A Comparison of Two Alternative Monetary Approaches to Exchange Rate Determination over the Long-Run

The aim of this paper is to compare the conventional monetary model of the exchange rate with an alternative model, which incorporates a stock price measure and is based on Friedman?s money demand function. These models are then compared using data from the UK, Canada and the USA, applying the Autoregressive Distributed Lag (ARDL) Bounds testing approach and the Phillips-Hansen approaches to cointegration. Although the results from the conventional monetary model are poor, the version which includes stock prices produces evidence of a long-run relationship, which has more appropriate long-run coefficients than the conventional model.Exchange Rate, Stock Price, ARDL, Cointegration

Exchange Rates and Stock Prices in the Long Run and Short Run

Using the ARDL bounds testing approach to cointegration this paper provides evidence of a stable long run relationship between the exchange rate and stock prices for the UK, Japan and Swiss currencies with respect to the US dollar. The resultant error correction models suggest a positive relationship between stock prices and the exchange rate, which in an out-of-sample forecast outperforms the random walk. We compare these results with a similar model incorporating interest rates, suggested by Solnik (1987), however this does not in general improve the results.stock prices; forecast; cointegration; exchange rates

Lidar observations of polar stratospheric clouds at McMurdo, Antarctica, during NOZE-2

SRI International operated a dual wavelength (1.064 micrometer and .532 micrometer) aerosol lidar at McMurdo Station, Antarctica, as part of the National Ozone Expedition-2 (NOZE-2). The objective of the project was to map the vertical distributions of polar stratospheric clouds (PSCs), which are believed to play an important role in the destruction of ozone in the Antarctic spring. Altitude, thickness, homogeneity, and duration of PSC events as well as information on particle shape, size or number density will be very useful in determining the exact role of PSCs in ozone destructions, and when combined with measurements of other investigators, additional properties of PSCs can be estimated. The results are currently being analyzed in terms of PSC properties which are useful for modeling the stratospheric ozone depletion mechanism

Sovereign Credit Default Swaps and the Macroeconomy

The aim of this study is to determine whether the domestic interest rate or the exchange rate affect the sovereign credit default swaps. To date most studies on corporate CDS markets have emphasised the importance of domestic factors such as the interest rate. But with the sovereign CDS market, the international environment also needs to be incorporated into any analysis. Using a VAR and Granger non-causality tests, the results suggest that it is the exchange rate that has the most important effect on sovereign CDS markets, with domestic interest rates having only a marginal effect.

Greece shows the flaws in pursuing a common monetary policy response to economic shocks across the EU

To what extent is the Greek debt crisis a function of wider flaws in the design of the single currency? Bruce Morley writes that while Greece’s debt already exceeded 100 per cent of GDP in the 1990s, it is not simply the size of a country’s debt that determines whether it is sustainable. He argues that the real problems illustrated by Greece stem from the application of a common monetary policy across the Eurozone despite key structural differences between individual Eurozone economies

Uncovered Interest Parity and the Risk Premium

The aim of this study is to analyze the potential risk premium inherent in the uncovered interest parity (UIP) condition. In this approach the GARCH class models, including Component GARCH are used to measure the time-varying risk premium and the results show that it is significant in most countries studied in this analysis. This suggests that risk is an important part of modeling exchange rates and needs to be considered in both empirical and theoretical models. In general, the results suggest emerging countries work better in terms of UIP and the risk premium than developed countries.

To Bat or Not to Bat: An Examination of Contest Rules in Day-night Limited Overs Cricket

The tradition of tossing a coin to decide who bats first in a cricket match introduces a randomly-assigned advantage to one team that is unique in sporting contests. In this paper we develop previous work on this issue by examining the impact of the toss on outcomes of day-night one day international games explicitly allowing for relative team quality. We estimate conditional logit models of outcomes using data from day-night internationals played between 1979 and 2005. Other things equal, we find that winning the toss and batting increases the probability of winning by 31%. In contrast, winning the toss does not appear to confer any advantage if the team choose to bowl first.cricket, contest rules, match results, competitive balance, outcome uncertainty

Purchasing power parity and structural instability in the US/UK exchange rate

The aim of this study is to determine if nonlinearities have affected purchasing power parity (PPP) since 1885. Also using recent advances in the econometrics of structural change we segment the sample space according to the identified breaks and look at whether the PPP condition holds in each sub-sample and whether this involves linear or non-linear adjustment. Our results suggest that during some sub-periods, PPP holds, although whether it holds or not and whether the adjustment is linear or non-linear, depends primarily on the type of exchange rate regime in operation at any point in time

Forecasting the Exchange Rate with the Taylor Rule Model during Times of Alternative Monetary Policies

This study aims to incorporate the effects of recently used alternative monetary policies, such as quantitative easing into standard Taylor rule exchange rate models. Using out-of-sample forecasting, we determine whether including long-term government bond yields and shadow interest rates improves on these model’s performance. Using data from the Eurozone, Japan, UK and USA, we perform out of sample forecasts using a rolling window, the results suggest that the model with government bond returns performs best against the random walk, although the results vary across countries, particularly when we compare the forecasts with those produced by a version of UIP