrated with the vector (1,-1). This result is consistent with many previous studies on the savings-investment relations and therefore confirms the validity of the Feldstein-Horioka puzzle. Because of the special cointegrating relation between the savings rate and investment rate, we introduce the savings-investment rate differential (SID). Investigating each country through a vector autoregression (VAR) model, we observe extremely insignificant coefficient estimates of the historical SIDs upon the present FX rates. We also report similar findings through the panel VAR approach. We thus conclude that the historical SIDs are useless in forecasting the FX rate. Nonetheless, the coefficients of the past FX rates upon the current SIDs for both the country-specific and the panel VAR models are statistically significant. Therefore, we conclude that the historical FX rates can conversely predict the SID to some degree. Specifically, depreciation in the domestic currency would cause the increase in the SID.

Macroeconomic News Effects and Foreign Exchange Jumps

This thesis investigates how macroeconomic news announcements affect jumps and cojumps in foreign exchange markets, especially under different business cycles. We use 5-min interval from high frequency data on Euro/Dollar, Pound/Dollar and Yen/Dollar from Nov. 1, 2004 to Feb. 28, 2015. The jump detection method was proposed by Andersen et al. (2007c), Lee & Mykland (2008) and then modified by Boudt et al. (2011a) for robustness. Then we apply the two-regime smooth transition regression model of Teräsvirta (1994) to explore news effects under different business cycles. We find that scheduled news related to employment, real activity, forward expectations, monetary policy, current account, price and consumption influences forex jumps, but only FOMC Rate Decisions has consistent effects on cojumps. Speeches given by major central bank officials near a crisis also significantly affect jumps and cojumps. However, the impacts of some macroeconomic news are not the same under different economic states.

Macroeconomic News and LOB in Foreign Exchange ECN Market

We investigate the macroeconomic news effect on the dynamics of the limit order books (LOB) for euro-dollar ECN market in different economic states between Jan. 2006 to Dec. 2009. Using a VAR-STR model on the news surprise, pure news, aggregated good and bad news, we show that news effects on the LOB dynamics vary in different states of economy. The LOB dynamics are measured by depth, spread, slope and volatility. In contract to slope and volatility, depth and spread strongly respond to news surprise and pure news during recession and expansion. These characteristics are more affected by aggregated good and bad news during expansion. News effects are robust to alternative characteristic measures, the different sides of the LOB and the different levels in the LOB.

Macroeconomic News and Exchange Rates: Evidence of Unstable Effect

Although the link between macroeconomic news announcements and exchange rates is well documented in recent literature, this connection may be unstable. By using a broad set of macroeconomic news announcements and high frequency forex data for the Euro/Dollar, Pound/Dollar and Yen/Dollar from Nov 1, 2004 to Mar 31, 2014, we obtain two major findings with regards to this instability. First, many macroeconomic news announcements exhibit unstable effects with certain patterns in foreign exchange rates. These news effects may change in magnitude and even in their sign over time, over business cycles and crises within distinctive contexts. This finding is robust because the results are obtained by applying a Two-Regime Smooth Transition Regression Model, a Breakpoints Regression Model, and an Efficient Test of Parameter Instability which are all consistent with each other. Second, when we explore the source of this instability, we find that global risks and the reaction by central bank monetary policy to these risks to be possible factors causing this instability.

Collaborative learning in a Japanese as a foreign language classroom /

This study examined the influence of training on Asian learners' beliefs, interaction, and attitudes during collaborative learning (CL) and explored the processes of their CL in pairs. The literature contains few studies on the effect of collaborative training in language learning. In addition, it shows gaps between SLA theory and practice resulting from learners' cultural differences. Although second/subsequent language acquisition (SLA) theory assumes that CL contributes to language learning, implementing CL in a multicultural classroom is often considered to be unsuccessful by teachers. The research questions designed to address this gap explore: (a) the extent to which tra~ng affects Asian learners' attitudes towards and interaction during CL; (b) how Asian learners accomplish collaborative tasks in pairs. In the quasi-experimental research design, the learners in the treatment group received special training in CL for 5 weeks while the learners in the comparison group did not receive similar training. Data were collected from 45 McMaster University students through pre- and posttests, pre- and postintervention questionnaires, student information, and informal classroom observations. To detennine the influence of training, the frequency of communication units (c-units), Language Related Episodes (LREs), Collaborative Dialogue (CD) from audio-taped data, and the fmal draft scores were compared between pre- and posttests. The learners' pre- and postintervention questionnaires were also compared. Transcripts from audio-taped data, students' information, their responses and comments from questionnaires, and informal observations served to investigate the processes of Asian learners' CL. Overall, this study found that training had significant influence on the frequency of c-units and CD, and considerable impact on the draft scores, although little influence on the frequency of LREs was observed. The results from the questionnaires in the treatment group showed positive changes in the learners' beliefs on pair work after training. On the other hand, analyses of the transcription data showed that the learners did not conduct enough discussion for a resolution of problems with peers. In conclusion, results suggested the need for teacher intervention, a longer period of collaborative training, and an implementation of self-evaluation into the course grade to encourage the learners to succeed in collaborative learning.