the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

momentum and funding conditions abstract we find evidence linking return momentum with macroeconomic conditions namely the funding environment we show that winners outperform losers by a significant amount in restrictive funding states while in expansive states winners and losers perform similarly this pattern is consistent with changing investor preferences for winners and losers following signaled shifts in funding availability one plausible channel for this relation is the interaction between stock level illiquidity and funding conditions we find that liquidity risk is significantly priced during restrictive states especially in loser stocks furthermore loser stocks become more illiquid during restrictive conditions both effects help explain the relative performance difference between losers and winners across funding environments moreover the funding environment influences the relationship between momentum and firm characteristics after controlling for the influence of sentiment market states and return dispersion overall transitions in funding states appear to encourage investors to revise their factor pricing decisions which produces inter temporal variation in momentum

estimating the open market desk s daily reaction function this paper presents the results of an empirical investigation into the proximate determinants of the federal reserve s daily open market operations using information available each morning at the fed conference call the author models the open market desk s choice of both the quantity and the type of operation using a friction model for the former and a multinomial logit framework for the latter different types of operations are shown to send different signals to the market about the underlying thrust of fed policy and open market operations in recent years are shown to have become increasingly keyed to the federal funds rate copyright 1993 by ohio state university press

liquidity effects and the monetary transmission mechanism several recent papers provide strong empirical support for the view that an expansionary monetary policy disturbance generates a persistent decrease in interest rates and a persistent increase in output and employment existing quantitative general equilibrium models which allow for capital accumulation are inconsistent with this view there does exist a recently developed class of general equilibrium models which can rationalize the contemporaneous response of interest rates output and employment to a money supply shock however a key shortcoming of these models is that they cannot rationalize persistent liquidity effects this paper discusses the basic frictions and mechanisms underlying this new class of models and investigates one avenue for generating persistence we argue that once a simplified version of the model in christiano and eichenbaum 1991 is modified to allow for extremely small costs of adjusting sectoral flow of funds positive money shocks generate long lasting quantitatively significant liquidity effects as well as persistent increases in aggregate economic activity

the information content of the federal funds rate is it unique this paper investigates the information content of the federal funds rate relative to other market interest rates the empirical results indicate that the federal funds rate is not informationally superior to the overnight repurchase rate or the three month t bill rate unanticipated changes in monetary policy do not systematically move the funds rate away from its long run equilibrium relationship with other short term interest rates these results support the efficient market view that the federal funds rate should not contain more information including that about monetary policy than other interest rates copyright 1995 by ohio state university press

market based empirical research in accounting a review interpretation and extension a decade and a half of the most concerted and ambitious research effort in accounting history is evaluated here it is the search into the relationship between publicly disclosed accounting information and the consequences of the use of this information by the major group of usersequity investors as such consequences are reflected in characteristics of common stocks traded in major exchanges this research effort known as market based accounting research mbar obtained its impetus from major developments in finance theory during the late 1950s and early 1960s these were the portfolio selection theory and its offspring the capital asset pricing model capm and the concept of informationally efficient capital markets ecm subsequent developments in information economics agency theory and optimal incentive signaling models were quickly incorporated into mbar while the impetus to this line of research came from other disciplines accounting was not only a beneficiary but also to a modest extent a benefactor mbar is relevant to the study of capital market efficiency the capm information economics and regulation this contribution distinguishes mbar from most accounting areas whose contributions to other disciplines are negligible in

international interest rates and us monetary policy announcements evidence from hong kong and singapore this paper investigates the responses of market interest rates to us monetary policy announcements for the us and two emerging economies hong kong and singapore which are similar on many respects but have experienced opposite exchange rate regimes in the last twenty years our results based on market expectations extracted from federal fund futures rates document that fomc announcements significantly affect the term structure of interest rate in the us and both asian countries further international interest rate differentials around fomc meeting dates tend to be negative for short maturities with the impact gradually dissipating as bond maturity increases finally for the case of singapore we find that domestic interest rates react to both external and domestic monetary policy announcements with a magnitude that is larger over the full bond maturity spectrum for domestic announcements these results are robust to time varying futures risk premia and alternative measures of interest rates expectations

the effect of unanticipated money on the money and foreign exchange markets abstract a number of studies have attempted to determine why unanticipated increases in the money supply are positively correlated with money market interest rates by examining the response of the foreign exchange market to unanticipated changes in the money stock they have found a significant positive relationship between unanticipated increases in the money supply and the foreign exchange value of the dollar and have interpreted this as evidence for the anticipated liquidity effect hypothesis however these results support this hypothesis only if both markets respond simultaneously to unanticipated changes in money this paper examines the cross market consistency of the response using six bilateral exchange rates and the treasury bill rate all measured over a narrow time interval the results show that in general these markets do not respond simultaneously to money announcements

the fed and short term rates is it open market operations open mouth operations or interest rate smoothing abstract it is widely believed that the fed controls the federal funds rate by altering the degree of pressure in the reserve market through open market operations when it changes its target for the funds rate recently however several analysts have suggested that the fed need not conduct open market operations to change the funds rate rather they argue it is sufficient that the fed indicate its desire for the funds rate this paper notes that there is yet a third alternative the interest rate smoothing hypothesis that suggests that the fed does not move rates per se but rather smooths the transition of rates to the new equilibrium required by economic shocks this paper tests the open market and open mouth alternatives using a methodology first used by cook and hahn journal of monetary economics 1989a 331 finding no evidence that either open market operations or open mouth operations can account for the close relationship between the funds rate and the funds rate target a variety of evidence consistent with the interest rate smoothing hypothesis is considered the results suggest that many changes in the fed s funds rate target are an endogenous response to economic events and suggest that an alternative way to identify exogenous changes in policy is to identify exogenous changes in the fed s funds rate target

new directions in emissions trading the potential contribution of new institutional economics abstract once an arcane topic even among environmental economists emissions trading systems have substantially increased during this past decade in the usa moreover the implementation of these systems has necessitated increased involvement of professionals in many fields besides economics this paper reviews the practical experience of the six major types of emissions trading systems focusing on credit market development participation and results including transaction costs five more recent applications of emissions trading also are considered as well as the possibility of inter pollutant trading while inter pollutant trading has been successfully used for chlorofluorocarbons cfcs the applicability of this experience is probably very limited additionally it would be highly premature to attempt an evaluation of these newer emissions trading systems some of which have yet to be even partially implemented in order to improve these latter and future programs the paper considers the potential contribution of the new institutional economics nie to emissions trading the nie is used to develop theoretical insights and a series of predictions about the performance of a range of emissions trading systems

inter temporal variation in the illiquidity premium abstract we find evidence of a systematic link between monetary conditions and inter temporal variation in the price of liquidity specifically following an expansive monetary policy shift funding conditions improve and market wide liquidity increases which is especially beneficial for illiquid securities the improved liquidity and funding conditions reduce the returns required for holding illiquid securities consequently illiquid stocks experience relatively large price increases when monetary conditions become expansive and thus the measured return spread between illiquid and liquid stocks expands substantially overall our evidence supports the claim that the price of asset liquidity is dependent on monetary conditions

evidence on the effect of bond covenants and management compensation contracts on the choice of accounting techniques the case of the depreciation switch back abstract provisions of bond indenture agreements and management compensation contracts are examined to derive testable implications concerning management s incentives to choose among alternative accounting techniques the hypotheses are subjected to empirical examination by investigating the voluntary change from accelerated to straight line depreciation for financial reporting purposes only the methodology utilized incorporates an expectations model of accounting earnings in an attempt to separate out of the effects of earnings announcements from accounting change announcements which are often concurrent the evidence from both price and non price data is not consistent with the general hypothesis that bond covenants and management compensation contracts are important determinants of the decision to change depreciation techniques five potential explanations for the results are offered

effects of changes in the discount rate on the foreign exchange value of the dollar 1973 to 1978 this paper attempts to analyze the effects of changes in the federal reserve s discount rate on the dollar s foreign exchange value if a discount rate increase were to signal a subsequent general increase in market interest rates one would expect u s dollar denominated assets to become relatively more attractive and the ensuing increased demand for dollar assets to tend to raise the dollar s exchange value the reverse would be true for discount rate decreases however in recent years the federal reserve s policy of moving the discount rate with a lag behind the federal funds rate means that market participants generally have sufficient information to anticipate changes in the discount rate when this is the case announcement effectsimmediate and discernible market responses to discount rate changes do not occur under special circumstances in 1978 however announcement effects could and did occur by increasing the discount rate when the federal funds discount rate differential was around normal levels and by increasing the discount rate by a larger amount than the market anticipated the federal reserve used the discount rate as a signal to market participants that it would use other operating instruments to bring about changes in market interest rates and the monetary base in their 1977 article raymond e lombra and raymond g torto ran a number of econometric tests for discount rate exogeneity on monthly data from january 1968 to may 1974 they concluded that discount rate movements were not independent of the spread between the discount rate and the federal funds rate given rational expectations therefore changes in the discount rate could not generate announcement effects lombra and torto 1977 this paper updates the work of lombra and torto and then attempts to test directly

relation between market model prediction errors and omitted variables a methodological note a number of accounting studies have examined market model prediction errors to evaluate the share price effects of various events such as voluntary or mandatory accounting changes a common approach is to examine the prediction errors around the event date of a portfolio of potentially affected firms this approach has been extended recently through the use of cross sectional regressions e g leftwich 1981 holthausen 1981 collins rozeff and dhaliwal 1981 sepe 1982 and chow 1983 in which prediction errors or raw returns are regressed on firm specific variables such as size the purpose of this paper is to examine the implications of some recent findings in finance for the various finance based empirical accounting studies in general two types of omitted variables from the standard capital assets pricing model have been identified first several studies have reported that certain firm specific variables such as size banz 1981 and reinganum 1981 earnings yield basu 1975 1983 and dividend payout ratio litzenberger and ramaswamy 1979 may be omitted variables from the standard capm in addition other studies have found some special time series characteristics of stock returns such

why do t bill rates react to discount rate changes a number of alternative explanations for the response of t bill rates to discount rate changes have been offered in the literature this paper investigates cook and hahn s 1988 hypothesis that discount rate changes signal a change in the fed s federal funds rate target which in turn induce changes in t bill rates after showing that the evidence that theyt claim supports their view cannot be used to differentiate their hypothesis from equally plausible alternatives we show that a valid alternative test fails to provide support for their view and that discount rate changes do not appear to signal changes in the target for the funds rate copyright 1994 by ohio state university press

a note on tradeable permits this note offers a perspective on whether tradeable permits are a passing fad or an enduring trend it does so in noting how various types of tradeable permit systems relate to conventional environmental permits what are the unique requirements of tradeable permit systems and why they might be preferred to alternative instruments a final observation concerns the analogy between tradeable permits for environmental goods and private property in land

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

the impact of discount rate changes on market interest rates evidence from three european countries and japan abstract this paper examines the impact of official discount rate odr changes on market interest rates of four countries germany france japan and the uk during the period from 1980 through 1997 the overall results indicate that short term rates are more responsive than long term rates for all countries the magnitude of the changes is country specific market rate responses are lower for germany and japan which have fewer changes in odr these results are consistent with expectations that there is less uncertainty under such regimes consistent with the pace of regulatory reforms the results of odr changes are strongest in uk and weakest in japan when monetary policy is changed or reversed interest rate responses are shown to be larger for countries with frequent changes in discount rates

the effect of changes in the federal funds rate target on market interest rates in the 1970s abstract this paper examines the influence of monetary policy on interest rates by estimating the effect of changes in the federal funds rate target the federal reserve s policy instrument on market interest rates in the 1970s we find that changes in the target caused large movements in short term rates and smaller but significant movements in intermediate and long term rates we hypothesize that the similarity of the reactions of three six and twelve month rates to changes in the target offers a possible explanation for the lack of support for the expectations theory from studies that have tested the theory using these rates

carbon prices were they an obstacle to the launching of emission abatement projects in spain in the kyoto protocol period abstract the future of the carbon market approach under the united nations framework convention on climate change unfccc is uncertain however further development of carbon markets is expected this paper estimates the average carbon price of the carbon emission permits cop approved units acquired by the spanish government and also a more realistic figure for the average carbon cost of the aforesaid emission permits this is very useful for evaluating and comparing different carbon prices and markets in addition the paper contributes to the existing literature by providing a deeper understanding of the flow of emission permits between the european union emission trading scheme eu ets and the emission trading scheme ets under the kyoto protocol the main conclusions are that the estimated carbon price and cost are both lower than other reported prices and costs this may go some way towards explaining why the government preferred to use the flexibility mechanisms and acquire an especially large number of cop approved units mainly assigned amount units aaus through bilateral transactions with other annex b countries instead of launching actual greenhouse gas ghg abatement projects in the country moreover more transparency is needed in regard to bilateral transactions of aaus between the spanish government and other annex b seller countries

asset returns discount rate changes and market efficiency the primary purpose of this paper is to reconcile the previous findings of discount rate endogeneity with the presence of discount rate announcement effects in securities markets the crux of this reconciliation is the distinction between technical discount rate changes that are endogenous and nontechnical changes which contain some informative policy implications in essence we attempt to separate expected discount rate changes from unexpected changes or equivalently the expected component of discount rate changes from the unexpected component if markets are efficient the former should have no announcement effects while the latter may be associated with an announcement effect accordingly the focus of the empirical analysis is on the interaction between discount rate exogeneity the specific monetary policy regime and accouncement effects in addition we examine whether the behavior of these markets in the postannouncement period is consistent with the rapid price adjustment implied by market efficiency

econometric properties of alternative security return methods in recent years security price research has experienced a proliferation of research designs as a result there is a lack of interstudy comparability which is aggravated by the absence of a formal analysis of the properties of the alternative designs under various conditions the purpose here is to examine one important aspect of research design the choice of the security return measure in a simple but well defined setting of limited parameter uncertainty the analysis leads to the following results 1 with respect to raw returns versus residual returns it explicitly offers three potential rationales for residual returns as such the analysis provides a formal statement of the reasons for residual analyses to supplement the intuitive but less precise statements in the early literature 2 with respect to residual return versus difference in returns methods the analysis indicates the conditions under which a the residual approach dominates the difference in returns approach as judged by the statistical criteria examined b the converse holds and c the two methods possess the same econometric properties 3 the relative properties described in 2 are derived for a general model of nonzero covariation among returns and for two important special cases the zero beta model and the industry effects model

the information content of discount rate announcements and their effect on market interest rates this paper presents evidence that throughout the 1973 85 period the federal reserve systematically used certain types of discount rate a nnouncements to signal changes in its policy instrument the federal funds rate market participants understood the signals contained in d iscount rate announcements and used them to revise their expectations of the funds rate these revisions in funds rate expectations caused movements in treasury bill rates copyright 1988 by ohio state university press

cross sectional association between abnormal returns and firm specific variables abstract abnormal returns market model prediction errors are the subject of many event studies in accounting and finance literature conditional on the event of interest researchers have recently used cross sectional regressions to examine relations between abnormal returns and firm specific variables this paper demostrates that non constant variences and covariances in market model residuals across firms introduced bias in the estimated slope coefficients of the independent variables i e the expected signs of the estimated slope coefficients can be predicted a priori a method is develope to removed the bias in the estimated slope coefficiets and is found to be effective this method explicitly takes the dependence among abnormal returns across firms into account methods that assume abnormal returns across firms to be independent do not control for such bias

evidence of the impact of mandatory changes in accounting principles on corporate loan agreements abstract the theory in this paper predicts that mandatory changes in accounting princples can affect the measurement rules defined in restrictive covenants in firms lending agreements consequently those mandatory changes can have an impact on the value of a firm s equity even if the changes appear to be merely cosmetic this contracting cost theory is tested by examining of both event related and cross sectional abnormal performance of the equity of a sample of firms when the accounting princples board changes accounting princples for business combinations the theory provides at best in incomplete explanation of the observed abnormal performance

a model of carbon price interactions with macroeconomic and energy dynamics abstract this paper develops a model of carbon pricing by considering two fundamental drivers of european union allowances economic activity and energy prices on the one hand economic activity is proxied by aggregated industrial production in the eu 27 as it provides the best performance in a preliminary forecasting exercise vs other indicators on the other hand brent natural gas and coal prices are selected as being the main carbon price drivers as highlighted by previous literature the interactions between the macroeconomic and energy spheres are captured in a markov switching var model with two states that is able to reproduce the boom bust business cycle hamilton 1989 first industrial production is found to impact positively negatively the carbon market during periods of economic expansion recession thereby confirming the existence of a link between the macroeconomy and the price of carbon second the brent price is confirmed to be the leader in price formation among energy markets bachmeier and griffin 2006 as it impacts other variables through the structure of the markov switching model taken together these results uncover new interactions between the recently created eu emissions market and the pre existing macroeconomic energy environment

the information content of discount rate announcements revisited cook and hahn 1988 have argued that discount rate change announcements were used by the federal reserve to signal market participants about movements in the federal funds rate throughout the 1973 79 federal funds rate targeting period they maintained that announced changes in the discount rate provided new information to market participants about subsequent actions of the federal reserve regarding the federal funds rate market participants understood these signals and used them to revise their expectations of the future path of the funds rate which also affected treasuw bill rates however roley and troll 1984 and smirlock and yawitz 1985 have argued that the federal reserve chose to implement policy changes exclusively through the federal funds rate during the funds rate targeting period hence the federal reserve s discount rate policy did not reveal any additional information and thus did not have an effect on market interest rates cook and hahn 1988 found evidence of discount rate announcement effects on bill rates in the pre october 1979 funds rate operating period while both roley and troll and smirlock and yawitz did not these three studies differed in several ways including their discount rate announcement classification procedures l mistiming of five event days 2 and diserent sample starting dates 3 as cook and hahn 1988 table 1 pp 170 171 published

the information content of discount rate announcements what is behind the announcement effect abstract a considerable volume of research shows that asset prices respond to changes in the federal reserve s discount rate while several competing hypotheses have been advanced to explain the market s response to discount rate announcements comparatively little effort has been made to differentiate among alternative hypotheses the result is an abundance of evidence establishing that asset prices respond to discount rate announcements but little if any agreement about why markets respond this article attempts to fill a void in the literature by pointing out how competing hypotheses differ and by constructing tests explicitly designed to differentiate among competing explanations the evidence suggests that the market s reaction to discount rate changes is purely an announcement effect i e a reaction to new information contained in the announcement that the direct effect of discount rate changes on market rates is nil that the announcement effect is invariant to the federal reserve s operating procedure and that generally speaking changes in the discount rate do not signal a change in monetary policy the announcement effect appears to vary with both the nature and extent of the information that the announcement of a discount rate change is believed to contain

choosing a monetary value of greenhouse gases in assessment tools a comprehensive review there is a societal need for using monetary estimates of social impacts of co2 and other greenhouse gases in different assessment tools such as cost benefit analysis and life cycle assessment a number of estimates are available in the literature since these differ by several orders of magnitude there is ambiguity and confusion about which to use this review aims to give some guidance on this issue the variation in carbon value estimates depends on several uncertain aspects which will remain uncertain including climate sensitivity assumptions about future emissions and decision makers ethical standpoints hence there is no single correct monetary value for co2 it will depend on the ethical standpoint of the user due to this estimates of social costs of co2 emissions cannot be used for calculating an optimal emission level although they can inform such assessments it is suggested that marginal abatement cost values are used for emissions capped by binding targets in short term assessments and that social cost of carbon values should be used for all other emissions benchmark principles for choosing a monetary carbon value are suggested along with associated estimates depending on the choices made with regard to ethical standpoints and assumptions about future emissions and climate sensitivity estimates can be significantly higher than the ones typically used in assessment tools today the estimates need continuous updating and there is need for better understanding and communication around the limitations and uncertainties involved

lifting the veil of secrecy from monetary policy evidence from the fed s early discount rate policy traditionally monetary policy has been conducted under a veil of secrecy in its landmark freedom of information act case the federal reserve argued that it needed to delay the disclosure of its policy decisions claiming that immediate disclosure would cause the market to react in a way that was inconsistent with the fed s intentions based on this argument and others the fed was permitted to delay the release of fomc policy decisions most economists however believe that market forces would work to keep equilibrium outcomes more in line with policy maker s intentions if policy makers would announce their intentions and establish a reputation for behaving in a manner consistent with them this paper tests the hypothesis that the market responds more closely to the fed s intentions when the fed makes its intentions known by investigating the market s reaction to a change in discount rate policy in the early 1960s we find that the market responded in a manner inconsistent with the fed s intentions when they were unknown and responds in a manner consistent with them when the fed made its intentions known

the information content of german discount rate changes abstract discount rate changes always receive considerable attention in financial markets two hypotheses compete to explain financial market reactions the direct borrowing cost effect and the announcement effect for the bundesbank s discount rate changes after 1979 we find that market reactions cannot be attributed to a direct borrowing cost effect but exclusively to announcement effects the empirical results indicate that interest rates react to changes in the discount rate to the extent that they are unanticipated in contrast the response to anticipated changes in the discount rate is small and insignificant we proxy market anticipations by a multinomial logit model combined with a dummy variable capturing non quantifiable factors reported by the financial press moreover we show that the response of interest rates declines along the term structure and with the switch to greater emphasis on repurchase operations in early 1985

the economic determinants of the market reaction to proposed mandatory accounting changes in the oil and gas industry a cross sectional analysis abstract this paper examines the economic reasons for the observed negative abnormal common stock performance of firms whose reported earnings and stockholders equity were negatively affected by the proposed elimination of full cost accounting in the oil and gas industry four explanations of the market effects of this mandatory accounting change are examined 1 naive investor theory 2 modified naive investor theory 3 contracting cost theory and 4 estimation risk theory these hypotheses are developed in detail and used to generate variables for a cross sectional model which explains observed return behavior the effect of the accounting change on total stockholder s equity the existence of financial contracts denominated in terms of accounting numbers and to a lesser extent firm size are shown to be important explanatory variables the importance of these variables is consistent with both the contracting cost and estimation risk theories

discount rate changes and the foreign exchange market abstract changes in the discount rate can have associated announcement effects on the foreign exchange value of the dollar only if these changes are not anticipated by the market this paper provides evidence to support this contention specifically discount rate changes made for reasons other than technical adjustments have not been anticipated fully and consequently their announcements have had a significant impact on the dollar s exchange rate furthermore results are obtained that support the hypothesis that unanticipated discount rate changes alter inflationary expectations

coevolution of policy market and technical price risks in the eu ets within the eu there have been calls for governments to provide greater certainty over carbon prices even though it is evident that their price risk is not entirely due to policy uncertainty we develop a stochastic simulation model of price formation in the eu ets to analyse the coevolution of policy market and technology risks under different initiatives the current situation of a weak 20 overall abatement target motivates various technology support interventions elevating policy uncertainty as the major source of carbon price risk in contrast taking a firm decision to move to a more stringent 30 cap would leave the eu ets price formation driven much more by market forces than by policy risks this leads to considerations of how much risk mitigation by governments would be appropriate and how much should be taken as business risk by the market participants

estimating the discount rate policy reaction function of the monetary authority this paper estimates a policy rule that explains the sign and the magnitude of the federal reserve s fed s discount rate changes it sets out a two sided type ii tobit model and develops a procedure for its estimation considering the discrete and censored nature of the changes the results suggest that the fed has conducted discount rate policy counter cyclically to influence output and to curb inflation and that the fed s response to policy indicators varies over monetary regimes furthermore consistency is found between the model prediction of the discount rate change and a classification based on whether the change is technical or non technical copyright 1999 john wiley sons ltd