an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

some empirical evidence on the effects of shocks to monetary policy on exchange rates this paper investigates the effects of shocks to u s monetary policy on exchange rates we consider three measures of these shocks orthogonalized shocks to the federal funds rate orthogonalized shocks to the ratio of nonborrowed to total reserves and changes in the romer and romer index of monetary policy in sharp contrast to the literature we find substantial evidence of a link between monetary policy and exchange rates specifically according to our results a contractionary shock to u s monetary policy leads to i persistent significant appreciations in u s nominal and real exchange rates and ii significant persistent deviations from uncovered interest rate parity in favor of u s interest rates

payment card rewards programs and consumer payment choice abstract by using a unique data set that contains detailed information about consumer payment choice and consumers attitudes toward each payment method we estimate the effects of payment card rewards on consumer choice of payment methods our approach allows us to control for consumer heterogeneity we find the effects of rewards to be statistically significant across five retail types our policy experiments suggest that for the sub population who hold both credit and debit cards removing rewards would increase their share of paper based payment methods i e cash and checks measured in terms of in store transactions by no more than 4 percentage points

in love with the debit card but still married to cash abstractusing shopping diary survey data we show that changing payment patterns is a challenging task even when consumers have fallen in love with a new payment instrument they find it hard to divorce from their old payment instrument we find a discrepancy between how consumers prefer to pay and how they actually pay half of the consumers who prefer the debit card to cash don t use the debit card to pay a majority of their point of sale transactions our regression results show that the habit of paying cash plays a significant role explaining the presence of a gap

structural breaks in volatility spillovers between international financial markets contagion or mere interdependence abstract this paper conducts an investigation of volatility transmission between stock markets in hong kong europe and the united states covering the time period from 2000 up to 2011 using intra daily data we compute realized volatility time series for the three markets and employ a heterogeneous autoregressive distributed lag model as our baseline econometric specification motivated by the presence of various crisis events contained in our sample we detect time variation and structural breaks in volatility spillovers particularly during the financial crisis of 2007 we find effects consistent with the notion of contagion suggesting strong and sudden increases in the cross market synchronization of chronologically succeeding volatilities investigating the role of mean breaks and conditional heteroskedasticity in the realized volatilities however we find the latter to be the main driver of breaks in volatility spillovers taking the volatility of realized volatilities into account we find no evidence of contagion anymore

long memory versus structural breaks in modeling and forecasting realized volatility we explore the possibility of structural breaks in the daily realized volatility of the deutschemark dollar yen dollar and yen deutschemark spot exchange rates with observed long memory behavior we find that structural breaks in the mean can partly explain the persistence of realized volatility we propose a var rv break model that provides superior predictive ability when the timing of future breaks is known with unknown break dates and sizes we find that a var rv i d long memory model provides a robust forecasting method even when the true financial volatility series are generated by structural breaks

contagion and banking crisis international evidence for 2007 2009 abstract policy makers aim to avoid banking crises and although they can to some extent control domestic conditions internationally transmitted crises are difficult to tackle this paper identifies international contagion in banking during the 2007 2009 crisis for 54 economies we identify three channels of contagion systematic idiosyncratic and volatility and find evidence for these in 45 countries banking crises are overwhelmingly associated with the presence of both systematic and idiosyncratic contagion the results reveal that crisis shocks transmitted from a foreign jurisdiction via idiosyncratic contagion increase the likelihood of a systemic crisis in the domestic banking system by almost 37 percent whereas increased exposure via systematic contagion does not necessarily destabilize the domestic banking system thus while policy makers and regulatory authorities are rightly concerned with the systematic transmission of banking crises reducing the potential for idiosyncratic contagion can importantly reduce the consequences for the domestic economy

foreign exchange market efficiency and common stochastic trends abstract in a recent paper baillie and bollerslev 1989 using daily data from 1980 to 1985 identified six common stochastic trends in a vector of seven nominal exchange rates implying the existence of one cointegrating vector cointegration implies that granger causality must run in at least one direction that is at least one of the exchange rates is predictable using current available information this result has been interpreted as foreign exchange market inefficiency by many another interpretation is suggested if the stationary linear combination of spot rates proxies for a time varying risk premium in some way then these results could be explained in a rational and risk averse market this possibility is eliminated if the time series properties of the risk premium are incompatible with those of the error correction term specifically it is demonstrated that the forward risk premium is non stationary for the exchange rates that comprise the exchange rate cointegration relationship in this paper the existence of common stochastic trends in a vector of nominal exchange rates is tested over the period 1974 to 1991 the efficiency of foreign exchange markets is then tested by examining the implications of stochastic trends in the forward premium and what this means for the time series properties of a time varying forward risk premium jel f31 g14

econometric issues in the analysis of contagion this paper presents a canonical econometric model of contagion and investigates the conditions under which contagion can be distinguished from inter dependence in a two country market set up it is shown that for a range of fundamentals the solution is not unique and for sufficiently large values of the contagion coefficients it has interesting bifurcation properties with bimodal density functions the extension of the model to herding behaviour is also briefly discussed to identify contagion effects in the presence of inter dependencies the equations for the individual markets or countries must contain country market specific forcing variables this sheds doubt on the general validity of the correlation based tests of contagions recently proposed in the literature which do not involve any country market specific fundamentals finally we show that ignoring inter dependence can introduce an upward bias in the estimate of the contagion coefficient and using monte carlo experiments we further show that this bias could be substantial

financial innovation and the transactions demand for cash we document cash management patterns for households that are at odds with the predictions of deterministic inventory models that abstract from precautionary motives we extend the baumol tobin cash inventory model to a dynamic environment that allows for the possibility of withdrawing cash at random times at a low cost this modification introduces a precautionary motive for holding cash and naturally captures developments in withdrawal technology such as the increasing diffusion of bank branches and atm terminals we characterize the solution of the model which qualitatively reproduces several empirical patterns we estimate the structural parameters using micro data and show that quantitatively the model captures important economic patterns the estimates are used to quantify the expenditure and interest rate elasticity of money demand the impact of financial innovation on money demand the welfare cost of inflation and the benefit of atm ownership

consumers use of debit cards patterns preferences and price response debit card use at the point of sale has grown dramatically in recent years in the united states and now exceeds the number of credit card transactions however many questions remain regarding patterns of debit card use consumer preferences when using debit and how consumers might respond to explicit pricing of card transactions using a new nationally representative consumer survey this paper describes the current use of debit cards by u s consumers including how demographics affect use in addition consumers stated reasons for using debit cards are used to analyze how consumers substitute between debit and other payment instruments we also examine the relationship between household financial conditions and payment choice finally we use a key variable on bank imposed transaction fees to analyze price sensitivity of card use and find a 12 decline in overall use in reaction to a mean 1 8 fee charged on certain debit card transactions we believe this represents the first microeconomic evidence in the united states on price sensitivity for a card payment at the point of sale

roughing it up including jump components in the measurement modeling and forecasting of return volatility a rapidly growing literature has documented important improvements in financial return volatility measurement and forecasting via use of realized variation measures constructed from high frequency returns coupled with simple modeling procedures building on recent theoretical results in barndorff nielsen and shephard 2004a 2005 for related bi power variation measures the present paper provides a practical and robust framework for non parametrically measuring the jump component in asset return volatility in an application to the dm exchange rate the s p500 market index and the 30 year u s treasury bond yield we find that jumps are both highly prevalent and distinctly less persistent than the continuous sample path variation process moreover many jumps appear directly associated with specific macroeconomic news announcements separating jump from non jump movements in a simple but sophisticated volatility forecasting model we find that almost all of the predictability in daily weekly and monthly return volatilities comes from the non jump component our results thus set the stage for a number of interesting future econometric developments and important financial applications by separately modeling forecasting and pricing the continuous and jump components of the total return variation process

long memory in foreign exchange rates using the geweke porter hudak test we find evidence of long memory in exchange rate data this implies that the empirical evidence of unit roots in exchange rates may not be robust to long memory alternatives fractionally integrated autoregressive moving average arfima models are estimated by both the time domain exact maximum likelihood ml method and the frequency domain approximate ml method impulse response functions and forecasts based on these estimated arfima models are evaluated to gain insight into the long memory characteristics of exchange rates some tentative explanations of the long memory found in the exchange rates are discussed

channels of interstate risk sharing united states 1963 1990 we develop a framework for quantifying the amount of risk sharing among states in the united states and construct data that allow us to decompose the cross sectional variance in gross state product into several components which we refer to as levels of smoothing we find that 39 percent of shocks to gross state product are smoothed by capital markets 13 percent are smoothed by the federal government and 23 percent are smoothed by credit markets the remaining 25 percent are not smoothed we also decompose the federal government smoothing into subcategories taxes transfers and grants to states

correlations in price changes and volatility across international stock markets the short run interdependence of prices and price volatility across three major international stock markets is studied daily opening and closing prices of major stock indexes for the tokyo london and new york stock markets are examined the analysis utilizes the autoregressive conditionally heteroskedastic arch family of statistical models to explore these pricing relationships evidence of price volatility spillovers from new york to tokyo london to tokyo and new york to london is observed but no price volatility spillover effects in other directions are found for the pre october 1987 period article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the demand for money financial innovation and the welfare cost of inflation an analysis with household data we use microeconomic data on households to estimate the parameters of the demand for currency derived from a generalized baumol tobin model our data set contains information on average currency deposits and other interest bearing assets the number of trips to the bank the size of withdrawals and ownership and use of atm cards we model the demand for currency accounting for adoption of new transaction technologies and the decision to hold interest bearing assets the interest rate and expenditure flow elasticities of the demand for currency are close to the theoretical values implied by standard inventory models however we find significant differences between individuals with an atm card and those without the estimates of the demand for currency allow us to calculate a measure of the welfare cost of inflation analogous to bailey s triangle but based on a rigorous microeconometric framework the welfare cost of inflation varies considerably within the population but never turns out to be very lar

forecasting the conditional volatility of oil spot and futures prices with structural breaks and long memory models this paper extends previous studies by investigating the relevance of structural breaks and long memory in modeling and forecasting the conditional volatility of oil spot and futures prices using a variety of garch type models our results can be summarized as follows first we provide evidence of parameter instability in five out of nine garch based conditional volatility processes for energy prices second long memory is effectively present in all the series considered and a figarch model seems to better fit the data but the degree of volatility persistence diminishes significantly after adjusting for structural breaks finally the out of sample analysis shows that volatility models accommodating instability and long memory characteristics of the data provide the best volatility forecasts for most cases

cointegration and forward and spot exchange rate regressions abstract we investigate the relationship between cointegration models of the current spot exchange rate s t and the current forward rate f t and cointegration models of the future spot rate s t 1 and f t and the implications of this relationship for tests of the forward rate unbiasedness hypothesis fruh we show that simple models of cointegration between s t and f t imply complicated models of cointegration between s t 1 and f t consequently standard methods are often inappropriate for modeling the cointegrated behavior of s t 1 f t and we show that the use of such methods can lead to erroneous inferences regarding the fruh

business cycle convergence in emu a first look at the second moment we analyse the dynamics of the standard deviation of demand and supply shocks as well as of the demand component of gdp across countries in the european monetary union emu this analysis allows us to evaluate the patterns of cyclical comovement in emu and compare them the cyclical performance of the new members of the eu and other oecd countries we make use of sigma convergence methods to identify synchronization patterns in business cycles the eurozone has converged to a stable lower level of dispersion across business cycles during the end of the 80s and the beginning of the 90s the new eu members have also experienced a strong pattern of convergence from 1998 to 2005 when a strong divergence trend appears an enlargement of the emu to 22 members would not significantly decrease its optimality as a currency area there is evidence for some europe specific characteristics as compared to global comovements in business cycles authors abstract

atm foreign fees and cash withdrawals abstract we evaluate the impact of foreign fees paid by consumers on their cash withdrawals at automatic teller machines henceforth atms these so called foreign fees are paid when consumers withdraw cash from atms which are not owned by their home bank we take advantage of a natural experiment whereby non linear foreign atm fees in one specific bank became suddenly applicable at one point in time we also use this experiment to evaluate the substitutions between foreign atm withdrawals and other home atm or desk withdrawals as well as with payments by card using panel data on accounts we first estimate average treatment effects on the treated before carrying on with the estimation of a simple structural model the latter procedure allows us to compute the counterfactual impacts of changing the schedule of foreign fees impacts are sizeable on bank profits and consumer welfare

long memory and persistence in aggregate output abstract we examine persistence in u s aggregate output by estimating fractionally integrated arima models these models provide better low frequency approximations to the wold representation than previous stochastic specifications and earlier results on the importance of a permanent component emerge as special cases we find evidence of long memory which induces persistence though this long memory need not be associated with a unit root our point estimates indicate that macroeconomic shocks while persistent are distinctly less persistent than many earlier studies suggest however confidence intervals associated with the long run response are quite wide

technological change and the households demand for currency abstract it is shown that accounting for technology variations across households and periods is important to obtain theoretically consistent estimates of the demand for currency an inventory model is presented where the withdrawal technology is explicitly modeled both the level and the interest rate elasticity of cash holdings depend on the withdrawal technology available to households empirical proxies for the household withdrawal technology based on the diffusion of cash withdrawal points measured at city level are used to test the model predictions on a panel of italian household data over the 1993 2004 period

the long run fisher effect can it be tested empirical support for the long run fisher effect a hypothesis that a permanent change in inflation leads to an equal change in the nominal interest rate has been hard to come by this paper provides a plausible explanation of why past studies have been unable to find support for the long run fisher effect this paper argues that the necessary permanent change to the inflation rate following a monetary shock has not occurred in the industrialized countries of australia austria belgium canada denmark france germany greece ireland italy japan the netherlands norway sweden switzerland the united kingdom and the united states instead this paper shows that inflation in these countries follows a mean reverting fractionally integrated long memory process not the nonstationary inflation process that is integrated of order one or larger found in previous studies of the fisher effect applying a bivariate maximum likelihood estimator to a fractionally integrated model of inflation and the nominal interest rate the inflation rate in all seventeen countries is found to be a highly persistent fractionally integrated process with a positive differencing parameter significantly less than one hence in the long run inflation in these countries will be unaffected by a monetary shock and a test of the long run fisher effect will be invalid and uninformative as to the truthfulness of the long run fisher effect hypothesis

modeling long run behavior with the fractional arima model abstract when modeling long run behavior fractional arima models can give insights unobtainable with the nonfractional arima models as an application the deterministic trend and unit root with drift models are nested in the fractional arima model this allows testing between the two models based on estimated parameter values this test is applied to postwar us quarterly real gnp the test concludes that gnp is consistent with both models the estimated fractional parameter is significantly smaller than reported in diebold and rudebusch 1989 the difference is explained by bias in the previous estimates relationships with the cumulative impulse response and spectral density at frequency zero are noted

international risk sharing and european monetary unification abstract we explore income and consumption smoothing patterns among european community ec countries and among oecd countries during the period 1966 90 we find that for oecd as well as for ec countries about 40 percent of shocks to gdp are smoothed at the one year frequency with about half the smoothing achieved through national government budget deficits and half by corporate saving at the three year differencing frequency only 25 percent of shocks to gdp are smoothed mainly via government lending and borrowing in the absence of alternative income and consumption smoothing mechanisms the restrictions on budget deficits imposed by the maastricht treaty should be relaxed to allow governments to run large temporary deficits in response to output shocks

how people pay evidence from grocery store data abstract empirical evidence based on grocery store transaction data shows that consumer payment behavior at the point of sale is important for understanding models of money demand there are statistically significant effects of transaction costs opportunity costs and product characteristics on the choice of payment instrument which then in turn affect money demand these results emphasize the overlap between the work of empirical researchers in payment choice and theoretical modelers of monetary economics and should inform both literatures

return and volatility linkages between the us and the german stock market abstract this study investigates the contemporaneous correlation and the spillover effects between the us and the german stock markets around the opening of the two markets it is based on a newly compiled sample of intra day data for the two blue chip indices the dow jones industrial average dow and the deutsche aktienindex dax our main findings are as follows foreign daytime returns can significantly influence the domestic overnight returns this holds for both the us and the german market there is no evidence of spillovers from the previous daytime returns in the us to the dax morning trading short lived mean spillovers especially from the dax noon to 3 30 pm cet segment into the dow can be identified and the uncritical use of the dax opening quote is very likely to produce spurious results due to institutional peculiarities to avoid this problem we propose a proxy for the dax opening that appears satisfactory

deposit banks and the market for payment media this paper develops a model of bank deposit pricing with optimal consumer choices of spending shares among alternative media of exchange interpreting deposits as a tie in feature of the sale of bank payment services the paper shows that the wedge between consumer and social costs of currency use may reverse typical prescriptions regarding bank market structure and distortionary taxes on banks an explanation is offered for below cost bank service fees despite deregulated deposit interest rates while rate ceilings are shown to induce substitution into payment media with higher social costs copyright 1992 by ohio state university press

long memory and structural changes in the forward discount an empirical investigation abstract we analyze the evidence for long memory and structural changes in the five g7 countries forward discount we establish evidence for long memory by estimating the long memory parameter without allowing for structural breaks we also document evidence for multiple structural breaks in the mean of the forward discount we then adjust for structural changes in the forward discount rate and re estimate the long memory parameter after removing the breaks we still find evidence of stationary long memory in each country s forward discount

continuous time models realized volatilities and testable distributional implications for daily stock returns we provide an empirical framework for assessing the distributional properties of daily speculative returns within the context of the continuous time jump diffusion models traditionally used in asset pricing finance our approach builds directly on recently developed realized variation measures and non parametric jump detection statistics constructed from high frequency intra day data a sequence of simple to implement moment based tests involving various transformations of the daily returns speak directly to the importance of different distributional features and may serve as useful diagnostic tools in the specification of empirically more realistic continuous time asset pricing models on applying the tests to the 30 individual stocks in the dow jones industrial average index we find that it is important to allow for both time varying diffusive volatility jumps and leverage effects to satisfactorily describe the daily stock price dynamics copyright 2009 john wiley sons ltd

inflation targeting an indirect approach to assess the direct impact it is quite difficult to assess the benefits of inflation targeting it since its immediate effect will be on inflation expectations an unobserved variable due to lack of comprehensive data on inflation expectations most studies so far concentrated on the impact of it either on observable variables like output unemployment and inflation or compared post it surveys of itcountries with nonit countries in our study we focus on a yet unanswered question i e how the expectations change with the adoption of it we suggest that heterogeneous inflation expectations lead to long memory in actual inflation and it if successful should decrease this persistence by concentrating the public s expectations toward the announced target empirical results confirm our hypothesis with a reduction in inflation memory after the adoption of it in almost all eight developed countries in our sample

how do opec news and structural breaks impact returns and volatility in crude oil markets further evidence from a long memory process abstract since its formation opec through its conference decisions has been a major player in the world oil markets the purpose of this paper is to examine the impacts of opec s different news announcements on the conditional expectations and volatility of crude oil markets in the presence of long memory and structural changes to do so we first discern opec s oil production behavior in response to its cut maintain and increase decisions then by applying the arma garch class models to the two global benchmarks wti and brent over the period may 1987 through december 2012 we find strong evidence of long memory the empirical evidence also shows that opec s announcements especially the cut and the maintain decisions have a significant effect on both returns and volatility of the crude oil markets particularly that of the wti moreover we explore the possibility of structural breaks in the crude oil prices and detect five six breakpoints for the wti brent oil markets the presence of structural breaks reduces the persistence of volatility accounting for opec s scheduled news announcements in the presence of structural changes reduces the degree of volatility persistence and enhances the understanding of this volatility in the oil markets these results have several implications for policy makers oil traders and other participants in the crude oil markets

using cash to monitor liquidity implications for payments currency demand and withdrawal behavior this paper provides one explanation why cash is still used for transactions despite a broad diffusion of noncash payment instruments in particular we argue that a distinctive feature of cash a glance into one s pocket gives a signal of the remaining budget and past expenses provides utility to some consumers using payment survey data we show that consumers who need to keep control over their remaining liquidity and who have elevated costs of information processing conduct a larger percentage of payments using cash withdraw less often and hold larger cash balances than other consumers

regional non adjustment and fiscal policy asymmetric shocks regional non adjustment and fiscal policy how will countries handle idiosyncratic macroeconomic shocks under the single currency since the regional adjustment patterns currently prevailing within european currency unions are likely to prevail at the national level under the single currency looking at the ways in which european countries react to internally asymmetric shocks today provides a good preview for the answer to that question in this paper we compare the usa with germany italy and the uk and with canada which is closer to europe than the usa in its labour market and fiscal institutions europe s and to some extent canada s model of regional response differs from that of the usa changes in regional real exchange rates are small in all countries outside of the usa however there is more reliance on interregional transfer payments less on labour migration and the pace of regional adjustment appears to be slower if emu aims at the same degree of economic and social cohesion that its constituent nations enjoy today this suggests that its members may find it hard to resist the eventual extension of existing eu mechanisms of income redistribution a transfer union we propose an alternative strategy based on a relaxed stability pact further strictures against central eu borrowing labour market and fiscal reform and the issuance by individual member states of debt indexed to nominal gdp maurice obstfeld and giovanni peri

is the efficient market hypothesis day of the week dependent evidence from the banking sector in this article we propose a new hypothesis that the efficient market hypothesis is day of the week dependent we apply the test to firms belonging to the banking sector and listed on the nyse we find significant evidence that the efficient market hypothesis is day of the week dependent overall for only 62 of firms the unit root null hypothesis is rejected on all the five trading days we also discover that when investors do not account for unit root properties in devising trading strategies they obtain spurious profits

identifying monetary policy in a small open economy under flexible exchange rates abstract previous empirical study on the effects of monetary policy shocks in small open economies has generated puzzling dynamic responses in various macroeconomic variables this paper argues that these puzzles derive from an identification of monetary policy that is inappropriate for such economies to remedy this it is proposed that a structural model be estimated to explicitly account for the features of the small open economy such a model is applied to canada with tightly estimated results overall the dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the exchange rate as a transmission mechanism

modeling realized volatility on the spanish intra day electricity market abstract this paper models the realized volatility of the hourly prices from the six sessions of the spanish intra day electricity market for the period 2002 2014 based on the sequential organization of the market a model in which realized volatility depends on its own past and that of the other sessions is specified and then modified in two ways on the one hand total variation is decomposed into jump and non jump components and on the other hand egarch innovations are considered estimation results show significant volatility transmissions between the sessions out of sample forecast criteria select egarch innovations for sessions 1 and 2 while simpler models with no egarch innovations and no jump distinction are preferred for sessions 5 and 6 we argue how results are driven by the market structure the market design and the regulation of renewable generation

hourly volatility spillovers between international equity markets abstract this paper examines the timing of mean and volatility spillovers between new york and london equity markets using an arch model it is found that the evidence of volatility spillovers between these markets is minimal and have a duration which lasts only an hour or so the most significant effects surround the movement of share prices around the new york opening but these results are not strong several new arch models are estimated including an asymmetric or leverage model and a non linear model which allows big shocks to have a different impact from small shocks

estimating quadratic variation using realized variance this paper looks at some recent work on estimating quadratic variation using realised variance rv that is sums of m squared returns this econometrics has been motivated by the advent of the common availability of high frequency financial return data when the underlying process is a semimartingale we recall the fundamental result that rv is a consistent as m estimator of quadratic variation qv we express concern that without additional assumptions it seems difficult to give any measure of uncertainty of the rv in this context the position dramatically changes when we work with a rather general sv model which is a special case of the semimartingale model then qv is integrated variance and we can derive the asymptotic distribution of the rv and its rate of convergence these results do not require us to specify a model for either the drift or volatility functions although we have to impose some weak regularity assumptions we illustrate the use of the limit theory on some exchange rate data and some stock data we show that even with large values of m the rv is sometimes a quite noisy estimator of integrated variance

emu enlargement stabilization costs and insurance mechanisms this paper considers the determinants of the macroeconomic costs of joining emu for the new eu member sates and compares them with those of the emu members specifically we investigate the business cycle correlation between the candidate s economy and that of the euro area as a whole and the ability of insurance mechanisms and fiscal policies to smooth income fluctuations the results suggest that emu membership would not be costly for some countries cyprus hungary and malta but for other countries it could have relevant costs at least in the short run for some of these countries business cycles are not yet well synchronized with the euro area s business cycle and risk sharing mechanisms do not provide enough insurance against shocks

a re examination of the unbiased forward rate hypothesis in the presence of multiple unknown structural breaks we test the unbiased forward rate ufr hypothesis using new tests for cointegration developed by hatemi j 2008a that allows for multiple unknown structural breaks we analyse the australian dollar aud euro eur british pound gbp and japanese yen jpy versus the us dollar usd spot rates and forward rates relationship during the period 5 january 1999 to 28 december 2006 we find that the ufr does hold when the effects of the unknown structural breaks are taken into account the parameters that we obtained were close to unity hence taking into account transaction cost and the existence of a risk premium earning arbitrage profits may still not be possible thus the markets for these currencies may still be considered as efficient

economic effects of currency unions we develop a new instrumental variable iv approach to estimate the effects of different exchange rate regimes on bilateral outcomes the basic idea is that the characteristics of the exchange rate between two countries are partially related to the independent decisions of these countries to peg explicitly or de facto to a third currency notably that of a main anchor this component of the exchange rate regime can be used as an iv in regressions of bilateral outcomes we apply the methodology to study the economic effects of currency unions the likelihood that two countries independently adopt the currency of the same anchor country is used as an instrument for whether they share a common currency we find that sharing a common currency enhances trade increases price comovements and decreases the comovement of real gross domestic product shocks

effects of payment mechanism on spending behavior the role of rehearsal and immediacy of payments past expenses have been shown to influence future spending behavior by depleting available budgets however a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them this article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending specifically past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid rehearsal and when the consumer s wealth is depleted immediately rather than with a delay immediacy two experiments show support for the proposed theoretical framework

rethinking an old empirical puzzle econometric evidence on the forward discount anomaly using both semiparametric and parametric estimation methods this paper corroborates earlier findings of fractionally integrated behaviour in the forward premium two new explanations are also proposed to help reconcile earlier conflicting empirical evidence on the time series properties of the forward premium traditional regression approaches used to test the forward rate unbiasedness hypothesis are then evaluated including regression in levels in returns fama s 1984 regression and in error correction format interesting statistical and or interpretive implications are found in all three cases for example the predictions of the appropriate nonstandard limit theory are consistent with many of the standard empirical results reported from fama s regression including the commonly occurring yet puzzling negative correlations between spot returns and the forward premium it is suggested that the principal failure of unbiasedness may be due instead to the difference in persistence between these two series copyright 2001 john wiley sons ltd

incomplete record keeping and optimal payment arrangements abstract we study a random matching absence of double coincidence environment in which people cannot precommit and in which there are two imperfect ways to keep track of what other people have done in the past money and a public record of all past actions that is updated with an average lag we study how the magnitude of that lag affects the allocations that are optimal from among allocations that are stationary and feasible and that satisfy incentive constraints which arise from the absence of commitment and the imperfect ways of keeping track of what others have done in the past journal of economic literature classification numbers e40 c73 d82

money is memory abstract this paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible following myerson 8 the standard definition of feasibility is adapted to take account of the lack of commitment the environments feature either memory or money memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past money is defined as an object that does not enter utility or production functions and is available in fixed supply the main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory depending on the environment the converse may or may not be true hence from a technological point of view money is equivalent to a primitive form of memory journal of economic literature classification numbers e40 c73 d82

some contagion some interdependence more pitfalls in tests of financial contagion this paper develops a test of contagion in financial markets based on bivariate correlation analysis which generalizes existing tests and applies it to the international effects of the hong kong stock market crisis of october 1997 contagion is defined as a structural break in the international transmission of financial shocks for plausible values of the variance of country specific shocks in hong kong our test finds evidence of contagion for 5 countries out of a sample of 17 this is in sharp contrast with the findings of recent literature according to which there is no contagion only interdependence we show that this strong result in the literature is due to arbitrary and unrealistic restrictions on the variance of country specific shocks

the long memory of the forward premium abstract the estimation of arfima models by approximate maximum likelihood estimation methods reveals the forward premia for the currencies of canada germany and the uk vis a vis the us dollar to be well described by a fractionally integrated process these models imply that all the forward premia are mean reverting although their autocorrelations are quite persistent this degree of persistence has led other studies to erroneously conclude that the forward premia contains a unit root jel c22 e31

volatility spillovers between crude oil and chinese sectoral equity markets evidence from a frequency dynamics perspective abstract we examine the frequency dynamics of volatility spillovers between crude oil and china s stock markets in a spectral representation framework of generalized forecast error variance decomposition using sectoral stock indices data we find evidence of total volatility spillover driven mainly by short term spillovers the net spillovers of the oil market are almost all positive and dominated by short ter m components although the spillover during china s 2015 financial crisis is negative and attributable to long term components in addition there exists heterogeneity in net pairwise frequency spillovers between the oil and sectoral stock markets moreover structural breaks in volatilities appear to be a significant feature of volatility spillovers finally frequency spillovers in our system can predict future stock market volatility these results have economic implications for investors and policymakers

real and spurious long memory properties of stock market data we test for the presence of long memory in daily stock returns and their squares using a robust semiparametric procedure of lobato and robinson spurious results can be produced by nonstationarity and aggregation we address these problems by analyzing subperiods of returns and using individual stocks the test results show no evidence of long memory in the returns by contrast there is strong evidence in the squared returns

currency unions and international integration this paper characterizes the integration patterns of international currency unions such as the cfa franc zone we empirically explore different features of currency unions and compare them to countries with sovereign monies by examining the criteria for mundellos concept of an optimum currency area we find that members of currency unions are more integrated than countries with their own currencies for instance we find that currency union members have more trade and less volatile real exchange rates than countries with their own monies business cycles are more highly synchronized across currency union countries than across countries with sovereign monies

regional redistribution and stabilization by the center in canada france the uk and the us abstract this paper re examines earlier estimates of regional redistribution and stabilization through the central government budget in the us and produces new estimates of this redistribution and stabilization in the us canada france and the uk the new estimates rest on panel data econometrics and an adherence to certain accounting principles that have occasionally been violated in the past as a result of the accounting the peak estimates for the us and canada in the earlier literature are never attained regional stabilization of personal income through the central government budget emerges as close to 20 in the us france and the uk but only 10 to 14 in canada in case of gross product instead of personal income accounting regional stabilization is closer to 10 in the us as regards france and the uk the use of panel data econometrics proves essential

business cycle synchronization in the emu this article asks whether the business cycles of the eu countries have become more or less synchronized after the introduction of the euro our findings show that all countries in our eu sample are better synchronized with the emu wide economy in the post emu period than they were before the euro we also show that this increase in synchronization is present in all components of aggregate demand as well as two supply side variables but it is more pronounced in the trade components imports and particularly exports it is also shown that the increase in trade within the emu area is at least partly responsible for the increase in cyclical synchronization

the term structure of forward exchange premiums and the forecastability of spot exchange rates correcting the errors we develop a framework to extract information regarding subsequent spot rate movements from the term structure of forward exchange premiums while admitting possible deviations from rationality and