Exchange rate overvaluation under hyperinflation: The case of Peru

This dissertation examines the behavior of the exchange rate under two different scenarios. The first one is characterized by, relatively, low inflation or a situation where prices adjust sluggishly. The second is a high inflation economy where prices respond very rapidly even to unanticipated shocks. In the first one, following a monetary expansion, the exchange rate overshoots, i.e. the nominal exchange rate depreciates at a faster pace than the price level. Under high levels of inflation, prices change faster than the exchange rate so the exchange rate undershoots its long run equilibrium value.^ The standard work in this area, Dornbusch (1976), explains the overshooting process in the context of perfect capital mobility and sluggish adjustment in the goods market. A monetary expansion will make the exchange rate increase beyond its long run equilibrium value. This dissertation expands on Dornbusch's model and provides an analysis of the exchange rate under conditions of currency substitution and price flexibility, characteristics of the Peruvian economy during the hyper inflation process that took place at the end of the 1980's. The results of the modified Dornbusch model reveal that, given a monetary expansion, the change in the price level will be larger than the change in the exchange rate if prices react more than proportionally to the monetary shock.^ We will expect this over-reaction in circumstances of high inflation when the velocity of money is increasing very rapidly. Increasing velocity of money, gives rise to a higher relative price variability which in turn contributes to the appearance of new financial (and also non-financial) instruments that report a higher return than the exchange rate, causing people to switch their demand for foreign exchange to this new assets. In the context of currency substitution, economic agents hoard and use foreign exchange as a store of value. The big decline in output originated by hyper inflation induces people to sell this hoarded money to finance current expenses, increasing the supply of foreign exchange in the market. Both, the decrease in demand and the increase in supply reduce the price of foreign exchange i.e. the real exchange rate. The findings mentioned above are tested using Peruvian data for the period January 1985-July 1990, the results of the econometric estimation confirm our findings in the theoretical model. ^

Empirical study of exchange rates in Brazil, Canada and the Caribbean

This dissertation examines the monetary models of exchange rate determination for Brazil, Canada, and two countries in the Caribbean, namely, the Dominican Republic and Jamaica. With the exception of Canada, the others adopted the floating regime during the past ten years.^ The empirical validity of four seminal models in exchange rate economics were determined. Three of these models were entirely classical (Bilson and Frenkel) or Keynesian (Dornbusch) in nature. The fourth model (Real Interest Differential Model) was a mixture of the two schools of economic theory.^ There is no clear empirical evidence of the validity of the monetary models. However, the signs of the coefficients of the nominal interest differential variable were as predicted by the Keynesian hypothesis in the case of Canada and as predicted by the Chicago theorists in the remaining countries. Moreover, in case of Brazil, due to hyperinflation, the exchange rate is heavily influenced by domestic money supply.^ I also tested the purchasing power parity (PPP) for this same set of countries. For both the monetary as well as the PPP hypothesis, I tested for co-integration and applied ordinary least squares estimation procedure. The error correction model was also used for the PPP model, to determine convergence to equilibrium.^ The validity of PPP is also questionable for my set of countries. Endogeinity among the regressors as well as the lack of proper price indices are the contributing factors. More importantly, Central Bank intervention negate rapid adjustment of price and exchange rates to their equilibrium value. However, its forecasting capability for the period 1993-1994 is superior compared to the monetary models in two of the four cases.^ I conclude that in spite of the questionable validity of these models, the monetary models give better results in the case of the "smaller" economies like the Dominican Republic and Jamaica where monetary influences swamp the other determinants of exchange rate. ^

An evaluation of exchange rate policy and economic adjustment in Nicaragua, 1993--1995

Since the late 1970's, but particularly since the mid-1980s, the economy of Nicaragua has had persistent and large macroeconomic imbalances, while GDP per-capita has declined to 1950s' levels. By the second half of the 1990s, huge fiscal deficits and a reduction of foreign financing resulted in record hyperinflation. The Sandinista government's (1979–1990) harsh stabilization program in 1988–89 had only modest and short-lived success. It was doomed by their inability to lower the public sector deficit due to the war, plus diminishing financial support from abroad. Hyperinflation stopped only after their 1990 electoral defeat ended the war and massive aid began to flow in. Five years later, macroeconomic stability is still very fragile. A sluggish recovery of export agriculture plus import liberalization, have impeded a reduction of huge trade and current account deficits. Facing the prospects of diminished aid flows, the government's strategy has hinged on the achievement of a real devaluation through a crawling-peg adjustment of the nominal rate. However, at the end of 1995 the situation of the external accounts was still critical, and the modest progress achieved was attributable to cyclical terms-of-trade improvement and changes in the political outlook of agricultural producers. Using a Computable General Equilibrium Model and a Social Accounting Matrix constructed for this dissertation, the importance of structural rigidities in production and demand in explaining such outcome is shown. It is shown that under the plausible structural assumptions incorporated in the model, the role of devaluation in the adjustment process is restricted by structural rigidities. Moreover, contrary to the premise of the orthodox economic thinking behind the economic program, it is the contractionary effect of devaluation more than its expenditure-switching effects that provide the basis for is use in solving the external sector's problems. A fixed nominal exchange rate is found to lead to adverse results. The broader conclusion that emerges from the study is that a new social compact and a rapid increase in infrastructure spending plus fiscal support for the traditional agro-export activities is at the center of a successful adjustment towards external viability in Nicaragua. ^

The exchange of carbon, nitrogen, and phosphorus in dwarf and fringe mangroves of the oligotrophic southern Everglades

Water management has altered both the natural timing and volume of freshwater delivered to Everglades National Park. This is especially true for Taylor Slough and the C-111 basin, as hypersaline events in Florida Bay have been linked to reduced freshwater flow in this area. In light of recent efforts to restore historical flows to the eastern Everglades, an understanding of the impact of this hydrologic shift is needed in order to predict the trajectory of restoration. I conducted a study to assess the importance of season, water chemistry, and hydrologic conditions on the exchange of nutrients in dwarf and fringe mangrove wetlands along Taylor Slough. I also performed mangrove leaf decomposition studies to determine the contribution of biotic and abiotic processes to mass loss, the effect of salinity and season on degradation rates, and the importance of this litter component as a rapid source of nutrients. ^ Dwarf mangrove wetlands consistently imported total nutrients (C, N, and P) and released NO2− +NO3 −, with enhanced release during the dry season. Ammonium flux shifted from uptake to release over the study period. Dissolved phosphate activity was difficult to discern in either wetland, as concentrations were often below detection limits. Fluxes of dissolved inorganic nitrogen in the fringe wetland were positively related to DIN concentrations. The opposite was found for total nitrogen in the fringe wetland. A dynamic budget revealed a net annual export of TN to Florida Bay that was highest during the wet season. Simulated increases and decreases in freshwater flow yielded reduced exports of TN to Florida Bay as a result of changes in subsystem and water flux characteristics. Finally, abiotic processes yielded substantial nutrient and mass losses from senesced leaves with little influence of salinity. Dwarf mangrove leaf litter appeared to be a considerable source of nutrients to the water column of this highly oligotrophic wetland. To summarize, nutrient dynamics at the subsystem level were sensitive to short-term changes in hydrologic and seasonal conditions. These findings suggest that increased freshwater flow has the potential to lead to long-term, system-level changes that may reach as far as eastern Florida Bay. ^

Leader-member exchange and upward influence: Interrelationships and successful consequences

The relationship between leader-member exchange (LMX) and upward influence was investigated in a field sample of 134 employees in four organizations. These variables were related to three outcome variables comprising an employee's job success: (a) current annual salary, (b) overall job satisfaction, and (c) overall reputational effectiveness. Measures used were the LMX7, revised Influence Tactics Questionnaire, overall job satisfaction, and reputational effectiveness questionnaires. A negative relationship was found between coalitions and upward appeal with quality of LMX. Support was also found for the relationship between quality of LMX and overall job satisfaction. Partial support was found for the relationship between upward influence and success variables. Finally, partial support was found for the addition of quality of LMX above and beyond the control variables and influence tactics in explaining an employee's job success. Avenues for future research are discussed. ^

Computational modeling of intermediate temperature proton exchange membrane (PEM) fuel cells

A two-phase three-dimensional computational model of an intermediate temperature (120--190°C) proton exchange membrane (PEM) fuel cell is presented. This represents the first attempt to model PEM fuel cells employing intermediate temperature membranes, in this case, phosphoric acid doped polybenzimidazole (PBI). To date, mathematical modeling of PEM fuel cells has been restricted to low temperature operation, especially to those employing Nafion ® membranes; while research on PBI as an intermediate temperature membrane has been solely at the experimental level. This work is an advancement in the state of the art of both these fields of research. With a growing trend toward higher temperature operation of PEM fuel cells, mathematical modeling of such systems is necessary to help hasten the development of the technology and highlight areas where research should be focused.^ This mathematical model accounted for all the major transport and polarization processes occurring inside the fuel cell, including the two phase phenomenon of gas dissolution in the polymer electrolyte. Results were presented for polarization performance, flux distributions, concentration variations in both the gaseous and aqueous phases, and temperature variations for various heat management strategies. The model predictions matched well with published experimental data, and were self-consistent.^ The major finding of this research was that, due to the transport limitations imposed by the use of phosphoric acid as a doping agent, namely low solubility and diffusivity of dissolved gases and anion adsorption onto catalyst sites, the catalyst utilization is very low (∼1--2%). Significant cost savings were predicted with the use of advanced catalyst deposition techniques that would greatly reduce the eventual thickness of the catalyst layer, and subsequently improve catalyst utilization. The model also predicted that an increase in power output in the order of 50% is expected if alternative doping agents to phosphoric acid can be found, which afford better transport properties of dissolved gases, reduced anion adsorption onto catalyst sites, and which maintain stability and conductive properties at elevated temperatures.^

Essays on exchange rate economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. ^ Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. ^ Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. ^ Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption. ^

Making chamber measurements of net ecosystem exchange in a short-hydroperiod Everglades marsh (at TS/Ph-1b), Taylor Slough

This material is based upon work supported by the National Science Foundation through the Florida Coastal Everglades Long-Term Ecological Research program under Cooperative Agreements #DBI-0620409 and #DEB-9910514. This image is made available for non-commercial or educational use only.

Growth and gas exchange responses of Brazilian pepper (Schinus terebinthifolius) and native South Florida species to salinity

Schinus terebinthifolius Raddi (Schinus) is an invasive exotic species widely found in disturbed and native communities of Florida. This species has been shown to displace native species as well as alter community structure and function. The purpose of this study was to determine if the growth and gas exchange patterns of Schinus, under differing salinity conditions, were different from native species. Two native upland glycophytic species (Rapanea punctata and Randia aculeata) and two native mangrove species (Rhizophora mangle and Laguncularia racemosa) were compared with the exotic. Overall, the exotics morphologic changes and gas exchange patterns were most similar to R. mangle. Across treatments, increasing salinity decreased relative growth rate (RGR), leaf area ratio (LAR) and specific leaf area (SLA) but did not affect root/shoot ratios (R:S). Allocation patterns were however significantly different among species. The largest proportion of Schinus biomass was allocated to stems (47%), resulting in plants that were generally taller than the other species. Schinus also had the highest SLA and largest total leaf area of all species. This meant that the exotic, which was taller and had thinner leaves, was potentially able to maintain photosynthetic area comparable to native species. Schinus response patterns show that this exotic exhibits some physiological tolerance for saline conditions. Coupled with its biomass allocation patterns (more stem biomass and large area of thin leaves), the growth traits of this exotic potentially provide this species an advantage over native plants in terms of light acquisition in a brackish forested ecosystem.

Patterns of nutrient exchange in a riverine mangrove forest in the Shark River Estuary, Florida, USA

This study aimed to evaluate tidal and seasonal variations in concentrations and fluxes of nitrogen (NH4 +, NO2+NO3, total nitrogen) and phosphorus (soluble reactive phosphorus, total phosphorus) in a riverine mangrove forest using the flume technique during the dry (May, December 2003) and rainy (October 2003) seasons in the Shark River Estuary, Florida. Tidal water temperatures during the sampling period were on average 29.4 (± 0.4) oC in May and October declining to 20 oC (± 4) in December. Salinity values remained constant in May (28 ± 0.12 PSU), whereas salinity in October and December ranged from 6‒21 PSU and 9‒25 PSU, respectively. Nitrate + nitrite (N+N) and NH4+ concentrations ranged from 0.0 to 3.5 μM and from 0 to 4.8 μM throughout the study period, respectively. Mean TN concentrations in October and December were 39 (±0.8) μM and 37 (±1.5) μM, respectively. SRP and N+N concentrations in the flume increased with higher frequency in flooding tides. TP concentrations ranged between 0.2‒2.9 μM with higher concentrations in the dry season than in the rainy season. Mean concentrations were <1. 5 μM during the sampling period in October (0.75 ± 0.02) and December (0.76 ± 0.01), and were relatively constant in both upstream and downstream locations of the flume. Water residence time in the flume (25 m2) was relatively short for any nutrient exchange to occur between the water column and the forest floor. However, the distinct seasonality in nutrient concentrations in the flume and adjacent tidal creek indicate that the Gulf of Mexico is the main source of SRP and N+N into the mangrove forest.

Leaf gas exchange characteristics of three neotropical mangrove species in response to varying hydroperiod

We determined how different hydroperiods affected leaf gas exchange characteristics of greenhouse-grown seedlings (2002) and saplings (2003) of the mangrove species Avicennia germinans (L.) Stearn., Laguncularia racemosa (L.) Gaertn. f., and Rhizophora mangle L. Hydroperiod treatments included no flooding (unflooded), intermittent flooding (intermittent), and permanent flooding (flooded). Plants in the intermittent treatment were measured under both flooded and drained states and compared separately. In the greenhouse study, plants of all species maintained different leaf areas in the contrasting hydroperiods during both years. Assimilation-light response curves indicated that the different hydroperiods had little effect on leaf gas exchange characteristics in either seedlings or saplings. However, short-term intermittent flooding for between 6 and 22 days caused a 20% reduction in maximum leaf-level carbon assimilation rate, a 51% lower light requirement to attain 50% of maximum assimilation, and a 38% higher demand from dark respiration. Although interspecific differences were evident for nearly all measured parameters in both years, there was little consistency in ranking of the interspecific responses. Species by hydroperiod interactions were significant only for sapling leaf area. In a field study, R. mangle saplings along the Shark River in the Everglades National Park either demonstrated no significant effect or slight enhancement of carbon assimilation and water-use efficiency while flooded. We obtained little evidence that contrasting hydroperiods affect leaf gas exchange characteristics of mangrove seedlings or saplings over long time intervals; however, intermittent flooding may cause short-term depressions in leaf gas exchange. The resilience of mangrove systems to flooding, as demonstrated in the permanently flooded treatments, will likely promote photosynthetic and morphological adjustment to slight hydroperiod shifts in many settings.

The Use of Picture Exchange Communication System to Reduce Screaming Behavior in a Child with Severe Autism

Using a multiple baseline across subject areas design, the effect of a package intervention consisting of the Picture Exchange Communication System and differential reinforcement of alternative behavior to decrease screaming behavior of a child with autism was examined. Results showed that the intervention decreased the screaming behavior of the participant.

Controls on Ecosystem Carbon Dioxide Exchange in Short- and Long-Hydroperiod Florida Everglades Freshwater Marshes

Although freshwater wetlands are among the most productive ecosystems on Earth, little is known of carbon dioxide (CO2) exchange in low latitude wetlands. The Everglades is an extensive, oligotrophic wetland in south Florida characterized by short- and long-hydroperiod marshes. Chamber-based CO2 exchange measurements were made to compare the marshes and examine the roles of primary producers, seasonality, and environmental drivers in determining exchange rates. Low rates of CO2 exchange were observed in both marshes with net ecosystem production reaching maxima of 3.77 and 4.28 μmol CO2 m−2 s−1 in short- and long-hydroperiod marshes, respectively. Fluxes of CO2 were affected by seasonality only in the short-hydroperiod marsh, where flux rates were significantly lower in the wet season than in the dry season. Emergent macrophytes dominated fluxes at both sites, though this was not the case for the short-hydroperiod marsh in the wet season. Water depth, a factor partly under human control, significantly affected gross ecosystem production at the short-hydroperiod marsh. As Everglades ecosystem restoration proceeds, leading to deeper water and longer hydroperiods, productivity in short-hydroperiod marshes will likely be more negatively affected than in long-hydroperiod marshes. The Everglades stand in contrast to many freshwater wetlands because of ecosystem-wide low productivity rates.

Seasonal differences in the CO2 exchange of a short-hydroperiod Florida Everglades marsh

Although wetlands are among the world's most productive ecosystems, little is known of long-term CO2 exchange in tropical and subtropical wetlands. The Everglades is a highly managed wetlands complex occupying >6000 km2 in south Florida. This ecosystem is oligotrophic, but extremely high rates of productivity have been previously reported. To evaluate CO2 exchange and its response to seasonality (dry vs. wet season) in the Everglades, an eddy covariance tower was established in a short-hydroperiod marl marsh. Rates of net ecosystem exchange and ecosystem respiration were small year-round and declined in the wet season relative to the dry season. Inundation reduced macrophyte CO2 uptake, substantially limiting gross ecosystem production. While light and air temperature exerted the primary controls on net ecosystem exchange and ecosystem respiration in the dry season, inundation weakened these relationships. The ecosystem shifted from a CO2 sink in the dry season to a CO2 source in the wet season; however, the marsh was a small carbon sink on an annual basis. Net ecosystem production, ecosystem respiration, and gross ecosystem production were −49.9, 446.1 and 496.0 g C m−2 year−1, respectively. Unexpectedly low CO2 flux rates and annual production distinguish the Everglades from many other wetlands. Nonetheless, impending changes in water management are likely to alter the CO2 balance of this wetland and may increase the source strength of these extensive short-hydroperiod wetlands.