The Credibility of Cabo Verde’s Currency Peg

This paper studies the credibility of the currency peg of Cape Verde (CV) by assessing the impact of economic fundamentals, our explanatory variables, on the stochastic properties of Exchange Market Pressure (EMP), the dependent variable, using EGARCH-M models. Our EMP descriptive analysis finds a substantial reduction in the number of crisis episodes and of (unconditional) volatility after the peg’s adoption. Moreover, our estimation results suggest that mean EMP is driven by fundamentals and that conditional variability is more sensitive to negative shocks. We also find evidence that the expected return from holding CV’s assets is lower under the currency peg for the same increase in monthly volatility. The reason is that the return’s composition is “more virtuous”, as it results from the strengthening of CV’s foreign reserve position and is not due to either a larger risk premium or favourable exchange rate movements. We take this to be a sign of the credibility of the peg, which apparently reflects the intertemporal credibility of CV’s economic policy and so has successfully withstood international markets’ scrutiny.

Exchange market pressure and the credibility of Macau's currency Board

In this study, we assess the credibility of the currency board arrangement (CBA) of the Macau Special Administrative Region by studying the relationship between exchange market pressure (EMP) and the anchors of a rule-based CBA, namely, interest rate arbitrage, exchange rate arbitrage and economic discipline. A pure CBA signals its credibility by allowing the first two anchors to function automatically and by pursuing sound fiscal policies. The analysis’ results suggest that Macau’s CBA has been characterised by a state of low volatility since late 1992, with the brief exception of the East Asian financial crisis period. The paper’s main finding is that fiscal fundamentals seem to have a more pronounced role in reducing EMP’s variability during periods of low volatility whilst interest rate arbitrage is more important in periods of high volatility. We conclude that Macau’s CBA is credible at present as reflected in the low frequency of observed EMP, in the narrowing of Macau’s interest rate differential vis-à-vis U.S. interest rates and in Macau’s substantial fiscal reserves.

Exchange Market Pressure in African Lusophone Countries

This paper explores the credibility of exchange rate arrangements for the five African Portuguese-speaking (PALOP) countries. Our working hypothesis is that credibility necessarily implies low mean exchange market pressure (EMP), low EMP conditional volatility and low-severity EMP crises. In addition, economic fundamentals must account for EMP dynamics. We also seek evidence of a risk-return relationship for mean EMP and of “bad news” (negative shocks) having a greater impact on EMP volatility than “good news” (positive shocks). Using our econometric models, we are able to rank PALOP countries’ conditional volatility in ordinal terms. Our main conclusion is that countries with currency pegs, such as Guinea-Bissau (GB) and Cape Verde (CV), clearly have lower volatility when compared to those with managed floats and are therefore more credible. Moreover, EMP crises episodes under pegs are much less severe. We find that economic fundamentals correctly account for mean EMP in all countries and that the risk-return relationship is much more favourable for investors under currency pegs, as the increase in volatility is lower for the same rate of return. The exception to this finding is Mozambique (MOZ), which apparently has a risk-return profile akin to that enjoyed by countries with pegs. A plausible reason is that MOZ has the only managed float in our sample implementing monetary and exchange rate policy within the confines of an IMF framework, which establishes floors for international reserves and ceilings for the central bank’s net domestic assets. This intuition needs to be tested, however. EMP conditional volatility is generally driven by changes in domestic credit (lowers it) and foreign reserve changes (raises it). The first effect is more pronounced under currency pegs, but also under MOZ’s managed float. “Bad news” increases volatility more that “good news” only in the case of CV’s currency peg, which we take to be another sign of its credibility. A few striking cross-country comparisons also emerge in our analysis. Among countries with managed floats, we find that Angola (ANG) has the most severe EMP crises whilst MOZ has the least severe. São Tomé & Princípe (STP), meanwhile, lies between these two extremes but its EMP crises behaviour is clearly much closer to that of MOZ. STP’s credibility may also be improving since its volatility has declined as of 2002 and its level is now much closer to that of MOZ, whose managed float has lowest volatility of such arrangements.

Holographic quenches and anomalous transport

We study the response of the chiral magnetic effect due to continuous quenches induced by time dependent electric fields within holography. Concretely, we consider a holographic model with dual chiral anomaly and compute the electric current parallel to a constant, homogeneous magnetic field and a time dependent electric field in the probe approximation. We explicitly solve the PDEs by means of pseudospectral methods in spatial and time directions and study the transition to an universal "fast" quench response. Moreover, we compute the amplitudes, i.e.,~residues of the quasi normal modes, by solving the (ODE) Laplace transformed equations. We investigate the possibility of considering the asymptotic growth rate of the amplitudes as a well defined notion of initial time scale for linearized systems. Finally, we highlight the existence of Landau level resonances in the electrical conductivity parallel to a magnetic field at finite frequency and show explicitly that these only appear in presence of the anomaly. We show that the existence of these resonances induces, among others, a long-lived AC electric current once the electric field is switched off.Comment: 34 pages, 10 figure

Ultralight boson cloud depletion in binary systems

Ultralight scalars can extract rotational energy from astrophysical black holes through superradiant instabilities, forming macroscopic boson clouds. This process is most efficient when the Compton wavelength of the boson is comparable to the size of the black hole horizon, i.e. when the "gravitational fine structure constant" $\alpha\equiv G \mu M/\hbar c\sim 1$. If the black hole/cloud system is in a binary, tidal perturbations from the companion can produce resonant transitions between the energy levels of the cloud, depleting it by an amount that depends on the nature of the transition and on the parameters of the binary. Previous cloud depletion estimates considered binaries in circular orbit and made the approximation $\alpha\ll 1$. Here we use black hole perturbation theory to compute instability rates and decay widths for generic values of $\alpha$, and we show that this leads to much larger cloud depletion estimates when $\alpha \gtrsim 0.1$. We also study eccentric binary orbits. We show that in this case resonances can occur at all harmonics of the orbital frequency, significantly extending the range of frequencies where cloud depletion may be observable with gravitational wave interferometers.Comment: 12 pages, 6 figures. v2: references added, matches published versio

Light rings as observational evidence for event horizons: long-lived modes, ergoregions and nonlinear instabilities of ultracompact objects

Ultracompact objects are self-gravitating systems with a light ring. It was recently suggested that fluctuations in the background of these objects are extremely long-lived and might turn unstable at the nonlinear level, if the object is not endowed with a horizon. If correct, this result has important consequences: objects with a light ring are black holes. In other words, the nonlinear instability of ultracompact stars would provide a strong argument in favor of the "black hole hypothesis," once electromagnetic or gravitational-wave observations confirm the existence of light rings. Here we explore in some depth the mode structure of ultracompact stars, in particular constant-density stars and gravastars. We show that the existence of very long-lived modes -- localized near a second, stable null geodesic -- is a generic feature of gravitational perturbations of such configurations. Already at the linear level, such modes become unstable if the object rotates sufficiently fast to develop an ergoregion. Finally, we conjecture that the long-lived modes become unstable under fragmentation via a Dyson-Chandrasekhar-Fermi mechanism at the nonlinear level. Depending on the structure of the star, it is also possible that nonlinearities lead to the formation of small black holes close to the stable light ring. Our results suggest that the mere observation of a light ring is a strong evidence for the existence of black holes.Comment: 10 pages, RevTeX

Elements of a methodology to assess the alignment of core-values in collaborative networks

Collaborative networks are typically formed by heterogeneous and autonomous entities, and thus it is natural that each member has its own set of core-values. Since these values somehow drive the behaviour of the involved entities, the ability to quickly identify partners with compatible or common core-values represents an important element for the success of collaborative networks. However, tools to assess or measure the level of alignment of core-values are lacking. Since the concept of 'alignment' in this context is still ill-defined and shows a multifaceted nature, three perspectives are discussed. The first one uses a causal maps approach in order to capture, structure, and represent the influence relationships among core-values. This representation provides the basis to measure the alignment in terms of the structural similarity and influence among value systems. The second perspective considers the compatibility and incompatibility among core-values in order to define the alignment level. Under this perspective we propose a fuzzy inference system to estimate the alignment level, since this approach allows dealing with variables that are vaguely defined, and whose inter-relationships are difficult to define. Another advantage provided by this method is the possibility to incorporate expert human judgment in the definition of the alignment level. The last perspective uses a belief Bayesian network method, and was selected in order to assess the alignment level based on members' past behaviour. An example of application is presented where the details of each method are discussed

A method to analyse the alignment of core values in collaborative networked organisations

Since collaborative networked organisations are usually formed by independent and heterogeneous entities, it is natural that each member holds his own set of values, and that conflicts among partners might emerge because of some misalignment of values. In contrast, it is often stated in literature that the alignment between the value systems of members involved in collaborative processes is a prerequisite for successful co-working. As a result, the issue of core value alignment in collaborative networks started to attract attention. However, methods to analyse such alignment are lacking mainly because the concept of 'alignment' in this context is still ill defined and shows a multifaceted nature. As a contribution to the area, this article introduces an approach based on causal models and graph theory for the analysis of core value alignment in collaborative networks. The potential application of the approach is then discussed in the virtual organisations' breeding environment context