the impact of uncertainty shocks in emerging economies abstract a recent strand of research proposes that sudden jumps in uncertainty generate rapid drops and recoveries in real macroeconomic variables that drive the business cycle using an empirical model we find substantial heterogeneity in reactions to these shocks across countries in comparison to the u s and other developed countries emerging economies suffer much more severe falls in investment and private consumption following an exogenous uncertainty shock take significantly longer to recover and do not experience a subsequent overshoot in activity we provide evidence that the dynamics of investment and consumption are correlated with the depth of financial markets we control for the potential role of a credit channel and estimate that it can account for up to one half of the increased fall in investment generated by uncertainty shocks among emerging economies with less developed financial markets in this context monetary and fiscal policy actions that alleviate the impact of credit constraints facing firms may reduce the impact of uncertainty shocks in these economies

black markets for currency hoarding activity and policy reforms abstract in emerging market economies under development of financial markets leads to goods hoarding and foreign currency accumulation as forms of investment in this paper an asset market model supplemented by explicit treatment of smuggling and second economy activity is used to study the paths of black market exchange rates second economy prices hoarding stocks and privately held dollar balances following policy reforms we discuss conditions for overshooting and related dynamics of exchange rates and prices following official exchange rate adjustments price reforms and altered risks of monetary confiscation or currency reforms the saddlepath trajectory of financial adjustment is simulated using data from recent russian experience 1997 elsevier science b v

don t let the easy be the enemy of the good returns from art investments what is wrong with it abstract although geometric hedonic price indexes are widely used in the hedonic literature on non standard investments it is well known that portfolios of assets have values that are related to the arithmetic not geometric average of prices this paper explores the implications of the use of arithmetic hedonic price indexes for art investments log linear predictions are retransformed back to the original scale by performing a modified version of the duan s smearing factor this procedure is illustrated with an analysis of the returns from 10 459 surrealist paintings sold worldwide during the pre crisis period 1990 2007 findings show significant differences between the arithmetic versus geometric price indexes while emphasising the caution that should be exercised in interpreting the hedonic index prices of non standard investments as they are typically computed for academic and business applications

a random walk through mayfair art as a luxury good and evidence from dynamic models abstract the movement of international art prices in conjunction with other asset prices is preliminary to our understanding whether art is a luxury good it is well known that there are linkages between art market prices and equity prices however less is known about the structure of dependence between these variables and the influence of gold prices and sentiment we analyse art prices at the outset using granger causality and error correction models ecm to capture the long term dynamics between art prices equity markets gold prices and investor sentiment the dataset we use is unique and covers british art prices from 1895 to the present initial results do not give a complete picture of price movements or a fitting description of wealth effects to rectify this we look at short term dynamics in the art market we assume a regime switching model to describe the movement of prices using a threshold variable that drives prices into possibly locally explosive regimes these results indicate a dynamic wealth effect in that high low stock prices lead to subsequent increases decreases in art prices however this approach means that elasticities are now stochastic and we redefine what a luxury good is this is further explored by directly calculating elasticities from our model and its variants to analyse properties of art as a luxury good our threshold approach gives deeper insight into the impact of different market conditions than conventional ecm and cointegration modelling

law enforcement and the black market exchange rate abstract this paper examines how a system of multiple exchange rates can give rise to unreported exports and imports and a black market for foreign exchange risk aversion rather than an assumed smuggling or detection technology generally guarantees the coexistence of legal and illegal trading evidence for brazil suggests that enforcement of the exchange rate and trade regime is an important fundamental of the black market exchange rate that has so far invariably been left out of empirical work

art as an investment and conspicuous consumption good ments art is also a consumption good art owners take pleasure in its intrinsic value e g for aesthetic pleasure or as a storehouse of an artist s deftness and to the extent that it is a luxury good they derive additional enjoyment from the signal of wealth that owning a masterpiece transmits it is the mixture of pecuniary and nonpecuniary payoffs to ownership that makes artworks both compelling to purchase and difficult to value i exploit this insight to explain why the measured risk premium of a portfolio of artworks is low compared to other risky assets in a consumption based pricing model an asset s risk premium is a function of the covariance of its returns with agents marginal utility of consump tion agents need to be compensated if the asset pays off in a period of already high utility as a luxury good relative art demand is an increasing function of wealth therefore positive shocks to income increase the demand price and returns to art in periods of high consumption utility implying a high risk premium this intuition is at odds with empirical studies that quantify the average financial returns of paintings relative to more traditional investment vehicles these studies find that art 1 often underperforms relative to equities and bonds while there have been

is art market behaviour predictable abstract in this paper we look for relationships between art and financial markets through econometric methods the main results indicate that financial markets influence the art market with a lag of about one year which seems plausible due to the relative sizes of both markets the vector auto regressive v a r model shows that lagged financial variables help predicting art prices even if the lag does not allow for systematic profits

exchange rate behavior with currency inconvertibility abstract the paper analyzes exchange rate dynamics in a world where the domestic currency is inconvertible into foreign currency and there is a black market for foreign exchange the official exchnage rate is thus set by policy but the black market rate is determined by portfolio balance the stock of domestic money changes with the reported current account and the stock of foreign assets of the private sector changes with smuggling and other unreported current account transactions the effects of capital and current account disturbances as well as the effects of changes in the level and the rate of crawl of the official rate on the black market premium and on the currency substitution ratio are analyzed in variants of the basic model

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

u s intervention assessing the probability of success this paper estimates the unconditional and conditional probabilities that u s interventions successfully smooth short term mark dollar and yen dollar exchange rates the sample period extends from february 1987 to february 1990 assuming a binomial distribution the number of observed successes usually is greater than one would expect to see randomly results from a logit model suggest that coordinated intervention has a higher probability of success than unilateral intervention the probability of success also increases with the dollar amount of an intervention other conditioning variables are not significant the paper presents a reaction function with adjustments for the incidentally truncated nature of intervention data predicted values serve as instruments for intervention in the logit models

economic policy uncertainty shocks economic activity and exchange rate adjustments abstract we investigate the impact of foreign and domestic economic policy uncertainty epu shocks on the uk economy simulations with a structural var model indicate that domestic industrial production declines after a shock to the epu index in the us on the contrary disturbances to domestic uncertainty are an important source of real exchange rate fluctuations historical decomposition shows that a surge in domestic epu after brexit referendum was the reason behind a massive depreciation of the british pound these results are robust to different model specifications

art as a wartime investment conspicuous consumption and discretion the financial underperformance of art as an investment is well documented in contrast to studies conducted on peace time periods this paper shows that the art market in occupied france during wwii significantly outperformed all alternative investments bonds equities as well as currencies exchanged on the black market other than gold this suggests that art may be a good hedge against low probability disasters the paper further demonstrates that motives to purchase art consumption and investment vary over time in his theoretical model mandel 2009 attributes art s low return to the utility derived from conspicuous consumption in occupied france during wwii conspicuous consumption was impossible for artworks deemed degenerate by the nazis the price evolution of degenerate versus non degenerate artworks confirms the importance of conspicuous consumption in artworks pricing eventually the paper defines the concept of discretion the ability to store a large amount of value in small and easily transportable goods during wartime illegal activities and the risk of being forced to flee the country increased the interest for discreet assets as shown by the better performance of small and thus discreet artworks in comparison to large ones

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

the time varying correlation between uncertainty output and inflation evidence from a dcc garch model abstract using a new uncertainty index from baker et al 2012 we evaluate the time varying correlation between macroeconomic uncertainty inflation and output estimation results from a multivariate dcc garch model reveal that the sign of the correlation between macroeconomic uncertainty and inflation changed from negative to positive during the late 1990s whereas the correlation between uncertainty and output is consistently negative

central bank secrecy in the foreign exchange market abstract this paper argues that with sticky goods prices and a forward looking exchange rate the central bank will only want a partial dissemination of its information about shocks to the economy it is shown that in such a model the central bank may prefer to intervene secretly in the foreign exchange markets when responding in anticipation of future shocks but openly when reacting to current shocks the model thus provides a rationale for secrecy in central bank foreign exchange operations the model also elucidates the relationship between the signaling and portfolio balance channels of sterilized intervention

what prompts japan to intervene in the forex market a new approach to a reaction function abstract this paper estimates and analyzes the reaction function of japanese intervention in the foreign exchange forex markets using daily japanese intervention data from april 1 1991 to december 31 2002 a theoretical friction model is adopted to describe the intervention as cost minimizing behavior an ordered probit model consistent with the theoretical model is employed to estimate authorities reaction function a noise to signal ratio is applied in selecting the optimal cutoff point in estimated ordered probit function major findings are as follows 1 a regime change in june 1995 from small scale frequent interventions to large scale infrequent interventions is detected 2 the optimum cutoff is higher in the first half than the second half

smuggling and the black market for foreign exchange this paper develops a model of the black market for foreign exchange in which black market currency is demanded and supplied by firms engaged in smuggling it is demonstrated that quotas or foreign exchange rationing are not necessary to induce the coexistence of legal and black foreign exchange markets variants of the model analyze the implications of capital flight unbalanced trade quotas foreign exchange licensing and economies with more than two goods

revisiting baumol s art as floating crap game we show that baumol s conclusion that returns on bonds are higher than returns on paintings is too pessimistic there are segments in the market for which returns are significantly higher than returns on bonds and stocks during long periods of time 20 to 40 years since tastes do change slowly though not in a predictable way this may imply that beating the market is not impossible we also construct price indexes for paintings over the last 200 years

intervention strategies and exchange rate volatility a noise trading perspective abstract this paper estimates and explains the impacts of sterilized us intervention on exchange rate volatility i find that intervention reduced both yen dollar and dm dollar exchange rate volatilities during 1985 1986 but increased them during 1987 1989 these results are explained in a noise trading framework where the effectiveness of sterilized intervention may depend critically on the design and implementation of intervention strategies jel f31 1997 elsevier science ltd

the effectiveness of central bank intervention in the ems the post 1993 experience abstract we analyze the effectiveness of intervention in the european monetary system by using data on the dem intervention activity of six european central banks covering the period from august 1993 to april 1998 to allow for regime specific intervention effects we estimate markov switching autoregressive conditional heteroscedasticity models we find that interventions have only limited effects on the conditional means and variances

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

economic policy uncertainty and dollar pound exchange rate return volatility abstract the extent to which economic policy uncertainty epu amplifies exchange rate volatility has been an important research question for at least a decade previous research has investigated this relationship using monthly data concluding that epu imparts an effect on exchange rate volatility either contemporaneously or with a one month lag the use of monthly frequency however may not provide an accurate causal interpretation and may even compromise the accuracy of the estimates if the natural cycles of epu are shorter than a month to address this econometric concern i construct uncertainty measures at a daily frequency and estimate a garch model using daily usd british pound returns the evidence indicates that epu contributes to exchange rate volatility much more quickly than monthly data can detect using a regression technique for separating epu from non policy economic uncertainty i find that non policy market uncertainty increases volatility more than epu does

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

ex post the investment performance of collectible stamps this paper uses stamp catalogue prices to investigate the returns on british collectible postage stamps over the period 1900 2008 we find an annualized return on stamps of 7 0 in nominal terms or 2 9 in real terms these returns are higher than those on bonds but below those on equities the volatility of stamp prices approaches that of equities stamp returns are impacted by movements in the equity market but the systematic risk of stamps remains low stamps partially hedge against unanticipated inflation estimates of average after cost returns for individual investors show that stamps may rival equities in terms of realized performance

tax evasion and the marginal cost of public funds tax evasion and deadweight loss have similar implications for the rules of public finance the optimal mix of taxes can be derived from the minimization of the sum of aggregate deadweight loss and aggregate cost of tax evasion similarly the marginal cost of public funds includes allowances for marginal deadweight loss and marginal cost of tax evasion per dollar of public revenue acquired

on the inadequacy of newswire reports for empirical research on foreign exchange interventions abstract reuters news reports have become an accepted tool for empirical studies analyzing informational asymmetries in fx markets this paper tests the accuracy of the reuters reports for swiss interventions in the foreign exchange market the evidence finds that the time stamp of the reuters reports does not always lie near the recorded time of the first intervention trade as is commonly assumed in market microstructure studies the standard deviation of the time difference is measured in hours and not in minutes these and other regression results question the accuracy of reuters reports for swiss interventions

art as an investment the market for modern prints repeat sales of modern prints at auction are used to estimate a semiannual index of prices for the period 1977 92 as in other studies of art as an investment prints do not compare favorably to traditional financial assets there is substantial noise in auction prices but little or no support for the proposition that some artists command higher prices in certain countries or that masterpieces outperform the market one puzzle is the continuing tendency for prices realized at certain auction houses to exceed those realized at others notably at sotheby s relative to christie s in new york copyright 1993 by american economic association

real exchange rate misalignment and redistribution abstract developing countries frequently maintain an overvalued nominal exchange rate resulting in real exchange rate misalignment to finance import demand at the overvalued exchange rate countries have to raise the level of income taxation or they have to resort to monetary finance this paper explains nominal and implicitly real exchange rate misalignment as the outcome of the political process more specifically the paper explains the misalignment of an import exchange rate relative to a market exchange rate used for exports voters differ in their ownership of a single factor of production real exchange rate overvaluation results if the median voter spends a relatively large share of his income on the importable good the political economy of explicit and implicit import subsidies is first analyzed in a real model which is then extended to include money holdings and exchange rate policy

the intraday effects of central bank intervention on exchange rate spreads abstract we investigate the intraday effects of intra marginal intervention in a horizontal band on the exchange rate spread official intraday data on danish intervention transactions in the erm ii the exchange rate mechanism of the european union facilitates our analysis we show that intervention purchases and sales both exert a significant influence on the exchange rate spread but in opposite directions intervention purchases of the small currency on average narrow the spread while intervention sales of the small currency on average widen the spread this is a novel finding that differs from those of existing studies that find intervention always widens the exchange rate spread and increases market uncertainty

does the u s economic policy uncertainty connect financial markets evidence from oil and commodity currencies abstract we provide novel insight to the emerging literature on the role of u s monetary policy as a driver of a global financial cycle by examining the possible causal effect of u s economic policy uncertainty on the connectedness of crude oil and currency markets using a sample of commodity currencies from advanced and emerging nations a battery of linear and nonlinear granger based causality tests indicate the presence of a causal relationship between economic policy uncertainty and the connectedness of oil and currency markets particularly at low frequencies and more significantly after the outburst of the global financial crisis while crude oil generally serves as a net transmitter of shocks to currencies across all frequency bands the spillover effects from oil are largely concentrated towards the g10 currencies of australian and new zealand dollar that are often used as investment currencies in global carry trade strategies overall our findings suggest the presence of a significant pass through effect of economic policy uncertainty via oil prices spilling over to the currency market in line with the emerging evidence that the monetary policy by the u s fed serves as a major driver of a global financial cycle that describes patterns in global capital flows credit activity and asset prices across financial markets

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

foreign exchange controls in a black market economy abstract an investigation of the impact of foreign exchange controls in a black market economy is undertaken within the context of a choice theoretic cash in advance general equilibrium model while such controls may improve a distortion free economy s trade balance and balance of payments they are found to increase the domestic price of imports and lower the country s welfare the ramifications of black market for economic welfare turn out to be ambiguous depending crucially on the government s reaction to the leakage of foreign exchange into the economy via illegal activity

on limiting the market for status signals abstract in many societies individuals care how others view them in their efforts to impress such individuals engage in consumption signals which attempt to establish higher levels of status than their true status type this leads to an inefficiency which offers the possibility of a pareto improving tax policy the impacts of tax policy and benefits on the signalling equilibrium are considered

black and official exchange rates in morocco an analysis of their long run behaviour and short run dynamics 1974 1992 using vector error correction vec model estimation on monthly data from morocco for the period january 1974 to december 1992 this article tests the hypothesis that there is a long run stable relationship between the official and the black market exchange rates for us dollars we also examine the short run dynamics in the relationship between the two markets the econometric results indicate that the two exchange rates are cointegrated furthermore we reject weak exogeneity in the case of the official exchange rate but fail to reject it in the case of the black market rate granger causality tests show that the black market rate causes the official exchange rate the results seem to support the efficiency hypothesis suggesting that participants in the black market are able to anticipate changes in the official exchange rate the findings also suggest that morocco s decision in january 1993 to introduce only current account convertibility and keep controls on capital accounts was wise

on the link between the us economic policy uncertainty and exchange rates employing dynamic conditional correlation garch dcc garch model this paper analyzes spillover effects of the us economic policy uncertainty shock on real effective exchange rates with the data from january 2000 to december 2014 we find that the correlations between the us epu and the returns of the high yielding currencies are consistently negative throughout the sample period while the correlation between the us epu and the returns of japanese yen is consistently positive moreover we find that the correlations tend to be intensified during two post 2000 recession episodes

design innovation and fashion cycles a model of fashion cycles is developed in which designs are used as a signaling device in a dating game a monopolist periodically creates a new design over time the price of the design falls as it spreads across the population once sufficiently many consumers own the design it is profitable to create a new design and thereby render the old design obsolete this paper gives conditions under which all consumers would be better off by banning the use of fashion competition among designers may lead to less frequent changes in fashion and to higher prices than monopoly copyright 1995 by american economic association

auctions and the price of art the value of most important works of art is established by public auction either directly by an actual sale or indirectly by reference to other sales how the auction system works is thus a critical determinant of how the public s preferences are translated into the evaluation of artistic work the auction system is central in the determination of the incentives for artistic work and the efficiency of the auction system is a key determinant of the cost of creating and distributing works of art this paper contains a review of the burgeoning new research of the last decade that has been designed to shed light on how the art auction system actually works what it indicates about price formation and how well it performs we begin our discussion in section 2 with a short description of the mechanics of the auction system and then organize the remainder of our discussion around two major topics the first topic concerns how auction prices can be used to determine and compare overall price movements within the art market and other markets and the second topic concerns how the auction mechanism influences prices we

order flow and central bank intervention an empirical analysis of recent bank of japan actions in the foreign exchange market abstract this paper examines the behaviour of end user order flows in the foreign exchange market around periods of intense and large scale intervention activity by the bank of japan first we find very limited evidence that corporate customers are more than usually likely to be net sellers of yen on days when the bank of japan is intervening to sell yen however there is somewhat stronger evidence that financial customers are more likely to be net buyers of yen on the same days second we find very clear evidence that intervention matters in a microstructure analysis the strong contemporaneous correlation between order flows and exchange rate changes essentially disappears on days in which the bank of japan intervenes

vested interest and biased price estimates evidence from an auction market this study employs a new data set from art auctions to examine the relationship between auctioneer presale price estimates and the long term performance of artworks we find that the price estimates for expensive paintings have a consistent upward bias over a long period of 30 years high estimates at the time of purchase are associated with adverse subsequent abnormal returns moreover the estimation error for individual paintings tends to persist over time these results are consistent with the view that auction house price estimates are affected by agency problems and that

exchange rate rules black market premia and fiscal deficits the bolivian hyperinflation with dual exchange rates where a managed official exchange rate co exists with a floating black market rate a given budget deficit may be consistent with many different inflation rates rather than two which is the normal result in closed economy systems further all these inflation equilibria are saddle point stable a policy of adjusting the official exchange rate towards the black market rate may cause the economy to converge to a high inflation saddle point stable equilibrium where money inflation elasticity exceeds unity the analytics are motivated and illustrated by the bolivian hyperinflation of 1984 1985

buying beauty on prices and returns in the art market this paper investigates the price determinants and investment performance of art we apply a hedonic regression analysis to a new data set of more than one million auction transactions of paintings and works on paper based on the resulting price index we conclude that art has appreciated in value by a moderate 3 97 per year in real u s dollar terms between 1957 and 2007 this is a performance similar to that of corporate bonds at much higher risk a repeat sales regression on a subset of the data demonstrates the robustness of our index next quantile regressions document larger average price appreciations and higher volatilities in more expensive price brackets we also find variation in historical returns across mediums and movements finally we show that measures of high income consumer confidence and art market sentiment predict art price trends this paper was accepted by wei xiong finance

the price of wine abstract using historical price records for bordeaux premiers crus we examine the impact of aging on wine prices and the long term investment performance of fine wine in line with the predictions of an illustrative model young maturing wines from high quality vintages provide the highest financial returns past maturity famous ch teaus deliver growing non pecuniary benefits to their owners using an arithmetic repeat sales regression over 1900 2012 we estimate a real financial return to wine investment net of storage costs of 4 1 which exceeds bonds art and stamps returns to wine and equities are positively correlated finally we find evidence of in sample return predictability

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

the black market for dollars in brazil the model of the black market for dollars focuses on the interaction of portfolio decisions relevant to the holding of asset stocks and the determinants of net flows of dollars associated with tourism and smuggling a partial equilibrium model of the black market shows that the level of the premium is determined by the official real exchange rate and the official depreciation adjusted interest differential as well as seasonal factors associated with tourism expectations of future exchange rate changes under rational expectations are shown to affect the current level of the black market premium the empirical evidence provides ample support for the role of the key determinants of the premium as well as for an important seasonal pattern the magnitude of the seasonal variation is evidence of the imperfect substitutability between black dollars and cruzeiro assets in portfolios

bidding behavior and experience in internet auctions abstract we study the role of experience in internet art auctions by analyzing repeated bidding by the same bidder in a unique longitudinal field dataset our results show that experience significantly lowers the level of bids suggesting that bidders change their bidding behavior throughout time participating in more than ten auctions brings down average bids by up to 26 we further test several possible explanations for the observed learning behavior and show that the change in bidding strategy is a result of a change in within auction behavior that is generated with experience our results are robust to concerns of endogenous participation as well as bidder fixed effects

currency inconvertibility trade taxes and smuggling abstract in the classic analysis of smuggling importers choose the optimal mix of legal and illegal trade given trade taxes and the technology of detection this paper introduces an inconvertible currency in the framework so that illegal trade is valued at a rate higher than the fixed official exchange rate sections 2 and 3 show how the smuggling ratio and the domestic price markup for the import and export good are simultaneously determined with balanced legal and illegal trade changes in the long run black market premium are a weighted average of changes in trade taxes whereas changes in the smuggling ratios depend on the ration of trade taxes thus an import tariff and an export subsidy rising at the same rate would keep smuggling ratios constant but imply a rising black market premium sections 4 and 5 to determine the quantity of exports and imports a model of the economy is presented in section 6 featuring the production of exports and non traded goods and the consumption of imports and non traded goods as well as a government confiscating the amounts of traded goods unsuccessfully smuggled then export production may fall and welfare may rise if trade taxes have a negative effect on the relative price of exports and imports stronger than the positive effect on smuggled exports and imports which is always welfare reducing section 7 introduces the short run determination of the black market premium via portfolio balance in this case rising trade taxes may be associated with a premium rising even faster if there is unreported capital flight and conversely

uncertainty shocks and unemployment dynamics in u s recessions abstract what are the effects of uncertainty shocks on unemployment dynamics we answer this question by estimating non linear smooth transition vars with post wwii u s data the relevance of uncertainty shocks is found to be much larger than that predicted by standard linear vars in terms of i magnitude of the reaction of the unemployment rate to such shocks and ii contribution to the variance of the prediction errors of unemployment at business cycle frequencies the ability of different classes of dsge models to replicate our results is discussed

smuggling trade and price disparity a crime theoretic approach abstract we provide a simple but fairly general model of smuggling capable of handling both the bhagwati hansen type of illegal trade through illegal entry points and the pitt type of illegal trade through legal entry points the paper focuses on the latter type of trade we take explicit account of the risk and uncertainty associated with illegal activity and moreover treat the real costs of smuggling as a choice variable of the firm it is shown that smuggling legal trade and price disparity may coexist as in pitt the economy s response to increased enforcement of laws against smuggling is explicitly analyzed it is shown that increased enforcement raises real per unit costs of smuggling and the domestic price of importables but lowers both the absolute quantity and the share of illegal imports in total imports the effect on welfare is ambiguous

devaluation exchange controls and black markets for foreign exchange in developing countries abstract this paper analyzes the response of external balance indicators to anticipated devaluation in a model incorporating the movement of black market exchange rates under rational expectations the analysis is then extended to the case of devaluation cycles to examine the behavior of black market rates and official trade statistics in the face of persistent inflation that appreciates the real exchange rate and motivates periodic devaluation the data confirm the predicted response of the black market rate to devaluation as well as the sensitivity of official exports data to movements in the black market rate

the auction market for modern prints confirmations contradictions and new puzzles using a large data set with 80 214 repeat sales we find that the real return on a diversified portfolio of modern prints sold at auctions worldwide averaged a modest 1 51 during the period 1977 2004 we address several issues regarding the performance of modern prints as investments the selection bias arising from the self interest of auction houses the impact of an ever expanding universe of auction houses on investment returns the masterpiece effect or whether more expensive works of art outperform the market as a whole and the differences in returns that arise due to random fluctuations in collector tastes jel z11 g11 g14

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

collapsing exchange rate regimes some linear examples abstract we construct a pair of linear examples to study the collapse time of a fixed exchange rate regime the first example is a perfect foresight continuous time model which allows calculation of the exact collapse time and the tracking of reserves the second example is a discrete time stochastic model which yields an endogenous probability distribution over the collapse time and produces a forward discount of the exchange rate

monopoly quality uncertainty and status goods this paper provides an explanation of price and wage rigidities in certain industrial structures it considers products for which quality is important or the possession of which enhances a person s status it is argued that an individual s desire for such a good or service may be positively related to the amount of aggregate excess demand for it it is then shown that this gives rise to a natural discontinuity in demand which may result in price rigidities this explains for instance why it may be profit maximising for a doctor facing a long waiting line of patients not to raise his fees

veblen effects in a theory of conspicuous consumption the authors examine conditions under which veblen effects arise from the desire to achieve social status by signaling wealth through conspicuous consumption while veblen effects cannot ordinarily arise when preferences satisfy a single crossing property they may emerge when this property fails in that case budget brands are priced at marginal cost while luxury brands though not intrinsically superior are sold at higher prices to consumers seeking to advertise wealth luxury brands earn strictly positive profits under conditions that would with standard formulations of preferences yield marginal cost pricing the authors explore factors that induce veblen effects and they investigate policy implications copyright 1996 by american economic association

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

investigating asymmetric determinants of the cny cnh exchange rate spreads the role of economic policy uncertainty abstract this study investigates the asymmetric effects of economic policy uncertainty epu and other possible determinants on the cny cnh spreads by utilizing the nonlinear ardl model for this purpose we construct a novel epu index based on the epu indices of china and the g7 countries by using principal component analysis the results show substantial asymmetric effects of the concerned determinants on the spreads moreover the composite epu significantly affects the spreads with positive shocks to the composite epu inducing widening cny cnh spreads