Kelet-közép-európai devizaárfolyamok előrejelzése határidős árfolyamok segítségével (Forecasting the exchange rates of three Central-Eastern European currencies with forward exchange rates)

Írásunkban azt vizsgáljuk, hogy a hosszú lejáratú határidős árfolyamok stacionaritását feltételező hibakorrekciós modellek, amelyeknek korábbi számítások szerint - a világ devizapiaci forgalmának mintegy 75 százalékát kitevő fejlett ipari országokra alkalmazva - kitűnő a mintán kívüli előrejelző erejük, hogyan képesek három keletközép- európai ország devizaárfolyamát előrejelezni. A három vizsgálat alá vont deviza (cseh, magyar, lengyel) esetében az eredmények relációnként nagyon eltérnek, és összességében kedvezőtlenebbek, mint a fejlett ipari országokra kapott eredmények, amit a nem teljesen rugalmas árfolyamrezsim, a rendelkezésre álló adatsor rövidsége, az eurózóna-csatlakozáshoz kapcsolódó bizonytalanságok, a devizakockázati és a határidős kamatprémium létezése, továbbá a Balassa-Samuelson-hatás együttes befolyásaként tudunk értelmezni. JEL kód: E43, F31, F47. /===/ This paper studies whether models that assume long-maturity forward exchange rates are stationary (which proved in earlier studies to provide superior forecasting ability when applied to exchange rates of major currencies) are capable of forecasting the Euro exchange rates of three Central-East European currencies (the Czech koruna, Hungarian forint and Polish zloty). The results for the three currencies differ from each other and are generally much worse than those obtained earlier for major currencies. These unfavourable results are attributed to the consequences of managed exchange-rate systems, to the short time series available, to uncertainties related to future Euro-zone entry, to the existence of a foreign exchange and term premium, and to the Balassa–Samuelson effect.

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. ^

Essays on the determinants of private investment: The effects of relative price uncertainty and political instability

The objective of this study was to provide empirical evidence on the effects of relative price uncertainty and political instability on private investment. My effort is expressed in a single-equation model using macroeconomic and socio-political data from eight Latin American countries for the period 1970–1996. Relative price uncertainty is measured by the implied volatility of the exchange rate and political instability is measured by using indicators of social unrest and political violence. ^ I found that, after controlling for other variables, relative price uncertainty and political instability are negatively associated with private investment. Macroeconomic and political stability are key ingredients for the achievement of a strong investment response. This highlights the need to develop the state and build a civil society in which citizens can participate in decision-making and express consent without generating social turmoil. At the same time the government needs to implement structural policies along with relative price adjustments to eliminate excess volatility in price movements in order to provide a stable environment for investment. ^

A dinâmica da taxa de câmbio no Brasil face às operações swap (2002-2015)

This dissertation investigates, based on the Post-Keynesian theory and on its concept of monetary economy of production, the exchange rate behavior of the Brazilian Real in the presence of Brazilian Central Bank's interventions by means of the so-called swap transactions over 2002-2015. Initially, the work analyzes the essential properties of an open monetary economy of production and, thereafter, it presents the basic propositions of the Post-Keynesian view on the exchange rate determination, highlighting the properties of foreign exchange markets and the peculiarities of the Brazilian position into the international monetary and financial system. The research, thereby, accounts for the various segments of the Brazilian foreign exchange market. To accomplish its purpose, we first do a literature review of the Post-Keynesian literature about the topic. Then, we undertake empirical exams of the exchange rate determination using two statistical methods. On the one hand, to measure the volatility of exchange rate, we estimate Auto-regressive Conditional Heteroscedastic (ARCH) and Generalized Auto-regressive Conditional Heteroscedastic (GARCH) models. On the other hand, to measure the variance of the exchange rate in relation to real, financial variables, and the swaps, we estimate a Vector Auto-regression (VAR) model. Both experiments are performed for the nominal and real effective exchange rates. The results show that the swaps respond to exchange rate movements, trying to offset its volatility. This reveals that the exchange rate is, at least in a certain magnitude, sensitive to swaps transactions conducted by the Central Bank. In addition, another empirical result is that the real effective exchange rate responds more to the swaps auctions than the nominal rate.

Econometric models in foreign exchange market

According to the significance of the econometric models in foreign exchange market, the purpose of this research is to give a closer examination on some important issues in this area. The research covers exchange rate pass-through into import prices, liquidity risk and expected returns in the currency market, and the common risk factors in currency markets. Firstly, with the significant of the exchange rate pass-through in financial economics, the first empirical chapter studies on the degree of exchange rate pass-through into import in emerging economies and developed countries in panel evidences for comparison covering the time period of 1970-2009. The pooled mean group estimation (PMGE) is used for the estimation to investigate the short run coefficients and error variance. In general, the results present that the import prices are affected positively, though incompletely, by the exchange rate. Secondly, the following study addresses the question whether there is a relationship between cross-sectional differences in foreign exchange returns and the sensitivities of the returns to fluctuations in liquidity, known as liquidity beta, by using a unique dataset of weekly order flow. Finally, the last study is in keeping with the study of Lustig, Roussanov and Verdelhan (2011), which shows that the large co-movement among exchange rates of different currencies can explain a risk-based view of exchange rate determination. The exploration on identifying a slope factor in exchange rate changes is brought up. The study initially constructs monthly portfolios of currencies, which are sorted on the basis of their forward discounts. The lowest interest rate currencies are contained in the first portfolio and the highest interest rate currencies are in the last. The results performs that portfolios with higher forward discounts incline to contain higher real interest rates in overall by considering the first portfolio and the last portfolio though the fluctuation occurs.

Forecasting exchange rates in the presence of instabilities

Many exchange rate papers articulate the view that instabilities constitute a major impediment to exchange rate predictability. In this thesis we implement Bayesian and other techniques to account for such instabilities, and examine some of the main obstacles to exchange rate models' predictive ability. We first consider in Chapter 2 a time-varying parameter model in which fluctuations in exchange rates are related to short-term nominal interest rates ensuing from monetary policy rules, such as Taylor rules. Unlike the existing exchange rate studies, the parameters of our Taylor rules are allowed to change over time, in light of the widespread evidence of shifts in fundamentals - for example in the aftermath of the Global Financial Crisis. Focusing on quarterly data frequency from the crisis, we detect forecast improvements upon a random walk (RW) benchmark for at least half, and for as many as seven out of 10, of the currencies considered. Results are stronger when we allow the time-varying parameters of the Taylor rules to differ between countries. In Chapter 3 we look closely at the role of time-variation in parameters and other sources of uncertainty in hindering exchange rate models' predictive power. We apply a Bayesian setup that incorporates the notion that the relevant set of exchange rate determinants and their corresponding coefficients, change over time. Using statistical and economic measures of performance, we first find that predictive models which allow for sudden, rather than smooth, changes in the coefficients yield significant forecast improvements and economic gains at horizons beyond 1-month. At shorter horizons, however, our methods fail to forecast better than the RW. And we identify uncertainty in coefficients' estimation and uncertainty about the precise degree of coefficients variability to incorporate in the models, as the main factors obstructing predictive ability. Chapter 4 focus on the problem of the time-varying predictive ability of economic fundamentals for exchange rates. It uses bootstrap-based methods to uncover the time-specific conditioning information for predicting fluctuations in exchange rates. Employing several metrics for statistical and economic evaluation of forecasting performance, we find that our approach based on pre-selecting and validating fundamentals across bootstrap replications generates more accurate forecasts than the RW. The approach, known as bumping, robustly reveals parsimonious models with out-of-sample predictive power at 1-month horizon; and outperforms alternative methods, including Bayesian, bagging, and standard forecast combinations. Chapter 5 exploits the predictive content of daily commodity prices for monthly commodity-currency exchange rates. It builds on the idea that the effect of daily commodity price fluctuations on commodity currencies is short-lived, and therefore harder to pin down at low frequencies. Using MIxed DAta Sampling (MIDAS) models, and Bayesian estimation methods to account for time-variation in predictive ability, the chapter demonstrates the usefulness of suitably exploiting such short-lived effects in improving exchange rate forecasts. It further shows that the usual low-frequency predictors, such as money supplies and interest rates differentials, typically receive little support from the data at monthly frequency, whereas MIDAS models featuring daily commodity prices are highly likely. The chapter also introduces the random walk Metropolis-Hastings technique as a new tool to estimate MIDAS regressions.

Predicción de volatilidad de la rentabilidad diaria del mercado del azúcar y su aplicación en la razón de cobertura

Este trabajo predice la volatilidad de la rentabilidad diaria del precio del azúcar, en el período compren­dido entre 1 de junio de 2011 y el 24 de octubre de 2013. Los datos diarios utilizados fueron los precios del azúcar, del etanol y la tasa de cambio de la moneda de Brasil (Real) en dólares. Se usaron modelos multivariados de volatilidad autoregresiva condicional generalizada. A partir de la predicción de los precios del azúcar se calcula la razón de cobertura de mínima varianza. Los resultados muestran, que la razón de cobertura es 0.37, esto significa que, si un productor adverso al riesgo, que tiene la intención de eliminar un porcentaje de la volatilidad de la rentabilidad diaria del mercado mundial del azúcar, y espera vender 25 contratos de azúcar, cada uno de ellos de 50,84 toneladas (1.271 toneladas), el número de contratos optimo tomando cobertura a futuro será 9 y el número de contratos sin tomar cobertura (de contado) será 16.

Modelagem univariada e regressão múltipla na análise da oferta e do preço do boi gordo no mercado brasileiro

Dissertação (mestrado)—Universidade de Brasília, Faculdade de Agronomia e Medicina Veterinária, Programa de Pós-Graduação em Agronegócios, 2016.

Exchange market pressure and incidence of currency crises in Norway

Mestrado em Economia Monetária e Financeira

¿FRACASÓ LA POLÍTICA DE LAS “METAS DE INFLACIÓN” Y LAS BANDAS CAMBIARIAS?

Resumen El viernes 13 de octubre del 2006, el Banco Central de Costa Rica (BCCR) emitió un comunicado de prensa anunciando que modificaría, a partir del 17 de ese mes, el esquema cambiario de minidevaluaciones por otro denominado bandas cambiaras. En el nuevo esquema, el tipo de cambio podría ser fijado por el “mercado” siempre que fluctuara dentro de bandas predeterminadas. Este artículo analiza la evolución del tipo de cambio desde que se estableció el nuevo esquema, profundizando desde setiembre de 2009, cuando el BCCR dejó de intervenir el mercado cambiario y con ello aumentó la inestabilidad y volatilidad del tipo de cambio. Se pone en duda si el BCCR debe preocuparse solo por lograr una baja inflación y olvidarse del crecimiento económico, al igual que si el mercado cambiario opera en un mercado de competencia. Abstract On Friday October 13, 2006, the Banco Central de Costa Rica (BCCR) released a press communication announcing that the exchange regime would change, from the crawling-peg exchange regime to other called exchange rate band, effective on the 17th of that month. In the new scheme, the exchange rate may be established by the "market", when the fluctuation happened within predetermined bands. This article analyzes the evolution of the exchange rate from the establishment of the new scheme, deepening on the month of September 2009 when the BCCR stopped intervening the foreign exchange rate and therefore increased the instability and volatility of the exchange rate. It questions not only if the BCCR needs to worry only on achieving low inflation and forget about the economic growth, but also if the foreign exchange market operates in a competitive market.

An empirical investigation of the level effect in Australian interest rates

An extensive literature examines the dynamics of interest rates, with particular attention given to the positive relationship between interest-rate volatility and the level of interest rates—the so-called level effect. This paper examines the interaction between the estimated level effect and competing parameterisations of interest-rate volatility for the Australian yield curve. We adopt a new methodology that estimates elasticity in a multivariate setting that explicitly accommodates the correlations that exist between various yield factors. Results show that significant correlations exist between the residuals of yield factors and that such correlations do indeed impact on model estimates. Within the multivariate setting, the level of the short rate is shown to be a crucial determinant of the conditional volatility of all three yield factors. Measures of model fit suggest that, in addition to the usual level effect, the incorporation of GARCH effects and possible regime shifts is important

Evaluating Specification Tests for Markov-Switching Time-Series Models

We evaluate the performance of several specification tests for Markov regime-switching time-series models. We consider the Lagrange multiplier (LM) and dynamic specification tests of Hamilton (1996) and Ljung–Box tests based on both the generalized residual and a standard-normal residual constructed using the Rosenblatt transformation. The size and power of the tests are studied using Monte Carlo experiments. We find that the LM tests have the best size and power properties. The Ljung–Box tests exhibit slight size distortions, though tests based on the Rosenblatt transformation perform better than the generalized residual-based tests. The tests exhibit impressive power to detect both autocorrelation and autoregressive conditional heteroscedasticity (ARCH). The tests are illustrated with a Markov-switching generalized ARCH (GARCH) model fitted to the US dollar–British pound exchange rate, with the finding that both autocorrelation and GARCH effects are needed to adequately fit the data.

Is there timing ability in currency markets? Evidence from ADR issuances

Is there timing ability in the exchange rate markets? We address this question by examining foreign firms' decisions to issue American Depositary Receipts (ADRs). Specifically, we test whether foreign firms consider currency market conditions in their ADR issuance decisions and, in doing so, display some ability to time their local exchange rate market. We study ADR issuances in the U.S. stock market between 1976 and 2003. We find that foreign firms tend to issue ADRs after their local currency has been abnormally strong against the U.S. dollar and before their local currency becomes abnormally weak. This evidence is statistically significant even after controlling for local and U.S. past and future stock market performance and predicable exchange rate movements. Currency market timing is especially significant i) for value companies, relatively small (yet absolutely large) companies issuing relatively large amounts of ADRs, companies with higher currency exposure, manufacturing companies, and emerging market companies, ii) during currency crises (when mispricings are rife) and after the integration of the issuer's local financial market with the world capital markets, iii) when the ADR issue raises capital for the issuing firm (Level III ADR), and iv) regardless of the identity of the underwriting investment bank. Currency market timing is also economically significant since it translates into total savings for the issuing firms of about $646 million (or 1.86% of the total capital-raising ADR issue volume). In contrast, we find no evidence of currency timing ability in a control sample made of non-capital raising ADRs (Level II ADRs). These findings suggest that some companies may have, at least occasionally, private information about foreign exchange.

The high road or the low road? Alternatives for Australia's future

The OECD suggests that countries now have a choice. They can focus on development based on either:  competition via investment in technology and innovation - which is important in high knowledge industries and high innovation economies, or  competition via exchange rates and wages - which is important in industries producing standardised, lower-tech goods and services. The first route will maximise higher-skilled, higher-paid employment growth and living standards. Given the lack of control over the exchange rate, the second route requires competition based on wages. It is essential to understand that markets themselves won’t shift a country from one path to the other. These conclusions arise from the OECD’s recognition that technical progress - the creation of new products or the adoption of more efficient methods of production - is the main source of economic growth and enhanced quality of life. Technological change is, the OECD suggests, ...also the engine for job creation as higher wages and profits resulting from technology-induced productivity gains and lower prices lead to increased demand for new products from existing as well as new industries (1997: 4).Further, Competitiveness in high-technology industries is mainly driven by technology factors and much less by wage and exchange rate movements, while the reverse is true in low-technology industries (OECD 1996e: 12). The OECD has shown that sound macroeconomic conditions, such as the low inflation and reduced public sector debt visible in almost all member countries in the 1990s, are not enough to deal with high levels of unemployment and the need to increase levels of income: If economic performance is to improve, additional structural reform, which can increase innovation and the diffusion of technologies within and among national economies, seems necessary (OECD 1997: 4 Emphasis added).