187 research outputs found
International Shocks and the Role of Domestic Policy in Australia
VAR, open economy, monetary policy
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Detecting Contagion with Correlation: Volatility and Timing Matter
We examine whether contagion tests are affected by controls for volatility clustering and the collection of synchronized data sets. Without controlling for volatility clustering synchronization does not apparently matter. Once volatility clustering is accounted for synchronized data dramatically changes results
Cojumping: Evidence from the US Treasury Bond and Futures Market
The basis between spot and future prices will be affected by jump behavior in each asset price, challenging intraday hedging strategies. Using a formal cojumping test this paper considers the cojumping behaviour of spot and futures prices in high frequency US Treasury data. Cojumping occurs most frequently at shorter maturities and higher samling frequencies. We find that the presence of an anticipated macroeconomic news announcement is sufficient to change the probability of observing cojumps. Moreover, news surprises in non-farm payrolls, CPI, GDP and retail sales play a leading role in changing the probabilities of cojumps. However, surprises in non-farm payrolls also increase the probability of the cojumping tests being unable to determine whether jumps in spots and futures occur contemporaneously. On these occasions the market does not clearly signal its short term pricing behavior
An Empirical Analysis of the Effect of Growth on Inflation, Australia, Canada and the United States
Inflation, growth, potential growth, monetary policy
Testing for contagion using correlations: some words of caution
Tests for contagion in financial returns using correlation analysis are seriously affected by the size of the ânoncrisisâ and âcrisisâ periods. Typically the crisis period contains relatively few observations, which seriously affects the power of the test.Financial crises ; Financial markets
Cojumping: Evidence from the US Treasury Bond and Futures Markets
The basis between spot and future prices will be affected by jump behavior in each asset price, challenging intraday hedging strategies. Using a formal cojumping test this paper considers the cojumping behavior of spot and futures prices in high frequency US Treasury data. Cojumping occurs most frequently at shorter maturities and higher sampling frequencies. We find that the presence of an anticipated macroeconomic news announcement, and particularly non-farm payrolls, increases the probability of observing cojumps. However, a negative surprise in non-farm payrolls, also increases the probability of the cojumping tests being unable to determine whether jumps in spots and futures occur contemporaneously, or alternatively that one market follows the other. On these occasions the market does not clearly signal its short term pricing behavior.US Treasury markets, high frequency data, cojump test
The Steady Inflation Rate of Economic Growth
This paper considers the existence of a path of GDP corresponding to steady inflation in the prices of domestic goods. We estimate the steady inflation rate of growth, denoted the SIRG, at a little over 4 per cent per annum in the post-float period. Changes in inflation are modelled as a nonlinear combination of growth and changes in import price inflation. Because import price inflation is more volatile than overall inflation, policy that targets overall inflation may require growth to fluctuate considerably, whereas growth can be steady if the target is steady inflation of domestic goods' prices.inflation, growth , import prices, monetary policy
Factor analysis of a model of stock market returns using simulation-based estimation techniques
A dynamic latent factor model of stock market returns is estimated using simulation-based techniques. Stock market volatility is decomposed into common and idiosyncratic components, and volatility decompositions are compared between stable and turmoil periods to test for possible shift-contagion in equity markets during Asian financial crisis. Five core Asian emerging stock markets are analyzedâThailand, Indonesia, Korea, Malaysia and the Philippines. Results identify the existence of shift-contagion during the crisis and indicate that the Thai market was a trigger for contagious shock transmission. ; Monte Carlo experiments are conducted to compare simulation method of moments and indirect inference estimation techniques. Consistent with the literature such experiments find that, in the presence of autocorrelation and time-varying volatility, indirect inference is a better method of conducting variance decomposition analysis for stock market returns than the conventional method of moments.Stock market ; Asia
A Perspective on Modelling the Real Trade Weighted Index Since the Float
exchange rates, cointegration
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International financial contagion: what do we know?
This paper attempts a synthesis of theoretical and empirical work on international financial contagion. Although a professional consensus on the appropriate definitions of contagion has yet to emerge, we document substantial research progress towards this goal. On the empirical front, determining when returns are âexcessiveâ is a pre-condition for designing effective policy response to crises. At the theoretical level, tracing the observed herding behavior to market participantsâ uncertain beliefs and information asymmetries is a key element for understanding how contagious effects arise. It is argued that the recent focus on better understanding of high-frequency financial returns data and decision making at the market microstructure level are promising avenues for understanding the transmission of shocks across markets and countries
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