Real exchange rate dynamics in transition economies : a nonlinear analysis

We examine the behavior of the real exchange rates of nine transition economies during the 1990s. We propose an empirical model rationalized on the basis of standard economic models in the tradition of Mundell-Fleming-Dornbusch and Harrod-Balassa-Samuelson, allowing explicitly for real interest rate differentials and (implicitly) for productivity differentials to have an impact on real exchange rate equilibrium and employing nonlinear modeling techniques that are consistent with recently developed economic theories and observed regularities. Using a nonlinear multivariate generalization of the Beveridge-Nelson decomposition applied to our models, we also identify the permanent and temporary components of these real exchange rates implied by our estimates. The results have a natural interpretation and clear policy implications

The Out-of-Sample Success of Term Structure Models as Exchange Rate Predictors: A Step Beyond

A large literature suggests that standard exchange rate models cannot outperform a random walk forecast and that the forward rate is not an optimal predictor of the spot rate. However, there is evidence that the term structure of forward premia contains valuable information for forecasting future spot exchange rates and that exchange rate dynamics display nonlinearities. This paper proposes a term-structure forecasting model of exchange rates based on a regime-switching vector equilibrium correction model which is novel in this context. Our model significantly outperforms both a random walk and a linear term-structure vector equilibrium correction model for four major dollar rates across a range of horizons.

Regional vulnerability: the case of East Asia

In a case study of six East Asian economies, we use dynamic factor analysis to estimate a regional component of the exchange market pressure index (EMPI) as a measure of regional financial stress. The extent to which this indicator is explained by regional economic and financial factors is interpreted as regional vulnerability to crisis. We find that regional external liabilities and exuberance in domestic stock and credit markets, as well as the US high yield spread, were positively correlated with regional vulnerability. Individual country EMPIs are also explained by regional factors, with country-specific factors and trade linkages playing little role

Money demand instability and real exchange rate persistence in the monetary model of USD-JPY exchange rate

This article has been made available through the Brunel Open Access Publishing Fund.This paper proposes a hybrid monetary model of the dollar-yen exchange rate that takes into account factors affecting the conventional monetary model's building blocks. In particular, the hybrid monetary model is based on the incorporation of real stock prices to enhance money demand stability and also, productivity differential, relative government spending, and real oil price to explain real exchange rate persistence. By using quarterly data over a period of high international capital mobility and volatility (1980:01-2009:04), the results show that the proposed hybrid model provides a coherent long-run relation to explain the dollar-yen exchange rate as opposed to the conventional monetary model. © 2014

What are the important factors in health-related quality of life for people with aphasia? A systematic review

Objective: To determine factors associated with or predictive of poor health-related quality of life (HRQL) in people with aphasia poststroke. Better understanding of these factors can allow better targeting of rehabilitation programs. Data Sources: Electronic databases, covering medical (eg, Medline, Excerpta Medica Database, Evidence-Based Medicine Reviews, Cumulative Index to Nursing and Allied Health Literature, Ovid, Allied and Complementary Medicine Database) and social sciences (eg, PsycINFO) were searched and key experts were approached. Study Selection: Studies including specific information on the HRQL of people with aphasia poststroke using validated HRQL measures or established ways of analyzing qualitative data were included. Two reviewers independently screened studies against the eligibility criteria. Data Extraction: This was undertaken independently by 2 reviewers. Discrepancies were resolved by consensus. Quantitative studies were assessed for quality with Counsell and Dennis' critical appraisal tool for systematic review of prognostic models in acute stroke; qualitative studies with the Critical Appraisal Skills Program tool for qualitative research. Data Synthesis: Fourteen research reports met the eligibility criteria. Because of their high heterogeneity, the data synthesis was narrative. The evidence is not strong enough to determine the main predictors of HRQL in people with aphasia. Still, emotional distress/depression, severity of aphasia and communication disability, other medical problems, activity limitations, and aspects of social network and support were important factors. Conclusions: Emotional distress, aphasia severity, communication and activity limitations, other medical problems, and social factors affect HRQL. Stroke HRQL studies need to include people with aphasia and report separately on them, in order to determine the main predictors of their HRQL and to identify what interventions can best address them

What drives international portfolio flows?

Understanding what drives international portfolio flows has important policy implications for countries wishing to exert some control on the size, direction and volatility of the flows. This paper empirically assesses the relative contribution of common (push) and country-specific (pull) factors to the variation of bond and equity flows from the US to 55 other countries. Using a Bayesian dynamic latent factor model, we find that more than 80% of the variation in bond and equity flows is due to push factors from the US to other countries. Hence global economic forces seem to prevail over domestic economic forces in explaining movements in international portfolio flows. The dynamics of push and pull factors can be partially explained by US and foreign economic fundamentals

How the Subprime Crisis went global: Evidence from bank credit default swap spreads

How did the Subprime Crisis, a problem in a small corner of U.S. financial markets, affect the entire global banking system? To shed light on this question we use principal components analysis to identify common factors in the movement of banks' credit default swap spreads. We find that fortunes of international banks rise and fall together even in normal times along with short-term global economic prospects. But the importance of common factors rose steadily to exceptional levels from the outbreak of the Subprime Crisis to past the rescue of Bear Stearns, reflecting a diffuse sense that funding and credit risk was increasing. Following the failure of Lehman Brothers, the interdependencies briefly increased to a new high, before they fell back to the pre-Lehman elevated levels - but now they more clearly reflected heightened funding and counterparty risk. After Lehman's failure, the prospect of global recession became imminent, auguring the further deterioration of banks' loan portfolios. At this point the entire global financial system had become infected