Measuring the Economic Significance of Structural Exchange Rate Models

This paper examines both the in-sample and out-of-sample performance of three monetary fundamental models of exchange rates and compares their out-of-sample performance to that of a simple Random Walk model. Using a data-set consisting of five currencies at monthly frequency over the period January 1980 to December 2009 and a battery of newly developed performance measures, the paper shows that monetary models do better (in-sample and out-of-sample forecasting) than a simple Random Walk model.

The Signalling Channel of Central Bank Interventions: Modelling the Yen/US Dollar Exchange Rate

This paper presents a theoretical framework analysing the signalling channel of exchange rate interventions as an informational trigger. We develop an implicit target zone framework with learning in order to model the signalling channel. The theoretical premise of the model is that interventions convey signals that communicate information about the exchange rate objectives of central bank. The model is used to analyse the impact of Japanese FX interventions during the period 1999 -2011 on the yen/US dollar dynamics.

The Signalling Channel of Central Bank Interventions: Modelling the Yen/US Dollar Exchange Rate

This paper presents a theoretical framework analysing the signalling channel of exchange rate interventions as an informational trigger. We develop an implicit target zone framework with learning in order to model the signalling channel. The theoretical premise of the model is that interventions convey signals that communicate information about the exchange rate objectives of central bank. The model is used to analyse the impact of Japanese FX interventions during the period 1999 -2011 on the yen/US dollar dynamics.

Stock Market Reaction to Fed Funds Rate Surprises: State Dependence and the Financial Crisis

This paper examines the impact of Federal Funds rate (FFR) surprises on stock returns in the United States over the period 1989-2009, focusing on the impact of the recent financial crisis. We find that prior to the crisis, stock prices increased as a response to unexpected FFR cuts. State dependence is also identified with stocks exhibiting larger increases when interest rate easing coincided with recessions, bear stock markets, and tightening credit market conditions. However, an important structural shift took place during the financial crisis, which changed the stock market response to FFR shocks, as well as the nature of state dependence. Specifically, during the crisis period stock market participants did not react positively to unexpected FFR cuts. Our results highlight the severity of the recent financial turmoil episode and the ineffectiveness of conventional monetary policy close to the zero lower bound for nominal interest rates.

Influence of Trypanosoma cruzi strain on the pathogenesis of chronic myocardiopathy in mice

The murine model of chronic Chaga's myocardiopathy was developed in 201 inbred and outbred mice. The experimental groups consisted of 1st: 73 inbred AKR and A/J mice inoculated with one of the following. Trypanosoma cruzi strains: Peruvian (Type I), 12 SF (Type II) or Colombian (Type III); 2nd: 128 outbred Swiss mice, chronically infected either with Type II or Type III strains isolated from human patients from different geographical areas. All T. cruzi strains were previoulsly characterized by their morphobiological behaviour in mice and by isoenzymatic patterns. For the 1st group the inoculum was 5 x 10**4 for the Peruvian strain and 1 x 10**5 for the 12 SF and Colombian strains. In the 2nd group-Swiss mice the inoculum size varied from 2 x 10**4 to 2 x 10**5. The inbred animals were killed at a 3 time-point scale (90, 180 and 240 days) post-infection. The Swiss mice were killed from 180 to 660 days after infection. The evaluation of parasitemia and serology (xeodiagnosis and indirect immunofluorescent test) was performed. The incidence of macroscopic alterations of the heart and cardiac index were evaluated. Histopathological lesions of the myocardium were graded. The influence of T. cruzi strain on the intensity of cardiac lesions was evaluated by the Chi-square test; the incidence of inflammatory lesions and its relationship to the parasite strain was evaluated by the Fisher test. The influence of the duration of infection was evaluated by using the Gamma Coefficient of Kruskal and Goodman and its measure of significance. Slight to severe microscopic alterations occurred in 85% of the chronically infected nice. There were a clear predominance on the incidence and intensity of inflammatory and fibrotic alterations for the mice infected with Type III strains. Statistical analysis has shown significant differences among the infected groups, in the inflammatory and fibrotic lesions. Macroscopic alterations (right cavities dilatation and apex aneurism of left ventricle), differed in incidence according to mice strains; in Swiss and AKR mice, significant differences were seen in mice infected with different T. cruzi strains, but the A/J mice failed to show significant differences correlated with different parasite strains. The duration of infection, from 90 to 240 days, could not be correlated with the degree of lesions in the several groups.

Strain specific variation of outer membrane proteins of wild Yersinia pestis strains subjected to different growth temperatures

Three Yersinia pestis strains isolated from humans and one laboratory strain (EV76) were grown in rich media at 28§C and 37§C and their outer membrane protein composition compared by sodium dodecyl sulphate polyacrylamide gel electrophoresis (SDS-Page). Several proteins with molecular weights ranging from 34 kDa to 7 kDa were observed to change in relative abundance in samples grown at different temperatures. At least seven Y. pestis outer membrane proteins showed a temperature-dependent and strain-specific behaviour. Some differences between the outer membrane proteins of full-pathogenic wild isolates and the EV76 strain could aldso be detected and the relevance of this finding on the use of laboratory strains as a reference to the study of Y. pestis biological properties is discuted.

Complete Markets Strikes Back: Revisiting Risk Sharing Tests under Discount Rate Heterogeneity

Recent risk sharing tests strongly reject the hypothesis of complete markets, because in the data: (1) the individual consumption comoves with income and (2) the consumption dispersion increases over the life cycle. In this paper, I revisit the implications of these risk sharing tests in the context of a complete market model with discount rate heterogeneity, which is extended to introduce the individual choices of effort in education. I .nd that a complete market model with discount rate heterogeneity can pass both types of the risk sharing tests. The endogenous positive correlation between income growth rate and patience makes the individual consumption comove with income, even if the markets are complete. I also show that this model is quantitatively admissible to account for both the observed comovement of consumption and income and the increase of consumption dispersion over the life cycle.

Consumption Inequality and Discount Rate Heterogeneity

Although standard incomplete market models can account for the magnitude of the rise in consumption inequality over the life cycle, they generate unrealistically concave age pro.les of consumption inequality and unrealistically less wealth inequality. In this paper, I investigate the role of discount rate heterogeneity on consumption inequality in the context of incomplete market life cycle models. The distribution of discount rates is estimated using moments from the wealth distribution. I .nd that the model with heterogeneous income pro.les (HIP) and discount rate heterogeneity can successfully account for the empirical age pro.le of consumption inequality, both in its magnitude and in its non-concave shape. Generating realistic wealth inequality, this simulated model also highlights the importance of ex ante heterogeneities as main sources of life time inequality.

Currency Forecast Errors at Times of Low Interest Rates: Evidence from Survey Data on the Yen/Dollar Exchange Rate

Using survey expectations data and Markov-switching models, this paper evaluates the characteristics and evolution of investors' forecast errors about the yen/dollar exchange rate. Since our model is derived from the uncovered interest rate parity (UIRP) condition and our data cover a period of low interest rates, this study is also related to the forward premium puzzle and the currency carry trade strategy. We obtain the following results. First, with the same forecast horizon, exchange rate forecasts are homogeneous among different industry types, but within the same industry, exchange rate forecasts differ if the forecast time horizon is different. In particular, investors tend to undervalue the future exchange rate for long term forecast horizons; however, in the short run they tend to overvalue the future exchange rate. Second, while forecast errors are found to be partly driven by interest rate spreads, evidence against the UIRP is provided regardless of the forecasting time horizon; the forward premium puzzle becomes more significant in shorter term forecasting errors. Consistent with this finding, our coefficients on interest rate spreads provide indirect evidence of the yen carry trade over only a short term forecast horizon. Furthermore, the carry trade seems to be active when there is a clear indication that the interest rate will be low in the future.

Unemployment: natural rate epicycles or hysteresis?

This paper argues that the natural rate of unemployment hypothesis, in which equilibrium unemployment is determined by “structural” variables alone, is wrong: it is both implausible and inconsistent with the evidence. Instead, equilibrium unemployment is haunted by hysteresis. The curious history of the natural rate hypothesis is considered, curious because the authors of the hypothesis thought hysteresis to be relevant. The various methods that have been used to model hysteresis in economic systems are outlined, including the Preisach model with its selective, erasable memory properties. The evidence regarding hysteresis effects on output and unemployment is then reviewed. The implications for macroeconomic policy, and for the macroeconomics profession, are discussed.

Susceptibility of laboratory-reared female Lutzomyia longipalpis (Lutz & Neiva, 1912) to infection by different species and strains of Leishmania Ross, 1903

A study was undertaken to compare the susceptibility of laboratory-reared female Lutzomyia longipalpis to infection by different species or strains of New World Leishmania. The sand flies proved to be highly susceptible to infection by a strain of Le. guyanensis, with flagellates developing in all (18/18) of the specimens examined. A lower infection rate of 37 per cents (10/27) was recorded in flies exposed to infection by a strain of Le. amazonensis. Flagellates developed in 13 per cents (6/46) of the sand flies that glood fed on dogs in the earlly stage of experimental infection with an old laboratory strain of Le. chagasi. In contrast, promastigotes did not develop in sand flies that blood fed on dogs with naturally acquired Le. chagasi. The naturally infected dogas were in an advanced stage of disease. Flagellates developed in 9// (3/32) of the sand flies that blood fed on lesions of hamsters infected with a strain of Le. braziliensis and in 9 per cents (3/34) of those that fed on hamsters with lesions due to a parasite fo the mexicana complex (strain MHOM/BR/73/BH121). Sand flies did not develop flagellate infections after blood feeding on hamsters bearing lesions induced by strain MHOM/BR/71/BR49. Factors influencing the susceptibility of Lu. longipalpis to infection by New World species of Leishmania are discussed.

Exchange Rate Predictability in a Changing World

An expanding literature articulates the view that Taylor rules are helpful in predicting exchange rates. In a changing world however, Taylor rule parameters may be subject to structural instabilities, for example during the Global Financial Crisis. This paper forecasts exchange rates using such Taylor rules with Time Varying Parameters (TVP) estimated by Bayesian methods. In core out-of-sample results, we improve upon a random walk benchmark for at least half, and for as many as eight out of ten, of the currencies considered. This contrasts with a constant parameter Taylor rule model that yields a more limited improvement upon the benchmark. In further results, Purchasing Power Parity and Uncovered Interest Rate Parity TVP models beat a random walk benchmark, implying our methods have some generality in exchange rate prediction.

Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model

This paper employs an unobserved component model that incorporates a set of economic fundamentals to obtain the Euro-Dollar permanent equilibrium exchange rates (PEER) for the period 1975Q1 to 2008Q4. The results show that for most of the sample period, the Euro-Dollar exchange rate closely followed the values implied by the PEER. The only significant deviations from the PEER occurred in the years immediately before and after the introduction of the single European currency. The forecasting exercise shows that incorporating economic fundamentals provides a better long-run exchange rate forecasting performance than a random walk process.

On the Sources of Uncertainty in Exchange Rate Predictability

We analyse the role of time-variation in coefficients and other sources of uncertainty in exchange rate forecasting regressions. Our techniques incorporate the notion that the relevant set of predictors and their corresponding weights, change over time. We find that predictive models which allow for sudden rather than smooth, changes in coefficients significantly beat the random walk benchmark in out-of-sample forecasting exercise. Using innovative variance decomposition scheme, we identify uncertainty in coefficients' estimation and uncertainty about the precise degree of coefficients' variability, as the main factors hindering models' forecasting performance. The uncertainty regarding the choice of the predictor is small.