Is Foreign Exchange Intervention Effective?: The Japanese Experiences in the 1990s

This paper examines Japanese foreign exchanges interventions from April 1991 to March 2001 based on newly disclosed official data. All the yen-selling (dollar-purchasing) interventions were carried out when the yen/dollar rate was below 125, while all the yen-purchasing (dollar-selling) interventions were carried out when the yen/dollar was above 125. The Japanese monetary authorities, by buying the dollar low and selling it high, have produced large profits, in terms of realized capital gains, unrealized capital gains, and carrying (interest rate differential) profits, from interventions during the ten years. Profits amounted to 9 trillion yen (2% of GDP) in 10 years. Interventions are found to be effective in the second half of the 1990s, when daily yen/dollar exchange rate changes were regressed on various factors including interventions. The US interventions in the 1990s were always accompanied by the Japanese interventions. The joint interventions were found to be 20-50 times more effective than the Japanese unilateral interventions. Japanese interventions were found to be prompted by rapid changes in the yen/dollar rate and the deviation from the long-run mean (say, 125 yen). The interventions in the second half were less predictable than the first half.

Using Signal Processing Tools for Regulation Analysis and Implementation

Regulators often face the challenge of designing and implementing rules that both, respond to the policy objectives and that can be clearly referred to the day-to-day operations and practices in the marketplace. In many cases, the actual codes end up being a cumbersome collection of conditions that are very difficult to evaluate and re-design. This paper suggests that some of the most commonly used tools in Signal Processing could offer a convenient vehicle for tackling these difficulties. By starting from a SIMULINK(R) model of the regulation of Banco de Mexico on the foreign exchange transactions of commercial banks, this paper offers an example of how those tools could be used in this context.

Designing Indexed Units of Account

An indexed unit of account is a unit of measurement defined using an index such as a consumer price index so that prices, wages or deferred payments defined in terms of these units will automatically adjust to changing economic conditions. Evidence on money illusion and sticky prices, and evidence from countries (notably Chile) that have created indexed units of account, suggests that creating such indexed units is an important policy option for governments in countries with unstable prices or incomes. Choices for governments designing indexed units of account are discussed. Governments may choose to encourage the use of the units only for large long-deferred non-wage payments, or they may choose to go to the opposite extreme of encouraging the use of the units for defining all prices, wages and payments. A general equilibrium model is given that shows the dynamics of prices when all prices are expressed in the units. Governments may choose to link units to a consumer price index or to a per capita income index, and there may be advantages to creating both kinds of units simultaneously. Downward rigidity of real wages might be reduced if wages are denominated in base-income-indexed units of account, where base income is defined so that the growth rate in money value of the unit is biased down relative to actual per capita income growth. Examples of the units for United States are displayed and discussed. Could add description of simulation, if that is added.Indexation, escalator clause, cost of living allowance (COLA), monetized indexed units of account, base income, money illusion, sticky prices, fairness, unidad de fomento, Chile

Cartesian genetic programming for trading: a preliminary investigation

In this paper, a preliminary investigation of Cartesian Genetic Programming (CGP) for algorithmic intraday trading is conducted. CGP is a recent new variant of genetic programming that differs from traditional approaches in a number of ways, including being able to evolve programs with limited size and with multiple outputs. CGP is used to evolve a predictor for intraday price movements, and trading strategies using the evolved predictors are evaluated along three dimensions (return, maximum drawdown and recovery factor) and against four different financial datasets (the Euro/US dollar exchange rate and the Dow Jones Industrial Average during periods from 2006 and 2010). We show that CGP is capable in many instances of evolving programs that, when used as trading strategies, lead to modest positive returns

Aid Effectiveness and the Millennium Development Goals

This paper focuses on key ways in which donors can improve the quality of foreign assistance and make it more effective in achieving the Millennium Development Goals (MDGs). The paper makes three central arguments. First, donors should be much more goal and results oriented in their assistance programs, and should work with low-income countries to ensure that poverty reduction strategies (PRSs) have specific, well-defined goals both in the short-run and long-run. PRSs should be expected to specifically refer to the MDGs, even if governments choose to adopt goals that do not exactly coincide with the MDGs. PRSs should provide both a "baseline scenario" with targets consistent with the most likely policy changes and levels of financing and a "high achievement" scenario with much more ambitious targets which lays out the additional policy, institutional, and financing changes needed to reach these goals. Second, donors must go beyond the rhetoric of "country selectivity" and actually begin to allocate aid more seriously to poorer countries with strong and moderate governance. Although there has been some improvement in aid allocation in recent years, much more can be done. Donors should establish basic rules for allocating aid based on the extent of poverty and the quality of governance, not to be dogmatic and rigid, but to provide some defenses against other forces that push aid allocations towards political and commercial considerations. Third, country selectivity should be conceived as much more than simply allocating more money to countries with stronger governance: it should change the way donors deliver aid to different countries. Well-governed countries should have a much greater say in designing aid programs, should receive more of their aid as program funding, and should receive longer-term commitments from the donor community. In these countries, foreign assistance should finance a broader set of activities, with most (but not all) of the funding channeled through the recipient government. Poorly governed countries should not only receive less money, they should receive more of it as project aid, it should come with a shorter time commitment, should be focused on a narrower set of activities, and much of it should be distributed through NGOs.Millennium Development Goals (MDGs), development assistance, poverty reduction strategy

The U.S. economy and monetary policy

Economic conditions - United States ; Monetary policy - United States ; Inflation (Finance)

Transforming Energy Networks via Peer to Peer Energy Trading: Potential of Game Theoretic Approaches

Peer-to-peer (P2P) energy trading has emerged as a next-generation energy management mechanism for the smart grid that enables each prosumer of the network to participate in energy trading with one another and the grid. This poses a significant challenge in terms of modeling the decision-making process of each participant with conflicting interest and motivating prosumers to participate in energy trading and to cooperate, if necessary, for achieving different energy management goals. Therefore, such decision-making process needs to be built on solid mathematical and signal processing tools that can ensure an efficient operation of the smart grid. This paper provides an overview of the use of game theoretic approaches for P2P energy trading as a feasible and effective means of energy management. As such, we discuss various games and auction theoretic approaches by following a systematic classification to provide information on the importance of game theory for smart energy research. Then, the paper focuses on the P2P energy trading describing its key features and giving an introduction to an existing P2P testbed. Further, the paper zooms into the detail of some specific game and auction theoretic models that have recently been used in P2P energy trading and discusses some important finding of these schemes.Comment: 38 pages, single column, double spac

Long-Term Care Partnership Expansion: A New Opportunity for States

An issue brief intended to inform states about new long-term care options through the Deficit Reduction Act of 2005. Reviews the Partnership for Long-Term Care program and presents design and implementation issues for states' consideration