Inflation and growth: A discussion of Robert Barro's recent findings

A recent empirical study conducted by Robert Barro and published by the Bank of England finds surprisingly little evidence for harmful effects of inflation on growth, seemingly refuting the many theories purporting the contrary. Have the costs of inflation been exaggerated in the past? Is inflation in fact essentially harmless

Pricing of payments

The pricing of payments has received increasing attention of regulators. In many cases, regulators are concerned that consumers do not face cost based prices. They argue that without cost based prices consumers will make inefficient choices. In this paper, it is argued that both, economics of scale and the particular laws governing pricing in two-sided markets provide a case against cost based pricing

Dynamic Hedging in Currency Crisis

Garber and Spencer have argued that dynamic hedging may lead to perverse results when interest rates are used to defend an exchange rate. This paper shows that interest rate changes have little effects on dynamic hedgers when volatility is high. Keywords: Dynamic hedging, central bank intervention, currency crisis JEL classification: F3 ( * ) University of Cologne, Lecturer and Postdoctoral Fellow University of Western Ontario (1) Financial support of the Friedrich Flick Frderungsstiftung is gratefully acknowledged. I would like to thank Casper DeVries for helpful comments. The usual disclaimer applies. Malte Krger, Windmhlstr. 5, 60329 Frankfurt, Germany Phone: (49) 69 2427 8775, Fax: (49) 69 2427 8771, e-mail: [email protected] January to December 1998: University of Western Ontario, Social Science Center, Dept. of Economics, London, Ontario N6A 5C2, Canada, Phone: (1) 519 679 2111 ext. 5207, Fax: (1) 519 661 3666, e-mail: [email protected] 1 1. Introduction It..

Speculation, hedging and intermediation in the foreign exchange market

En este estudio se trata de estimar el nivel de especulacion existente en los mercados de cambios. Dicha estimacion resulta dificil, ya que, tanto teorica como empiricamente, no es sencillo delimitar la especulacion en relacion con otras actividades. A pesar de estas dificultades, en el estudio se muestra como puede obtenerse informacion acerca de la especulacion y la cobertura a partir de la composicion de los flujos brutos de capitales. En un analisis de las interconexiones entre las distintas actividades del mercado de cambios, se muestra que las operaciones de cobertura pueden generar grandes flujos de capital a corto plazo, que no se distinguen facilmente de los flujos de caracter especulativo. El tamaño de los flujos de cobertura no solo depende de los flujos de capital y de los flujos comerciales, sino tambien de los stocks brutos y netos de los activos y pasivos extranjeros. El estudio destaca, ademas, la importancia de los posiciones abiertas de residentes y no residentes. (mk) (mac

Exchange Rate Effects of Portfolio Shifts

Using the Branson model as an example, this paper seeks to clarify the role of interest rate and exchange rate changes in asset market models. Focusing on short-term adjustments, it is shown that portfolio shifts mainly affect relative interest rates in different countries. Only to the extent that portfolio shifts lead to changes in the money demand or money supply, are exchange rates affected as well. The announcement of German monetary union in 1990 is used as an example to illustrate the relative significance of interest rate changes as shock absorbers. * I would like to thank Russ Boyer, Barbara Dluhosch, John Pippenger and the participants at seminars of the Bank of Spain and the Verein fuer Socialpolitik for helpful comments. The ususal disclaimer applies

Forecast Uncertainty, Disagreement, and Linear Pools of Density Forecasts

In many empirical applications, a combined density forecast is constructed using the linear pool which aggregates several individual density forecasts. We analyze the linear pool in a mean/variance prediction space setup. Our theoretical results indicate that a well-known 'disagreement' term can be detrimental to the linear pool's assessment of forecast uncertainty. We demonstrate this argument in macroeconomic and financial forecasting case studies

Forecast uncertainty, disagreement, and the linear pool

The linear pool is the most popular method for combining density forecasts. We analyze its implications concerning forecast uncertainty, using a new framework that focuses on the means and variances of the individual and combined forecasts. Our results show that, if the variance predictions of the individual forecasts are unbiased, the well-known “disagreement” component of the linear pool exacerbates the upward bias of its variance prediction. This finding suggests the removal of the disagreement component from the linear pool. The resulting centered linear pool outperforms the linear pool in simulations and an empirical application to inflation

Improving GIS-Based Heat Demand Modelling and Mapping for Residential Buildings with Census Data Sets at Regional and Sub-Regional Scales

Heat demand of buildings and related CO2 emissions caused by energy supply contribute to global climate change. Spatial data-based heat planning enables municipalities to reorganize local heating sectors towards efficient use of regional renewable energy resources. Here, annual heat demand of residential buildings is modeled and mapped for a German federal state to provide regional basic data. Using a 3D building stock model and standard values of building-type-specific heat demand from a regional building typology in a Geographic Information Systems (GIS)-based bottom-up approach, a first base reference is modeled. Two spatial data sets with information on the construction period of residential buildings, aggregated on municipality sections and hectare grid cells, are used to show how census-based spatial data sets can enhance the approach. Partial results from all three models are validated against reported regional data on heat demand as well as against gas consumption of a municipality. All three models overestimate reported heat demand on regional levels by 16% to 19%, but underestimate demand by up to 8% on city levels. Using the hectare grid cells data set leads to best prediction accuracy values at municipality section level, showing the benefit of integrating this high detailed spatial data set on building age

Score-based calibration testing for multivariate forecast distributions

Calibration tests based on the probability integral transform (PIT) are routinely used to assess the quality of univariate distributional forecasts. However, PIT-based calibration tests for multivariate distributional forecasts face various challenges. We propose two new types of tests based on proper scoring rules, which overcome these challenges. They arise from a general framework for calibration testing in the multivariate case, introduced in this work. The new tests have good size and power properties in simulations and solve various problems of existing tests. We apply the tests to forecast distributions for macroeconomic and financial time series data