Speculative attack against the Hungarian forint

In mid-January 2003 a severe speculative attack was launched against the exchange rate of the Hungarian forint. The attack was very unusual in the history of foreign exchange speculations, since it was aimed at enforcing the appreciation — and not the depreciation — of the currency targeted. The specific nature of this kind of speculation is closely related to Hungary’s accession to the European Union in general and to EMU in particular. Since the other Central and Eastern European acceding countries face similar problems and challenges, the Hungarian experience may involve some instructive lessons on monetary and economic policy for them too.     

Costs and benefits of EU enlargement

While the political benefits of the coming EU enlargement are relatively easy to identify, its economic and financial consequences are less unequivocal. The following article examines the likely costs and benefits of enlargement to both existing and future Members, and in particular how it will affect Germany, one of the few present EU Member States which has direct borders with acceding states. The article expresses the personal opinions of the author.     

The New Economy is dead,long live the information economy

The arrival of the 2001–2003 recession caused many to suppose that the so-called “New Economy” was now defunct. This article addresses a number of related issues, including the question of the durability and viability of business cycles in the face of the technological developments of the information age. It asks what went wrong with the New Economy and examines its characteristics as well as its remaining possibilities and prospects for the future. Finally, it considers the spread of the Information Economy to Europe, especially to Germany, the country that one might expect to be the leading European player, but which is not at present actually a strong competitor for that role.     

Approximating unanimity orderings: An application to Lorenz dominance

Stochastic dominance and Lorenz dominance are examples of orderings which require unanimous agreement among an infinite set of indices. This paper considers various subsets of inequality measures that respect Lorenz dominance, and assesses the extent to which a small number of indices can reproduce the Lorenz ordering. Using income data for 80 countries, our results suggest that Lorenz dominance can be predicted with 99% accuracy using just 3 or 4 inequality measures, as long as two of them focus on the extreme upper and lower tails of the distribution. In contrast, confining attention to the index families and parameter ranges normally considered may fail to detect the majority of occasions when Lorenz curves intersect. These results lead us to question the faith placed in procedures based on a finite set of inequality indices, and to suggest that similar lessons will apply to other types of unanimity orderings.     

Some Tests of APT Mispricing Using Mimicking Portfolios

Cross-sectional and time-series tests using mimicking portfolios are used to assess the exactness of the APT with(out) a residual market factor. The first factor seems to be sufficient to span the efficient set, whether the model is estimated using (un)conditional variance-covariance matrices that are (un)adjusted for nonsynchronous trading. Although the conditional standard deviations of the mimicking portfolios significantly explain the time-variability of security volatilities, the residuals of the mean equation still exhibit heteroskedasticity. Similar results are obtained for portfolios of CAPM-betaranked securities, and for randomly selected individual securities.