The British foreign exchange reserves puzzle

The British foreign exchange reserves decreased by 40 percent during the period August 1996-December 1999 although the Pound Sterling is considered a floating exchange rate since it left the EMS in 1992. Since changes in the level of foreign exchange reserves are usually taken as indicators for foreign exchange interventions in the economic literature we investigate the case of the British reserves in detail. While the Pound Sterling has appreciated strongly against the Deutsch mark in this period its exchange rate versus the US dollar has remained comparatively stable. However, the Bank of England has denied any interventions in the foreign exchange markets. We find that transactions for the government, such as repayments of Treasury bonds, account for a large part of the decrease in reserves. Valuation changes due to exchange rate fluctuations can explain only a small fraction of the decrease. This result shows that variability in official reserves is not necessarily associated with foreign exchange intervention. However, even after estimating the effects of exchange rate fluctuations and interest earnings and correcting for government transactions we still find a considerable decrease in the UK reserves that is not explained by either the Bank of England or HM Treasury. --Pound Sterling,foreign exchange reserves,foreign exchange intervention

Safe Controller Optimization for Quadrotors with Gaussian Processes

One of the most fundamental problems when designing controllers for dynamic systems is the tuning of the controller parameters. Typically, a model of the system is used to obtain an initial controller, but ultimately the controller parameters must be tuned manually on the real system to achieve the best performance. To avoid this manual tuning step, methods from machine learning, such as Bayesian optimization, have been used. However, as these methods evaluate different controller parameters on the real system, safety-critical system failures may happen. In this paper, we overcome this problem by applying, for the first time, a recently developed safe optimization algorithm, SafeOpt, to the problem of automatic controller parameter tuning. Given an initial, low-performance controller, SafeOpt automatically optimizes the parameters of a control law while guaranteeing safety. It models the underlying performance measure as a Gaussian process and only explores new controller parameters whose performance lies above a safe performance threshold with high probability. Experimental results on a quadrotor vehicle indicate that the proposed method enables fast, automatic, and safe optimization of controller parameters without human intervention.Comment: IEEE International Conference on Robotics and Automation, 2016. 6 pages, 4 figures. A video of the experiments can be found at http://tiny.cc/icra16_video . A Python implementation of the algorithm is available at https://github.com/befelix/SafeOp

Forecasting economic activity in Germany: how useful are sentiment indicators?

We analyze four economic sentiment indicators for the German economy regarding their ability to forecast economic activity. Using cross correlations and Granger causality tests we find that the ifo business expectations (ifo), the Purchasing Managers Index (PMI) and the ZEW Indicator of Economic Sentiment (ZEW) lead the yearon-year growth rate of German industrial production by five months. Taking into account the publication lag of industrial production this lead is even larger. On the contrary, the European Commission?s Economic Sentiment Indicator (ESIN) does not exhibit a lead but rather seems to coincide or even lag economic activity. Analyzing lead/lag structures among the indicators we find that the ZEW indicator leads the ifo business expectations significantly by one month and that the latter has a onemonth lead over the PMI. Out-of-sample forecast evaluations suggest that both ifo and ZEW provide the best forecasts for industrial production among the three indicators ifo, PMI and ZEW. It is found that the ZEW indicator performs better than the ifo and PMI over the whole sample (Jan. 1994 – Mar. 2002) and especially over horizons from six to twelve months. The ifo expectations predict better at shorter horizons (up to three months) and is superior to the ZEW and PMI indicator when a shorter sample (Jan. 1998 – Mar. 2002) is regarded. --leading indicators,Germany,ifo,zew,PMI,ESIN

Is the View from the Eurotower Purely European? - National Divergence and ECB Interest Rate Policy

The official view on ECB monetary policy claims that decisions are based on euro zone data and that diverging regional developments are disregarded. To test empirically whether regional developments have an impact on ECB decisions we develop a generalised monetary policy reaction function which allows for an influence of regional divergence. Reaction function estimations and a probit model of interest rate decisions for the first years of the euro area offer some first weak support for an impact of regional divergence. The results clarify that ignoring a potential national perspective may lead to biased estimates for the ECB reaction function.ECB, monetary policy, Taylor rule

What Determines the ZEW Indicator?

This paper analyzes which factors are driving the ZEW Indicator of Economic Sentiment. Using the results of a poll among survey participants as well as Granger causality tests we identify three groups of influence factors: other sentiment indicators, financial variables and real economy data. In a second step these factors are used to estimate out-of-sample forecasts for the ZEW Indicator. We find that a simple model that includes German manufacturing order data, the German yield structure and the US Consumer Confidence indicator as explanatory variables is able to outperform a naive univariate benchmark model as well as the consensus forecast for the ZEW Indicator as published by news agencies. --leading indicators,Germany,zew,forecasting

QCD resummation for semi-inclusive hadron production processes

We investigate the resummation of large logarithmic perturbative corrections to hadron production in electron-positron annihilation and semi-inclusive deep-inelastic scattering. We find modest, but significant, enhancements of hadron multiplicities in the kinematic regimes accessible in present high-precision experiments. Our results are therefore relevant for the determination of hadron fragmentation functions from data for these processes.Comment: 14 pages, 11 figure