Forecasting exchange rates of major currencies with long maturity forward rates. Bruegel Working Paper | Issue 02 April 2020. Plus Annex in separate pdf

This paper presents unprecedented exchange rate forecasting results, based upon a new model that approximates the gap between the fundamental equilibrium exchange rate and the actual exchange rate with the longmaturity forward exchange rate. The theoretical derivation of our forecasting equation is consistent with the monetary model of exchange rates. Our model outperforms the random walk in out-of-sample forecasting of twelve major currency pairs over the short and long horizon forecasts for the 1990- 2020 period. The results are robust for all sub-periods, with the exception of the years around the collapse of Lehman Brothers in September 2008. Our results are robust to alternative model specifications, single equation and panel estimation, recursive and rolling estimation, and alternate data construction methods. The model performs better when the long-maturity forward exchange rate is assumed to be stationary, as opposed to assuming non-stationarity. The improvement in forecast accuracy from our model is economically and statistically significant for almost all exchange-rate series. The model is simple, linear, easy to replicate, and the data we use is available in real time and not subject to revision

Uncovering Yield Parity: A New Insight into the UIP Puzzle through the Stationarity of Long Maturity Forward Rates

Results and models of this paper are based on a strikingly new empirical observation: long maturity forward rates between bilateral currency pairs of the US, Germany, UK, and Switzerland are stationary. Based on this result, we suggest a new explanation for the UIP-puzzle maintaining rational expectations and risk neutrality. The model builds on the interaction of foreign exchange and fixed income markets. Ex ante short run and long run UIP and the EHTS is assumed. We show that ex post shocks to the term structure could explain the behavior of the nominal exchange rate including its volatility and the failure of ex post short UIP regressions. We present evidence on ex post validity of long run UIP and strikingly new evidence on the stationarity of the long forward exchange rates of major currencies. We set up, calibrate and simulate a stylized model that well captures the observed properties of spot exchange rates and UIP regressions of major currencies. We define the notion of yield parity and test its empirical performance for monthly series of major currencies with favorable resultsEHTS, forward discount bias, stationarity of long maturity forward rates, UIP, yield parity

Lakossági svájcifrank-hitelek árazása – narratíván innen és túl?

A lakossági devizahitel-válság kezelése az elmúlt hat-hét év meghatározó társadalmi problémája, gazdaságpolitikai kihívása. A szokásos szakmai és politikai narratíva a válság elmélyülésének egyik fő okát – a forint jelentős gyengülése mellett – abban látja, hogy a frankhitelek átárazása során a bankok mérték nélkül hárították át növekvő költségeiket a teherviselésük határán lévő adósokra. Empirikus elemzésünkkel e nézőpontot kívánjuk árnyalni. A hitelezési költségek négy alapvető komponensének – a referenciakamatnak, az országkockázati felárnak, a költségvetési terheknek és az elszámolt hitelezési veszteségnek – a frankhitelkamatokra gyakorolt hatását vizsgáljuk. A grafikus megjelenítés megszokott módszerétől kiindulva lépésről lépésre jutunk el a komplex, egyensúlyi árazási visszacsatolásokat is integráltan kezelő vektor-hibakorrekciós modellig (VECM). Ez utóbbira épülő becslések szerint a bankok a felmerülő költségeiket arányosan vagy inkább tompítva érvényesítették a jelzáloghitelek árazásakor. Ha volt tere a gyakran emlegetett „tisztességtelen banki magatartásnak”, akkor az inkább a vizsgált költségektől független tényezők érvényesítésében, egyfajta erőfölényes induló árazásban kereshető, amelyet elsődlegesen a szignifikáns és jelentős mértékű konstans tagok tükröznek.* Journal of Economic Literature (JEL) kód: D14, G21

Felsõoktatás-politika és állami finanszírozás: a 2007. évi felvételi tanulságai a gazdaságtudományi alapképzésben

A gazdaságtudományi képzés a 2007. évi felsõoktatási felvételi eljárás egyik nagy vesztese. Az állami finanszírozású alapképzési helyek számának drasztikus csökkenése mellett a kormányzati felsõoktatási politika határozott preferenciákat érvényesít a képzési terület belsõ arányainak, azaz az egyes gazdaságtudományi szakok létszámkeretének meghatározása során is. Tanulmányunk célja az ennek nyomán kialakuló létszámstruktúra belsõ arányainak, egyes szakokra és intézményekre gyakorolt hatásainak vizsgálata, elõtérbe helyezve a közgazdasági szakok, ezen belül az alkalmazott közgazdaságtan szak (és az általunk kiemelt szempontok többségében hasonlóan viselkedi gazdaságelemzõ szak) megítélésünk szerint nyugtalanító fejleményeinek tárgyalását. Hangsúlyosan rámutatunk a közgazdasági képzési ág nemzetközi összehasonlításban rendkívül alacsony részarányára a teljes hazai felsõoktatáson belül. Munkánkban külön foglalkozunk a nem-állami intézményeknek az állami finanszírozású gazdasági felsioktatásban betöltött ellentmondásos szerepével, és kvantitatív eredményeket közlünk az oktatáspolitika létszámkeret-meghatározó döntéseinek a következõ év hallgatói keresletét befolyásoló szerepérõl is.

ECONOMIC DEVELOPMENT INITIATIVES IN RURAL NORTH DAKOTA COMMUNITIES: SOCIOECONOMIC IMPACTS

The purpose of this study was to examine the local socioeconomic impacts of new economic development initiatives in North Dakota's rural (nonmetropolitan) communities. This report is the second to present findings from this project; an earlier report analyzed the effects of four new agricultural processing plants on their host communities. This report examines the effects of manufacturing and/or exported services facilities in three communities and presents comparison data drawn from two control communities (i.e., towns that had not experienced the advent of a major new employer during the 1990s). The information from the two groups of development communities and the control communities is compared and contrasted to discern similarities and differences in the effects of the different types of development initiatives and to develop a set of general principles and recommended actions for community leaders to follow when planning for a new employer. The agricultural processing projects were sited in rural counties, developed during the 1990s, and employed at least 40 workers. The communities with other types of economic development initiatives were rural communities where a new nonagricultural employer or an expansion of an existing facility had created at least 40 new jobs during the 1990s. The two control communities were located in rural counties, had not experienced a new nonagricultural employer or expansion with more than 20 new jobs since 1990, and were characterized by economic and demographic trends prior to 1990 that were similar to those of the development counties. In each of the study communities, the authors conducted in-depth interviews with a cross-section of community leaders, with the aim of gaining an understanding of the community (e.g., its population, economic base), the effects of project development, other socioeconomic changes that might have either exacerbated or offset the project's effects, and the community's response to the situation. Representatives of each of the development projects also were interviewed. Subsequently, a short survey was completed by a random sample of residents in each community. Improved job opportunities and enhanced incomes were generally seen as major positive effects of each of the new economic development initiatives. Further, aside from some management and engineering positions, most of the plant jobs appeared to represent employment opportunities for area workers, rather than being taken primarily by in-migrants. Residents' incomes were enhanced both by the plants' jobs and payroll (which often represented second incomes for area households) and by increased incomes for area farmers (in the case of agricultural processing facilities). Because most of the plant jobs were taken by persons already living in the area, the new plants did not lead to substantial in-migration or major population growth in the host communities. Rather, a reoccurring comment by local leaders was that the plant in their community had stabilized the local economy and population. Comparison of population trends in the development and control communities supports the perception of local informants that the economic development initiatives served to stabilize local populations.rural development, community impacts, North Dakota, manufacturing, Community/Rural/Urban Development,

A kötvény- és devizapiacok kölcsönhatásának szerepe a rugalmas devizaárfolyamok alakulásának értelmezésében = The role of the interaction between foreign exchange and fixed income markets in understanding exchange rate behavior

Kutatásaink három főbb vonalon hoztak eredményeket: 1) A devizapiac és a hozamgörbe várakozási hipotéziseinek együttes feltevéséből kiinduló elméleti megközelítésünkben rámutattunk, hogy a kötvény- és devizapiacok sokkjai között szimultán összefüggés valósul meg. Szimulációs vizsgálataink szerint a hozamgörbe hosszú végének sokkjai a gyakorlatban megfigyelt jelenségekkel összhangban transzformálódhatnak a devizaárfolyamok mozgásaiba. 2) Elméleti megközelítésünkkel összefüggésben felfedeztünk egy eddig nem vizsgált empirikus tényt: a vezető devizák határidős devizaárfolyamainak perzisztenciája a lejárat növelésével csökken. Hosszú (5-10 éves) lejáratoknál a stacionaritás lehetőségét sem vetik el a formális tesztek. 3) A hosszú lejáratú határidős devizaárfolyamok stacionaritását vélelmező hibakorrekciós modellek lehetővé teszik az azonnali árfolyamok mintán kívüli előrejelzését: a) 20 éves mintán kívüli előrejelzési időszakot vizsgáltunk havi frekvencián; b) Az amerikai dollár 9 legfontosabb árfolyamát vizsgáltuk (a devizapiac 75%-a!); c) A mintán kívüli előrejelzések szignifikanciáját bootstrap-teszttel ellenőriztük; d) Valamennyi esetben szignifkánsan jobb mintán kívüli előrejelzést adtunk, mint a benchmark martingál hipotézis (véletlen bolyongás), ill. az alternatív modellek. e) Bár eredményeink a világgazdasági válság 2008 őszi kirobbanását követően minimálisan romlottak, alapvető következtetéseink továbbra sem módosultak. | Our research has reached delivered new findings in the following three main topics: 1) Our model combining the expectation hypotheses of the FOREX market and the term structure of interest rates has revealed the interconnection of shocks to FOREX and fixed income markets. We showed that shocks to the term structure could explain the behaviour of the nominal exchange rate including its volatility and the failure of regressions to provide evidence in favour of the hypothesis of short horizon uncovered interest rate parity. 2) In connection to our theoretical model, we have discovered a strikingly new empirical observation: long maturity (e.g. 5/10 years) forward rates between major currencies are less persistent than spot exchanges rate and even many of them are found to be stationary by a large number of unit root and stationarity tests. 3) Our error correction models assuming that long-maturity forward rates are stationary provide extraordinary forecasting results. These models outperform the random walk (and many alternative models) in out-of-sample forecasting at forecasting horizons mostly above one year, for US dollar exchange rates against nine industrial countries? currencies, using a 20-year long period (1990-2009) for evaluating out-of-sample forecasts. The improvement in forecast accuracy of our models is economically significant for most of the exchange rate series and statistically significant according to a bootstrap test

SOCIOECONOMIC IMPACTS OF AGRICULTURAL AND NON-AGRICULTURAL DEVELOPMENT IN RURAL NORTH DAKOTA

Information from the groups of development communities and control communities is compared and contrasted to discern similarities and differences in the effects of the different types of development initiatives and to develop a set of general principles and recommended actions for community leaders to follow when planning for a new employer.Community/Rural/Urban Development,

Performance of three-photon PET imaging: Monte Carlo simulations

We have recently introduced the idea of making use of three-photon positron annihilations in positron emission tomography. In this paper the basic characteristics of the three-gamma imaging in PET are studied by means of Monte Carlo simulations and analytical computations. Two typical configurations of human and small animal scanners are considered. Three-photon imaging requires high energy resolution detectors. Parameters currently attainable by CdZnTe semiconductor detectors, the technology of choice for the future development of radiation imaging, are assumed. Spatial resolution is calculated as a function of detector energy resolution and size, position in the field of view, scanner size, and the energies of the three gamma annihilation photons. Possible ways to improve the spatial resolution obtained for nominal parameters: 1.5 cm and 3.2 mm FWHM for human and small animal scanners, respectively, are indicated. Counting rates of true and random three-photon events for typical human and small animal scanning configurations are assessed. A simple formula for minimum size of lesions detectable in the three-gamma based images is derived. Depending on the contrast and total number of registered counts, lesions of a few mm size for human and sub mm for small animal scanners can be detected