Price-Quality Relations and Hedonic Price Indexes for Cars in the United Kingdom

The main objective of this paper is to employ a complete set of panel data on UK car characteristics to estimate a hedonic car price model. This enables us to examine price differences between various car models in terms of variations in individual car characteristics.We also pay greater attention to the specification of the hedonic price model than previous studies, as shown by the wide range of diagnostics reported. A second objective of the paper is to utilise the estimates of the hedonic price model to construct a hedonic price index for cars, which allows us to investigate the increase of car prices due to quality and non-quality factors.     

Long‐Run PPP under the Presence of Near‐to‐Unit Roots: The Case of the British Pound–US Dollar Rate*

Empirical tests typically provide evidence that the British pound–US dollar exchange rate and the relative wholesale price index contain exact unit roots and exhibit cointegration. However, the cointegrating vector is significantly different from [1, ?1], thus raising doubts on the validity of the purchasing power parity (PPP) hypothesis. Following Elliott (1998 ), we show that if the exchange rate and relative price series contain near‐to‐unit roots in the context of a bivariate system, then any inference on the “cointegrating” vector and consequently on PPP, which is based on standard cointegration estimation methods, will be misleading. We then argue that the existing evidence against the PPP hypothesis in the British pound–US dollar market can be attributed to the finite sample bias of the standard cointegration estimators, arising from an endogenous and “nearly” nonstationary regressor. We also show that when robust procedures are employed the evidence favors the PPP hypothesis.     

The monetary exchange rate model in the long run: An empirical investigation

The Monetary Exchange Rate Model in the Long Run: An Empirical Investigation. — This paper uses the Johansen multivariate cointegration method to examine three variants of the monetary approach to the long-run exchange rate model: flexible price, forward-looking and sticky price monetary models. Evidence is provided for four bilateral sterling exchange rates. The sensitivity of the results to the measurement of monetary aggregates is also examined. The cointegration results provide dismal evidence for the flexible price and forward-looking models irrespective of the measurement of money. The findings are more mixed for the sticky price model, particularly when broad money is used.     

Relative prices,investment incentives,cash flow,and vintage investment functions for UK manufacturing industries

This paper has two objectives: First, to calculate the present value of all investment incentives for ten 2-digit manufacturing industries and for total manufacturing over the period 1951–1974, by using actual rates of return as measures of the discount rate. Second, to estimate industry investment functions based on a vintage production model whose speed of adjustment is made a function of cash flow. The parameter estimates are used in a simulation analysis in order to estimate the effects on manufacturing investment of the various incentive systems adopted in the UK over the period 1951–1974 and to assess the potential impact of alternative policies.     

Structural breaks, rural transformation and total factor productivity growth in China

This paper carries out an empirical investigation into the contribution of rural transformation, which can produce efficiency gains over and above those associated with technical progress, to total factor productivity in China during the post-reform period 1980–2010. For the first time for China, the roles of rural transformation and technical progress are examined whilst structural breaks are taken into account. We employ Bai and Perron (Econometrica 66:47–68, 1998; J Appl Econom 18:1–22, 2003a; Econom J 6:72–78, 2003b) methods which allow for multiple structural breaks at unknown dates and can be applied for both pure and partial structural changes. We also evaluate the robustness of our results by employing alternative production functions and two capital series. Two structural breaks near the Tiananmen Square incident in 1989 and the implementation of further reforms and opening-up measures in 1995 were identified for both capital series. We found the contribution of rural transformation to total factor productivity to be significant and positive across all regimes. However, its importance to the growth of total factor productivity has been declining over time, while that of technical progress has been increasing.     

A dynamic asset market model for the exchange rate of the pound sterling

Zusammenfassung Ein dynamisches verm?genstheoretisches Modell zur Bestimmung des Wechselkurses für das Pfund Sterling. - Dieser Aufsatz soll untersuchen, wie inl?ndische und ausl?ndische Verm?genswerte in den H?nden von britischen Einwohnern sowie das Nordsee-?l den Wert des Pfunds Sterling beeinflussen. Zun?chst wird in Anlehnung an den verm?genstheoretischen Ansatz ein theoretisches Modell entwickelt. Anschlie\end wird die Ungleichgewichts-Version dieses Modells spezifiziert und auf fünf bilaterale Wechselkurse des Pfundes angewandt. Die Regressionsergebnisse, die anhand einer Reihe von statistischen Ma\en beurteilt werden, zeigen, da\ die Gleichungen das Verhalten des Pfundes ausreichend erkl?ren und für den gew?hlten Ansatz sprechen.

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Résumé Un modèle dynamique de marché d’actifs pour le taux de change de la livre sterling. - Cet article essaie d’examiner l’influence des actifs locaux et étrangers tenus par les résidents du RU, aussi bien du pétrole de la mer du Nord, sur la value de la livre sterling. D’abord, l’auteur développe un modèle théorique basé sur l’approche de la balance de portefeuille. Puis il spécifie une version de déséquilibre de ce modèle et l’applique aux cinq taux de change bilatéraux vis-à-vis la livre sterling. Il utilise quelques statistiques diagnostiques pour évaluer les résultats de régression qui expliquent d’une manière satisfaisante le développement de la livre sterling et supportent l’approche choisie.

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Resumen Un modelo dinámico del mercado de activos para la tasa de cambio de la libra esterlina. - El presente trabajo tiene por objeto examinar la infuencia que puedan tener activos nacionales y extranjeros en manos de residentes del Reino Unido como también el petróleo del Mar del Norte sobre el valor de la libra esterlina. En primer lugar se construye un modelo teórico basado en el ?portfolio balance approach?. Se especifica una versión de desequilibrio de este modelo que es aplicada a cinco tasas de cambio bilaterales de la libra esterlina. Varios estadísticos son utilizados para evaluar los resultados de la regresión, la cual presenta una explicatión satisfactoria de la conducta de la libra esterlina, confirmando así el enfoque aplicado.

     

Foreign exchange,fractional cointegration and the implied–realized volatility relation

Almost all relevant literature has characterized implied volatility as a biased predictor of realized volatility. In this paper we provide new time series techniques to investigate the validity of this finding in several foreign exchange options markets, including the Euro market. First, we develop a new fractional cointegration test that is shown to be robust to both stationary and non-stationary regions. Second, we employ both intra-day and daily data to measure realized volatility in order to assess the relevance of data frequency in resolving the bias. Third, we use data on implied volatility traded on the market. In contrast to previous studies, we show that the frequency of data used for measuring realized volatility within a fractionally cointegrating framework is important for the results of unbiasedness tests. Significantly, for many popular exchange rates, the use of intra-day rather than daily data affects the emergence of a different bias, as the possibility of a fractionally integrated risk premium admits itself!     

Some empirical evidence on the effects of U.S. monetary policy shocks on cross exchange rates

This paper examines the impact of U.S. monetary policy shocks on the cross exchange rates of sterling, yen and mark. The main finding of the paper is a ‘delayed overshooting’ pattern for all currency cross rates examined (sterling/yen, yen/mark and mark/sterling) following an unexpected U.S. monetary policy change, which in turn generates excess returns. We also provide evidence that the ‘delayed overshooting’ pattern in cross exchange rates is accompanied by asymmetric interventions by central banks in the foreign exchange markets under consideration triggered by a U.S. monetary policy shock.     

Structural breaks and the equilibrium real effective exchange rate of China: A NATREX approach

This paper investigates the equilibrium real effective exchange rate for the Chinese RMB during the post-reform period, 1982–2010. We extend the NATREX model in several important perspectives and apply it for the first time to China. A wide range of economic fundamentals that are unique to the Chinese economy is introduced into the model. We construct a unique set of quarterly data and employ unit root and cointegration tests that can account for multiple endogenous structural breaks. In addition, to capture the evolution of China's foreign trade pattern, we employ time-varying (i.e. 3-year average) trade weights to construct the real effective exchange rate. We find two structural breaks in the cointegration relationship (in 1988 and 1992). Effective terms of trade, demographic factors, liquidity constraints and government investment are significant determinants of the equilibrium real effective exchange rate. The RMB was overvalued against a basket of 14 currencies until mid-1980s. During 1986–2010, it was undervalued in most years except after the Asian financial crisis in 1997. We have found persistent undervaluation from 2004 onwards. However, the misalignment rates are much lower than those reported by previous studies and the undervaluation rate actually declined sharply in 2008. The undervaluation rate rose modestly in 2009 and sharply in 2010, though it is still lower than what has been suggested by other studies.