Calibrating an algorithm for estimating transactions from FXFX exchange rate quotes

In this paper we investigate the efficiency of a class of transaction-generating algorithms, originally suggested in Bollerslev and Domowitz (1993). Our comparison utilizes real transaction data recorded over Reuters D2000-2 electronic broking system for 7 h in June 1993 and transaction data generated from FXFX quotations over an identical period. Results suggest that, at this high-frequency data sampling, the performance of these transaction-generating algorithms is poor, with the most likely explanation of this outcome due to the high-frequency characteristics of FXFX spreads and quotation intensity.     

Estimating the credibility of an exchange rate target zone

Recent breakthroughs in the theory of exchange rate target zones have not been followed by similar contributions on the empirical side. The drift adjustment method of evaluating the credibility of a target zone has become common practice. However, the estimates of the expected rate of depreciation inside the band do not model knowledge of the band in the agents' information set. In this paper, a rational expectations limited-dependent variable method to estimate the expected rate of depreciation is used to remedy this weakness. In the case of the franc-mark target zone with daily data covering a 4-year period, we show that expected rates of devaluation of the order of 2.5% were still present in the early 1990s. Their reappearance in the autumn of 1992 may thus not be surprising.     

Post Bretton Woods deviations from purchasing power parity in G7 exchange rates—an empirical exploration

Exchange rates have deviated substantially and idiosyncratically from purchasing power parity (PPP) since the breakdown of Bretton Woods. In this paper, a model incorporating both traditional PPP and financial market variables is constructed and tested on the US dollar's six G7 exchange rates during the floating rate era. Empirical tests show that the model's common set of variables—with consistent signs—can explain the divergent behavior of G7 exchange rates during 1973.2–90.2. Idiosyncracies are reflected in different subsets of the model's variables entering significantly into each exchange rate's regression; the existence of stable relationships is demonstrated by the equations' co-integration.     

我国生物资产准则与IAS41的比较与思考

本文对我国生物资产会计准则与IAS41的异同点进行了比较分析,并在此基础上对当前和今后我国生物资产准则的完善进行了探讨。作者认为,我国生物资产准则与IAS41相比,在规范范围,生物资产确认、计量和披露诸方面实现了“大同”,但也存有“小异”;“大同”是我国实现会计国际趋同的客观要求,“小异”则是我国当前会计环境和会计改革进程的必然。从长远看,生物资产的计量应逐步由以历史成本为主转为以公允价值为主,实现计量属性选择优先序与IAS41的一致,同时,应在未来修订的生物资产准则和应用指南中充实、细化其信息披露的相关内容。     

Financial statement data in assessing the future potential of a technology firm: The case of Nokia

The paper introduces a financial statement method to assess the future potential of a firm. First, the last strategic steady phase is identified. Second, growth rate for total expenditure is estimated (growth process). Third, the revenue generating potential of total expenditure is evaluated by a distributed lag function (revenue-generating process). This function is used to recalculate expenses and assets using alternative depreciation theories. Third, financial behavior is modeled by analyzing financial assets, taxation, interest expenses and revenues, and dividends (financial process). Fourth, these processes are used to assess the future potential. The method is illustrated by the case of Nokia for the period 1990-2000.     

Trade costs, firms and productivity

This paper examines the response of U.S. manufacturing industries and plants to changes in trade costs using a unique new dataset on industry-level tariff and transportation rates. Our results lend support to recent heterogeneous-firm models of international trade that predict a reallocation of economic activity towards high-productivity firms as trade costs fall. We find that industries experiencing relatively large declines in trade costs exhibit relatively strong productivity growth. We also find that low-productivity plants in industries with falling trade costs are more likely to die; that relatively high-productivity non-exporters are more likely to start exporting in response to falling trade costs; and that existing exporters increase their shipments abroad as trade costs fall. Finally, we provide evidence of productivity growth within firms in response to decreases in industry-level trade costs.     

Target zones in theory and history: Credibility, efficiency, and policy autonomy

An experiment with an exchange-rate band in Austria-Hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones. Providing a new derivation of the target zone model as a set of nested hypotheses, the inference is drawn that policy credibility and market efficiency were paramount in the success of the Austro-Hungarian experience.     

The impact of monetary policy on the exchange rate: evidence from three small open economies

This paper studies the impact effect of monetary policy shocks on the exchange rate in Australia, Canada, and New Zealand during the 1990s. Shocks are identified by the reaction of three month market interest rates to policy announcements that were not themselves endogenous to economic news on the same day. The main result is that a 100 basis point contractionary shock will appreciate the exchange rate by 2-3 percent on impact. The association of interest rate hikes with depreciations that is sometimes observed during periods of exchange market pressure is mainly attributable to reverse causality.     

Dynamic risksharing in the United States and Europe

We use a panel VAR model to improve upon the existing methodologies to analyze interregional risksharing and consumption smoothing channels. First, we endogenize the output process within a more general multi-equation framework, capturing the dynamic feedback between output and various smoothing channels. Second, in line with dynamic general equilibrium open economy models of risksharing, we exploit impulse response functions to trace the role of each smoothing channel over time, in the presence of different structural shocks (temporary vs. permanent and output vs. smoothing channels). In the application to the US and OECD countries, we find different dynamic properties of different smoothing channels. We compare our results with the predictions of standard risksharing and consumption theories, and tackle some of the puzzles in the literature, such as the “international risksharing puzzle” and the “consumption-output correlation puzzle.” We are also able to address such policy issues as whether fiscal stabilizers have been substitutes or complements for financial market diversification activities and whether further financial market integration is likely to provide countries with more shock-absorption tools. A key result is the strong substitutability between capital and credit smoothing in the US, and between fiscal and credit smoothing in the OECD.     

Monetary policy in emerging markets: Can liability dollarization explain contractionary devaluations?

In emerging markets, external debt is denominated almost entirely in large, developed country currencies such as the U.S. dollar. This liability dollarization offers a channel through which exchange rate variation can lead to business cycle instability. When firms' assets are denominated in domestic currency and liabilities are denominated in foreign currency, an exchange rate depreciation worsens firms' balance sheets, which leads to higher capital costs and contractions in capital spending. To illustrate this, I construct a quantitative, sticky price, small open economy model in which a monetary policy induced devaluation leads to a persistent contraction in output. In this model, fixed exchange rates offer greater stability than an interest rule that targets inflation.