Speculative attacks and defenses as wars of attrition

This paper extends the currency crisis models in Obstfeld [Obstfeld, M., 1994. The logic of currency crises. Cahiers Economiques et Monetaries], [Obstfeld, M., 1996. Models of currency crises with self-fulfilling features. European Economic Review 40, 1037–1047] by modeling both the government's side and speculators' side and introducing uncertainty about each party's payoff. We argue that a speculative attack (defense) can be well modeled as a war of attrition between the government and speculators under asymmetric information. We then solve for a pure strategy, weakly perfect, Bayesian rational expectation equilibrium in which each party's time until concession depends on her benefits from winning and her costs of fighting. Using this model, we are able to explain important facts of currency crises. First, the model shows that failed defenses (attacks) can be ex-ante rational for governments (speculators). Second, the model predicts systematic variations in the durations of defenses. Finally, we also show that currency crises can be self-fulfilling in the sense that there exist multiple rational expectation equilibria in our model.     

我国外汇储备急剧增长的原因及实证检验

截至2011年6月,我国外汇储备已高达31 975亿美元。贸易顺差、人民币汇率、外商直接投资和货币供给量被普遍认为是影响我国外汇储备规模的普遍因素。通过实证分析探讨了这些因素与外汇储备急剧增长之间的关系,并给出了相应的政策建议。     

当前顺差、外汇储备和资产泡沫关系探讨

2006年我国贸易顺差达到创历史纪录的1774.7亿美元.顺差过多导致外汇储备过多,人民币升值压力增大,使得宏观调控特别是货币政策效果减弱,并且催生货币流动性过剩,导致国内股市和房地产有泡沫化趋势.目前大多数观点认为这种资产泡沫化趋势如不采取有力措施尽快调控将产生重大危害.本文认为过度资产泡沫很可能演变为金融危机,但是温和的泡沫对于目前国内经济是有利的.通过制定合理的政策,可以发挥资产泡沫的正面作用,缓解目前产能过剩与顺差的问题.     

Global impact of a shift in foreign reserves to euros

This paper uses QUEST III, a multi-region DSGE model, to study the macroeconomic effects of a gradual equalization of official foreign reserves between dollars and euros. We simulate a scenario of a shift in the composition of foreign reserves holdings from the present ratio of 65% dollars and 25% euros to equal 45% shares over a 10 years period. We assume imperfect substitutability between financial assets to allow this shift to have real effects. Our simulations point towards small real effects due to the reduction in real interest rates resulting from this shift in official holdings.

Growth of China's foreign exchange reserve

China's growing foreign exchange reserve is estimated to exceed $2 trillion by 2010. The purpose of its paper is to examine its impact on the balance sheet of the Chinese central bank, the money supply and the bond market. The paper will then move on to discuss its social welfare effect by comparing the estimated future return of the foreign exchange reserves with its opportunity costs measured by the potential return of domestic investments.     

Friction model and foreign exchange market intervention

The friction model is consistent with the hypothesis that a central bank intervenes in a foreign exchange market only if the necessity grows beyond certain thresholds. For this feature, the model is adopted in some recent studies as an attractive central bank reaction function. However, with official data on Federal Reserve and Bundesbank intervention, this paper shows that the friction model's advantage relative to a linear model may be negligible in terms of RMSE and MAE of in-sample fitting and out-of-sample forecasts. The implication is that intervention decisions are at the monetary authorities' discretion rather than dictated by a rule.     

Heterogeneous expectations in the foreign exchange market

In this study a regime-switching approach is applied to estimate the chartist and fundamentalist (c&f) exchange rate model originally proposed by Frankel and Froot (1986). The c&f model is tested against alternative regime-switching specifications applying likelihood ratio tests. Nested atheoretical models like the popular segmented trends model suggested by Engel and Hamilton (1990) are rejected in favour of the multi-agent model. Our findings turned out to be relatively robust when assessing the models sub-sample estimates and out-of-sample performance.JEL Classification: F31, F37, G12, G15 Correspondence to: S. Reitz     

A fractal analysis of foreign exchange markets

Long memory in foreign exchange markets is examined for the post-Bretton Woods period using Lo's [1991] modified rescaled range (R/S). Conventional R/S techniques are presented for comparison. Unlike conventional techniques, Lo's analysis is robust to short-term dependence and conditional heteroskedasticity. Significant long memory and fractal structure are conclusively demonstrated for all 22 countries studied, indicating that traditional econometric methods are inadequate for analyzing foreign exchange markets. However, short-term dependence and conditional heteroskedasticity are also present, making it difficult to describe the nature of the long memory process or processes in foreign exchange markets. The average nonperiodic cycle ranges from 7 months for Canada and the United Kingdom, to approximately 20 months for Austria, Finland, France, Germany, Ireland, Japan, Malaysia, Netherlands, Sweden, and Switzerland. No support is found for the efficient market hypothesis. Results broadly agree with those provided by less sophisticated, less robust R/S methodologies and suggest the possibility that traditional technical analysis should be able to achieve systematic positive returns. This paper was presented at the Forty-Sixth International Atlantic Economic Conference, Boston, MA, October 8–11, 1998. The author is profoundly indebted to the session discussant, Takashi Kamihigashi, and to Nicholas Apergis for many helpful comments, to colleague Patrick Allen Hays who provided FORTRAN programs to estimateH and perform the Lo analysis and who provided immeasurably invaluable advice and support, to student Mark Douglas Wells, Jr. who assisted as part of the undergraduate honors project in the Honors College of Western Carolina University, and to an anonymous referee whose comments greatly improved the paper. Responsibility for any shortcomings belong to the author.     

Central bank intervention and foreign exchange volatility

This paper provides additional empirical evidence on the topic of the effectiveness and the impact of Federal Reserve intervention on U.S. exchange rates. Using a daily measure of exchange rate intervention in the yen/dollar and mark/dollar exchange markets for the period January 3, 1985 to March 19, 1997, this paper finds a statistically significant impact of intervention on spot rates. A generalized autoregressive conditional heteroskedasticity exchange rate equation is used to measure the impact of intervention on exchange rate uncertainty. This study finds that intervention is associated with a significant increase in the interday conditional variance (uncertainty) of both bilateral spot exchange rates. This supports the view of Friedman and Schwartz that exchange rate intervention serves to destabilize the foreign exchange market by introducing additional levels of exchange rate uncertainty.     

Financial amplification of foreign exchange risk premia

Theories of financial frictions in international capital markets suggest that financial intermediaries' balance sheet constraints amplify fundamental shocks. We present empirical evidence for such theories by decomposing the U.S. dollar risk premium into components associated with macroeconomic fundamentals, and a component associated with financial intermediary balance sheets. Relative to the benchmark model with only macroeconomic state variables, balance sheets amplify the U.S. dollar risk premium. We discuss applications to financial stability monitoring.     

国际工程承包项目汇率风险应对

随着人民币汇率的上升,许多中国承包商在国际工程项目上,特别是以美元作为收支款项货币的项目,因未能采取有效的汇率风险防范措施蒙受了巨大的利润损失,有的甚至陷入了亏损的境地.未来的汇率走势难以预测,承包商应当对汇率风险采取适当的措施加以管理.本文以国际工程项目寿命周期为主线,研究承包商在项目各个阶段的汇率风险应对方法.     

On the neglect of foreign exchange risk premiums

This note discusses the slope coefficient of a linear regression of the rate of exchange rate depreciation on the interest differential. It is shown that the variance of the rationally expected rate of depreciation exceeds the variance of the foreign exchange risk premium if that coefficient exceeds the value 0.5 (and vice versa). Empirical results indicating that the variance of the risk Premium typically exceeds the variance of the rationally expected rate of depreciation are presented.     

Frequency domain analysis of foreign exchange order flows

Using a unique data set from the Bank of Canada, this paper presents the frequency domain analysis of a causal relationship between the Canada/US dollar exchange rate movements and currency order flows. The evidence shows that the existence as well as the direction of causality depends on the customer type, frequency, and time period.     

The foreign exchange constraint,suppression of the trade deficit and the shadow price of foreign exchange in a fix-price economy

The foreign exchange gap is analysed as a possible feature of a fix-price economy. The implications of closing the gap by means of import rationing are then discussed. Finally, a set of shadow rates of exchange is derived. These shadow prices are conditional on the prevailing regimes, and include the paradoxical possibility of a negative shadow rate of exchange.     

Speculative trading with rational beliefs and endogenous uncertainty

Summary. This paper introduces the framework of rational beliefs of Kurz (1994), which makes the assumptions of heterogeneous beliefs of Harrison and Kreps (1978) and Morris (1996) more plausible. Agents hold diverse beliefs that are “rational” in the sense of being compatible with ample observed data. In a non-stationary environment the agents only learn about the stationary measure of observed data, but their beliefs can remain non-stationary and diverse. Speculative trading then stems from disagreements among traders. In a Markovian framework of dividends and beliefs, we obtain analytical results to show how the speculative premium depends on the extent of heterogeneity of beliefs. In addition, we demonstrate that there exists a unique Rational Belief Equilibrium (RBE) generically with endogenous uncertainty (as defined by Kurz and Wu, 1996) and that the RBE price is higher than the rational expectation equilibrium price (REE) under some general conditions Received: March 15, 2001; revised version: April 26, 2002 RID="*" ID="*" We are deeply grateful to Mordecai Kurz for his constant encouragement and inspiring guidance over the years. We wish to express our gratitude to an anonymous referee for the very valuable comments provided. We also thank Kenneth Arrow, Peter Hammond, Roko Aliprantis and Nicholas Yannelis for their helpful suggestions and Academia Sinica and the National Science Council of the R.O.C. for their indispensable support. Correspondence to: H.-M. Wu     

对外工程承包公司的恐怖险研究

编者按:随着我国承包商在国际工程承包市场的份额逐年大幅增长,驻外工程人员的安全问题引起各界广泛关注.发展中国家突发事件频起、政治动荡不安带来的风险,特别是阿富汗和巴基斯坦连续出现针对我国工程人员的恐怖袭击,使得我国对外承包工程企业面临着前所未有的挑战.对海外工程投保恐怖险的重要性凸显,建立相应的对外工程承包风险保障制度也愈益迫切.     

Predicting foreign exchange movements using historic deviations from PPP

The ability to forecast FX rates from historical exchange rate movements is examined. An eight nation study shows a currency's deviation from the rate predicted by PPP over a four year period can predict the direction of its movement in the subsequent one to four years. We show short term exchange rate movements of freely floating currencies are large in comparison with changes in economic fundamentals and these movements accumulate to create pressure which results in a predictable pattern of reversal. The results are robust across currencies and relatively insensitive to the time parameters used in the estimation.     

Evidence on the contrarian trading in foreign exchange markets

This paper investigates the existence and price impacts of contrarian behavior in the foreign exchange markets. By utilizing a nonlinear behavioral model where the chartists and fundamentalists coexist, evidence obtained from two sample periods significantly supports the existence of contrarian trading in the British pound, the Japanese yen and the German mark markets. The contrarian trading can only partially offset the price impacts of trend-followers, therefore the price impact of the chartists as a whole is destabilizing. The ability that the contrarians can counterbalance the extrapolation of the trend-followers differs across markets. Traders in the BP market have the highest tendency to contrarian strategy, which in turn contributes to the least deviations of the BP exchange rates departing from its PPP fundamentals. The fundamentalists' confidence in trade fades during large misalignments, which make the mean reversion function of the fundamentalists weak under the circumstances. We find the magnitudes of interventions will be affected by the price impacts of contrarians and their abilities on market stabilization.     

境外承包工程中的外汇管理

我国对外工程承包事业经过二十多年的发展,已经形成相当规模。我国加入WTO 后世贸组织成员国也将向中国开放更多的市场,更有利于带动国产设备和材料的出口。国产设备和材料的国际比价相对较低,有利于降低对外承包工程的成本,提高国内企业在国际市场的竞争力。因此,对外工程承包无论从量与质等方面都将有很大发展。外汇管理部门如何应对这一形势发展的要求,成为了摆在我们面前需要重点研究的课题。一、境外承包工程及其收汇的特点境外承包工程具有自身特征。（1）收付汇主体的多元性。即在工程外汇收付主体中,有发包人、承包人、分…