Used to investigate the presence of distinctive recurrent behaviours in natural processes, the recurrence plots can be applied to the analysis of economic data, and, in particular, to the characterization of exchange rates of currencies too. In this paper, we will show that these plots are able to characterize the periods of oscillation and random walk of currencies and enhance their reply to news and events, by means of texture transitions. The examples of recurrence plots given here are obtained from time series of exchange rates of Euro.
{"title":"Recurrence Plots of Exchange Rates of Currencies","authors":"Amelia Carolina Sparavigna","doi":"10.18483/ijSci.545","DOIUrl":"https://doi.org/10.18483/ijSci.545","url":null,"abstract":"Used to investigate the presence of distinctive recurrent behaviours in natural processes, the recurrence plots can be applied to the analysis of economic data, and, in particular, to the characterization of exchange rates of currencies too. In this paper, we will show that these plots are able to characterize the periods of oscillation and random walk of currencies and enhance their reply to news and events, by means of texture transitions. The examples of recurrence plots given here are obtained from time series of exchange rates of Euro.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85026481","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2014-02-01DOI: 10.5089/9781484302859.001.A001
C. Ebeke, Yinqiu Lu
The paper shows that foreign holdings of local currency government bonds in emergingmarket countries (EMs) have reduced bond yields but have somewhat increased yieldvolatility in the post-Lehman period. Econometric analyses conducted from a sample of12 EMs demonstrate that these results are robust and causal. We use an identificationstrategy exploiting the geography-based measure of EMs financial remoteness vis-a-vismajor offshore financial centers as an instrumental variable for the foreign holdingsvariable.The results also show that, in countries with weak fiscal and external positions,foreign holdings are greatly associated with increased yield volatility. A case study usingPoland data elaborates on the cross country findings.
{"title":"Emerging Market Local Currency Bond Yields and Foreign Holdings in the Post-Lehman Period: A Fortune or Misfortune?","authors":"C. Ebeke, Yinqiu Lu","doi":"10.5089/9781484302859.001.A001","DOIUrl":"https://doi.org/10.5089/9781484302859.001.A001","url":null,"abstract":"The paper shows that foreign holdings of local currency government bonds in emergingmarket countries (EMs) have reduced bond yields but have somewhat increased yieldvolatility in the post-Lehman period. Econometric analyses conducted from a sample of12 EMs demonstrate that these results are robust and causal. We use an identificationstrategy exploiting the geography-based measure of EMs financial remoteness vis-a-vismajor offshore financial centers as an instrumental variable for the foreign holdingsvariable.The results also show that, in countries with weak fiscal and external positions,foreign holdings are greatly associated with increased yield volatility. A case study usingPoland data elaborates on the cross country findings.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76090334","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper uses transaction-level data from a large discount chain together with zip-code-level explanatory variables to learn about consumer payment choices across size of transaction, location, and time. With three years of data from thousands of stores across the country, we identify important economic and demographic effects; weekly, monthly, and seasonal cycles in payments, as well as time trends and significant state-level variation that is not accounted for by the explanatory variables. We use the estimated model to forecast how the mix of consumer payments will evolve and to forecast future demand for currency. Our estimates based on this large retailer, together with forecasts for the explanatory variables, lead to a benchmark prediction that the cash share of retail sales will decline by 2.54 percentage points per year over the next several years.
{"title":"Payment Choice and the Future of Currency: Insights from Two Billion Retail Transactions","authors":"Zhu Wang, Alexander L. Wolman","doi":"10.2139/ssrn.2420420","DOIUrl":"https://doi.org/10.2139/ssrn.2420420","url":null,"abstract":"This paper uses transaction-level data from a large discount chain together with zip-code-level explanatory variables to learn about consumer payment choices across size of transaction, location, and time. With three years of data from thousands of stores across the country, we identify important economic and demographic effects; weekly, monthly, and seasonal cycles in payments, as well as time trends and significant state-level variation that is not accounted for by the explanatory variables. We use the estimated model to forecast how the mix of consumer payments will evolve and to forecast future demand for currency. Our estimates based on this large retailer, together with forecasts for the explanatory variables, lead to a benchmark prediction that the cash share of retail sales will decline by 2.54 percentage points per year over the next several years.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79932405","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We combine signal processing to machine learning methodologies by introducing a hybrid Ensemble Empirical Mode Decomposition (EEMD), Multivariate Adaptive Regression Splines (MARS) and Support Vector Regression (SVR) model in order to forecast the monthly and daily Euro (EUR)/United States Dollar (USD), USD/Japanese Yen (JPY), Australian Dollar (AUD)/Norwegian Krone (NOK), New Zealand Dollar (NZD)/Brazilian Real (BRL) and South African Rand (ZAR)/Philippine Peso (PHP) exchange rates. After the decomposition with EEMD of the original exchange rate series into a smoothed and a fluctuation component, MARS selects the most informative input datasets from the plethora of variables included in our initial data set. The selected variables are fed into two distinctive SVR models for forecasting each component separately one period ahead for daily and monthly data. The summation of the two forecasted components provides exchange rate forecasts. The above implementation exhibits superior forecasting ability in exchange rate forecasting compared to various models. Overall the proposed model a) is a combination of empirically proven effective techniques in forecasting time series, b) is data driven, c) relies on minimum initial assumptions and d) provides a structural aspect of the forecasting problem.
{"title":"Forecasting Daily and Monthly Exchange Rates with Machine Learning Techniques","authors":"Vasilios Plakandaras, Theophilos Papadimitriou, Periklis Gogas","doi":"10.2139/ssrn.2990344","DOIUrl":"https://doi.org/10.2139/ssrn.2990344","url":null,"abstract":"We combine signal processing to machine learning methodologies by introducing a hybrid Ensemble Empirical Mode Decomposition (EEMD), Multivariate Adaptive Regression Splines (MARS) and Support Vector Regression (SVR) model in order to forecast the monthly and daily Euro (EUR)/United States Dollar (USD), USD/Japanese Yen (JPY), Australian Dollar (AUD)/Norwegian Krone (NOK), New Zealand Dollar (NZD)/Brazilian Real (BRL) and South African Rand (ZAR)/Philippine Peso (PHP) exchange rates. After the decomposition with EEMD of the original exchange rate series into a smoothed and a fluctuation component, MARS selects the most informative input datasets from the plethora of variables included in our initial data set. The selected variables are fed into two distinctive SVR models for forecasting each component separately one period ahead for daily and monthly data. The summation of the two forecasted components provides exchange rate forecasts. The above implementation exhibits superior forecasting ability in exchange rate forecasting compared to various models. Overall the proposed model a) is a combination of empirically proven effective techniques in forecasting time series, b) is data driven, c) relies on minimum initial assumptions and d) provides a structural aspect of the forecasting problem.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86746940","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2013-06-01DOI: 10.22883/KJDA.2013.25.2.007
Scott Y. Lin
Being the second largest economy with the largest foreign exchange reserves, not only has China joined most international governance mechanisms, but it is also expected to carry more responsibility in international governance, especially after 2008. As more doors open for China, the country develops more power resources. Therefore, its longstanding One-China Principle shows no signs of wavering but will be advanced as China’s participation in international governance continues to expand. One significant consequence of China’s accelerating integration into international governance is the continual forcing of Taiwan into China’s orbit. Heretofore, the greatest pressure on Taiwan has been a growing number of global agents acknowledging Taiwan as an integral part of China. With China’s more prominent global role, that pattern gradually threatens to become an “international consensus” that conditions Taiwan’s development. This paper carefully uses a dyad of concepts of power analysis to measure the process of China’s promoted power in and through international governance for building structures, wherein the application of the One-China Principle is reorienting Taiwan into the Chinese orbit.
{"title":"Reorienting Taiwan into the Chinese Orbit: Power Analysis of China's Rise in Promotion of China's One-China Principle in International Structures","authors":"Scott Y. Lin","doi":"10.22883/KJDA.2013.25.2.007","DOIUrl":"https://doi.org/10.22883/KJDA.2013.25.2.007","url":null,"abstract":"Being the second largest economy with the largest foreign exchange reserves, not only has China joined most international governance mechanisms, but it is also expected to carry more responsibility in international governance, especially after 2008. As more doors open for China, the country develops more power resources. Therefore, its longstanding One-China Principle shows no signs of wavering but will be advanced as China’s participation in international governance continues to expand. One significant consequence of China’s accelerating integration into international governance is the continual forcing of Taiwan into China’s orbit. Heretofore, the greatest pressure on Taiwan has been a growing number of global agents acknowledging Taiwan as an integral part of China. With China’s more prominent global role, that pattern gradually threatens to become an “international consensus” that conditions Taiwan’s development. This paper carefully uses a dyad of concepts of power analysis to measure the process of China’s promoted power in and through international governance for building structures, wherein the application of the One-China Principle is reorienting Taiwan into the Chinese orbit.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84943571","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies the effect of external vulnerability indicators on the implied foreign exchange rate volatility. Controlling for a set of domestic and external macroeconomic factors and using options-implied volatilities, the results suggest that (i) market participants expect a lower future volatility in response to a decrease in current account deficit or an increase in international reserve adequacy; (ii) when global financial conditions are on the edge (when the VIX is above a certain threshold), both external vulnerability indicators imply a stronger effect on the future expected volatility (around twice as high, on average); (iii) these effects are by-and-large stronger for emerging market economies.
{"title":"On the Implied Foreign Exchange Rate Volatility: The Role of External Vulnerability Indicators and When They Count the Most?","authors":"Salih Fendoğlu","doi":"10.2139/ssrn.2237846","DOIUrl":"https://doi.org/10.2139/ssrn.2237846","url":null,"abstract":"This paper studies the effect of external vulnerability indicators on the implied foreign exchange rate volatility. Controlling for a set of domestic and external macroeconomic factors and using options-implied volatilities, the results suggest that (i) market participants expect a lower future volatility in response to a decrease in current account deficit or an increase in international reserve adequacy; (ii) when global financial conditions are on the edge (when the VIX is above a certain threshold), both external vulnerability indicators imply a stronger effect on the future expected volatility (around twice as high, on average); (iii) these effects are by-and-large stronger for emerging market economies.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84429015","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Official purchases of foreign assets--a broad definition of currency intervention--are strongly correlated with current account (trade) imbalances. Causality runs in both directions, but statistical analysis using instrumental variables reveals that the effect of official asset purchases on current accounts is very large. A country's current account balance increases between 60 and 100 cents for each dollar spent on intervention. This is a much larger effect than is widely assumed. These results raise serious questions about the efficiency of international financial markets.
{"title":"The Elephant Hiding in the Room: Currency Intervention and Trade Imbalances","authors":"Joseph E. Gagnon","doi":"10.2139/ssrn.2238170","DOIUrl":"https://doi.org/10.2139/ssrn.2238170","url":null,"abstract":"Official purchases of foreign assets--a broad definition of currency intervention--are strongly correlated with current account (trade) imbalances. Causality runs in both directions, but statistical analysis using instrumental variables reveals that the effect of official asset purchases on current accounts is very large. A country's current account balance increases between 60 and 100 cents for each dollar spent on intervention. This is a much larger effect than is widely assumed. These results raise serious questions about the efficiency of international financial markets.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-03-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83248817","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using a Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model, we study the effects of the US monetary policy and macroeconomic announcements on Argentine money, stock and foreign exchange markets over the period January 1998 to July 2007. We show, first, that both types of news have a significant impact on all markets. Second, there are noticeable differences in reaction for different subsamples: Argentine money markets were more dependent on US news under the currency board than after it was abandoned as the floating exchange rate partly absorbs spillover effects from the US. Finally, we find that the US-dollar-denominated assets react less to US news than peso-denominated assets, which suggests that the currency board was not completely credible during its final years.
{"title":"Does the Currency Board Matter? U.S. News and Argentine Financial Market Reaction","authors":"B. Hayo, Matthias Neuenkirch","doi":"10.2139/ssrn.1302847","DOIUrl":"https://doi.org/10.2139/ssrn.1302847","url":null,"abstract":"Using a Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model, we study the effects of the US monetary policy and macroeconomic announcements on Argentine money, stock and foreign exchange markets over the period January 1998 to July 2007. We show, first, that both types of news have a significant impact on all markets. Second, there are noticeable differences in reaction for different subsamples: Argentine money markets were more dependent on US news under the currency board than after it was abandoned as the floating exchange rate partly absorbs spillover effects from the US. Finally, we find that the US-dollar-denominated assets react less to US news than peso-denominated assets, which suggests that the currency board was not completely credible during its final years.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2012-07-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89990219","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It is often suggested that currency unions unduly inhibit the efficient adjustment of real exchange rates. Recently, this has been seen as a key failure of the Eurozone. This paper presents evidence that throws doubt on this conclusion. Our evidence suggests that real exchange rate movement within the Eurozone was at least as compatible with efficient adjustment as the behavior of real exchange rates for the floating rate countries outside the Eurozone. This interpretation is consistent with a model in which nominal exchange rate movements give rise to persistent deviations from the law of one price in traded goods.
{"title":"Real Exchange Rate Adjustment In and Out of the Eurozone","authors":"Martin Berka, M. Devereux, C. Engel","doi":"10.1257/AER.102.3.179","DOIUrl":"https://doi.org/10.1257/AER.102.3.179","url":null,"abstract":"It is often suggested that currency unions unduly inhibit the efficient adjustment of real exchange rates. Recently, this has been seen as a key failure of the Eurozone. This paper presents evidence that throws doubt on this conclusion. Our evidence suggests that real exchange rate movement within the Eurozone was at least as compatible with efficient adjustment as the behavior of real exchange rates for the floating rate countries outside the Eurozone. This interpretation is consistent with a model in which nominal exchange rate movements give rise to persistent deviations from the law of one price in traded goods.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2012-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73585262","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This MEDPRO Technical Report shows that the monetary and exchange rate policies conducted by central banks in the south Mediterranean region display apparent homogeneity in their operational frameworks, albeit with some specificities and differing degrees of advancement. While central banks state that price stability is their ultimate objective, failures to control interest rates as operational objectives of monetary policy result in monetary authorities resorting to quantitative approaches to monetary policy, meaning that monetary aggregates and credit targets are being used as intermediate targets of monetary policy.An econometric exercise limited to Maghreb countries (Algeria, Morocco, and Tunisia) has been conducted to analyze the potential scenarios of convergence and monetary policy coordination. Given the high structural heterogeneity and the slow pace of real convergence due to weak commercial integration in the Maghreb, results nevertheless show alternative dynamics in the integration of effective nominal exchange rates, as well as a complete convergence dynamic in exchange rate policies. Partial convergence of monetary policies regarding the stabilization of inflation rates remains an open option for a transitional phase where financial integration is low.
{"title":"The Role of Monetary Policies and Macroeconomic Convergence in the Development of Financial Systems in South Mediterranean Countries","authors":"M. Sami","doi":"10.2139/ssrn.2037765","DOIUrl":"https://doi.org/10.2139/ssrn.2037765","url":null,"abstract":"This MEDPRO Technical Report shows that the monetary and exchange rate policies conducted by central banks in the south Mediterranean region display apparent homogeneity in their operational frameworks, albeit with some specificities and differing degrees of advancement. While central banks state that price stability is their ultimate objective, failures to control interest rates as operational objectives of monetary policy result in monetary authorities resorting to quantitative approaches to monetary policy, meaning that monetary aggregates and credit targets are being used as intermediate targets of monetary policy.An econometric exercise limited to Maghreb countries (Algeria, Morocco, and Tunisia) has been conducted to analyze the potential scenarios of convergence and monetary policy coordination. Given the high structural heterogeneity and the slow pace of real convergence due to weak commercial integration in the Maghreb, results nevertheless show alternative dynamics in the integration of effective nominal exchange rates, as well as a complete convergence dynamic in exchange rate policies. Partial convergence of monetary policies regarding the stabilization of inflation rates remains an open option for a transitional phase where financial integration is low.","PeriodicalId":20949,"journal":{"name":"PSN: Exchange Rates & Currency (Comparative) (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2012-04-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88821295","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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