3 research outputs found
Deconstructing the Consumption Function: New Tools and Old Problems
In this paper, we analyse anew the relationship between aggregate income and consumption in the United Kingdom. Our analysis entails a close examination of the structure of the data, for which we employ a variety of spectral methods which depend on the concepts of Fourier analysis. We discover that fluctuations in the rate of growth of consumption tend to precede similar fluctuations in income, which contradicts a common supposition. We also highlight the difficulty of uncovering from the aggregate data a structural equation representing the behaviour of consumers.Consumption function, Trend estimation, Seasonal adjustment, Spectral analysis
Bridging emerging market models and investors realities: the case of currency and external debt markets.
PhDOur target is to objectively quantify important aspects of emerging
economies’ financial markets and deliver value adding actionable
recommendations that can be used by a wide spectrum of end-users like
academics, policy makers and real life investors. We create two quantitative
models that capture the dynamics of global Emerging Market currencies and
sovereign debt ratings. We build on the extensive literature on Emerging
Market crises and introduce a number of methodological and conceptual
innovations. A wide range of market stylized facts and practical and intuitive
limitations dictate the way we progress with our research, from considering
and selecting dependent and explanatory variables to the way we apply and
interpret the model results. We first estimate a parsimonious panel
specification that models and forecasts Emerging Market currency dynamics
and produces trade signals for investing in one-month forward exchange
rates. The second instrument models and forecasts credit ratings assigned by
two of the leading rating agencies to Emerging Market sovereigns. The
specifications we select are tested on the basis of their statistical and
forecasting performance which is found to be solid and unbiased. The
currency model is further tested based on its ability to generate profit making
trading portfolios. The ratings model is also assessed based on its forecasts
for forthcoming sovereign rating actions. We proceed to apply both models on
real time data and compare the results from blindly following the model
recommendations to a situation where an investor filters these results by
superimposing his market awareness and subjective judgement. Our findings
suggest that the tools developed here can reliably be integrated in an
investor’s decision process. The events of late 2010 suggest that many of the
ideas presented in our work can be implemented to Developed Markets and
be expected to produce interesting and usable results