Modeling the Volatility of Real GDP Growth: The Case of Japan Revisited

Previous studies (e.g., Hamori, 2000; Ho and Tsui, 2003; Fountas et al., 2004) find high volatility persistence of economic growth rates using generalized autoregressive conditional heteroskedasticity (GARCH) specifications. This paper reexamines the Japanese case, using the same approach and showing that this finding of high volatility persistence reflects the Great Moderation, which features a sharp decline in the variance as well as two falls in the mean of the growth rates identified by Bai and Perronâs (1998, 2003) multiple structural change test. Our empirical results provide new evidence. First, excess kurtosis drops substantially or disappears in the GARCH or exponential GARCH model that corrects for an additive outlier. Second, using the outlier-corrected data, the integrated GARCH effect or high volatility persistence remains in the specification once we introduce intercept-shift dummies into the mean equation. Third, the time-varying variance falls sharply, only when we incorporate the break in the variance equation. Fourth, the ARCH in mean model finds no effects of our more correct measure of output volatility on output growth or of output growth on its volatility.

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.

Cross-Country Evidence on Output Growth Volatility: Nonstationary Variance and GARCH Models

This paper revisits the issue of conditional volatility in real GDP growth rates for Canada, Japan, the United Kingdom, and the United States. Previous studies find high persistence in the volatility. This paper shows that this finding largely reflects a nonstationary variance. Output growth in the four countries became noticeably less volatile over the past few decades. In this paper, we employ the modified ICSS algorithm to detect structural change in the unconditional variance of output growth. One structural break exists in each of the four countries. We then use generalized autoregressive conditional heteroskedasticity (GARCH) specifications modeling output growth and its volatility with and without the break in volatility. The evidence shows that the time-varying variance falls sharply in Canada, Japan, and the U.K. and disappears in the U.S., excess kurtosis vanishes in Canada, Japan, and the U.S. and drops substantially in the U.K., once we incorporate the break in the variance equation of output for the four countries. That is, the integrated GARCH (IGARCH) effect proves spurious and the GARCH model demonstrates misspecification, if researchers neglect a nonstationary unconditional variance.

Exchange rate depreciation and exports: The case of Singapore revisited

This paper revisits the weak relationship between exchange rate depreciation and exports for Singapore, using a bivariate GARCH-M model that simultaneously estimates time-varying risk. The evidence shows that depreciation does not significantly improve exports, but that exchange rate risk significantly impedes exports. In sum, Singaporean policy makers can better promote export growth by stabilizing the exchange rate rather than generating its depreciation.

Optimal Test for Parameter Instability When the Unstable Process and the Error Distribution are Unknown

This paper proposes asymptotically optimal tests for unstable parameter process under the feasible circumstance that the researcher has little information about the unstable parameter process and the error distribution, and suggests conditions under which the knowledge of those processes does not provide asymptotic power gains. I first derive a test under known error distribution, which is asymptotically equivalent to LR tests for correctly identified unstable parameter processes under suitable conditions. The conditions are weak enough to cover a wide range of unstable processes such as various types of structural breaks and time varying parameter processes. The test is then extended to semiparametric models in which the underlying distribution in unknown but treated as unknown infinite dimensional nuisance parameter. The semiparametric test is adaptive in the sense that its asymptotic power function is equivalent to the power envelope under known error distribution.

Asset Pricing with Heterogeneous Agents, Incomplete Markets and Trading Constraints

The consumption capital asset pricing model is the standard economic model used to capture stock market behavior. However, empirical tests have pointed out to its inability to account quantitatively for the high average rate of return and volatility of stocks over time for plausible parameter values. Recent research has suggested that the consumption of stockholders is more strongly correlated with the performance of the stock market than the consumption of non-stockholders. We model two types of agents, non-stockholders with standard preferences and stock holders with preferences that incorporate elements of the prospect theory developed by Kahneman and Tversky (1979). In addition to consumption, stockholders consider fluctuations in their financial wealth explicitly when making decisions. Data from the Panel Study of Income Dynamics are used to calibrate the labor income processes of the two types of agents. Each agent faces idiosyncratic shocks to his labor income as well as aggregate shocks to the per-share dividend but markets are incomplete and agents cannot hedge consumption risks completely. In addition, consumers face both borrowing and short-sale constraints. Our results show that in equilibrium, agents hold different portfolios. Our model is able to generate a time-varying risk premium of about 5.5% while maintaining a low risk free rate, thus suggesting a plausible explanation for the equity premium puzzle reported by Mehra and Prescott (1985).

Holocene sedimentation rates in the Northwest Passage

Palynological, geochemical, and physical records were used to document Holocene paleoceanographic changes in marine sediment core from Dease Strait in the western part of the main axis of the Northwest Passage (core 2005-804-006 PC latitude 68°59.552'N, longitude 106°34.413'W). Quantitative estimates of past sea surface conditions were inferred from the modern analog technique applied to dinoflagellate cyst assemblages. The chronology of core 2005-804-006 PC is based on a combined use of the paleomagnetic secular variation records and the CALS7K.2 time-varying spherical harmonic model of the geomagnetic field. The age-depth model indicates that the core spans the last ~7700 cal years B.P., with a sedimentation rate of 61 cm/ka. The reconstructed sea surface parameters were compared with those from Barrow Strait and Lancaster Sound (cores 2005-804-004 PC and 2004-804-009 PC, respectively), which allowed us to draw a millennial-scale Holocene sea ice history along the main axis of the Northwest Passage (MANWP). Overall, our data are in good agreement with previous studies based on bowhead whale remains. However, dinoflagellate sea surface based reconstructions suggest several new features. The presence of dinoflagellate cysts in the three cores for most of the Holocene indicates that the MANWP was partially ice-free over the last 10,000 years. This suggests that the recent warming observed in the MANWP could be part of the natural climate variability at the millennial time scale, whereas anthropogenic forcing could have accelerated the warming over the past decades. We associate Holocene climate variability in the MANWP with a large-scale atmospheric pattern, such as the Arctic Oscillation, which may have operated since the early Holocene. In addition to a large-scale pattern, more local conditions such as coastal current, tidal effects, or ice cap proximity may have played a role on the regional sea ice cover. These findings highlight the need to further develop regional investigations in the Arctic to provide realistic boundary conditions for climatic simulations.

(Table 1) Chlorophyll a content and microalgae abundance and biovolume in pack ice in the Bellingshausen Sea

Pack ice in the Bellingshausen Sea contained moderate to high stocks of microalgal biomass (3-10 mg Chl a/m**2) spanning the range of general sea-ice microalgal microhabitats (e.g., bottom, interior and surface) during the International Polar Year (IPY) Sea Ice Mass Balance in the Antarctic (SIMBA) studies. Measurements of irradiance above and beneath the ice as well as optical properties of the microalgae therein demonstrated that absorption of photosynthetically active radiation (PAR) by particulates (microalgae and detritus) had a substantial influence on attenuation of PAR and irradiance transmission in areas with moderate snow covers (0.2-0.3 m) and more moderate effects in areas with low snow cover. Particulates contributed an estimated 25 to 90% of the attenuation coefficients for the first-year sea ice at wavelengths less than 500 nm. Strong ultraviolet radiation (UVR) absorption by particulates was prevalent in the ice habitats where solar radiation was highest - with absorption coefficients by ice algae often being as large as that of the sea ice. Strong UVR-absorption features were associated with an abundance of dinoflagellates and a general lack of diatoms - perhaps suggesting UVR may be influencing the structure of some parts of the sea-ice microbial communities in the pack ice during spring. We also evaluated the time-varying changes in the spectra of under-ice irradiances in the austral spring and showed dynamics associated with changes that could be attributed to coupled changes in the ice thickness (mass balance) and microalgal biomass. All results are indicative of radiation-induced changes in the absorption properties of the pack ice and highlight the non-linear, time-varying, biophysical interactions operating within the Antarctic pack ice ecosystem.

Minerals and geochemistry abundance and occurance, as well as K-Ar determinations for DSDP Site 92-597 basalts

Preliminary studies of hydrothermally altered massive basalts formed at the fast-spreading Mendoza Rise and recovered from DSDP Holes 597B and 597C indicate the presence of three secondary mineral assemblages which formed in the following order: (1) trioctahedral chlorite and talc, (2) goethite and smectite, and (3) calcite and celadonite. The sequential precipitation of these mineral assemblages denotes high water:rock ratios and time-varying conditions of temperature (early >200°C to late <30°C) and state of oxidation (early nonoxidative to late oxidative). A decrease in the relative proportion of oxidative mineral assemblages with depth to 70 m in Site 597 basement indicates a zone of oxidative alteration that became shallower with time as the deeper, more constricted fracture systems were filled by secondary mineralization. In this report we present the first results of the K-Ar dating of celadonite formation age; celadonite formation reflects end-stage hydrothermal alteration in Site 597 basement. Three celadonite dates obtained from Site 597 samples include 13.1 ± 0.3 m.y. from 17 m basement depth (Hole 597B), 19.9 ± 0.4 m.y. from 18 m basement depth (Hole 597C), and 19.3 ± 1.6 m.y. from 60 m basement depth (Hole 597C). The age of host rock crystallization (28.6 m.y.) and the K-Ar dates of celadonite formation establish that hydrothermal alteration in the upper 70 m of Site 597 basement continued for at least 10 m.y. and possibly as long as 16 m.y. after basalt crystallization at the ridge crest. Assuming a half-spreading rate of 55 km/m.y., we calculate that hydrothermal circulation was active in shallow basement at a distance of at least 550 km off ridge crest and possibly as far as 1000 km off ridge crest.

Investment promotion agencies: do they work?

In this paper, we examine the role of investment promotion agencies (IPAs) in promoting outward FDI from Japan and Korea. Looking at two home countries enables us to control for both country-pair time-invariant characteristics and host country time-varying characteristics. Our empirical results suggest that home-country IPAs tend to be more effective in promoting outward FDI in politically risky host countries. However, this finding depends on whether the home-country firm is listed or unlisted. More specifically, we find that the positive effect of home country IPAs on outward FDI in politically risky countries is limited to unlisted home- country firms, which are widely assumed to be less competitive and productive.

Do export promotion agencies increase exports?

In this paper, we examine the role of export promotion agencies (EPAs) in promoting exports from Japan and Korea. Looking at two home countries enables us to tackle endogeneity issues by controlling for both country-pair time-invariant characteristics and importing country time-varying characteristics. Our empirical results indicate that the coefficients of the EPA dummy are similar in size to those of the FTA dummy. This implies that establishing an EPA office in a country is equivalent to signing an FTA with that country. In addition, we find that EPA’s effects are larger for manufactured products than non-manufactured products. Finally, the EPA effect is larger for low income trade partners than for high income trade partners.

Forecasting Electricity Prices and their volatilities using Unobserved Components.

The liberalization of electricity markets more than ten years ago in the vast majority of developed countries has introduced the need of modelling and forecasting electricity prices and volatilities, both in the short and long term. Thus, there is a need of providing methodology that is able to deal with the most important features of electricity price series, which are well known for presenting not only structure in conditional mean but also time-varying conditional variances. In this work we propose a new model, which allows to extract conditionally heteroskedastic common factors from the vector of electricity prices. These common factors are jointly estimated as well as their relationship with the original vector of series, and the dynamics affecting both their conditional mean and variance. The estimation of the model is carried out under the state-space formulation. The new model proposed is applied to extract seasonal common dynamic factors as well as common volatility factors for electricity prices and the estimation results are used to forecast electricity prices and their volatilities in the Spanish zone of the Iberian Market. Several simplified/alternative models are also considered as benchmarks to illustrate that the proposed approach is superior to all of them in terms of explanatory and predictive power.

Pulsatile blood flow-split in aortic arch dissection

Abnormalities of the aortic arch, as the most proximal site of the cardiovascular system, are of great interest due to its major role in blood distribution to all downstream members. Wall dissection is one of the disorders that an aorta may suffer due to hypertension or degradation of aortic wall properties. A geometrical change of the aortic arch caused by the dissected wall, and consequently the blood flow path, makes the time-varying flow curves to be different in comparison to the healthy aortic arch. This phenomenon modifies wall shear stress (WSS) history during the cardiac cycle. In the current work, the pulsatile blood flow in a typical Stanford A (DeBakey II) dissected aorta is simulated by CFD technique, STAR-CCM+. The boundary conditions are calculated based on a combination of the impedance boundary condition and the auto-regulation concept in the cardiovascular system.

Diseño de una interfaz de representación gráfica de la base de datos de HRTF

El actual proyecto consiste en la creación de una interfaz gráfica de usuario (GUI) en entorno de MATLAB que realice una representación gráfica de la base de datos de HRTF (Head-Related Transfer Function). La función de transferencia de la cabeza es una herramienta muy útil en el estudio de la capacidad del ser humano para percibir su entorno sonoro, además de la habilidad de éste en la localización de fuentes sonoras en el espacio que le rodea. La HRTF biaural (terminología para referirse al conjunto de HRTF del oído izquierdo y del oído derecho) en sí misma, posee información de especial interés ya que las diferencias entre las HRTF de cada oído, conceden la información que nuestro sistema de audición utiliza en la percepción del campo sonoro. Por ello, la funcionalidad de la interfaz gráfica creada presenta gran provecho dentro del estudio de este campo. Las diferencias interaurales se caracterizan en amplitud y en tiempo, variando en función de la frecuencia. Mediante la transformada inversa de Fourier de la señal HRTF, se obtiene la repuesta al impulso de la cabeza, es decir, la HRIR (Head-Related Impulse Response). La cual, además de tener una gran utilidad en la creación de software o dispositivos de generación de sonido envolvente, se utiliza para obtener las diferencias ITD (Interaural Time Difference) e ILD (Interaural Time Difference), comúnmente denominados “parámetros de localización espacial”. La base de datos de HRTF contiene la información biaural de diferentes puntos de ubicación de la fuente sonora, formando una red de coordenadas esféricas que envuelve la cabeza del sujeto. Dicha red, según las medidas realizadas en la cámara anecoica de la EUITT (Escuela Universitaria de Ingeniería Técnica de Telecomunicación), presenta una precisión en elevación de 10º y en azimut de 5º. Los receptores son dos micrófonos alojados en el maniquí acústico llamado HATS (Hats and Torso Simulator) modelo 4100D de Brüel&Kjaer. Éste posee las características físicas que influyen en la percepción del entorno como son las formas del pabellón auditivo (pinna), de la cabeza, del cuello y del torso humano. Será necesario realizar los cálculos de interpolación para todos aquellos puntos no contenidos en la base de datos HRTF, este proceso es sumamente importante no solo para potenciar la capacidad de la misma sino por su utilidad para la comparación entre otras bases de datos existentes en el estudio de este ámbito. La interfaz gráfica de usuario está concebida para un manejo sencillo, claro y predecible, a la vez que interactivo. Desde el primer boceto del programa se ha tenido clara su filosofía, impuesta por las necesidades de un usuario que busca una herramienta práctica y de manejo intuitivo. Su diseño de una sola ventana reúne tanto los componentes de obtención de datos como los que hacen posible la representación gráfica de las HRTF, las HRIR y los parámetros de localización espacial, ITD e ILD. El usuario podrá ir alternando las representaciones gráficas a la vez que introduce las coordenadas de los puntos que desea visualizar, definidas por phi (elevación) y theta (azimut). Esta faceta de la interfaz es la que le otorga una gran facilidad de acceso y lectura de la información representada en ella. Además, el usuario puede introducir valores incluidos en la base de datos o valores intermedios a estos, de esta manera, se indica a la interfaz la necesidad de realizar la interpolación de los mismos. El método de interpolación escogido es el de la ponderación de la distancia inversa entre puntos. Dependiendo de los valores introducidos por el usuario se realizará una interpolación de dos o cuatro puntos, siendo éstos limítrofes al valor introducido, ya sea de phi o theta. Para añadir versatilidad a la interfaz gráfica de usuario, se ha añadido la opción de generar archivos de salida en forma de imagen de las gráficas representadas, de tal forma que el usuario pueda extraer los datos que le interese para cualquier valor de phi y theta. Se completa el presente proyecto fin de carrera con un trabajo de investigación y estudio comparativo de la función y la aplicación de las bases de datos de HRTF dentro del marco científico y de investigación. Esto ha hecho posible concentrar información relacionada a través de revistas científicas de investigación como la JAES (Journal of the Audio Engineering Society) o la ASA (Acoustical Society of America), además, del IEEE ( Institute of Electrical and Electronics Engineers) o la “Web of knowledge” entre otras. Además de realizar la búsqueda en estas fuentes, se ha optado por vías de información más comunes como Google Académico o el portal de acceso “Ingenio” a los todos los recursos electrónicos contenidos en la base de datos de la universidad. El estudio genera una ampliación en el conocimiento de la labor práctica de las HRTF. La mayoría de los estudios enfocan sus esfuerzos en mejorar la percepción del evento sonoro mediante su simulación en la escucha estéreo o multicanal. A partir de las HRTF, esto es posible mediante el análisis y el cálculo de datos como pueden ser las regresiones, siendo éstas muy útiles en la predicción de una medida basándose en la información de la actual. Otro campo de especial interés es el de la generación de sonido 3D. Mediante la base de datos HRTF es posible la simulación de una señal biaural. Se han diseñado algoritmos que son implementados en dispositivos DSP, de tal manera que por medio de retardos interaurales y de diferencias espectrales es posible llegar a un resultado óptimo de sonido envolvente, sin olvidar la importancia de los efectos de reverberación para conseguir un efecto creíble de sonido envolvente. Debido a la complejidad computacional que esto requiere, gran parte de los estudios coinciden en desarrollar sistemas más eficientes, llegando a objetivos tales como la generación de sonido 3D en tiempo real. ABSTRACT. This project involves the creation of a Graphic User Interface (GUI) in the Matlab environment which creates a graphic representation of the HRTF (Head-Related Transfer Function) database. The head transfer function is a very useful tool in the study of the capacity of human beings to perceive their sound environment, as well as their ability to localise sound sources in the area surrounding them. The binaural HRTF (terminology which refers to the HRTF group of the left and right ear) in itself possesses information of special interest seeing that the differences between the HRTF of each ear admits the information that our system of hearing uses in the perception of each sound field. For this reason, the functionality of the graphic interface created presents great benefits within the study of this field. The interaural differences are characterised in space and in time, varying depending on the frequency. By means of Fourier's transformed inverse of the HRTF signal, the response to the head impulse is obtained, in other words, the HRIR (Head-Related Impulse Response). This, as well as having a great use in the creation of software or surround sound generating devices, is used to obtain ITD differences (Interaural Time Difference) and ILD (Interaural Time Difference), commonly named “spatial localisation parameters”. The HRTF database contains the binaural information of different points of sound source location, forming a network of spherical coordinates which surround the subject's head. This network, according to the measures carried out in the anechoic chamber at the EUITT (School of Telecommunications Engineering) gives a precision in elevation of 10º and in azimuth of 5º. The receivers are two microphones placed on the acoustic mannequin called HATS (Hats and Torso Simulator) Brüel&Kjaer model 4100D. This has the physical characteristics which affect the perception of the surroundings which are the forms of the auricle (pinna), the head, neck and human torso. It will be necessary to make interpolation calculations for all those points which are not contained the HRTF database. This process is extremely important not only to strengthen the database's capacity but also for its usefulness in making comparisons with other databases that exist in the study of this field. The graphic user interface is conceived for a simple, clear and predictable use which is also interactive. Since the first outline of the program, its philosophy has been clear, based on the needs of a user who requires a practical tool with an intuitive use. Its design with only one window unites not only the components which obtain data but also those which make the graphic representation of the HRTFs possible, the hrir and the ITD and ILD spatial location parameters. The user will be able to alternate the graphic representations at the same time as entering the point coordinates that they wish to display, defined by phi (elevation) and theta (azimuth). The facet of the interface is what provides the great ease of access and reading of the information displayed on it. In addition, the user can enter values included in the database or values which are intermediate to these. It is, likewise, indicated to the interface the need to carry out the interpolation of these values. The interpolation method is the deliberation of the inverse distance between points. Depending on the values entered by the user, an interpolation of two or four points will be carried out, with these being adjacent to the entered value, whether that is phi or theta. To add versatility to the graphic user interface, the option of generating output files in the form of an image of the graphics displayed has been added. This is so that the user may extract the information that interests them for any phi and theta value. This final project is completed with a research and comparative study essay on the function and application of HRTF databases within the scientific and research framework. It has been possible to collate related information by means of scientific research magazines such as the JAES (Journal of the Audio Engineering Society), the ASA (Acoustical Society of America) as well as the IEEE (Institute of Electrical and Electronics Engineers) and the “Web of knowledge” amongst others. In addition to carrying out research with these sources, I also opted to use more common sources of information such as Academic Google and the “Ingenio” point of entry to all the electronic resources contained on the university databases. The study generates an expansion in the knowledge of the practical work of the HRTF. The majority of studies focus their efforts on improving the perception of the sound event by means of its simulation in stereo or multichannel listening. With the HRTFs, this is possible by means of analysis and calculation of data as can be the regressions. These are very useful in the prediction of a measure being based on the current information. Another field of special interest is that of the generation of 3D sound. Through HRTF databases it is possible to simulate the binaural signal. Algorithms have been designed which are implemented in DSP devices, in such a way that by means of interaural delays and wavelength differences it is possible to achieve an excellent result of surround sound, without forgetting the importance of the effects of reverberation to achieve a believable effect of surround sound. Due to the computational complexity that this requires, a great many studies agree on the development of more efficient systems which achieve objectives such as the generation of 3D sound in real time.