Does Exchange Rate Risk Affect Exports Asymmetrically? Asian Evidence

The effects of exchange rate risk have interested researchers, since the collapse of fixed exchange rates. Little consensus exists, however, regarding its effect on exports. Previous studies implicitly assume symmetry. This paper tests the hypothesis of asymmetric effects of exchange rate risk with a dynamic conditional correlation bivariate GARCH(1,1)-M model. The asymmetry means that exchange rate risk (volatility) affects exports differently during appreciations and depreciations of the exchange rate. The data include bilateral exports from eight Asian countries to the US. The empirical results show that real exchange rate risk significantly affects exports for all countries, negative or positive, in periods of depreciation or appreciation. For five of the eight countries, the effects of exchange risk are asymmetric. Thus, policy makers can consider the stability of the exchange rate in addition to its depreciation as a method of stimulating export growth.

Relationships between soil nitrate desorbed from anion-exchange membranes, canopy reflectance and nitrate leaching losses from cool-season lawn turf.

Nutrient leaching studies are expensive and require expertise in water collection and analyses. Less expensive or easier methods that estimate leaching losses would be desirable. The objective of this study was to determine if anion-exchange membranes (AEMs) and reflectance meters could predict nitrate (NO3-N) leaching losses from a cool-season lawn turf. A two-year field study used an established 90% Kentucky bluegrass (Poa pratensis L.)-10% creeping red fescue (Festuca rubra L.) turf that received 0 to 98 kg N ha-1 month-1, from May through November. Soil monolith lysimeters collected leachate that was analyzed for NO3-N concentration. Soil NO3-N was estimated with AEMs. Spectral reflectance measurements of the turf were obtained with chlorophyll and chroma meters. No significant (p > 0.05) increase in percolate flow-weighted NO3-N concentration (FWC) or mass loss occurred when AEM desorbed soil NO3-N was below 0.84 µg cm-2 d-1. A linear increase in FWC and mass loss (p < 0.0001) occurred, however, when AEM soil NO3-N was above this value. The maximum contaminant level (MCL) for drinking water (10 mg L-1 NO3-N) was reached with an AEM soil NO3-N value of 1.6 µg cm-2 d-1. Maximum meter readings were obtained when AEM soil NO3 N reached or exceeded 2.3 µg cm-2 d-1. As chlorophyll index and hue angle (greenness) increased, there was an increased probability of exceeding the NO3-N MCL. These data suggest that AEMs and reflectance meters can serve as tools to predict NO3-N leaching losses from cool-season lawn turf, and to provide objective guides for N fertilization.

Efficient Unit Root Tests of real Exchange Rates in the Post-Bretton Woods Era

We apply the efficient unit-roots tests of Elliott, Rothenberg, and Stock (1996), and Elliott (1998) to twenty-one real exchange rates using monthly data of the G-7 countries from the post-Bretton Woods floating exchange rate period. Our results indicate that, for eighteen out of the twenty-one real exchange rates, the null hypothesis of a unit root can be rejected at the 10% significance level or better using the Elliot et al (1996) DF-GLS test. The unit-root null hypothesis is also rejected for one additional real exchange rate when we allow for one endogenously determined break in the time series of the real exchange rate as in Perron (1997). In all, we find favorable evidence to support long-run purchasing power parity in nineteen out of twenty-one real exchange rates. Second, we find no strong evidence to suggest that the use of non-U.S. dollar-based real exchange rates tend to produce more favorable result for long-run PPP than the use of U.S. dollar-based real exchange rates as Lothian (1998) has concluded.

A Dynamic Analysis: the Smile and Display of Dentition during Speech

The objective of this retrospective study is to follow up on a previous Dynamic Smile Analysis and videographically analyze and develop averages for soft tissue norms with respect to the display of dentition during speech. These values would then be compared cross-sectionally across different age groups to see whether changes attributable to the aging process could be seen. A secondary objective was to compare averages for soft tissue norms in the display of dentition during speech to averages for soft tissue norms in the display of dentition during the smile. Materials and Method: Records from a previous study in which video equipment was used to capture video for 26 1 subjects were re-evaluated to find appropriate frames to analyze for speech. Two frames for each subject were selected; one frame representing the maximal display of maxillary incisors during speech and the second representing the widest transverse display of dentition during speech. After excluding 40 subjects the data for the remaining 221 subjects was analyzed. These averages were then compared to averages attained in the previous study to compare the display of the dentition during speech to the display of the dentition during smile. Results: On average, a difference in 1.29 mm was seen in the display of the maxillary incisors during speech at maximal display and during the smile. An average of 7.23 mm of maxillary incisors is readily visible during maximum display of maxillary incisors during speech, as compared to 8.52 mm during the smile. The constructed smile index was also smaller when measured during the speech when compared to the smile index by an average of 2.58 units. Conclusion: This study helps to establish age-related dynamic norms for the display of dentition during speech. The dynamic measures indicate that the display of dectition is greater, on average, during the smile than at speech.

Export Promotion through Exchange Rate Policy: Exchange Rate Depreciation or Stabilization?

Exchange rate movements affect exports in two ways -- its depreciation and its variability (risk). A depreciation raises exports, but the associated exchange rate risk could offset that positive effect. The present paper investigates the net effect for eight Asian countries using a dynamic conditional correlation bivariate GARCH-M model that simultaneously estimates time varying correlation and exchange rate risk. Depreciation encourages exports, as expected, for most countries, but its contribution to export growth is weak. Exchange rate risk contributes to export growth in Malaysia and the Philippines, leading to positive net effects. Exchange rate risk generates a negative effect for six of the countries, resulting in a negative net effect in Indonesia, Japan, Singapore, Taiwan and a zero net effect in Korea and Thailand. Since the negative effect of exchange rate risk may offset, or even dominate, positive contributions from depreciation, policy makers need to reduce exchange rate fluctuation along with and possibly before efforts to depreciate the currency.

Dynamic Effects of Currency Depreciation on Stock Market Returns during the Asian Financial Crisis

The current international integration of financial markets provides a channel for currency depreciation to affect stock prices. Moreover, the recent financial crisis in Asia with its accompanying exchange rate volatility affords a case study to examine that channel. This paper applies a bivariate GARCH-M model of the reduced form of stock market returns to investigate empirically the effects of daily currency depreciation on stock market returns for five newly emerging East Asian stock markets during the Asian financial crisis. The evidence shows that the conditional variances of stock market returns and depreciation rates exhibit time-varying characteristics for all countries. Domestic currency depreciation and its uncertainty adversely affects stock market returns across countries. The significant effects of foreign exchange market events on stock market returns suggest that international fund managers who invest in the newly emerging East Asian stock markets must evaluate the value and stability of the domestic currency as a part of their stock market investment decisions.

Dynamic Smile Analysis : Changes with Age

Introduction: The objective of this study was to define age-related changes in the human smile. The areas of interest were: upper lip length at smile and repose, upper lip thickness at smile and repose, maxillary incisal display at smile, interlabial gap height at smile, smile index, percent buccal corridors, intercommissural width at rest, smile height, and smile arc. A secondary objective was to study the perioral changes from rest to smile and compare them on the basis of age. Materials and Method: Video equipment was used to capture video for 261 subjects. Two frames for each subject were selected; one frame representing the lips and rest and the second representing the widest smile. After excluding 40 subjects the data for the remaining 221 subjects was analyzed. Results: There was a decrease of 1.5 to 2 mm in the maxillary incisor display during smile, with increase in age. Smile index significantly increased with increase in age. Most (78%) subjects displayed an average smile height. No subjects in the 50 and over age group displayed a high smile while no subjects in the 15-19 year old age group presented with a low smile. All the dynamic measures indicated there was a pattern of decreasing change from rest to smile especially evident after the 30-39 year old age group. Conclusions: This study helps to establish age related dynamic norms. As the person ages the smile gets narrower vertically and wider transversely. The dynamic measures indicate that the muscles' ability to create a smile decreases with increasing age.

Non-Parametric Tests of Real Exchange rates in the Post-Bretton Woods Era

This paper examines the mean-reverting property of real exchange rates. Earlier studies have generally not been able to reject the null hypothesis of a unit-root in real exchange rates, especially for the post-Bretton Woods floating period. The results imply that long-run purchasing power parity does not hold. More recent studies, especially those using panel unit-root tests, have found more favorable results, however. But, Karlsson and Löthgren (2000) and others have recently pointed out several potential pitfalls of panel unit-root tests. Thus, the panel unit-root test results are suggestive, but they are far from conclusive. Moreover, consistent individual country time series evidence that supports long-run purchasing power parity continues to be scarce. In this paper, we test for long memory using Lo's (1991) modified rescaled range test, and the rescaled variance test of Giraitis, Kokoszka, Leipus, and Teyssière (2003). Our testing procedure provides a non-parametric alternative to the parametric tests commonly used in this literature. Our data set consists of monthly observations from April 1973 to April 2001 of the G-7 countries in the OECD. Our two tests find conflicting results when we use U.S. dollar real exchange rates. However, when non-U.S. dollar real exchange rates are used, we find only two cases out of fifteen where the null hypothesis of an unit-root with short-term dependence can be rejected in favor of the alternative hypothesis of long-term dependence using the modified rescaled range test, and only one case when using the rescaled variance test. Our results therefore provide a contrast to the recent favorable panel unit-root test results.

Determinants and Effects of Maturity Mismatches in Emerging Markets: Evidence from Bank Level Data

Despite the extensive work on currency mismatches, research on the determinants and effects of maturity mismatches is scarce. In this paper I show that emerging market maturity mismatches are negatively affected by capital inflows and price volatilities. Furthermore, I find that banks with low maturity mismatches are more profitable during crisis periods but less profitable otherwise. The later result implies that banks face a tradeoff between higher returns and risk, hence channeling short term capital into long term loans is caused by cronyism and implicit guarantees rather than the depth of the financial market. The positive relationship between maturity mismatches and price volatility, on the other hand, shows that the banks of countries with high exchange rate and interest rate volatilities can not, or choose not to hedge themselves. These results follow from a panel regression on a data set I constructed by merging bank level data with aggregate data. This is advantageous over traditional studies which focus only on aggregate data.

A Dynamic Stochastic Frontier Production Model with Time-Varying Efficiency

In this paper we introduce technical efficiency via the intercept that evolve over time as a AR(1) process in a stochastic frontier (SF) framework in a panel data framework. Following are the distinguishing features of the model. First, the model is dynamic in nature. Second, it can separate technical inefficiency from fixed firm-specific effects which are not part of inefficiency. Third, the model allows one to estimate technical change separate from change in technical efficiency. We propose the ML method to estimate the parameters of the model. Finally, we derive expressions to calculate/predict technical inefficiency (efficiency).

Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure

Understanding the effects of off-balance sheet transactions on interest and exchange rate exposures has become more important for emerging market countries that are experiencing remarkable growth in derivatives markets. Using firm level data, we report a significant fall in exposure over the past 10 years and relate this to higher derivatives market participation. Our methodology is composed of a three stage approach: First, we measure foreign exchange exposures using the Adler-Dumas (1984) model. Next, we follow an indirect approach to infer derivatives market participation at the firm level. Finally, we study the relationship between exchange rate exposure and derivatives market participation. Our results show that foreign exchange exposure is negatively related to derivatives market participation, and support the hedging explanation of the exchange rate exposure puzzle. This decline is especially salient in the financial sector, for bigger firms, and over longer time periods. Results are robust to using different exchange rates, a GARCH-SVAR approach to measure exchange rate exposure, and different return horizons.