Financial liberation and adjustment in Chile and New Zealand

The authors analyze macrodynamic adjustment during financial liberalization in Chile and New Zealand. During the adjustment to more open capital accounts in the late 1970s or mid-1980s, both countries experienced appreciation of the real exchange rate and a collapse of net exports, while domestic interest rates slowly converged to international levels. The authors develop and estimate a two-sector dynamic model using both current and time-varying parameters. They find the domestic interest rate to be more responsive to shocks under imperfect capital mobility, the real exchange rate more responsive under perfect capital mobility. In short, liberalization of the capital account does not eliminate volatility but rather shifts it from the domestic interest rate to the real exchange rate.Economic Theory&Research,Macroeconomic Management,Economic Stabilization,Environmental Economics&Policies,Banks&Banking Reform

Volatility reversal from interest rates to the real exchange rate : financial liberalization in Chile, 1975-82

The authors analyze the dynamic adjustment of the real exchange rate, the domestic interest rate, and foreign borrowing under conditions of perfect and imperfect capital mobility during financial liberalization. Making use of a two-sector model with current and capital accounts interacting, they show that the domestic interest rate is more volatile under imperfect mobility and the real exchange rate more volatile under perfect mobility. So liberalizing the capital accounts does not eliminate variations in the domestic interest rate but shifts them to the real exchange rate. Studying data for Chile during the period of financial liberalization from 1975 to 1982, they found that the domestic interest rate became less volatile and less responsive to domestic variables - and more dependent on the covered international interest rate, while the real exchange rate became more responsive to domestic wealth. Foreign reserve holdings and net exports followed a similar pattern: the covered international rate had stronger effects on reserve changes while real wealth became more important for determining net exports.Economic Theory&Research,Macroeconomic Management,Economic Stabilization,Environmental Economics&Policies,Banks&Banking Reform

Daugavet's equation and orthomorphisms

The main result of this paper asserts that each Dunford-Pettis operator on an AL-space having no discrete elements satisfies Daugavet' s equation || I + T |

The Cantor set in probability theory

The present paper discusses some aspects of the role of the Cantor set in probability theory. It contains a simple construction of the Cantor set which is used to construct a singular-continuous distribution and a singular martingale

Asymptotic optimality of Bayes and credibility premiums

For a risk whose annual claim amounts are conditionally i.i.d. with respect to a risk parameter, it is known that the Bayes and the credibility premiums are asymptotically optimal in terms of losses. In the present note it is shown that the Bayes and the credibility premiums actually converge to the individual premium

Common extensions of order bounded vector measures

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Memoryless distributions revisited

The present paper discusses the memoryless property of distributions on the real line. The main result asserts that every distribution Q which is memoryless on a set containing 0 must be concentrated on {0} or (0,∞). It is then shown that this condition is necessary and sufficient for Q to be either the Dirac distribution in 0 or an exponential distribution. Corresponding results for the geometric distribution are given as well

Common extensions of positive vector measures

We prove a general theorem on the existence of a positive common extension of a family of positive vector measures in an order complete Riesz space. Our theorem gives an easy access to vector-valued versions of results due to Guy, Horn and Tarski, and Marczewski