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.

Monetary Policy in a Portfolio Balance Model with Endogenous Physical Capital

We develop a portfolio balance model with real capital accumulation. The introduction of real capital as an asset as well as a good produced and demanded by firms enriches extant portfolio balance models of exchange rate determination. We show that expansionary monetary policy causes exchange rate overshooting, not once, but twice; the secondary repercussion comes through the reaction of firms to changed asset prices and the firms' decisions to invest in real capital. The model sheds further light on the volatility of real and nominal exchange rates, and it suggests that changes in corporate sector profitability may affect exchange rates through portfolio diversification in corporate securities.

Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.

Sources of fluctuations in parallel exchange rates and policy reform in Myanmar

Myanmar maintained a multiple exchange rate system, and the parallel market exchange rate was left untamed. In the last two decades, the Myanmar kyat exchange rate of the parallel market has exhibited the sharpest fluctuations among Southeast Asian currencies in real terms. Since the move to a managed float regime in April 2012, the question arises of whether exchange rate policies will be effective in stabilizing the real exchange rate. This paper investigates the sources of fluctuations in the real effective exchange rate using Blanchard and Quah’s (1989) structural vector autoregression model. As nominal shocks can be created by exchange rate policies, a persistent impact of a nominal shock implies more room for exchange rate policies. Decomposition of the fluctuations into nominal and real shocks indicates that the impact of nominal shocks is small and quickly diminishes, implying that complementary sterilization is necessary for effective foreign exchange market interventions.

FTA in international finance : impacts of exchange rates on FTA utilization

This paper investigates how exchange rates affect the utilization of a free trade agreement (FTA) scheme in trading. Changes in exchange rates affect FTA utilization by two ways. The first way is by changing the excess profits gained by utilizing the FTA scheme, and the second way is by promoting the compliance of rules of origin. Our theoretical models predict that the depreciation of exporters' currency against that of importers enhances the likelihood of FTA utilization through those two channels. Furthermore, our empirical analysis, which is based on rich tariff-line-level data on the utilization of FTA schemes in Korea's imports from ASEAN countries, supports the theoretical prediction. We also show that the effects are smaller for more differentiated products.

Transition from black to official markets for foreign exchange in Myanmar

We address the puzzle why the black market for foreign exchange thrives in Myanmar despite the successful unification of multiple exchange rates. A closer look at the black market reveals that its enduring competitiveness stems from its lower transaction costs. A question arising from this observation is how the official market, namely banks, can compete with and replace the black market. Our empirical analysis based on an original questionnaire survey of private export firms regarding their choices of currency trading modes suggests that banks can attract exporters by exploiting the economies of scope between currency trading and lending.

Fractionation factors and activation energies for exchange of the low barrier hydrogen bonding proton in peptidyl trifluoromethyl ketone complexes of chymotrypsin

NMR investigations have been carried out of complexes between bovine chymotrypsin Aα and a series of four peptidyl trifluoromethyl ketones, listed here in order of increasing affinity for chymotrypsin: N-Acetyl-l-Phe-CF3, N-Acetyl-Gly-l-Phe-CF3, N-Acetyl-l-Val-l-Phe-CF3, and N-Acetyl-l-Leu-l-Phe-CF3. The D/H fractionation factors (φ) for the hydrogen in the H-bond between His 57 and Asp 102 (His 57-Hδ1) in these four complexes at 5°C were in the range φ = 0.32–0.43, expected for a low-barrier hydrogen bond. For this series of complexes, measurements also were made of the chemical shifts of His 57-Hɛ1 (δ2,2-dimethylsilapentane-5-sulfonic acid 8.97–9.18), the exchange rate of the His 57-Hδ1 proton with bulk water protons (284–12.4 s−1), and the activation enthalpies for this hydrogen exchange (14.7–19.4 kcal⋅mol−1). It was found that the previously noted correlations between the inhibition constants (Ki 170–1.2 μM) and the chemical shifts of His 57-Hδ1 (δ2,2-dimethylsilapentane-5-sulfonic acid 18.61–18.95) for this series of peptidyl trifluoromethyl ketones with chymotrypsin [Lin, J., Cassidy, C. S. & Frey, P. A. (1998) Biochemistry 37, 11940–11948] could be extended to include the fractionation factors, hydrogen exchange rates, and hydrogen exchange activation enthalpies. The results support the proposal of low barrier hydrogen bond-facilitated general base catalysis in the addition of Ser 195 to the peptidyl carbonyl group of substrates in the mechanism of chymotrypsin-catalyzed peptide hydrolysis. Trends in the enthalpies for hydrogen exchange and the fractionation factors are consistent with a strong, double-minimum or single-well potential hydrogen bond in the strongest complexes. The lifetimes of His 57-Hδ1, which is solvent shielded in these complexes, track the strength of the hydrogen bond. Because these lifetimes are orders of magnitude shorter than those of the complexes themselves, the enzyme must have a pathway for hydrogen exchange at this site that is independent of dissociation of the complexes.

Inflation-Targeting, Flexible Exchange Rates and Macroeconomic Performance since the Great Recession. CEPS Working Document No. 394, March 2014

Has inflation targeting (IT) conferred benefits in terms of economic growth on countries that followed this particular monetary policy strategy during the crisis period 2007-12? This paper answers this question in the affirmative. Countries with an IT monetary regime with flexible exchange rates weathered the crisis much better than countries with other monetary regimes, predominantly countries with fixed exchange rates. Part of this difference in growth performance reflects differences in export performance during the initial years of the crisis, which in turn can be explained by real exchange rate depreciations. However, IT seems also to confer other benefits on the countries above and beyond the effects from currency depreciation.

Essays on International Asset Allocation and Pricing

Thesis (Ph.D.)--University of Washington, 2016-06

DOSY NMR studies of chemical exchange behavior of poly(2-hydroxyethyl methacrylate)

PFG-NMR was used to study the chemical exchange of linear PHEMA having a range of molecular weights with water in DMSO containing varying quantities of water. The aim was to investigate the use of PFG-NMR to study chemical exchange between a polymer with exchangeable protons and a small fast diffusing molecule to provide insight into the conformation adopted by a polymer in solution. The experimental data were simulated closely for the two-site exchange case using the Bloch equations modified for chemical exchange and diffusion. The exchange rate could be used to detect changes in polymer conformation resulting from changes in the solvent. PHEMA of MW 10 000 showed significant time-dependent changes in exchange rate, resulting from preferential solvation of the OH sites by water, and subsequent conformational changes which altered accessibility of the OH sites to water. This behavior was not observed for larger MW PHEMA, which adopted a stable conformation immediately. Large changes in the exchange rate were not reflected in changes to the hydrodynamic radius, suggesting that a minimal overall change in the chain dimensions occurred. DMSO was found to be a poor solvent for PHEMA, which adopts a compact conformation in DMSO. This work has demonstrated that PFG-NMR is a sensitive method for detecting subtle changes in polymer conformation in polymers with exchangeable protons.

Forecasting exchange rates with linear and nonlinear models

In this paper, the exchange rate forecasting performance of neural network models are evaluated against the random walk, autoregressive moving average and generalised autoregressive conditional heteroskedasticity models. There are no guidelines available that can be used to choose the parameters of neural network models and therefore, the parameters are chosen according to what the researcher considers to be the best. Such an approach, however,implies that the risk of making bad decisions is extremely high, which could explain why in many studies, neural network models do not consistently perform better than their time series counterparts. In this paper, through extensive experimentation, the level of subjectivity in building neural network models is considerably reduced and therefore giving them a better chance of Forecasting exchange rates with linear and nonlinear models 415 performing well. The results show that in general, neural network models perform better than the traditionally used time series models in forecasting exchange rates.

Volatility transmission between stock and bond markets

A two-factor no-arbitrage model is used to provide a theoretical link between stock and bond market volatility. While this model suggests that short-term interest rate volatility may, at least in part, drive both stock and bond market volatility, the empirical evidence suggests that past bond market volatility affects both markets and feeds back into short-term yield volatility. The empirical modelling goes on to examine the (time-varying) correlation structure between volatility in the stock and bond markets and finds that the sign of this correlation has reversed over the last 20 years. This has important implications far portfolio selection in financial markets. © 2005 Elsevier B.V. All rights reserved.

Forecasting exchange rates with linear and nonlinear models

In this paper the exchange rate forecasting performance of neural network models are evaluated against random walk and a range of time series models. There are no guidelines available that can be used to choose the parameters of neural network models and therefore the parameters are chosen according to what the researcher considers to be the best. Such an approach, however, implies that the risk of making bad decisions is extremely high which could explain why in many studies neural network models do not consistently perform better than their time series counterparts. In this paper through extensive experimentation the level of subjectivity in building neural network models is considerably reduced and therefore giving them a better chance of performing well. Our results show that in general neural network models perform better than traditionally used time series models in forecasting exchange rates.

The management of foreign exchange exposure on business contracts overseas

This thesis is a piece of applied research. It is the result of a joint project between the University of Aston Interdisciplinary Higher Degrees Scheme and International Aeradio plc (IAL). It considers the structure and organisation of overseas business and the effects that exchange rate movements have on financial performance. It looks in detail at a series of overseas contracts and factors which affect the monitoring and performance of those contracts. From this initial research is developed a series of conceptual models which attempt to capture the effects of foreign exchange rate movements on contract costing, the monitoring of performance on overseas contracts and a measure of company wide exposure. These models are then considered in the context of real IAL generated data and circumstances. The work is finally considered in the context of a survey of other companies with a similar mode of undertaking overseas business with the aim of placing the work in a general context.