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.

Horizontal Agreements and R&D Complementarities: Merger versus RJV

We study the decision of two rms within an oligopoly concerning whether to enter into a horizontal agreement to exploit complementarities between their R&D activities and, if so, whether to merge or form a research joint venture (RJV). In contrast to horizontal merger, there is a probability that an RJV contract will fail to enforce R&D sharing. We nd that a horizontal agreement always arises. The insiders' merger/RJV choice involves a trade-o : While merger o ers certainty that R&D complementarities will be exploited, it leads to a pro t-reducing reaction by outsiders on the product market, where competition is Cournot. Greater brand similarity and contract enforceability (\quality") both favour RJV, while greater R&D complementarity favours merger. Interestingly, the insiders may choose to merge even when RJV contracts are always enforceable, and they may opt to form an RJV even when the likelihood of enforceability is negligible.

Gene duplication and neofunctionalization: POLR3G and POLR3GL.

RNA polymerase III (Pol III) occurs in two versions, one containing the POLR3G subunit and the other the closely related POLR3GL subunit. It is not clear whether these two Pol III forms have the same function, in particular whether they recognize the same target genes. We show that the POLR3G and POLR3GL genes arose from a DNA-based gene duplication, probably in a common ancestor of vertebrates. POLR3G- as well as POLR3GL-containing Pol III are present in cultured cell lines and in normal mouse liver, although the relative amounts of the two forms vary, with the POLR3G-containing Pol III relatively more abundant in dividing cells. Genome-wide chromatin immunoprecipitations followed by high-throughput sequencing (ChIP-seq) reveal that both forms of Pol III occupy the same target genes, in very constant proportions within one cell line, suggesting that the two forms of Pol III have a similar function with regard to specificity for target genes. In contrast, the POLR3G promoter-not the POLR3GL promoter-binds the transcription factor MYC, as do all other promoters of genes encoding Pol III subunits. Thus, the POLR3G/POLR3GL duplication did not lead to neo-functionalization of the gene product (at least with regard to target gene specificity) but rather to neo-functionalization of the transcription units, which acquired different mechanisms of regulation, thus likely affording greater regulation potential to the cell.

Cardiac expression of ms1/STARS, a novel gene involved in cardiac development and disease, is regulated by GATA4.

Ms1/STARS is a novel muscle-specific actin-binding protein that specifically modulates the myocardin-related transcription factor (MRTF)-serum response factor (SRF) regulatory axis within striated muscle. This ms1/STARS-dependent regulatory axis is of central importance within the cardiac gene regulatory network and has been implicated in cardiac development and postnatal cardiac function/homeostasis. The dysregulation of ms1/STARS is associated with and causative of pathological cardiac phenotypes, including cardiac hypertrophy and cardiomyopathy. In order to gain an understanding of the mechanisms governing ms1/STARS expression in the heart, we have coupled a comparative genomic in silico analysis with reporter, gain-of-function, and loss-of-function approaches. Through this integrated analysis, we have identified three evolutionarily conserved regions (ECRs), α, SINA, and DINA, that act as cis-regulatory modules and confer differential cardiac cell-specific activity. Two of these ECRs, α and DINA, displayed distinct regulatory sensitivity to the core cardiac transcription factor GATA4. Overall, our results demonstrate that within embryonic, neonatal, and adult hearts, GATA4 represses ms1/STARS expression with the pathologically associated depletion of GATA4 (type 1/type 2 diabetic models), resulting in ms1/STARS upregulation. This GATA4-dependent repression of ms1/STARS expression has major implications for MRTF-SRF signaling in the context of cardiac development and disease.

Immunopathology of american cutaneous leishmaniasis. Modulation of MHC class II gene products by Keratinocytes before and after glucantime therapy

Epidermal changes from 32 cutaneous and 3 mucosal American leishmaniasis (ACL) active lesions were studied for HLA-DR, -DP expression, Lanerhans cells and lymphocyte infiltration. In addition to a DR and DQ positivity at the surface of the cells of the inflammatory infiltrate, a strong reaction for DR antigens was detected on keratinocytes. Hyperplasia of Langerhans cells was present in al cutaneous lesions and epidermis was infiltrated by T lymphocytes. When healed lesions of 14 of these subjects were re-biopsied 1 to 12 months after the end of pentavalent antimonial therapy, MHC class antigens could no longer be seen on keratinocytes. Our data represrn evidence for hhe reversibility of the abnormal HLA-DR expression by keratinocytes in ACL after Glucantime therapy or spontaneous scar formation, demonstrating that this expresion is restricted to the period of active lesions. The present findings can be regarded as an indirect evidence that keratinocytes may be involved in the immunopathology of ACL.

Co-movements in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model

We analyze and quantify co-movements in real effective exchange rates while considering the regional location of countries. More specifically, using the dynamic hierarchical factor model (Moench et al. (2011)), we decompose exchange rate movements into several latent components; worldwide and two regional factors as well as country-specific elements. Then, we provide evidence that the worldwide common factor is closely related to monetary policies in large advanced countries while regional common factors tend to be captured by those in the rest of the countries in a region. However, a substantial proportion of the variation in the real exchange rates is reported to be country-specific; even in Europe country-specific movements exceed worldwide and regional common factors.

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.

Mutations in the colony stimulating factor 1 receptor (CSF1R) gene cause hereditary diffuse leukoencephalopathy with spheroids.

Hereditary diffuse leukoencephalopathy with spheroids (HDLS) is an autosomal-dominant central nervous system white-matter disease with variable clinical presentations, including personality and behavioral changes, dementia, depression, parkinsonism, seizures and other phenotypes. We combined genome-wide linkage analysis with exome sequencing and identified 14 different mutations affecting the tyrosine kinase domain of the colony stimulating factor 1 receptor (encoded by CSF1R) in 14 families with HDLS. In one kindred, we confirmed the de novo occurrence of the mutation. Follow-up sequencing identified an additional CSF1R mutation in an individual diagnosed with corticobasal syndrome. In vitro, CSF-1 stimulation resulted in rapid autophosphorylation of selected tyrosine residues in the kinase domain of wild-type but not mutant CSF1R, suggesting that HDLS may result from partial loss of CSF1R function. As CSF1R is a crucial mediator of microglial proliferation and differentiation in the brain, our findings suggest an important role for microglial dysfunction in HDLS pathogenesis.

Price Transmission and Effects of Exchange Rates on Domestic Commodity Prices via Offshore and Currency Hedging

The framework presents how trading in the foreign commodity futures market and the forward exchange market can affect the optimal spot positions of domestic commodity producers and traders. It generalizes the models of Kawai and Zilcha (1986) and Kofman and Viaene (1991) to allow both intermediate and final commodities to be traded in the international and futures markets, and the exporters/importers to face production shock, domestic factor costs and a random price. Applying mean-variance expected utility, we find that a rise in the expected exchange rate can raise both supply and demand for commodities and reduce domestic prices if the exchange rate elasticity of supply is greater than that of demand. Whether higher volatilities of exchange rate and foreign futures price can reduce the optimal spot position of domestic traders depends on the correlation between the exchange rate and the foreign futures price. Even though the forward exchange market is unbiased, and there is no correlation between commodity prices and exchange rates, the exchange rate can still affect domestic trading and prices through offshore hedging and international trade if the traders are interested in their profit in domestic currency. It illustrates how the world prices and foreign futures prices of commodities and their volatility can be transmitted to the domestic market as well as the dynamic relationship between intermediate and final goods prices. The equilibrium prices depends on trader behaviour i.e. who trades or does not trade in the foreign commodity futures and domestic forward currency markets. The empirical result applying a two-stage-least-squares approach to Thai rice and rubber prices supports the theoretical result.

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.

Transaction Costs and Institutions: Investments in Exchange

This paper proposes a simple model for understanding transaction costs for their composition, size and policy implications. We distinguish between investments in institutions that facilitate exchange and the cost of conducting exchange itself. Institutional quality and market size are determined by the decisions of risk averse agents and conditions are discussed under which the efficient allocation may be decentralized. We highlight a number of differences with models where transaction costs are exogenous, including the implications for taxation and measurement issues.