intervention policy of the boj a unified approach intervening in the fx market implies a complex decision process for central banks monetary authorities have to decide whether to intervene or not and if so when and how since the successive steps of this procedure are likely to be highly interdependent we adopt a nested logit approach to capture their relationships and to characterize the prominent features of the various steps of the intervention decision process our estimations based on japanese data from 1991 to 2004 indicate that the bank of japan i mainly reacted to deviations of the exchange rate with respect to fundamentals and ii tended to favour secrecy when its credibility was low we also provide new insights on the so called secrecy puzzle by modeling explicitly the risk for a secret intervention to be detected our results have important implications in terms of exchange rate policy such as the emergence of a trade off between intervention size communication policy and secrecy our results tend to provide some explanation for the observed persistence of ineffective intervention policy during some sub periods c 2008 elsevier b v all rights reserved

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

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

tests of the foreign exchange risk premium using the expected second moments implied by option pricing abstract this paper utilizes the second moment expectations implied by currency option pricing to demonstrate that these expectations are systematically related to expected return differentials across assets denominated in different currencies because the measured deviations from uncovered interest rate parity are tied to variables which theory links to the risk premium the results provide substantial evidence that a risk premium does indeed exist as opposed to the alternative of a violation of rational expectations however like previous attempts the data do not support an explicit mean variance formulation of the risk premium

teacher pay reform and productivity panel data evidence from adoptions of q comp in minnesota this paper studies the impacts of teacher pay for performance p4p reforms adopted with complementary human resource management hrm practices on student achievement and workforce flows since 2005 dozens of minnesota school districts in cooperation with teachers unions implemented p4p as part of the state s quality compensation program exploiting district variation in participation status and timing we find evidence that p4p centered hrm reform raises students achievement by 0 03 standard deviations falsification tests suggest that gains are causal they appear to be driven especially by productivity increases among less experienced teachers

foreign exchange intervention how to signal policy objectives and stabilise the economy abstract within a simple model of monetary policy for an open economy we study how foreign exchange intervention may be used as a costly signal of the policy makers objectives our analysis indicates that i foreign exchange intervention typically stabilises the national economy reducing the fluctuations of employment and output ii this result is sensitive to the institutional structure of decision making in that a larger stability gain is obtained when foreign exchange intervention and monetary policy are kept under the jurisdiction of different governmental agencies

should central bankers talk to the foreign exchange markets in this paper we study the role of official statements and speeches given by central bank authorities in charge of foreign exchange policy we investigate the impact of statements that comment on and confirm such interventions on the day of the intervention on the two major foreign exchange markets over an extended period 1989 2003 we also study the impact in terms of policy effectiveness of central bank communication before the actual operations our results suggest that appropriate speeches clarifying the current intervention policy can have marginally virtuous effects both in terms of exchange rate level and exchange rate volatility this leads us to conclude that in general actual interventions on the market should still be employed provided that official statements are used to clarify the nature and purpose of these interventions c 2008 elsevier ltd all rights reserved

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

central bank interventions and exchange rate band regimes abstract this paper presents an endogenous switching regression model for the exchange rate process where the switch is defined by the central bank criteria functions for intervening we study the signal effect of interventions on the exchange rate using norwegian daily data on official interventions we first find that interventions seemed to have been more effective in moving the exchange rate in the expected desired direction in the regime when the exchange rate was kept away from the edges of the band this type of intervention regime also reduces significantly the conditional volatility of the exchange rate thus when the exchange rate was near the weakest edge of the currency band its conditional variance was significantly larger than when it was moving around its central parity finally we show that in order to obtain consistent estimates intervention variables cannot enter as exogenous variables in the conditional mean or conditional variance of the exchange rate

evidence on the political economy of the urbanization process urbanization and economic development go hand in hand as a country moves from a rural agricultural base to an urban industrial base this paper argues that urbanization per se occurs in response to the basic sector shift out of agriculture and government policies such as price controls and trade protection of industry affect the process only indirectly through their effect on sector composition however urban concentration the extent to which a country s urban resources are concentrated in one or two large cities as opposed to more evenly spread is much more directly affected by policies and politics the paper finds specifically that investments in inter regional infrastructure facilitates urban deconcentration away from primate to hinterland cities as does increasing democratization or increasing fiscal decentralization the findings move beyond establishing basic correlations in the data to trying to quantify causal effects in a panel framework with instrumental variables estimation

the significance of technical trading rule profits in the foreign exchange market a bootstrap approach abstract in this paper we present new evidence on the profitability and statistical significance of technical trading rules in the foreign exchange market we utilize a new data base currency futures contracts for the period 1976 1990 and we implement a new testing procedure based on bootstrap methodology our results suggest that simple technical trading rules have very often led to profits that are highly unusual splitting the entire sample period into three 5 year periods reveals that on average the profitability of some trading rules declined in the latest period although profits remained positive on average and significant in many cases jel f31 f47 g15

volatility impulse response functions for multivariate garch models an exchange rate illustration we introduce a new concept of impulse response functions tracing the effects of independent shocks on volatility through time while avoiding typical orthogonalization and ordering problems in an empirical study of a bivariate foreign exchange fx rate series we use volatility impulse response functions to discuss the effects of central bank decisions such as direct interventions in the fx market or open market activities on fx market volatility comparing our concept with conditional moment profiles introduced by gallant et al gallant a r rossi p e tauchen g 1993 nonlinear dynamic structures econometrica 61 871 907 we show that for shocks affecting fx rates in an asymmetric way the difference between the two methodologies and their interpretation can be substantial

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

foreign exchange market intervention in two small open economies the canadian and australian experience abstract we examine intervention by the bank of canada and the reserve bank of australia for daily data from 1989 to 1998 both central banks intervene in response to excessive exchange rate volatility and uncertainty volatility is the implied volatility of foreign currency futures options uncertainty is the kurtosis of the implied risk neutral probability density functions we also examine the impact of inflation targets unlike other studies we also consider commodity futures prices these turn out to help explain the effectiveness of intervention central bank intervention was largely unsuccessful in both countries though volatility and kurtosis were modestly affected

foreign exchange intervention when interest rates are zero does the portfolio balance channel matter after all abstract this paper provides an empirical investigation of transmission channels of central bank foreign exchange intervention when interest rates are zero and traditional monetary policy options are constrained the paper develops empirically testable hypotheses regarding the functioning of the intervention transmission channels under study these hypotheses evolve around whether or not the market is aware or unaware of intervention official daily data on interventions in the jpy usd market during the 1999 to 2004 japanese zero interest rate period facilitate the analysis the results of the analysis are consistent with the suggestion that intervention when interest rates are zero works through the portfolio balance channel

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

education democracy and growth abstract this note presents a model of endogenous growth where redistribution determined by a political equilibrium is in the form of public education it is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and at the same time tends to produce a more even income distribution

economic integration and political disintegration in a world of trade restrictions large countries enjoy economic benefits because political boundaries determine the size of the market under free trade and global markets even relatively small cultural linguistic or ethnic groups can benefit from forming small homogeneous political jurisdictions this paper provides a formal model of the relationship between openness and the equilibrium number and size of countries and successfully tests two implications of the model firstly the economic benefits of country size are mediated by the degree of openness to trade secondly the history of nation state creations and secessions is influenced by the trade regime

large versus small foreign exchange interventions abstract we use non temporal threshold analysis to investigate the exchange rate effects of large versus small interventions more than two decades of official daily data on intervention in the jpy usd market facilitate our analysis we find no evidence that small interventions exert a discernible influence on the exchange rate while large interventions significantly influence the exchange rate in the theoretically consistent manner we conclude that small interventions may not be considered a determinant of the exchange rate while large interventions constitute an important element in our understanding and modeling of the exchange rate

standard deviations implied in option prices as predictors of future stock price variability abstract standard deviations implied in option prices have recently been introduced as being better than average predictors of future stock price variability this article specifically studies the predictive ability of implicit standard deviations taking into account the dividend problem and the problem of optimal weighting schemes of the standard deviations when there are several options on the same stock transaction data information was used to study the importance of non simultaneities in observing stock and option prices

urban influences on rural schooling in india abstract many believe that low levels of schooling in rural areas of developing economies are a consequence of the low rate of return to schooling in agriculture this belies the possibility that rural schooling decisions are undertaken in response to the possibility of employment in urban areas this paper tests this hypothesis using three cross sections of household data for rural india it finds that urban rates of return do influence rural schooling particularly amongst households who are most likely to seek urban employment such as the landless the results suggest that low levels of rural schooling may reflect not just conditions in the local village economy but also the functioning and size of the relevant labor market

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

generational accounts for the united states an update abstract although relatively new generational accounting has been used in 26 countries to evaluate the generational stance of national fiscal policies generational accounting calculates the size of prospective net tax burdens and lifetime net tax rates that different generations face under current fiscal policy information that standard budget presentations do not reveal this method can also be used to calculate the policy changes required for achieving a generationally balanced and therefore sustainable fiscal policy that implies equal lifetime net tax rates on today s newborns and future generations those born after 1998 calculations made two years ago suggested a sizable generational imbalance in u s fiscal policy implying lifetime net tax rates on future generations that are 72 percent higher than those on newborns in 1995 since then unexpectedly strong growth in both gross domestic product gdp and the tax share of gdp has boosted revenues and slow growth in defense spending has reduced federal purchases as a share of gdp to a postwar low those developments augur federal budget surpluses for at least a decade and portend a corresponding reduction in the generational imbalance

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

exchange rate dynamics central bank interventions and chaos control methods abstract we use a simple chartist fundamentalist model developed by day and huang to explore recent chaos control algorithms as potential candidates for central bank intervention rules we find that methods such as delayed feedback control ogy and constant feedback have in principle the potential to reduce exchange rate variability and deviations from fundamentals even in the presence of large dynamic noise

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

a new database on human capital stock in developing and industrial countries sources methodology and results abstract the paper describes the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years 1960 1987 the series are built from enrollment data using the perpetual inventory method adjusted for mortality estimates are corrected for grade repetition among school goers and country specific drop out rates for primary and secondary students enrollment data series used start as far back as 1930 for most countries and even earlier for others this reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory

a class of quadratic options for exchange rate stabilization abstract we propose the use of a new option which we call quadratic and that central banks could use to smooth exchange rate volatility through the hedging strategies of the issuers we derive analytic pricing and hedging formulas we suggest a criterion to derive the optimal for the central bank option parameters finally we perform several simulation exercises which show the effectiveness of using this option with or without conventional spot interventions

colonial legacies and economic growth much of the work on colonialism has been theoretical or anecdotal in this paper i close the gap between the literature on development and new growth theory by testing the effect of colonization on subsequent growth and development in a sample of 63 ex colonial states from 1961 1990 i find that colonies that were held for longer periods of time than other countries tend to perform better on average after independence finally i show that the level of education at the time of independence can help to explain much of the development gap between the former british and french colonies in africa

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

international comparisons of rural urban educational attainment data and determinants we study cross country differences in rural and urban educational attainment by using a data set comprising 56 countries we focus on the determinants of rural urban educational inequality which is measured by the ratio of rural to urban average years of schooling within each country we find that riskier human capital investment less credit availability a colonial heritage a legal system of french origin and landlockedness of nations are all associated with relatively lower rural educational levels and greater rural urban educational inequality conversely larger formal labor markets better infrastructure and a legal system of british origin are associated with relatively higher rural educational levels and lower rural urban educational inequality we also identify an interaction effect between economic development level and some of these factors in particular we find that as development level increases the negative positive relationship between french british legal systems and rural urban educational inequality is reversed and becomes positive negative

the quality of schooling quantity alone is misleading although much research discusses the quantity of schooling as an effective impact on productivity and earnings most such research leaves out the idea of the quality of schooling which may cause biases in the estimated returns to schooling this paper consequently attempts to extend the standard mincerian approach to incorporate school quality as well as quantity it demonstrates how exclusion of quality in the standard procedure may cause biases in the estimated returns to years of schooling probably in the upward direction the paper explores the implications of this extension of the standard model for the case of young brazilian males it shows that the estimate of the private return to years of schooling using the preferred quality inclusive specification is only one half the estimate using the standard procedure indicating substantial upward bias in the standard estimates it further outlines a method for estimating a social return to quality and finds that it exceeds substantially the social return to quantity the paper then shows why this in turn suggests there may be an equity productivity trade off in schooling investments

the effectiveness of foreign exchange interventions under a floating exchange rate regime for the turkish economy a post crisis period analysis the reported study has two purposes first it attempts to improve the literature on foreign exchange interventions of the central banks for the emerging market economies an area not previously studied in detail the turkish economy in the post crisis period constitutes a good example in this context second it proposes a new methodology a time varying parameter model to analyse the effectiveness of the foreign exchange interventions when the results from such an exercise are compared with those obtained from an event study analysis it is found that purchase based interventions seem to be successful especially after stabilization of the financial markets in that sense an asymmetry is detected regarding the effectiveness of interventions concerning the relationship between interest rates and exchange rates it is found that the uncovered interest rate parity condition operates in an unconventional way supporting the views put forward by recent emerging markets literature