target zones and interest rate variability abstract for narrow exchange rate bands and for reasonable parameter values the interest rate differential s asymptotic unconditional variability is increasing in the width of the exchange rate band whereas for wide exchange rate bands it is slowly decreasing in the exchange rate band the interest rate differential s instantaneous conditional variability is decreasing in the width of the exchange rate band a narrow target zone differs from a completely fixed exchange rate regime in that the interest rate differential s instantaneous standard deviation is high and even increases when the zone narrows

central bank intervention and risk in the forward market abstract a two country inter temporal asset pricing model is developed which implies that central bank foreign exchange intervention affects the forward exchange risk premium the model is estimated from daily foreign exchange intervention data for the us german and japanese central banks considerable empirical support is found for the theoretical model with intervention influencing the risk premium in the forward market purchases of dollars by the federal reserve bank are found to be associated with excess denominated returns there is evidence that intervention has increased rather than reduced exchange rate volatility

can learning affect exchange rate behavior the case of the dollar in the early 1980 s this paper demonstrates that a change in parameters of the money market that is not immediately understood will affect the behavior of exchange rate forecast errors while the market is learning the analysis is applied to the behavior of u s dollar german mark forecast errors during the early 1980 s when the market appeared to systematically underpredict the strength of the dollar consistent with this observation empirical estimates of implied forecast errors based upon bayesian learning suggest that forecast errors would have been on average negative during the period as the market came to realize the increase in u s money demand

teacher quality in educational production tracking decay and student achievement growing concerns over the inadequate achievement of u s students have led to proposals to reward good teachers and penalize or fire bad ones the leading method for assessing teacher quality is value added modeling vam which decomposes students test scores into components attributed to student heterogeneity and to teacher quality implicit in the vam approach are strong assumptions about the nature of the educational production function and the assignment of students to classrooms in this paper i develop falsification tests for three widely used vam specifications based on the idea that future teachers cannot influence students past achievement in da ta from north carolina each of the vams exclusion restrictions are dramatically viola ted in particular these models indicate large effects of 5th grade teachers on 4th grade t est score gains i also find that conventional measures of individual teachers value added fade out very quickly and are at best weakly related to long run effects i discuss implic ations for the use of vams as personnel tools

the demand for teacher characteristics in the market for child care evidence from a field experiment abstract this paper sheds light on two key issues regarding the demand for teacher characteristics in the market for center based child care first we study the extent to which teacher qualifications often considered important inputs to classroom quality are valued by providers during the hiring process we then examine the impact of state regulations on hiring decisions to do so a resume audit study was administered in which job seeker characteristics were randomly assigned to resumes that were submitted in response to real child care job postings in 14 u s cities our results indicate that center based providers may not hire the most qualified applicants for example we find that although providers have a strong preference for individuals with previous work experience in early childhood education ece those with more ece experience are less likely to receive an interview than those with less experience we also find that individuals with bachelor s degrees in ece are no more likely to receive an interview than their counterparts at the associate s level our analysis of state regulations shows that they strongly influence teacher hiring decisions we find that providers advertised job requirements are largely in compliance with the state standards for teachers experience and education in addition providers are substantially more likely to interview job seekers who meet these requirements given that most providers voluntarily exceed the state regulations a tentative conclusion is that such rules have a limited effect on child care supply and prices

state and time contingent switches of exchange rate regime abstract recent papers have analysed the effects of britain s return to gold in 1925 one line of argument has been that the return to gold was a state contingent regime switch an alternative view is that it was time contingent this paper shows that these approaches are not mutually exclusive the solution for the exchange rate is derived in a model where a switch to a fixed rate takes place either when a state contingent trigger is reached or at a fixed time whichever is the sooner state contingent and time contingent elements are thus combined within the same model

measuring the impacts of teachers i evaluating bias in teacher value added estimates are teachers impacts on students test scores value added a good measure of their quality one reason this question has sparked debate is disagreement about whether value added va measures provide unbiased estimates of teachers causal impacts on student achievement we test for bias in va using previously unobserved parent characteristics and a quasi experimental design based on changes in teaching sta using school district and tax records for more than one million children we nd that va models which control for a student s prior test scores exhibit little bias in forecasting teachers impacts on student achievement although teachers have substantial impacts

the accuracy of reports of foreign exchange intervention abstract this paper considers both qualitative and quantitative evidence on the accuracy of press reports of foreign exchange intervention by the federal reserve between january 1985 and december 1989 the evidence shows that the likelihood of intervention being reported given that it actually occurred was 72 per cent and that the likelihood of intervention actually occurring given that it was reported was 88 per cent interventions which were reported were larger on average than those which were not reported and this difference is statistically significant multinomial logit analysis also demonstrates that the likelihood of intervention being reported increased with the size of the intervention jel f31

learning about intervention target zones abstract this paper provides a framework for evaluating how market participants beliefs about foreign exchange target zones change as they learn about central bank intervention policy we generalize the standard target zone model to allow for intra marginal intervention intra marginal intervention implies that market participants beliefs about the target zone can be determined from their beliefs about the likelihood of intervention we then estimate a daily probability of intervention model for the period following the louvre accord we find that the market s views of intervention target zones would have varied quite a bit over time even over this relatively stable period

task specific experience and task specific talent decomposing the productivity of high school teachers abstract we use administrative panel data to decompose worker performance into components relating to general talent task specific talent general experience and task specific experience we consider the context of high school teachers in which tasks consist of teaching particular subjects in particular tracks using the timing of changes in the subjects and difficulty levels to which teachers are assigned to provide identifying variation we show that a substantial part of the productivity gains to teacher experience are actually subject specific similarly while three quarters of the variance in the permanent component of productivity among teachers is portable across subjects and levels there exist non trivial subject specific and level specific components counterfactual simulations suggest that maximizing the test score contribution of task specific experience and task specific talent can increase student performance by as much as 04 test score standard deviations relative to random assignment of teachers to classrooms

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

on the mean reverting properties of target zone exchange rates a cautionary note abstract we estimate a franc mark target zone model and find a very limited honeymoon effect monte carlo experiments calibrated with the estimates caution against the use of standard linear tests for non mean reversion as indirect tests of the target zone model

the target zone model non linearity and mean reversion is the honeymoon really over we estimate a target zone model for three erm exchange rates for 1983 6 and 1987 91 by the method of simulated moments taking account of the continuous time specification by using daily data with the interruptions of holidays and weekends specification tests are unable to reject the model the estimates imply however an essentially linear relationship between the exchange rate and the fundamentals with a very limited honeymoon effect using monte carlo simulations calibrated on the estimates we find that standard tests for mean reversion of the exchange rate would largely reject the target zone model when in fact it held

the effect of evaluation on teacher performance observable teacher characteristics like graduate education and experience beyond the first few years are not typically correlated with increased productivity many researchers and policymakers have suggested that under these conditions the only way to adjust the teacher distribution for the better is to gather information on individual productivity through evaluation and then dismiss low performers this paper offers evidence that evaluation can shift the teacher effectiveness distribution through a different mechanism by improving teacher skill effort or both in ways that persist long run we study a sample of mid career math teachers in the cincinnati public schools cps who were assigned to evaluation in a manner that permits a quasi experimental analysis all teachers in our sample were evaluated by a year long classroom observation based program the treatment between 2003 2004 and 2009 2010 the timing of each teacher s specific evaluation year was determined years earlier by a district planning process to this setting we add measures of student achievement which were not part of the evaluation and use the within teacher over time variation to compare teacher performance before during and after their evaluation year we find that teachers are more productive during the school year when they are being evaluated but even more productive in the years after evaluation a student taught by a teacher after that teacher has been through the cincinnati evaluation will score about 10 percent of a standard deviation higher in math than a similar student taught by the same teacher before the teacher was evaluated under our identification strategy these estimates may be biased by patterns of student assignment that favor previously evaluated teachers or by preexisting positive

match quality worker productivity and worker mobility direct evidence from teachers i investigate the importance of the match between teachers and schools for student achievement i show that teacher effectiveness increases after a move to a different school and estimate teacher school match effects match quality explains away a quarter of and has two thirds the explanatory power of teacher quality match quality is negatively correlated with school switching is unrelated to exit and increases with experience this paper provides the first estimates of worker firm match quality using output data as opposed to inferring productivity from wages or employment durations the results suggest that workers seek high quality matches for reasons other than higher pay

price dynamics under stochastic process switching some extensions and an application to emu abstract in this paper we solve a particular type of stochastic process switching problem where the date of switching is fixed and known but the terminal price may depend on past prices we derive closed form solutions for the price dynamics of the asset before the terminal date and deduce the variance and jump components of these dynamics at the announcement we subsequently extend the model to price dynamics prior to the announcement of the regime switch assuming that markets may have some expectations regarding the occurrence and or the type of the regime switch finally we apply the general model to discuss the implications of the chosen conversion modalities in the european monetary union emu conversion procedure

the euro and inflation uncertainty in the european monetary union in this paper we investigate empirically the relationship between inflation and inflation uncertainty in twelve emu countries we estimate a time varying parameter model with a garch specification for the conditional volatility of inflation in order to distinguish between short run structural and impulse and steady state uncertainty we then introduce a dummy variable to model the policy regime shift which occurred in 1999 with the introduction of the euro and its effects on the links between inflation and inflation uncertainty we find that steady state inflation has generally remained stable with the important exception of germany where the trend has become positive steady state inflation uncertainty and inflation persistence have both increased and the relationship between inflation and inflation uncertainty has broken down in many countries these findings cast doubt on the optimistic view taken by the ecb concerning its success in controlling inflation and suggest the need for improvements in its analytical framework

balance of payments crises and devaluation the collapse of a fixed exchange rate is typically marked by a sudden balance of payments crisis in which speculators fleeing from the domestic currency acquire a large portion of the central bank s foreign exchange holdings faced with such an attack the central bank often withdraws temporarily from the foreign exchange market allowing the exchange rate to float freely before devaluing and returning to a fixed rate regime this paper links the timing of the initial speculative attack to the magnitude of the expected devaluation and to the length of the transitional period off loating an implication of the analysis is that there exist devaluations so sharp and transition periods so short that acrisis must occur the moment the market first learns that the current exchange parity will eventually be altered for sufficiently long transition periods the floating exchange rate overshoots its new peg before appreciating back toward it for shorter periods the rate depreciates monotonically to its new fixed level accordingly the central bank s return tothe foreign exchange market can occasion a capital outflow or a capital inflow this abstract was borrowed from another version of this item

an interpretation of recent research on exchange rate target zones how do exchange rate bands work compared to completely fixed rates between realignments or more precisely what are the dynamics of exchange rates interest rates and central bank interventions within exchange rate bands does the difference between bands and completely fixed exchange rates matter and if so which of the two arrangements is best or more precisely what are the tradeoffs that determine the optimal bandwidth this article will present an interpretation of some selected recent theoretical and empirical research on exchange rate target zones with emphasis on main ideas and results and without technical detail

productivity returns to experience in the teacher labor market methodological challenges and new evidence on long term career improvement abstract we present new evidence on the relationship between teacher productivity and job experience econometric challenges require identifying assumptions to model the within teacher returns to experience with teacher fixed effects we describe the identifying assumptions used in past models and in a new approach that we propose and we demonstrate how violations of these assumptions can lead to substantial bias consistent with past research we find that teachers experience rapid productivity improvement early in their careers however we also find evidence of returns to experience later in the career indicating that teachers continue to build human capital beyond these first years

soft exchange rate bands and speculative attacks theory and evidence from the erm since august 1993 we present a model of a soft exchange rate target zone and interpret it as a stylized description of the post august 1993 erm our central bank targets a moving average of the current and past exchange rates rather than the exchange rate s current level thus allowing the rate to move within wide margins in the short run but within narrow margins in the long run for realistic parameters soft target zones are significantly less vulnerable to speculative attacks than hard target zones these predictions are consistent with the erm s experience and the abatement of speculative pressure in european markets since the bands widening in 1993

teacher training teacher quality and student achievement abstract we study the effects of various types of education and training on the productivity of teachers in promoting student achievement previous studies on the subject have been hampered by inadequate measures of teacher training and difficulties in addressing the non random selection of teachers to students and of teachers to training we address these issues by estimating models that include detailed measures of pre service and in service training a rich set of time varying covariates and student teacher and school fixed effects we find that elementary and middle school teacher productivity increases with experience informal on the job training the largest gains from experience occur in the first few years but we find continuing gains beyond the first five years of a teacher s career in contrast we do not find a consistent relationship between formal professional development training and teacher productivity however this may be partly driven by estimation issues as we find more significant positive effects of formal training in the subject grade combination where estimates should be most precise middle school math there is no evidence that teachers pre service undergraduate training or college entrance exam scores are related to productivity

is there evidence of fear of appreciation in china s foreign exchange market intervention abstractusing the data after the exchange rate regime reform in july 2005 this paper systematically studied the issue whether china has conducted fear of appreciation asymmetric intervention th

volatility regime switching in european exchange rates prior to monetary unification abstract several theoretical models suggest that the mere announcement of entering a currency union in the future triggers instantaneous changes in exchange rate volatility first this paper develops a markov switching framework by which in fact volatility regime switching in foreign exchange rates can be detected for all currencies in the run up to the european monetary union emu second the paper attributes the currency specific volatility regime switches to decisive economic institutional and political factors prior to emu all in all the empirical results suggest that for future emu accession countries volatility regime switching models provide a useful tool for a broad range of financial applications e g for the pricing of currency options or for the construction of emu probability calculators

a strategy for launching the euro abstract this paper analyzes the constraints european union law places on the 1 january 1999 choices of irrevocably fixed conversion rates between the euro and the currencies of emu members states current eu legislation notably the maastricht treaty requires that the bilateral currency conversion factors implied by the 1 january 1999 choices equal closing market exchange rates on 31 december 1998 given that legal constraint there still exist several strategies for choosing the relative prices of emu member currencies against the euro unfortunately most of these have potentially damaging side effects one approach based on official stage 2 offers of contingent euro forward contracts with value dates at the start of stage 3 allows a highly credible preannouncement of the bilateral currency conversion factors to be set at the start of emu that approach assumes however that no prospective emu members can withdraw between their selection in may 1998 and the start of stage 3

the rip tide of privatization lessons from chile abstract chile is one of the rare exceptions where the voluble enthusiasm for privatization has been put into effect of the 500 companies that were under state ownership in the early 1970s only 19 remained under public control at the end of the decade moreover a land reform which had affected 43 of the country s cultivable area was rolled back by almost 40 privatization indisputably increased the economic power of a number of conglomerates and fostered the concentration of assets however the complexity of the liberalization package that accompanied privatization makes it difficult to establish strict causality for the economic collapse that followed in the early 1980s the chilean experience with privatization reveals some interesting lessons that other countries may wish to consider

an empirical reassessment of target zone nonlinearities abstract in this paper we investigate the presence of target zone nonlinearities in the pound sterling german mark exchange rate for the period of the uk european exchange rate mechanism erm membership using data with frequency of every 2 days tests against general nonlinear specifications as well as specifications consistent with a stochastic devaluation risk model of exchange rate target zones are carried out using recursive techniques in addition the significance of nonlinear effects is analysed within a recursive bayesian framework we find evidence of target zone nonlinearities in the whole sample but the recursive analysis yields support for the presence of such nonlinearities only in specific subsamples our results imply that the reduction in the uk inflation rate was most likely a consequence of contractionary policies rather than of the expectational effects associated with the target zone

testing the basic target zone model on swedish data 1982 1990 the swedish exchange rate band is studied using daily data on exchange rates and interest rate differentials for the 1980s applying a number of different statistical and econometric techniques it is found that the first generation of target zone models cannot provide an adequate explanation of swedish data the main reasons are probably intra marginal interventions by the swedish central bank and time varying devaluation expectations

pulled away or pushed out explaining the decline of teacher aptitude in the united states logic suggests that a teacher s value added is related to her academic aptitude it is therefore troubling that teachers aptitude has declined significantly in the united states since 1960 as demonstrated by sean corcoran et al 2002 combining longitudinal surveys they find a marked fall in teachers propensity to be in the top achievement quartile there are two main hypotheses for the decline in teacher aptitude first greater pay parity with males in nonteaching occupations may have drawn able women out of teaching second unionization may have compressed pay benefits and nonmonetary returns to aptitude in teaching and thereby pushed out high aptitude people in short there is a pull hypothesis pay parity in alternative opportunities and a push hypothesis pay compression in teaching the hypotheses are not mutually exclusive we need not choose between them instead we try to apportion blame to do this we need variation in the timing and size of the pull and push factors fortunately such variation exists among u s states our econometric identification relies on variation in labor markets and unionization laws among states at a point in time and within each state over time

economic stabilization and structural transformation lessons from the chilean experience 1973 87 abstract this paper evaluates the experience of economic reforms and stabilization efforts in chile during 1973 87 the paper presents a brief historical background and then reviews the main goals policy tools and results of the economic program implemented since the military government came to power in september 1973 the paper discusses in detail the stabilization and structural transformation aspects of the economic program including the privatization of the economy and the trade and financial liberalization the main conclusion is that despite a healthy improvement in the economic situation during 1985 87 the future of the chilean economy remains uncertain and vulnerable to external shocks the paper concludes by summarizing the main policy lessons of the chilean experience

exchange rate dynamics under state contingent stochastic process switching this paper offers a closed form solution of a process switching problem i e switching the exchange rate regime from free floating to a completely fixed one an example of such regime change is the adoption of the euro in contrast to previous studies on the subject this paper analyzes a specific case when foreign exchange market participants consider both the euro locking rate and locking date as uncertain preceding the locking the exchange rate is determined by three factors fundamental market expectations for the euro locking rate and date the model is used to examine the conditions under which the exchange rate volatility is mitigated by the prospect of locking

the linkage between speculative attack and target zone models of exchange rates in this paper we generalize the target zone exchange rate as model formalized by krugman 1988b to include finite sized interventions in defense of the zone the main contributions of these pages consist of linking the recent developments in the theory of target zones to the mirror image theory of speculative attacks on asset price fixing regimes and in using aspects of that linkage to give an intuitive interpretation to the smooth pasting condition usually invoked as a terminal condition this abstract was borrowed from another version of this item

dynamics of the exchange rate in anticipation of pegging abstract this paper studies an economy in which agents expect the current floating rate regime to be interrupted on a specific future date by a transitional fixed rate policy when the new peg is not revealed in advance the path of the floating rate in anticipation of pegging is determined by the interaction between what agents perceive to be the objectives and the constraints of the central bank the paper highlights the role of the pegging date the duration of the fixed rate interval the quantity of reserves available to the authorities and the nature of policies expected after pegging is terminated

the width of the band and exchange rate mean reversion some further erm based results one key prediction of the target zone model is that the exchange rate should be mean reverting within the band in this paper we investigate this prediction by examining the time series characteristics of seven currencies participating in the exchange rate mechanism erm of the european monetary system both immediately before and after the introduction of wide exchange rate bands in 1993 using standard univariate unit root tests we find some evidence of mean reversion and this is much more pronounced using variance ratio test statistics it turns out that such mean reversion is as strong for the wide band erm as for the narrow band erm

a univariate analysis of ems exchange rates using a target zone model summary the models in the literature on exchange rate target zones imply a non linear time series model for the exchange rate we show how the parameters of such models can be estimated and develop maximum likelihood and method of simulated moments estimators for the target zone model of krugman 1991 the maximum likelihood estimator is based on a computationally attractive approximation to the exact predictive density of the continuous time model monte carlo experiments are used to assess the properties of this estimator in the empirical part we estimate the model with data on recent ems exchange rates we find that the krugman 1991 target zone model is not able to explain the full observed kurtosis and conditional heteroscedasticity of the exchange rate returns

speculative anticipations of sterling s return to gold was keynes wrong the view held by keynes that there was a speculative appreciation of sterling prior to its return to the gold standard has been challenged by gregor smith and todd smith who argue that expectations of return must have weakened the currency the authors demonstrate that the positive but decreasing trend displayed in the exchange rate data is consistent with a pattern of autoregressive convergence in fundamentals and that this continues to be true when there is a positive speculative element based on expectations of an early return hence the key features of the data seem compatible with keynes s views copyright 1994 by royal economic society

measuring the degree of exchange market intervention in a small open economy abstract in this article i introduce an index of intervention activity which can be calculated on the basis of observed data this intervention index measures intervention activity as the proportion of exchange market pressure relieved by exchange market intervention the properties of the intervention index are established analytically using a model of a small open economy with rational expectations the index is used to calculate measures of bilateral and multilateral intervention for canada over the period 1975 1990

playing with the band dynamic effects of target zones in an open economy this paper applies techniques of regulated brownian motion to a model of a small open economy to investigate how bands on fundamental driving variables affect the realization of the nominal exchange rate the real exchange rate prices and output the author shows that these bands mitigate the relationship between exogenous fundamentals and endogenous variables through their effects on expectations he also considers the effects of changing the width of the band and finds greater stabilization of endogenous variables with more narrow bands on exogenous fundamentals copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

target zones and realignments recent contributions emphasize that the presence of exchange rate target zones has important effects on the within band behavior of exchange rates when agents are forward looking the authors find that the implications of available models are inconsistent with european exchange rate data and they suggest that the frequent realignments occurring in the period they consider may be responsible for this they construct a model in which the likelihood of a realignment in the near future increases as the exchange rate approaches the limits of its fluctuation band and show that its implications are broadly consistent with the evidence copyright 1992 by american economic association

estimating the degree of interventionist policies in the run up to emu based on a theoretical monetary exchange rate model in continuous time this article establishes a sequential estimation framework which is capable of indicating central bank intervention in the run up to a currency union using daily pre european monetary union pre emu exchange rate data for the countries of the current euro zone we find mixed evidence of active pre emu intervention policies so called institutional frontloading strategies our estimation framework is highly relevant to economic and political agents operating in financial markets of the upcoming emu accession countries

the presence of target zone nonlinearities when narrower bands exist within official zones the presence of target zone nonlinearities is generally refuted in empirical research we argue that this may be due to estimation being performed vis a vis official limits when monetary authorities are in fact targeting a narrower band estimation results for the belgian and french franc confirm that nonlinearities are present when narrower zones are accounted for

rational expectations econometric analysis of changes in regime an investigation of the term structure of interest rates abstract this paper is of interest both for its methodological contribution of new tools for analyzing rational expectations models and for its substantive conclusions concerning the term structure of interest rates during the monetary experiment of october 1979 the paper studies systems subject to changes in regime interpreted here as occasional discrete shifts in the parameters governing the time series behavior of exogenous economic variables the specification is shown to be quite tractable both theoretically and empirically the technique is used to analyze yields on three month treasury bills and ten year treasury bonds during 1962 to 1987 a constant parameter linear model for short term rates is shown to be inconsistent both with the univariate time series properties of short rates and with the observed bivariate relation between long and short rates under the expectations hypothesis of the term structure an alternative nonlinear model that admits the possibility of changes in regime affords a much better description of the univariate process for short rates moreover the cross equation restrictions implied by the expectations hypothesis of the term structure are consistent with the nonlinear specification indeed the residuals of the restricted relation have a standard error of only 0 8 basis points this is a third less than that of a completely unrestricted linear regression of long rates on short rates and compares with an unconditional standard deviation of long rates of 142 basis points i conclude that once the recognition by bond traders of changes in regime is taken into account the expectations hypothesis of the term structure of interest rates holds up fairly well for these data

exchange rate dynamics in anticipation of time contingent regime switching modelling the effects of a possible delay abstract the procedure of fixing a currently floating exchange rate at a given and publicly announced future date has a broad range of applications based on a continuous time monetary exchange rate model with flexible prices this paper analyzes exchange rate dynamics during the transition from floating to fixed rates in a situation in which market participants are uncertain about adherence to the fixing date and in which they take account of a possible delay in the regime switch the closed form solutions derived here allow us to quantify announcement effects as well as effects on the exchange rate variance caused by news that significantly changes the market s assessment of uncertainty

on biases in the measurement of foreign exchange risk premiums abstract the hypothesis that the forward rate is an unbiased predictor of the future spot rate has been consistently rejected in recent empirical studies this paper examines several sources of measurement error and misspecification that might induce biases in such studies although previous inferences are shown to be robust to a failure to construct true returns and to omitted variable bias arising from conditional heteroskedasticity in spot rates we show that the parameters were not stable over the 1975 89 sample period estimation that allows for endogenous regime shifts in the parameters demonstrates that deviations from unbiasedness were more severe in the 1980s jel f31

real exchange rates and switching regimes abstract we suggest that the real exchange rate between the major currencies in the post bretton woods period can be described by a stationary 2 state markov switching ar 1 model based on the forecast performance we find that this model outperforms two competing models where the real exchange rate is nonstationary we also find that the existence of different regimes as in the markov switching model is consistent with the common finding of unit roots in real exchange rates

testing target zone models using efficient method of moments the objectives of this article are threefold 1 to test target zone models using more efficient and direct econometric methodology than previous research 2 to identify an implicit band if it exists from observed data and to test target zone models based on the estimated implicit band rather than the stated official band and 3 to examine whether the exchange rate can be modeled as a managed float system with a central parity that lacks a band we find strong evidence that a model with intramarginal intervention and a narrower implicit unofficial band can describe the dynamics of the french franc deutsche mark exchange rate from january 1 1987 july 30 1993

central bank intervention and exchange rate volatility abstract this paper explores the effects of foreign exchange intervention by central banks on the behavior of exchange rates the g 3 central banks have undertaken an unprecedented number of both coordinated and unilateral intervention operations in the last 10 years existing empirical evidence on the effectiveness of intervention is mixed studies using data from the 1970s suggest that intervention operations that do not affect the monetary base have at most a short lived influence on exchange rates but more recent studies indicate that the intervention operations that followed the plaza agreement influenced both the level and variance of exchange rates this paper examines the effects of us german and japanese monetary and intervention policies on dollar mark and dollar yen exchange rate volatility over the 1977 1994 period the results indicate that intervention operations generally increase exchange rate volatility this is particularly true of secret interventions which are those undertaken by central banks without notification of the public overt interventions in the mid 1980s appear to have reduced exchange rate volatility but in other periods and for the 1977 1994 period as a whole central bank intervention is associated with greater exchange rate volatility

big effects of small interventions the informational role of intervention in exchange rate policy abstract in this paper we demonstrate how an infintesimal unsterilized foreign exchange intervention may cause a very large discrete change in the exchange rate we analyze an example in which there is a target zone policy in place but the actual width of the target zone is not known by participants in the foreign exchange market in this case intervention both affects fundamentals and conveys information about policy the exchange rate jumps in response to intervention with the size of the jump related to the uncertainty about the true band width also in this model the relationship between the exchange rate and the fundamental depends upon both the history of the path of the exchange rate and whether or not intervention has occured

does it pay to pay teachers more evidence from texas abstract this study presents robust evidence on the relationship between teacher pay and turnover using detailed panel data from texas while controlling for changes in district and local labor market characteristics i estimate an overall turnover elasticity of 1 4 and show that the effect is largest for inexperienced teachers declines with experience and disappears around 19 years of experience combining these results with what we know about the relationship between teacher value added and experience i show that paying teachers more improves student achievement through higher retention rates the results also suggest that adopting a flat salary schedule may be a cheap way to improve student performance i find no evidence that pay effects vary by the teacher s gender or subject taught

generalizations about using value added measures of teacher quality the extensive investigation of the contribution of teachers to student achievement produces two generally accepted results first there is sub stantial variation in teacher quality as measured by the value added to achievement or future aca demic attainment or earnings second variables often used to determine entry into the profession and salaries including post graduate schooling experience and licensing examination scores appear to explain little of the variation in teacher quality so measured with the exception of early experience together these findings underscore explicitly that observed teacher characteristics do not represent teacher quality

the dynamics of teacher quality abstract an extensive literature finds that while teachers vary considerably in initial quality there are limited teacher quality dynamics except for the first few years of teaching teacher quality does not improve over the course of a teacher s career this study evaluates the importance of various modeling restrictions to the key findings of this literature using data covering all 5th grade public school teachers from the state of north carolina i replicate the findings of the previous literature using their restrictive experience assumptions however using an unrestricted experience model i find that for mathematics achievement there are high returns to later career teaching experience about twice as much dispersion in initial teacher quality as previously estimated and a pattern of negative selection where high quality teachers are more likely to exit

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

a markov model of switching regime arch in this article i present a new approach to model more realistically the variability of financial time series i develop a markov arch model that incorporates the features of both hamilton s switching regime model and engle s autoregressive conditional heteroscedasticity arch model to examine the issue of volatility persistence in the monthly excess returns of the three month treasury bill the issue can be resolved by taking into account occasional shifts in the asymptotic variance of the markov arch process that cause the spurious persistence of the volatility process i identify two periods during which there is a regime shift the 1974 2 1974 8 period associated with the oil shock and the 1979 9 1982 8 period associated with the federal reserve s policy change the variance approached asymptotically in these two episodes is more than 10 times as high as the asymptotic variance for the remainder of the sample i conclude that regime shifts have a greater impact on the properties of the data and i ca

a model of exchange rate dynamics this model treats the exchange rate as an asset price that depends on expectations concerning exogenous real and monetary factors that will affect relative prices and absolute price levels in future periods changes in exchange rates reflect both expected changes in these exogenous factors and changes in expectations occasioned by new information the model explains the random component in exchange rate behavior the source of divergences from purchasing power parity the anticipatory response of exchange rates to future expected disturbances and the causes of exchange rate overshooting

equilibrium exchange rates in transition economies taking stock of the issues in this paper we present an overview of a number of issues relating to the equilibrium exchange rates of transition economies of the former soviet bloc in particular we present a critical overview of the various methods available for calculating equilibrium exchange rates and discuss how useful they are likely to be for the transition economies amongst our findings is the result that the trend appreciation usually observed for the exchange rates of these economies is affected by factors other than the usual balassa samuelson effect such as the behaviour of the real exchange rate of the open sector and regulated prices we then consider three main sources of uncertainty relating to the implementation of an equilibrium exchange rate model namely differences in the theoretical underpinnings differences in the econometric estimation techniques and differences relating to the time series and cross sectional dimensions of the data the ensuing three dimensional space of real misalignments is probably a useful tool in determining the direction of a possible misalignment rather than its precise size copyright blackwell publishers ltd 2006

pension spiking free riding and the effects of pension reform on teachers earnings in many states local school districts are responsible for setting the earnings that determines the size of pensions but are not required to make contributions to cover the resulting state pension fund liabilities in this paper i document evidence that this intergovernmental incentive inherent in public sector defined benefit pension systems distorts the amount and timing of income for public school teachers i use the introduction of a policy that required experience rating on earnings increases above a certain limit in a differences in differences framework to identify whether districts are willing to pay the full costs of their earnings promises because of the design of the policy overall earnings of teachers near retirement did not change instead districts that previously provided one time pay increases shifted to smaller increments spread out over several years in addition some districts that did not practice pension spiking prior to the reform appear to begin providing payments up to the new lower limit perhaps due to increased salience of the fiscal incentive therefore the policy was ineffective at decreasing pension costs

fundamentals uncertainty bubbles and exchange rate dynamics abstract using a monetary model of exchange rate determination we study exchange rate dynamics with bubbles which depend on stochastic market fundamentals these dynamics can be either stochastically stable or unstable and either monotonic or non monotonic including cyclic in an extreme case they converge with probability one and exhibit cyclic movements implications for the analysis of time dependent regime shifts are also explored exchange rates with bubbles are likely to appear less volatile than the fundamentals in finite samples both the variance bounds and cointegration tests might thus be ineffective in testing the absence of bubbles under fundamentals uncertainty

the term structure of interest rate differentials in a target zone theory and swedish data abstract the term structure of interest rate differentials is derived in a model of a small open economy with a target zone exchange rate regime for given time to maturity the interest rate differential is decreasing in the exchange rate and for given exchange rate the interest rate differential s absolute value and its instantaneous variability are both decreasing in the time to maturity devaluation realignment risks are incorporated and imply upward shifts of the interest rate differentials several implications of the theory are found to be broadly consistent with data on swedish exchange rates and interest differentials for the period 1986 1989

teacher characteristics and their effects on student test scores a systematic review it has become widely accepted that teachers are important in facilitating student learning hundreds of empirical studies have tried to explain differences in student performance by evaluating the impact of particular teacher characteristics yet this topic has not been the subject of a systematic review for more than 10 years even though most of the empirical evidence has emerged over the past decade this study provides an up to date review drawing on empirical findings from several countries and distinguishing between acquired and sociodemographic teacher characteristics this review confirms the existing consensus that subject related degrees and knowledge and not general teacher certifications are positively related to student performance and particularly so for master s degrees in math and science a new insight is that recent findings point out that teacher experience continues to contribute to student test scores throughout a teacher s career instead of merely the first few years an important future research avenue would be to examine which mechanisms can explain these teacher characteristic effects