an exchange market pressure measure for cross country analysis abstract emp measures in the existing literature are oriented towards applications in crisis dating and prediction we propose a modified emp measure where cross country comparisons are possible this is the sum of the observed change in the exchange rate with an estimated counterfactual of the magnitude of the change in the exchange rate associated with the observed currency intervention we construct a multi country dataset for emp in each month this opens up many new research possibilities

foreign exchange market intervention and expectations the yen dollar exchange rate abstract using press reports and official statistics on central bank intervention in conjunction with options market data we find that central bank intervention had no statistically significant systematic impact on the mean or higher moments of the exchange rate during 1993 2000 we also find that japanese authorities appeared to intervene mainly in response to deviations of the exchange rate from some implicit target levels and to a rise in market uncertainty u s monetary authorities intervened only in cooperation with the japanese authorities

time to build and capacity choice abstract this paper studies how demand uncertainty and time to build interact in affecting irreversible investment activity using impulse control methods we find the optimal timing and size of investment for a firm such as an electric utility that considers expanding its capacity in order to meet an uncertain demand when the construction lag is short uncertainty delays investment while increasing its size once it takes place however for comparatively long and realistic times to build the sensitivity to uncertainty is drastically reduced and the results can even be reversed more uncertainty can speed up investment and reduce its size

energy investment risk assessment for nations along china s belt road initiative abstract overseas energy investment as an effective way of securing energy supply is being favored by the world s leading energy consuming countries however energy investment has the potential high risk on multiple forms including political and regulatory risk currency liquidity and refinancing risk as well as resource risk and so on to effectively evaluate overseas energy investment risk this study proposed a new indicator system from six dimensions furthermore a fuzzy integrated evaluation model based on the entropy weight was constructed to rate the energy investment risk for 50 nations along china s belt road initiative the findings indicate that resource potential and chinese factors have become the main determinant of energy investment risk while environmental constraints and political risk should also be considered for investing decisions in conclusion saudi arabia united arab emirates pakistan kazakhstan and russia are the most ideal choices for china s energy investment balancing resource potential and investment environment

blending under uncertainty real options analysis of ethanol plants and biofuels mandates abstract the value of a representative ethanol producer that benefits from both low and high gasoline prices in the short run is modeled ethanol producers make a modest competitive profit in the mandate induced region of production a low price of gasoline increases the demand for blend ethanol and consequently increases the profit of ethanol producers on the other hand when gasoline becomes costlier than ethanol the capacity constraints of the biofuels sector bind and ethanol producers gain large quasi monopoly margins this is an interesting example of a market where two commodities are complement up to a point and then substitute after that we postulate the value of an ethanol producer as a strangle option consisting of two real options the option to substitute gasoline at times of expensive crude oil and the option to expand supply of blend at times of cheap gasoline using a dynamic model we show that the higher volatilities of crude oil and ethanol costs increase biofuels firms value we also find non monotonic relationships between the value of an ethanol plant and several underlying variables including gasoline price level we estimate the value provided by a 10 blend mandate to be around 150 000 000 for a representative ethanol unit our results offer a novel view of oil and feedstock price risks in contrast to the common belief that considers those risks as a negative factor for the biofuels sector

high frequency analysis of foreign exchange interventions what do we learn abstract the high frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction interventions increase volatility in the short run as they are regarded as information but they can reduce volatility overall ways of transmission may reach beyond the signalling channel and also include the portfolio balance and a damping channel finally interventions are more successful if they obey certain conditions such as being coordinated among central banks and going with the market and fundamentals

can information heterogeneity explain the exchange rate determination puzzle empirical evidence shows that most exchange rate volatility at short to medium horizons is related to order flow and not to macroeconomic variables we introduce symmetric information dispersion about future macroeconomic fundamentals in a dynamic rational expectations model in order to explain these stylized facts consistent with the evidence the model implies that a observed fundamentals account for little of exchange rate volatility in the short to medium run b over long horizons the exchange rate is closely related to observed fundamentals c exchange rate changes are a weak predictor of future fundamentals and d the exchange rate is closely related to order flow

balancing energy strategies in electricity portfolio management traditional management of electricity portfolios is focused on the day ahead market and futures of longer maturity within limits market participants can however also resort to the balancing energy market to close their positions in this paper we determine strategic positions in the balancing energy market and identify corresponding economic incentives in an analysis of the german balancing energy demand we find that those strategies allow an economically optimal starting point for real time balancing and create a marketplace for flexible capacity that is more open than alternative marketplaces the strategies we proffer in this paper we believe will contribute to an effective functioning of the electricity market

the temporal pattern of trading rule returns and exchange rate intervention intervention does not generate technical trading profits abstract this paper characterizes the temporal pattern of trading rule returns and official intervention for australian german swiss and u s data to investigate whether intervention generates technical trading rule profits the data reject the hypothesis that intervention generates inefficiencies from which technical rules profit in particular high frequency data show that abnormally high trading rule returns precede german swiss and u s intervention australian intervention precedes high trading rule returns but trading intervention patterns make it implausible that intervention actually generates those returns rather intervention responds to exchange rate trends from which trading rules have recently profited

res diffusion and r d investments in the flexibilisation of the european electricity networks abstract the present analysis adds up to the discussion carried around the flexibilisation of the electricity networks as means of higher diffusion of renewable energy sources res inspiring from innovation studies the paper proposes an economic rationale for considering res technology manufacturers as investors in electricity networks moreover the present analysis scrutinize the extent to which the various economic operators within specific segments of the power supply chain invest in a portfolio of research and development activities among which the electricity grids and storage technologies the intensity of these research investments was mapped across the european countries for the year of 2011 their geographic distribution confirms the rationale of an analysis based on canonical correlation testing the associations between res market diffusion and power network indicators the analysis provides useful insights for specific technology such as the one revealing pv market sensitivity to research investments in storage technologies confirming a potential business model coupling the two technologies accommodating this pattern and enabling further diversification of research portfolios the public incentives could be redesigned in order to address the flexibilisation of power networks

the microstructure of exchange rate management fx intervention and capital controls in brazil this article uses a microstructure approach to analyse the effectiveness of capital controls introduced in brazil to counter an appreciation of the real based on a rich data set from the brazilian foreign exchange market we estimate a reduced form var to characterize the interaction of the central bank financial and commercial customers in times of regulatory policy measures we find that capital controls change market participants behaviour and that central bank interventions elicit a significant response in financial order flow referring to the source of order flow we find no direct price impact by financial flows and thus no evidence that the appreciation of the real is driven by financial customers activity instead commercial customers seem to be a primary driver of the real within our model

effective sterilized foreign exchange intervention evidence from a rule based policy abstract this paper investigates the effectiveness of sterilized foreign exchange interventions by exploiting a discontinuous policy rule used by the central bank of colombia we use a unique data set that comprises tick by tick intervention and order book data daily capital in and outflows and balance sheet information of financial institutions we apply regression discontinuity methods to identify the surprise component of rule based interventions and use this variation to measure how they affect exchange rates and capital flows our findings indicate that interventions had significant effects on the exchange rate albeit short lived 2 3 weeks moreover capital controls amplify the effect of intervention though some effect remains even in the presence of free capital flows a methodological contribution of the paper is to extend regression discontinuity designs to a time series environment and to show how these techniques can be used to identify and estimate local non linear impulse response functions a clearly defined policy rule and high frequency data are crucial in exploiting local variation around the policy cutoff

real time effects of central bank interventions in the euro market abstract this paper investigates the real time effects of sterilized foreign exchange intervention using official intraday intervention data provided by the danish central bank our analysis employs a two step weighted least squares estimation procedure we control for macro surprises address the issue of endogeneity and carry out an array of robustness tests only when the direction of intervention is consistent with the monetary policy stance do we find that intervention exerts a significant influence on exchange rate returns

deutsche mark dollar volatility intraday activity patterns macroeconomic announcements and longer run dependencies this paper provides a detailed characterization of the volatility in the deutsche mark dollar foreign exchange market using an annual sample of five minute returns the approach captures the intraday activity patterns the macroeconomic announcements and the volatility persistence arch known from daily returns the different features are separately quantified and shown to account for a substantial fraction of return variability both at the intraday and daily level the implications of the results for the interpretation of the fundamental driving forces behind the volatility process is also discussed the efficient market hypothesis contends that financial asset prices provide rational assessments of fundamental values and future payoffs by implication price changes should reflect the arrival and processing of all relevant new information however the proportion of return variability that can be ascribed to public news announcements is low for example cutler poterba and summers 1989 find that even the largest daily price changes in the stock market generally cannot be associated with any significant economic news 1 moreover proxies for the flow of public information e g the number of news items released by reuter s news service berry and hiowe 1994 or dow jones company mitchell and mulherin 1994 explain little of the overall variation thus if private information is ruled out proponents of rational price formation have to assert the existence of important news items

recent trends in u s higher education costs and prices the role of government funding it is something of a commonplace that government subsidies of the provision of a good or service affect the behavior of both suppliers and demanders of the commodity in question in the case of higher education attention has focused almost exclusively on the demand side focusing on the behavior of students and parents while the effect of such subsidies on the suppliers colleges and universities themselves has been strangely neglected this neglect is unfortunate for at least two reasons first the net effect of federal policy changes on demanders of higher education may well be influenced by these supply responses if for example universities systematically raise their prices when student aid subsidies increase as former secretary of education william bennett 1987 has alleged then the impact of the subsidies on student enrollments may be substantially reduced second and more generally if changes in the form and level of external support modify universities own resource allocation decisions assessment of all such policies becomes a more complicated matter cuts in federal research support for example may impact not only on universities levels of research effort but on the prices they charge and on the amounts of resources they devote to undergraduate instruction this paper reports preliminary findings from an effort to trace empirically impacts of changes in federal subsidy policies on universities resource allocation behavior i trends in higher education costs and revenues

financial market models with levy processes and time varying volatility abstract asset management and pricing models require the proper modeling of the return distribution of financial assets while the return distribution used in the traditional theories of asset pricing and portfolio selection is the normal distribution numerous studies that have investigated the empirical behavior of asset returns in financial markets throughout the world reject the hypothesis that asset return distributions are normally distribution alternative models for describing return distributions have been proposed since the 1960s with the strongest empirical and theoretical support being provided for the family of stable distributions with the normal distribution being a special case of this distribution since the turn of the century specific forms of the stable distribution have been proposed and tested that better fit the observed behavior of historical return distributions more specifically subclasses of the tempered stable distribution have been proposed in this paper we propose one such subclass of the tempered stable distribution which we refer to as the kr distribution we empirically test this distribution as well as two other recently proposed subclasses of the tempered stable distribution the carr geman madan yor cgmy distribution and the modified tempered stable mts distribution the advantage of the kr distribution over the other two distributions is that it has more flexible tail parameters for these three subclasses of the tempered stable distribution which are infinitely divisible and have exponential moments for some neighborhood of zero we generate the exponential levy market models induced from them we then construct a new garch model with the infinitely divisible distributed innovation and three subclasses of that garch model that incorporates three observed properties of asset returns volatility clustering fat tails and skewness we formulate the algorithm to find the risk neutral return processes for those garch models using the change of measure for the tempered stable distributions to compare the performance of those exponential levy models and the garch models we report the results of the parameters estimated for the s p 500 index and investigate the out of sample forecasting performance for those garch models for the s p 500 option prices

informational integration and fx trading abstract this paper addresses international financial integration in a new way we focus on informational integration specifically the importance of information conveyed by order flow in major currencies for pricing minor currencies we develop a multi currency model of portfolio allocation in the presence of dispersed information we then test the model s implications using four months of concurrent transaction data on nine currencies the model explains 45 to 78 of daily returns in all nine currencies moreover its prediction that order flow in individual markets should be relevant for determining prices in other markets is borne out

intraday effects of foreign exchange intervention by the bank of japan abstract we examine the effects of intervention by the bank of japan using intraday data from oct 1 1992 to sept 30 1993 news related to the bank of japan s intervention in the jpy market was retrieved from reuters headlines we find that jpy volatility varies significantly differently across periods from 1 h before to 1 h after reuters intervention reports results from arch models show that intervention by the bank of japan has a positive and significant impact on jpy volatility particularly at high frequencies 5 and 10 min intervals we also find that our intervention proxy has the largest effect upon high frequency volatility 30 to 45 min prior to reuters reports

is foreign exchange intervention effective some microanalytical evidence from the czech republic abstract i estimate a two equation system on the czech koruna euro exchange rate and order flow at hourly frequency with transactions data from the reuters spot matching market in the second half of 2002 during which the czech national bank intervened to stem the appreciation of the koruna i find a significant impact of order flow on the exchange rate equal to 7 6 basis points per 10 million of which 80 persists throughout the day the news of intervention increases the price impact of order flow by 3 9 basis points per 10 million the order flow equation yields inconclusive results

the advantage to hiding one s hand speculation and central bank intervention in the foreign exchange market abstract we analyze an asymmetric information model of sterilized intervention in the foreign exchange market we characterize an equilibrium in which a central bank with inside information about its exchange rate target trades with risk averse speculators who have private information about future spot rates the model identifies circumstances in which perverse responses to intervention will be observed i e the domestic currency depreciates when the central bank purchases it and it provides conditions under which the exchange rate will be highly sensitive to intervention the model also provides an explanation for two forms of policy secrecy i secrecy about the scale of an intervention operation is always desirable ii secrecy about the target is sometimes desirable

once in a generation yen volatility in 1998 fundamentals intervention and order flow abstract the dramatic yen dollar volatility of 1998 has been popularly ascribed to order flow driven by changing tastes for risk and hedge fund herding on unwinding yen carry trade positions rather than fundamentals high frequency evidence of shifting fundamentals is provided by a comprehensive list of macroeconomic announcements news is found to have significant effects on volatility but order flow may play a more important role since portfolio shifts are revealed to the market through trading the results are consistent with order flow playing a significant role in the revelation of private information and associated exchange rate shifts

information sharing and central bank intervention in the foreign exchange market abstract this paper develops a model of information sharing among heterogeneously informed agents and it uses the model to examine a rationale for intervention in the foreign exchange market the model shows that in a partially revealing rational expectations equilibrium some agents can gain by sharing among themselves private information about transitory exchange rate disturbances in this setting a central bank can affect the exchange rate by aggregating and disseminating agents information the paper also illustrates the usefulness of intervention as a way to transmit that information

investment firm value and risk for a system operator balancing energy grids abstract with the liberalization of energy markets integrated energy companies have separated into entities that specialize in production and or transmission of energy transmission of energy requires balancing the grid to guarantee system security which is performed by the independent system operator so when the so faces stochastic demand grid balancing has sizeable consequences on current and future profits and hence on firm value and firm risk we explore these value and risk consequences with and without an investment option to expand transmission capacity we show that firm value consists of the value of the transmission capacity in place plus the value of a short put and a short call option that are the result of the so s balancing actions firm risk without investment option is non linear and determined by the short option positions it is decreasing with increasing energy demand the existence of an option to expand transmission capacity increases firm value and firm risk

foreign exchange intervention in emerging markets a survey of empirical studies nowadays foreign exchange interventions occur in emerging market economies whereas empirical studies on interventions mainly refer to advanced economies however interventions in emerging markets are different from those in advanced economies they occur regularly and central banks have considerable leverage derived from relatively high reserves some non sterilisation the central bank s information advantage and capital controls consequently these interventions often successfully impact the level and volatility of exchange rates nevertheless more research on interventions in emerging markets is needed analysing the influence of heterogeneous institutional circumstances examining the role of central bank communication and using high frequency data

time varying liquidity in foreign exchange abstract this paper addresses whether currency trades have greater price impact when public information is flowing rapidly we develop an optimizing model to account for why public news should increase the price impact of trades using transaction data made available by electronic trading we test whether trades following macroeconomic news have higher price impact they do price impact per dollar traded is about 10 percent higher per news announcement in the previous hour after controlling for public information flow we do not find evidence that liquidity depends on trading volume and return volatility the findings provide policy makers with guidance for the timing and magnitude intervention

central bank forex internvention assessed in continous time abstract this paper looks at some of the principal characteristics of foreign exchange intervention by central banks the approach is novel in that virtually continous time data have been exploited using reuters screen information jel f31

the market microstructure of central bank intervention abstract how quickly do central bank intervention operations impact the foreign exchange market and do intra daily market conditions influence the effectiveness of central bank interventions this paper uses high frequency intra daily data to examine the relationship between the efficacy of intervention operations and the state of the market at the moment that the operation is made public the results indicate that some traders typically know that the fed is intervening at least 1 h prior to the public release of the information in newswire reports also the evidence suggests that the timing of intervention operations matters interventions that occur during heavy trading volume that are closely timed to scheduled macro announcements and that are coordinated with another central bank are the most likely to have large effects

exchange rate effects of central bank interventions an analysis of transaction prices the impact of sterilised interventions by the swiss national bank on the swiss franc u s dollar exchange rate is examined for the 1986 94 period the paper extends results from earlier studies by using the actual prices of interventions based on the fact that all swiss national bank interventions are announced our test exploits the informational differences between interventions and customer transactions a key finding is that only initial interventions matter customer transactions and subsequent interventions have no influence when the bretton woods system of fixed exchange rates broke up in the early 1970s central banks continued to intervene on the foreign exchange market in the meantime a substantial literature has emerged that focuses on the effectiveness of official interventions this literature has been summarised by edison 1993 and almekinders 1995 chapter 3 its central policy issue is whether sterilised interventions defined as interventions that leave the monetary base unchanged can have a significant influence on exchange rate behaviour macroeconomic theory proposes various channels for interventions to operate through but the empirical evidence accumulated over the years is less encouraging it suggests that there is no permanent effect of sterilised interventions on the exchange rate more surprisingly perhaps even shortterm effects are hard to pin down the evidence is weak and sample dependent at best in most cases coefficients are either insignificant or have the wrong sign see almekinders 1995 chapter 6 baillie and humpage 1992 dominguez 1998 dominguez and frankel 1993 klein and rosengren 1991 lindberg 1994 and osterberg and wetmore humes 1995 during the last decade the bulk of the empirical research has concentrated on the analysis of daily or weekly data this line of research which adopts the view that exchange rate markets are highly efficient was stimulated by the decision of the federal reserve board and the deutsche bundesbank to make their daily intervention data available to outside researchers to rationalise the gap between the fragile empirical evidence and the manifest interest paid by the media and other observers to interventions various explanations have been offered in this paper we stress two measurement problems first there is the problem of properly defining the exchange rate change in the regression analysis since intervention exchange rates are not available the

a transaction level study of the effects of central bank intervention on exchange rates abstract we study the effects of sterilised intervention operations executed on behalf of the swiss national bank snb using tick by tick transactions data between 1986 and 1995 we extend the preliminary analysis of economic journal 109 1999 662 by matching these data with indicative intra day exchange rate quotes and news wire reports of central bank activity using an event study approach we find that intervention has important short run effects on exchange rate returns in particular among various results we find that i intervention has a stronger impact when the snb moves with the market and when its activity is concerted with that of other central banks and ii exchange rate returns move in the 15 min interval prior to interventions

migration benefit spillovers and state support of higher education this paper tests the hypothesis that benefit spillovers from public higher educationproxied by out niigration led to lower higher education appropriations by state legislatures a model addressing legislative appropriations tuition and out migration activity is developed and estimated the results support the benefit spillover hypothesis indicating that for each percentage point increase in out migration appropriations per student decline by 100 the results also reveal a bi directional relationship between tuition and state appropriations this is in contrast with the view that tuition is a residual source of revenue representing the difference between the institutional budgets endorsed by educational policy makers and the level of state appropriations

exchange rate management in emerging markets intervention via an electronic limit order book this paper describes and analyzes the implementation of a crawling exchange rate band on an electronic trading platform the placement of limit orders at the central bank s target rate serves as a credible policy statement that may coordinate beliefs of market participants we find for our sample that intervention increases exchange rate volatility and spread for the next minutes but that intervention days show a lower degree of volatility and spread than non intervention days we also show for intraday data that the price impact of interbank order flow is smaller on intervention days than on non intervention days these stabilizing effects however rely on the conditions of large currency reserves and the existence of capital controls an electronic market seems to support this goal

the effect of the availability of student credit on tuition testing the bennett hypothesis using evidence from a large scale student loan program in brazil we test whether the availability of student loans increases tuition costs the bennet hypothesis starting in 2010 there was a major ramp up in the fies a student loan program funded by the brazilian federal government fies s rules for eligibility produce a marked heterogeneity in the access to funding in different higher education institutions we take advantage of these rules and of an unique dataset with information on tuition costs at the major college level and document two facts using a difference in differences approach we show that relaxing access to student loans caused an increase in tuition fees we also estimate a structural model of demand and show that relaxing credit constraints reduces the demand price elasticity thus the mechanism behind the increase in tuition costs is an increased tuition insensitivity at least in part duarte belafduarte gmail com de mello joaompm insper we are very grateful to hoper educacao for kindly sharing their proprietory data we also thank luis braido leonardo rezende and seminar participants at eaesp fgv for useful comments all errors are ours

when do central bank interventions influence intra daily and longer term exchange rate movements this paper examines dollar interventions by the g3 since 1989 and the reasons that trader reactions to these interventions might differ over time and across central banks market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders and how this process in turn might influence exchange rates using intra daily and daily exchange rate and intervention data the paper analyzes the influence of interventions on exchange rate volatility finding evidence of both within day and daily impact effects but little evidence that interventions influence longer term volatility

do sales of foreign exchange reserves lead to currency appreciation we employ novel time stamped reserve sales data provided by the czech national bank cnb to carry out a time series analysis of the exchange rate implications of czech reserve sales aimed at mitigating valuation losses on euro denominated assets the sales were explicitly not intended to influence the value of the koruna relative to the euro the period under study includes a well defined regime change in the cnb s approach to reserves sales allowing us to address whether the manner in which the sales are carried out matters for their influence on the relative value of the domestic currency we find little evidence that reserve sales influence the exchange rate when sales are carried out on a discretionary and relatively infrequent basis however when the sales are carried out daily we find a statistically and economically significant appreciation of the domestic currency follows