A test for volatility spillovers

This paper proposes a new procedure for analyzing volatility links between di®erent markets based on a bivariate Markov switching model. An empirical application of this procedure to three emerging markets is examined and discussed

Red Signals: Trade Deficits and the Current Account

This paper proposes a method to asses the potential problems of sustainability of a country’s sovereign debt. We claim that the relevant variables used for this analysis are typically subject to changes which are associated with changes in macroeconomics policies. We propose a procedure for identifying periods under which the trade deficit and the current account accumulate at a nonstationary rate. Our approach is based on imposing identifying restrictions on Markov switching type models. An empirical application of the procedure to UK data is examined and discussed. We find that periods of non-stationary trade deficits typically coincide with current account crises

Coordinate representation for non Hermitian position and momentum operators

In this paper we undertake an analysis of the eigenstates of two non self-adjoint operators $\hat q$ and $\hat p$ similar, in a suitable sense, to the self-adjoint position and momentum operators $\hat q_0$ and $\hat p_0$ usually adopted in ordinary quantum mechanics. In particular we discuss conditions for these eigenstates to be {\em biorthogonal distributions}, and we discuss few of their properties. We illustrate our results with two examples, one in which the similarity map between the self-adjoint and the non self-adjoint is bounded, with bounded inverse, and the other in which this is not true. We also briefly propose an alternative strategy to deal with $\hat q$ and $\hat p$, based on the so-called {\em quasi *-algebras}.Comment: Accepted in Proceedings of the Royal Society

Testing the Unbiased Forward Exchange Rate Hypothesis Using a Markov Switching Model and Instrumental Variables

This paper develops a model for the forward and spot exchange rate which allows for the presence of a Markov switching risk premium in the forward market and considers the issue of testing for the unbiased forward exchange rate (UFER) hypothesis. Using US/UK data, it is shown that the UFER hypothesis cannot be rejected provided that instrumental variables are used to account for within-regime correlation between explanatory variables and disturbances in the Markov switching model on which the test is based

Exchange rate uncertainty and international portfolio flows

This paper examines the impact of exchange rate uncertainty on different components of portfolio flows, namely equity and bond flows, as well as the dynamic linkages between exchange rate volatility and the variability of these two types of flows. Specifically, a bivariate GARCH-BEKK-in-mean model is estimated using bilateral data for the US vis-à-vis Australia, the UK, Japan, Canada, the euro area, and Sweden over the period 1988:01-2011:12. The results indicate that the effect of exchange rate uncertainty on equity flows is negative in the euro area, the UK and Sweden, and positive in Australia, whilst it is negative in all countries except Canada (where it is positive) in the case of bond flows. Under the assumption of risk aversion, this suggests that exchange rate uncertainty induces a home bias and causes investors to reduce their financing activities to maximise returns and minimise exposure to uncertainty. Furthermore, since exchange rate volatility and the variability of flows are interlinked, exchange rate or credit controls on these flows can be used to pursue economic and financial stability

Constraints on anomalous gauge couplings from present LEP1 and future LEP2, BNL data

We analyze, in a rather general model where anomalous triple gauge couplings are present, the visible effects in R$_b$ (measured at LEP1), in W pair production (to be measured at LEP2) and in the muon anomalous magnetic moment (to be measured at BNL). From the combination of the three experiments a remarkable improvement on the pure LEP2 constraints is obtained.Comment: 10 pages and 6 figures. e-mail: [email protected]

Photometric measurements of simulated lunar surfaces Quarterly progress report no. 2, 1 Oct. - 31 Dec. 1965

Spectral and suspended particle photometry and geometry of backscattering surfaces in study on photometric measurements of simulated lunar surface

Photometric measurements of simulated lunar surfaces Quarterly progress report, Jul. 1 - Sep. 30, 1965

Modified photometric analyzer and enlarged beam splitter for studying simulated lunar surfaces and opposition effect on moo

The effects of different parameterizations of Markov-switching in a CIR model of bond pricing

We examine several discrete-time versions of the Cox, Ingersoll and Ross (CIR) model for the term structure, in which the short rate is subject to discrete shifts. Our empirical analysis suggests that careful consideration of which parameters of the short-term interest rate equation that are allowed to be switched is crucial. Ignoring this issue may result in a parameterization that produces no improvement (in terms of bond pricing) relative to the standard CIR model, even when there are clear breaks in the data

Contemporaneous-threshold smooth transition GARCH models

This paper proposes a contemporaneous-threshold smooth transition GARCH (or C-STGARCH)model for dynamic conditional heteroskedasticity. The C-STGARCH model is a generalization tosecond conditional moments of the contemporaneous smooth transition threshold autoregressive model of Dueker et al. (2007) in which the regime weights depend on the ex ante probability that a contemporaneous latent regime-specific variable exceeds a threshold value. A key feature of the C-STGARCH model is that its transition function depends on all the parameters of the model as well as on the data. The structural properties of the model are investigated, in addition to the finite-sample properties of the maximum likelihood estimator of its parameters. An application to U.S. stock returns illustrates the practical usefulness of the C-STGARCH model