2-vertex Lorentzian Spin Foam Amplitudes for Dipole Transitions

We compute transition amplitudes between two spin networks with dipole graphs, using the Lorentzian EPRL model with up to two (non-simplicial) vertices. We find power-law decreasing amplitudes in the large spin limit, decreasing faster as the complexity of the foam increases. There are no oscillations nor asymptotic Regge actions at the order considered, nonetheless the amplitudes still induce non-trivial correlations. Spin correlations between the two dipoles appear only when one internal face is present in the foam. We compute them within a mini-superspace description, finding positive correlations, decreasing in value with the Immirzi parameter. The paper also provides an explicit guide to computing Lorentzian amplitudes using the factorisation property of SL(2,C) Clebsch-Gordan coefficients in terms of SU(2) ones. We discuss some of the difficulties of non-simplicial foams, and provide a specific criterion to partially limit the proliferation of diagrams. We systematically compare the results with the simplified EPRLs model, much faster to evaluate, to learn evidence on when it provides reliable approximations of the full amplitudes. Finally, we comment on implications of our results for the physics of non-simplicial spin foams and their resummation.Comment: 27 pages + appendix, many figures. v2: one more numerical result, plus minor amendment

The empirical failure of the expectations hypothesis of the term structure of bond yields

This paper tests the expectations hypothesis (EH) using US monthly data for bond yields spanning the 1952-2003 sample period and ranging in maturity from 1 month to 10 years. We apply the Lagrange multiplier test developed by Bekaert and Hodrick (2001) and extend it to increase the test power: (a) by introducing economic variables as conditioning information; and (b) by using more than two bond yields in the model and testing the EH jointly on more than one pair of yields. While the conventional bivariate procedure provides mixed results, the more powerful testing procedures suggest rejection of the EH throughout the maturity spectrum examined. ; Earlier titles: Testing the expectations hypothesis: some new evidence, New evidence on the expectations hypothesis of the term structure of bond yieldsRational expectations (Economic theory)

Monetary Policy Rules, Asset Prices and Exchange Rates

We examine empirically whether asset prices and exchange rates may be admitted into a standard interest rate rule, using data for the US, the UK and Japan since 1979. Asset prices and exchange rates can be employed as information variables for a standard ‘Taylor-type’ rule or as arguments in an augmented interest rate rule. Our empirical evidence, based on measures of the output gap proxied by marginal costs calculations, suggests that monetary policy-makers may use asset prices and exchange rates not only as part of their information set for setting interest rates, but also to set interest rates to offset deviations of asset prices or exchange rates from their equilibrium levels. These results are open to several alternative interpretations.Asset prices; exchange rates; interest rate rules; monetary policy.

Federal Funds Rate Prediction

Recent research has reported that both the federal funds rate futures market and the federal funds target contain valuable information for explaining the behavior of the US effective federal funds rate. A parallel literature on interest rate modelling has recorded evidence that the dynamics of interest rates displays significant regime-switching behavior. In this paper we produce out of sample forecasts of the federal funds rate at horizons up to 8 weeks ahead using linear and nonlinear, regime-switching equilibrium correction models of the funds rate and employing both point and density measures of forecast accuracy. We cannot discriminate among the models considered in terms of point forecast accuracy. However, in terms of density forecast accuracy, we find that the term structure model of the federal funds futures rate is significantly better than the other models considered, and that regime-switching models provide a substantial forecasting improvement relative to their linear counterparts and relative to individual series of the futures rate.federal funds rate, term structure of interest rates, forecasting, nonlinearity

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.

Empirical exchange rate models and currency risk: some evidence from density forecasts

A large literature in exchange rate economics has investigated the forecasting performance of empirical exchange rate models using conventional point forecast accuracy criteria. However, in the context of managing exchange rate risk, interest centers on more than just point forecasts. This paper provides a formal evaluation of recent exchange rate models based on the term structure of forward exchange rates, which previous research has shown to be satisfactory in point forecasting, in terms of density forecasting performance. The economic value of the exchange rate density forecasts is investigated in the context of an application to a simple risk management exercise