Long memory in energy futures prices

This paper extends the work in Serletis [Serletis, A. (1992). Unit root behavior in energy futures prices. The Energy Journal 13, 119-128] by re-examining the empirical evidence for random walk type behavior in energy futures prices. It tests for fractional integrating dynamics in energy futures markets utilizing more recent data (from January 3, 1994 to June 30, 2005) and a new semi-parametric wavelet-based estimator, which is superior to the more prevalent GPH estimator (on the basis of Monte-Carlo evidence). We find new evidence that energy prices display long memory and that the particular form of long memory is anti-persistence, characterized by the variance of each series being dominated by high frequency (low wavelet scale) components.     

The Performance Effect of Feedback Frequency and Detail: Evidence from a Field Experiment in Customer Satisfaction

This paper presents the results from a field experiment that examines the effects of nonfinancial performance feedback on the behavior of professionals working for an insurance repair company. We vary the frequency (weekly and monthly) and the level of detail of the feedback that the 800 professionals receive. Contrary to what we would expect if these professionals conformed to the model of the Bayesian decision maker, more (and more frequent) information does not always help improve performance. In fact, we find that professionals achieve the best outcomes when they receive detailed but infrequent (monthly) feedback. The treatment groups with frequent feedback, regardless of how detailed it is, perform no better than the control group (with monthly and aggregate information). The results are consistent with the information in the latest feedback report being most salient and professionals in the weekly treatments overweighting their most recent performance, hampering their ability to learn.     

Inflation Targeting,Recursive Inattentiveness,and Heterogeneous Beliefs

We consider a monetary authority that provides an explicit inflation target in order to align expectations with the policy objective. However, biased perceptions of the target may arise due to imperfect information flows. We allow agents to revise expectations over time and we model their recursive choice among prediction strategies as an optimization problem under rational inattention. We then investigate whether a simple policy rule can steer the economy toward the targeted equilibrium. Our findings suggest that determinacy under rational expectations may not be sufficient to reach the target. Instead, monetary policy should be fine‐tuned to correct agents' biased beliefs.     

The α-stable processes and their relationship with the exponent of self-similarity: Exchange rates of USA Dollar,Canadian Dollar,Euro and Yen

This research work analyzes the yields of the exchange rate parities of the American dollar, Canadian dollar, Euro, and Yen; estimates the basic statistics and the α-stables; carries out the Kolmogorov–Smirnov, Anderson–Darling, and Lilliefors goodness of fit tests; estimates the self-similar exponents and carries out the t and F tests, ruling out that the series of parities are multifractal. It also estimates the confidence intervals of the exchange rate parities and concludes that the estimated α-stable distributions are more efficient than the Gaussian distribution to quantify the risks of the market, and that the series are self-similar. Through the ? index, we can infer the risk of the events, indicating that the parities are anti-persistent and thus have short-term memory, mean reversion, and a negative correlation with the high risk in the short and medium term. The estimation and validation of the α-stable distributions and the self-similar exponent are important in the evaluation and creation of innovative investment instruments through financial engineering, risk administration, and the evaluation of derived products.     

Inequalities of opportunity in the access and use of telecommunication services in Togo

The liberalization of the telecommunications sector in Togo aimed at ensuring access to a better quality of telecommunication services at affordable prices to everyone. While the liberalization policy has increased competition in the sector and reduced significantly telecommunication services prices charged to costumers, statistics on the access and use of telecommunication services in Togo reveal disparities with respect to individuals' socio-economic characteristics which could be an indication of the existence of inequalities of opportunities in the access and use of these services.This paper investigates the inequalities of opportunity in the access and use of telecommunication services in Togo using a parametric approach. The results of estimations indicate that, inequalities of opportunities are larger for men and the elderly than respectively women and youths and are more pronounced in urban areas and regions such as the Plateaux and Savanna regions. Moreover, the circumstance variables such as the ‘place of residence’ and the ‘region’ are the key variables in explaining the inequalities of opportunities in the access and use of telecommunication services in Togo. So, policies toward reducing inequalities of opportunity in the access and use of telecommunication services in Togo should be designed with regards to men, the elderly, and people living in urban areas and regions such as the Plateaux and Savanna regions.     

Loan supply shocks during the financial crisis: Evidence for the Euro area

This paper employs a panel vector autoregressive model for the member countries of the Euro Area to explore the role of banks during the slump of the real economy that followed the financial crisis. In particular, we seek to quantify the macroeconomic effects of adverse loan supply shocks, which are identified using sign restrictions. We find that loan supply shocks significantly contributed to the evolution of the loan volume and real GDP growth in all member countries during the financial crisis. However, concerning both, the timing and the magnitude of the shocks our results also indicate that the Euro Area was characterized by a considerable degree of cross-country heterogeneity.     

Taylor rules and the Canadian–US equilibrium exchange rate

This paper identifies the Canadian–US equilibrium exchange rate based on a simple structural model of the real exchange rate, in which monetary policy follows a Taylor-rule interest rate reaction function. The exchange rate is explained by relative output and inflation as observable variables, and by unobserved equilibrium rates as well as unobserved transitory components in output and the exchange rate. Using Canadian data over 1974–2009 we jointly estimate the unobserved components and the structural parameters using the Kalman filter and Bayesian technique. We find that Canada's equilibrium exchange rate evolves smoothly and follows a trend depreciation. The transitory component is found to be very persistent but much more volatile than the equilibrium rate, resulting in few but prolonged periods of currency misalignments.     

The effect of IMF lending on the probability of sovereign debt crises

This paper explores empirically how the adoption of IMF programs affects sovereign risk over the medium term. We find that IMF programs significantly increase the probability of subsequent sovereign defaults by approximately 1.5–2 percentage points. These results cannot be attributed to endogeneity bias as they are supported by specifications that explain sovereign defaults and program participation simultaneously. Furthermore, IMF programs turn out to be especially detrimental to fiscal solvency when the Fund distributes its resources to countries whose economic fundamentals are already weak. Our evidence is therefore consistent with the hypothesis that debtor moral hazard is most likely to occur in these circumstances. Other explanations that point to the effects of debt dilution and the possibility of IMF triggered debt runs, however, are also possible.     

Real exchanges rates in commodity producing countries: A reappraisal

Commodity price booms, as those recorded in the last decade, may have a significant economic impact in small, commodity exporting, developing countries. Whether the impact on output is positive or negative is still unclear. It depends on various factors, notably on the impact that commodity prices can have on the real exchange rate of the commodity exporting countries. Two recent papers show that the real exchange rate appreciates when commodity prices increase. Our analysis produces new estimates of this relationship by focusing on a large sample of developing countries which are specialized in the export of one leading commodity. By using non-stationary panel techniques robust to cross-sectional dependence, we find that the price of the dominant commodity has a significant long-run impact on the real exchange rate when the exports of the leading commodity have a share of at least 20 percent in the country's total exports of merchandises. Our results also show that the larger this share, the larger the size of the impact.     

Combining equilibrium,resampling, and analyst’s views in portfolio optimization

This paper proposes the use of a portfolio optimization methodology which combines features of equilibrium models and investor’s views as in Black and Litterman (1992), and also deals with estimation risk as in Michaud (1998). In this way, our combined methodology is able to meet the needs of practitioners for stable and diversified portfolio allocations, while it is theoretically grounded on an equilibrium framework. We empirically test the methodology using a comprehensive sample of developed countries fixed income and equity indices, as well as sub-samples stratified by geographical region, time period, asset class and risk level. In general, our proposed combined methodology generates very competitive portfolios when compared to other methodologies, considering three evaluation dimensions: financial efficiency, diversification, and allocation stability. By generating financially efficient, stable, and diversified portfolio allocations, our methodology is suitable for long-term investors such as Central Banks and Sovereign Wealth Funds.