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Technical Analysis |
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What is technical analysis?
Technical analysis is the study of past market information such as price, volume
and open interest, primarily through the use of charts, to forecast future price
trends.The security under study can be a stock, future, index, foreign exchange,
and any other thing traded in the financial market.
What is the underlying rationale for technical analysis?
Technicians believe that the market price reflects anything that can possibly
affect the price. They also believe that securities move in trends. These trends
continue until something happens to change them. Until a trend ends, the future
prices are detectable from past information of price and volume. It is not necessary
to know the fundamental factors that affect the price of a security, such as
a company's financial performance and its market condition.
What are the commonly used technical indicators?
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Moving average |
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Moving average is the average value of a security's price
over a period of time. For example, the 20-day moving average is computed
by adding up the closing prices for the past 20 days and dividing them
by 20. Moving averages can smooth out price fluctuations that confuse
the interpretation of a trend.
The most commonly used moving averages are the 20, 30,
50, 100, and 200-day moving averages. The shorter the period is, the more
sensitive the moving average is to the stock price. Often, when the price
(short-run moving average) moves below its moving average (long-run moving
average), technicians consider there will be a negative trend for the
security price. While when the price (short-run moving average) protrudes
its moving average (long-run moving average), technician consider it a
signal to hold the security.
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| 2. |
Relative strength index (RSI) |
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RSI is computed from the following equation:
RSI = 100 - [100/(1 + RS)]
where:
RS = (Avg. of n-day up closes)/(Avg. of n-day down closes)
n= days (most analysts use 9 - 15 day RSI)
RSI indicates the strength of a stock. RSI ranges from 0-100. Usually,
when RSI>70 (80 in a strong bull market), it is a signal of market
overbought. Technicians consider it a sell signal. Likewise, a security
is considered as oversold when RSI drops below 30 (20 in a strong bear
market). Technicians suggest it as a signal to buy the security.
The shortcoming of RSI is that it can be affected by big
surges and drops in stock. Thus the resulting buy/sell signals can be
false. Most technicians suggest using it just as a compliment to other
analysis tools.
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| 3. |
Money flow index |
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Money flow index indicates the strength of money flowing
out/into a stock. It measures the ratio of positive money flow to negative
money flow in a certain number of days. Here money flow is the product
of average price (the average of day high, day low, and closing prices)
and day's volume. The money flow is "positive" in a day with
price closed up; it is "negative" in a day with price closed
down.
When money flow index is in the range of 70-80, it is
an overbought signal, suggesting selling of a stock. Likewise, if the
index is in the range of 20-30, signals an oversold market, suggesting
buying of a stocking.
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| 4. |
Bollinger Bands |
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The Bollinger Bands are plotted as three lines. The middle
line is the simple moving average. The upper and low bands are plotted two
standard deviations away from the moving average. The bands show the range
that the stock price should be most possibly located in. If the price is
close to the upper band, there is a large possibility that the stock price
should decrease. Likewise, if the price is close to the lower band, the
stock price will possibly increase. |
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| 5. |
Support and resistance |
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The resistance level is defined as the local maximum.
The support level is the local minimum price. The trading rule related
with support and resistance is called trading range break-out (TRB). Here
a buy signal is generated when the price penetrates the resistance level.
A sell signal is generated when the price penetrates the support level.
The local maximum/minimum price can be determined based on the past 50,
150 and 200 days.
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Is technical analysis a widely used practice?
Yes. According to results of most relevant surveys, the technical trading analysis
is widely used and known among practitioners of different markets: stock market,
foreign exchange market, futures market and market of valuable metal. For instance,
Lui and Mole (1998), and Wong and Cheung (1999) have confirmed, respectively,
the wide use of trading rules in Hong Kong foreign exchange and stock markets.
Taylor and Allen (1992) have revealed its wide use among chief foreign exchange
dealers in London. Shiller (1987) shows that technical analysis considerations
influenced many investors even during the 1987 stock market crash.
Profitability of technical analysis.
The wide use of technical analysis suggests it profitability, which is against
the theory of efficient market. If a market is efficient, prices "fully
reflect" available information. If all the information at time t is used
by the market in assessing expected future prices, there is no way an investor
can use this information set at time t as the basis of a trading system with
expected returns in excess of equilibrium expected returns.
Most economic studies concerning the profitability of technical
analysis find favorable results. For example, Fama and Blume (1966) studied
the profitability of filter rules for the US stock market as a test of random
walk or efficient market. More recently, Brock, Lakonishok and LeBaron (1992)
investigated the profitability of simple moving average trading rules and trading
range break-out; their results provide strong support for the technical strategies.
Following Brock, Lakonishok and LeBaron (1992), numerous studies have investigated
the profitability of trading rules for stock markets around the world. Examples
include Hudson Dempsey and Keasey (1996) on the UK market; Bessembinder and
Chan (1995) on the Asian markets; Ito (1999) on the markets of Japan, U.S.,
Canada, Indonesia, Mexico and Taiwan. All of these studies focus on stock market
indices instead of individual stocks.
As to studies of foreign exchange markets, Chang and Osler (1994)
evaluated the head-and-shoulders pattern, one of the standard patterns used
by chart-based technical analysts. Their results favor the predictive power
of head-and-shoulders trading rule for mark and yen but not the Canadian dollar,
Swiss franc, French franc, or pound. LeBaron (1999) confirms the efficacy of
moving average in predicting foreign exchange prices. Osler (2000) offers strong
evidence that the support and resistance levels help to predict intraday trend
interruptions in foreign exchange.
Using the US Dow Jones Industrial Average index, both LeBaron (2000) and Sullivan
et al. (1999) have found that technical trading rule profits have fallen recently.
However, no similar evidence has been reported for other countries.
As one of the few studies concerning the source of profit from technical trading,
LeBaron (1999) finds
that central bank intervention may be a source. |
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Keywords:
Technical analysis, Foreign Exchange, Equity and Bonds |
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Links
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Links related to Technical analysis
(5 out of 37
links are shown. Complete list of links can be found at here.)
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Merrill Lynch |
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URL:
http://www.ml.com/ |
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Merrill Lynch is a global financial management and advisory company with a presence in 43 countries across six continents. It serves the needs of both individual and institutional clients with a diverse range of financial services, including: Personal financial planning, Securities underwriting ,Trading and brokering, Investment banking and advisory services, Trading of foreign exchange, Commodities and derivatives, Banking and lending Insurance and Research. Merrill Lynch makes available to investors its annual reports, earnings releases, and various other financial information. |
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Ecuador (Banco Central del Ecuador) |
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URL:
http://www.bce.fin.ec/ind_ing.htm |
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Central bank of Ecuador. Unfortunately, the site does not have English page. |
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2249
visits has been made through our site. |
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New Zealand Stock Exchange Home Page |
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URL:
http://www.nzse.co.nz/ |
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New Zealand Stock Exchange Home Page |
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visits has been made through our site. |
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Untitled Document
Links related to Foreign Exchange
(5 out of 155
links are shown. Complete list of links can be found at here.)
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Foreign Currency Notes Exchange Rates |
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URL:
http://www.hkbea.com/cgi-bin/whp_ttfx.pl |
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This website is the courtesy of Bank of East Asia, it provides Foreign Currency Notes Exchange Rates of the main countries all over the world. |
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6989
visits has been made through our site. |
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Bloomberg.com : Currency Rates |
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URL:
http://www.bloomberg.com/markets/currency.html |
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Bloomberg's Currency Calculator is used for searching for the foreign exchange rate. Bloomberg.com offers you the ability to determine the rate of exchange between any two world currencies, spot rates of the top 11 countries, regional currency rates, and a quick listing of currencies in alphabetical order. |
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visits has been made through our site. |
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FOREX NEWS: Foreign Exchange and Currency Trading Information |
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URL:
http://www.forexnews.com/ |
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This is an online source for foreign exchange (forex) information like news, analysis, articles, ideas , global calendar, forex charts, etc. Subscription to Forex News can get in-depth foreign exchange market analyses via e-mail, no fee is charged. |
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Currency-Exchange |
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URL:
http://www.wiso.gwdg.de/ifbg/currency.html |
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This web site provides a lot of links to those web sites about currencies and currency-exchange rates. |
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visits has been made through our site. |
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Links related to Equity and Bonds
(5 out of 234
links are shown. Complete list of links can be found at here.)
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Global Financial Data Home Page |
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URL:
http://www.globalfindata.com/ |
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This impressive collection of historical global financial data stretches from the years 1264 to 2000. While most of the actual data must be purchased, this Website does offer several free series, including Stock Markets since 1693, Interest Rates since 1700, and Inflation Rates since 1264. The site also contains a decent-sized collection of research papers written about the Eurodollar and a links page with financial Websites from around the world. Subscriptions to the database are charged. |
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Singapore Exchange |
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URL:
http://www.ses.com.sg/ |
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Inaugurated on December 1, 1999, Singapore Exchange is the first demutualised, integrated securities and derivatives exchange in Asia Pacific. There are 5 market divisions: Securities Trading, Derivatives Trading, Securities Clearing and Depository, Derivatives Clearing, and the IT Solutions divisions. And the 5 service divisions are: Corporate Strategy and Marketing, Finance and Administration, Human Resources, Information Technology, and Risk Management and Regulation divisions.
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visits has been made through our site. |
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London Stock Exchange |
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URL:
http://www.londonstockexchange.com/ |
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You can get general information about the London Stock Exchange from this site, covering its history, activities, publications and press releases. You can also gain access to key contacts in the Exchange and the City of London, and useful reference guides such as a glossary and FAQs. |
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References
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References related to Technical analysis
(15 references
are shown.)
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Technical Analysis from A to Z Second Edition
|
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Author:
Steven B. Achelis
Book: Technical Analysis from A to Z Second Edition |
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Year:
2000-2001 |
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Technical Analysis from A to Z begins with a concise yet thorough introduction to technical analysis. It then explains the intricacies of more than 140 technical indicators. The explanations provide an overview, an example, and details on calculating the indicators.
The Second Edition adds:
- All new illustrations (more than 200 charts)
- 40 new indicators (more than 140 in all)
- Detailed explanations to calculate the indicators |
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Remarks:
You can know the details at: http://www.atozbook.com/ |
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Technical Trading Rule Profitability and Foreign Exchange Intervention
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Author:
LeBaron, Blake
Book: Journal of International Economics |
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Year:
1999 Vol: 49(1), pages 125-43.
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There is reliable evidence that simple rules used by traders have some predictive value over the future movement of foreign exchange prices. This paper will review some of this evidence and discuss the economic magnitude of this predictability. The profitability of these trading rules will then be analyzed in connection with central bank activity using intervention data from the Federal Reserve. The objective is to find out to what extent foreign exchange predictability can be confined to periods of central bank activity in the foreign exchange market. The results indicate that after removing periods in which the Federal Reserve is active, exchange rate predictability is dramatically reduced. |
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Simple Technical Trading Rules and the Stochastic Properties of Stock Returns
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Author:
Brock, William; Lakonishok, Josef; LeBaron, Blake
Book: Brock, William; Lakonishok, Josef; LeBaron, Blake
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Year:
1992 Vol: 47(5), pages 1731-64. |
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This paper tests two of the simplest and most popular trading rules--moving average and trading range break--by utilizing the Dow Jones Index from 1897 to 1986. Standard statistical analysis is extended through the use of bootstrap techniques. Overall, their results provide strong support for the technical strategies. The returns obtained from these strategies are not consistent with four popular null models: the random walk, the AR(1), the GARCH-M, and the Exponential GARCH. Buy signals consistently generate higher returns than sell signals, and further, the returns following buy signals are less volatile than returns following sell signals. Moreover, returns following sell signals are negative, which is not easily explained by any of the currently existing equilibrium models.
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The Use of Fundamental and Technical Analyses by Foreign Exchange Dealers: Honk Kong Evidence
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Author:
Lui,Yu Hon; Mole, David
Book: Journal of International Money and Finance |
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Year:
1998 Vol: 17(3), pages 535-45.
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This article reports the results of a questionnaire survey conducted in February 1995 on the use by foreign exchange dealers in Hong Kong of fundamental and technical analyses to form their forecasts of exchange rate movements. The authors' findings reveal that > 85 percent of respondents rely on both fundamental and technical analyses for predicting future rate movements at different time horizons. At shorter horizons, there exists a skew towards reliance on technical analysis as opposed to fundamental analysis, but the skew becomes steadily reversed as the length of horizon considered is extended. Technical analysis is considered slightly more useful in forecasting trends than fundamental analysis, but significantly more useful in predicting turning points. Interest rate-related news is found to be a relatively important fundamental factor in exchange rate forecasting, while moving average and/or other trend-following systems are the most useful technical technique.
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The practice of investment management in Hong Kong: Market forecasting and stock selection
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Author:
Wong, Michael Chak-sham; Cheung, Yan-leung
Book: Omega |
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Year:
1999 Vol: 27, Pages 451-465 |
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The authors study on the practice of investment management in terms of stock market forecasting and stock selection, indicate that Hong Kong analysts rely more on fundamental and technical analyses, but less on portfolio analysis. |
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The Use of Technical Analysis in the Foreign Exchange Market
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Author:
Taylor, Mark P. and Allen, Helen
Book: Journal of International Money and Finance |
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Year:
1992 Vol: 11(3), pages 304-14.
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Technical, or chartist, analysis of financial markets involves providing forecasts or trading advice on the basis of largely visual inspection of past prices, without regard to any underlying economic or "fundamental" analysis. This paper reports the results of a questionnaire survey, conducted on behalf of the Bank of England, among chief foreign exchange dealers based in London in November 1988. Amongst other findings, it is revealed that at least 90 percent of respondents place some weight on this form of non-fundamental analysis when forming views at one or more time horizons. There is also a skew toward reliance on technical, as opposed to fundamentalist, analysis at shorter horizons, which becomes steadily reversed as the length of horizon considered is increased. A very high proportion of chief dealers view technical and fundamental analysis as complementary forms of analysis and a substantial proportion suggest that technical advice may be self-fulfilling.
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Filter rules and stock market trading profits
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Author:
Fama, E.F. and Blume, M.
Book: Journal of Business |
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Year:
1966 Vol: 39, 226-241 |
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The authors studies the profitability of filter rules for the U.S. stock market as a test of random walk or efficient market. |
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The profitability of technical trading rules in the Asian stock markets
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Author:
Bessembinder, H. and Chan, K.
Book: Pacific-Basin Finance Journal |
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Year:
1995 Vol: 3(2-3), 257-284 |
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The authors assess whether some simple forms of technical analysis can predict stock price movement in Asian markets. They find the rules to be quite successful in the emerging markets of Malaysia, Thailand and Taiwan. The rules have less explanatory power in more developed markets such as Hong Kong and Japan. On average for their sample, mean percentage changes in stock indices on days that the rules emit buy signals exceed means on days that the rules emit sell signals by 0.095% per day, or about 26.8% on an annualized basis. They estimate ``break-even'' round-trip transactions costs (which would just eliminate gains from technical trading) to be 1.57% on average. They also find that technical signals emitted by U.S. markets have substantial forecast power for Asian stock returns beyond that of own-market signals. This is consistent with the reasoning that the technical rules identify periods when global equilibrium expected returns deviate substantially from their unconditional mean. |
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A Note on the Weak Form Efficiency of Capital Markets: The Application of Simple Technical Trading Rules to UK Stock Prices--1935 to 1994
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Author:
Hudson, Robert; Dempsey, Michael; Keasey, Kevin
Book: Journal-of-Banking-and-Finance |
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Year:
1994 Vol: 20(6), pages 1121-32.
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Brock et al. (1992) found technical trading rules to have predictive ability with regards to the Dow Jones Index. The current paper considers whether this result can be replicated on UK data. The paper also considers whether investors could earn excess returns from technical analysis in a costly trading environment. The paper concludes that although the technical trading rules examined do have predictive ability in terms of UK data, their use would not allow investors to make excess returns in the presence of costly trading.
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Simple technical trading rule by using moving average
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Author:
Mak, Billy S.C.
Book: Hong Kong Economic Papers |
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Year:
1996 Vol: 24, 55-68 |
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Using the Hang Seng Index from January 1981 to December 1992, the author finds the profit for some of the trading rules but the selection of moving average window is very crucial in generating profit. |
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Profits on technical trading rules and time-varying expected returns: evidence from Pacific-Basin equity markets
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Author:
Ito,Akitoshi
Book: Pacific-Basin Finance Journal |
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Year:
1999 Vol: (7)3-4, pp. 283-330
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This study evaluates the profitability of technical trading rules in Pacific-Basin equity markets by using equilibrium asset pricing models with time-varying expected returns. Specifically, this study uses asset pricing models under complete integration, mild segmentation [Errunza, V., Losq, E., Padmanablan, P., 1985. International asset pricing under mild segmentation hypothesis. Journal of Banking and Finance, 16, 949--972.], and complete segmentation in assessing trading rule profits. The same set of technical rules that Brock et al. [Brock, W., Lakonishok, J., LeBaron, B., 1992. Simple technical trading rules and the stochastic properties of stock returns, Journal of Finance, 47, 1731--1764.] examine are applied to the Japanese, U.S., Canadian, Indonesian, Mexican and Taiwanese equity indices. The results from the standard tests indicate that the technical rules have significant forecast power for all countries, except for the U.S. However, the results from the bootstrap tests indicate that some equilibrium asset pricing models (mainly, the asset pricing model under mild segmentation) are consistent with the observed trading rule returns for Japan, the U.S., the recent period of Canada and Taiwan. The overall results indicate that taking into account the time-varying expected returns is important to evaluate the profitability of the technical trading rules.
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Evaluating Chart-Based Technical Analysis: The Head-and-Shoulders Pattern in Foreign Exchange Markets
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Author:
Chang, Kevin; Osler, Carol L.
Book: Federal Reserve Bank of New York Research Paper |
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Year:
1994 Vol: 9414, pages 30..
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This paper evaluates rigorously the preductive pewer of the head-and-shoulders pattern which is one of the standard patterns used by chart-based technical analysts. We apply this trading rule to daily dollar exchange rates during the floating rate period (March 1973-June 1994). To do so we use an objective, computer-implemented algorithm to identify head-and-shoulders patterns, basing the algorithm on criteria recommended in published technical analysis manuals. The resulting profits, replicable in real-time, are then compared with the hypothesis of a random walk. Results: The head-and-shoulders trading rule appears to have some predictive power for the mark and yen but not the Canadian dollar, Swiss franc, French franc, or pound. Profits for the mark and yen are large but extremely risky.
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Support for Resistance: Technical Analysis and Intraday Exchange Rates
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Author:
Osler, Carol
Book: Federal Reserve Bank of New York Economic Policy Review |
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Year:
2000 Vol: 6(2), pages 53-68..
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"Support" and "resistance" levels--points at which an exchange rate trend may be interrupted and reversed--are widely used for short-term exchange rate forecasting. Nevertheless, the levels' ability to predict intraday trend interruptions has never been rigorously evaluated. This article undertakes such an analysis, using support and resistance levels provided to customers by six firms active in the foreign exchange market. The author offers strong evidence that the levels help to predict intraday trend interruptions. However, the levels' predictive power is found to vary across the exchange rates and firms examined.
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The Stability of moving average technical trading rules on the Dow Jones Index
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Author:
LeBaron
Book: Derivative Use, Trading and Regulation |
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Year:
2000 Vol: 5, 324-338 |
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Using the US Dow Jones Industrial Average Index, the author found that technical trading rule profits have fallen recently. |
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Remarks:
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Data-Snooping, Technical Trading Rule Performance, and the Bootstrap
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Author:
Sullivan, Ryan; Timmermann, Allan; White, Halbert
Book: Journal-of-Finance |
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Year:
1999 Vol: 54(5), pages 1647-91. |
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In this paper the authors utilize White's Reality Check bootstrap methodology (White [1999]) to evaluate simple technical trading rules while quantifying the data-snooping bias and fully adjusting for its effect in the context of the full universe from which the trading rules were drawn. Hence, for the first time, the paper presents a comprehensive test of performance across all technical trading rules examined. The authors consider the study of Brock, Lakonishok, and LeBaron (1992), expand their universe of 26 trading rules, apply the rules to 100 years of daily data on the Dow Jones Industrial Average, and determine the effects of data-snooping.
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Untitled Document
References related to Foreign Exchange
(33 references
are shown.)
Untitled Document
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Exchange Rate Regimes and Institutional Arrangements in the Shadow of Capital Flows
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Author:
Dani Rodrik
Book: |
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Year:
Sep 2000 Vol: 20 Pages |
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This paper has been prepared for a conference on Central Banking and Sustainable Development, held in Kuala
Lumpur, Malaysia, August, 28-30, 2000, in honor of Tun Ismail Mohamed Ali. It talks about the Choice of exchange rate regimes. The conventional wisdom today is that countries need to choose between two corners: either floating exchange rates or irrevocably fixed rates. The reason is the potential of capital flows to wreak havoc with any intermediate regime (“soft pegs”). So much of the debate on exchange rate policy focuses on the pros and cons of currency boards/dollarization versus floats.
The trouble with this debate is that the evidence shows clearly that neither corner works very well for developing countries for long periods of time. Countries that have done well in the postwar period in terms of economic performance have in almost all cases had intermediate exchange rate regimes. Then he discussed 1) Why floating is not a solution; 2) Why currency boards or dollarization are not a solution |
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Remarks:
This paper can be downloaded in http://ksghome.harvard.edu/~.drodrik.academic.ksg/Malaysia%20conference%20paper.PDF |
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Currency Crises and Foreign Reserves: A Simple Model
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Author:
Piti Disyatat
Book: IMF working paper |
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Year:
Feb 2001 |
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This paper addresses the important question of how far a government will run down its stock of foreign reserves in a defense of a fixed exchange rate. An optimizing model of currency crises is presented in which the decision of whether or not to borrow in a defense of a peg is explicitly analyzed. The threshold level of reserves in then determined endangeously and shown to be a function of fundamental economic variables. The analysis also demonstrates how an increase in the level of reserves, a crdit-rating upgrade, or the imposition of capital controls can remove the multiplicity of equilibria. |
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Remarks:
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Technical Analysis from A to Z Second Edition
|
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Author:
Steven B. Achelis
Book: Technical Analysis from A to Z Second Edition |
| |
Year:
2000-2001 |
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Technical Analysis from A to Z begins with a concise yet thorough introduction to technical analysis. It then explains the intricacies of more than 140 technical indicators. The explanations provide an overview, an example, and details on calculating the indicators.
The Second Edition adds:
- All new illustrations (more than 200 charts)
- 40 new indicators (more than 140 in all)
- Detailed explanations to calculate the indicators |
| |
Remarks:
You can know the details at: http://www.atozbook.com/ |
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The Failure of Uncovered Interest Parity: Is It Near-Rationality in the Foreign Exchange Market?
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Author:
David Gruen, Gordon Menzies
Book: Publication of Reserve Bank of Australia |
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Year:
May 1991 |
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A risk-averse US investor adjusts the shares of a portfolio of short-term nominal domestic and foreign assets to maximise expected utility. The optimal strategy is to respond immediately to all new information which arrives weekly. They calculate the expected utility foregone when the investor abandons the optimal strategy and instead optimises less frequently. They also consider the cases where the investor ignores the covariance between returns sourced in different countries, and where the investor makes unsystematic mistakes when forming expectations of exchange rate change. They demonstrate that the expected utility cost of sub-optimal behaviour is generally very small. Thus, for example, if investors adjust portfolio shares every three months, they incur an average expected utility loss equivalent to about 0.16 per cent p.a.. It is therefore plausible that slight opportunity costs of frequent optimisation may outweigh the benefits. This result may help explain the failure of uncovered interest parity.
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Remarks:
An electronic version of this paper is not available.
If you want to the printed copy of the paper, you can simply follow the instruction in this site: http://www.rba.gov.au/PublicationsAndResearch/RDP/RDP9103.html |
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Long-Horizon Uncovered Interest Rate Parity
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Author:
Guy Meredith, Menzie D. Chinn
Book: NBER Working Paper |
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Year:
November 1998 Vol: No. W6797
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Uncovered interest parity (UIP) has been almost universally rejected in studies of exchange rate movements, although there is little consensus on why it fails. In contrast to previous studies, which have used relatively short-horizon data, we test UIP using interest rates on longer-maturity bonds for the G-7 countries. These long-horizon regressions yield much more support for UIP -- all the coefficients on interest differentials are of the correct sign, and almost all are closer to the UIP value of unity than to the zero coefficient implied by the random walk hypothesis. We then use a small macroeconomic model to explain the differences between the short- and long-horizon results. Regressions run on data generated by stochastic simulations replicate the important regularities in the actual data, including the sharp differences between short- and long-horizon parameters. In the short run from risk premium shocks in the face of endogenous monetary policy. In the long run, in contrast, exchange rate movements are driven by the "fundamentals," leading to a relationship between interest rates and exchange rates that is more consistent with UIP. |
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Remarks:
The full version of the paper in PDF format can be downloaded at:
http://papers.nber.org/papers/W6797 |
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Purchasing Power Parity and Interest Parity in the Laboratory
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Author:
Eric O™N. Fisher, Department Of Economics, The Ohio State University
Book: |
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Year:
10 April 2001 |
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This paper analyzes purchasing power parity and uncovered interest parity in the laboratory. It finds strong evidence that purchasing power parity, covered interest parity, and uncovered interest parity hold. Subjects are endowed with an intrinsically useless
(green) currency that can be used to purchase another useless (red) currency. Green goods can be bought only with green currency, and red goods can be bought only with red currency. The foreign exchange markets are organized as call markets. In the
treatment analyzing purchasing power parity, the price of the red good varies. In a second treatment, the interest rate on red currency varies. In a third treatment, the interest
rate on red currency varies, and the price of the red good is random.
The paper is 35-page long and can be downloaded at: http://econ.ohio-state.edu/efisher/pppuip.pdf |
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Risk, Policy Rules, and Noise: Rethinking Deviations from Uncovered Interest Parity
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Author:
Nelson Mark, Ohio State University
Yangru Wu, West Virginia University
Book: |
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Year:
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This paper attempts to understand why the forward premium helps to predict the future change in the exchange rate, but with the wrong (negative) sign. A corollary to the negative forward premium bias is that the rational deviation from uncovered interest parity (DUIP) is negatively correlated with the rationally expected rate of depreciation. These facts have long posed a challenge to international economic theory. In this paper, they explore three approaches to explain these puzzles: (i)the standard representative-agent asset pricing model, (ii)a monetary-policy rule model with exchange-rate feedback, and (iii)a model of noise trading.
They begin by presenting some stylized facts that characterize the problem. They obtain implied values of the rational DUIP and the rationally expected depreciation from a vector error correction model (VECM) for log spot and forward exchange rates and demonstrate the credibility of the estimates of these unobserved series by showing that they match a number key sample moments. With these credible estimates of the rational DUIP in hand, They then ask if they behave like risk premia implied by the standard representative agent asset pricing approach. The answer to this question is no. The risk premium is a conditional covariance between the intertemporal marginal rate of substitution of money and the payoff from forward currency speculation. Since the rational DUIP fluctuates between positive and negative values, according to the risk premium hypothesis, this conditional covariance must also. Our empirical analysis shows, however, that required conditional correlations required by the theory are largely absent from the data.
Next, they re-examine a recent contribution by McCallum~(1994), who develops a non-risk interpretation of the rational DUIP. There, monetary policy involves the setting of the interest differential according to a rule that partially offsets the contemporaneous depreciation of the domestic currency. The feedback of the contemporaneous depreciation to the interest differential induces an error in the variables problem in the regression of the future depreciation on the forward premium and perfectly negatively correlated rational DUIPs and rationally expected depreciations. The error in the variables problem is the source of the forward premium bias in this model.
Their investigation of McCallum's model uncovers suggests two reasons to apply his results with caution. First, they report econometric estimates of the policy rule parameters which have the wrong sign required to explain the forward premium bias. The second reason is that the results are not robust to a reasonable reformulation of the policy rule. In the original formulation, the interest rate differential depends on the contemporaneous rate of depreciation. A trading sequence that rationalizes this rule is that the foreign exchange market closes before the monetary policy authorities determine the current period interest differential. But an alternative and equally plausible sequence is to have the authorities determine the interest differential prior to the opening of the foreign exchange market. Under the alternative sequence, the interest rate rule depends on the lagged depreciation and the forward premium bias vanishes.
The third approach that they explore is the Delong et. al. noise trader model. This model combines rational investors with noise traders who hold distorted beliefs concerning future currency returns. They model this distortion in beliefs in a particular way by building in Frankel and Froot's (1989) finding that foreign exchange traders place excessive weight on the forward premium in forming their expectations of the future depreciation. Their model of noise-trader beliefs also induces an error in the variables problem into the forward premium regression which forms the basis of the noise trader model's explanation of the forward premium bias. Trading volume is induced entirely by the presence of noise traders and the rational DUIP is not compensation for risk. In addition to the forward premium bias, the noise-trader model provides an explanation for the apparent short-term overreaction of exchange rate changes and the gradual adjustment towards its (economic) fundamental value in the long run that has been documented in recent empirical work.
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Remarks:
The paper is not available in the Internet, JEL classification is available -- F31, F47 |
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Co-Movements in Long-Term Interest Rates and the Role of PPP-Based Exchange Rate Expectations
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Author:
Jan Marc Berk and Klaas H.W. Knot
Book: |
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Year:
April 1999 |
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They investigate international co-movements in bond yields by testing for uncovered interest parity. They supplement existing work by focussing on long instead of short-term
interest rates, and, related to that, by employing exchange rate expectations derived from purchasing power parity instead of actual outcomes. For the major floating currencies over the period 1975-97, they cannot support the notion of further increases in co-movement beyond that associated with the wave of financial market liberalization and deregulation in
the early 1980s. Given the similarity between PPP-based UIP tests and those employing actual exchange rate outcomes, the value added of the former mainly lies with their ready availability. |
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Nonlinear dynamics and covered interest rate parity
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Author:
Nathan S. Balke
Book: Empirical Economics |
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Year:
1998 Vol: Pages: 535-559
Volume: 23
Issue: 4 |
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This paper examines the dynamics of deviations from covered interest parity using daily data on the UK/US spot, forward exchange rates and interest rates over the period January 1974 to September 1993. Like other studies we find a substantial number of instances during the sample in which the covered interest parity condition exceeds the transaction costs band, implying arbitrage profit opportunities. While most of these implied profit opportunities are relatively small, there is also evidence of some very large deviations from covered interest parity in the sample. In order to examine the persistence of these deviations, we estimated a threshold autoregression in which the dynamics behavior of deviations from covered interest parity is different outside the transaction costs band than inside them. We find that while the impulse response functions when inside the transaction costs band are nearly symmetric, those for the outside the bands are asymmetric-suggesting less persistence outside of the transaction costs band than inside the band. |
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Remarks:
The full version of the paper in PDF format can be downloaded at: http://netec.mcc.ac.uk/WoPEc/data/Articles/sprempecov:23:y:1998:i:4:p:535-559.html |
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Official Exchange Rate Arrangements and Real Exchange Rate Behavior
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Author:
David C. Parsley and Helen A. Popper
Book: Journal of Money, Credit and Banking |
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Year:
March 2000 |
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Here is the abstract of the paper:
We study the behavior of real exchange rates under various official designations of exchange rate arrangements. Examining many currencies, we find important differences across the designations. Most notably, real exchange rate mean reversion is fastest when nominal exchange rates are officially pegged. We also find a large nonlinear effect: adjustment is fastest when the real exchange rate deviates greatly from its mean. This nonlinear effect is also most striking among officially pegged currencies. Finally, we find that nominal exchange rates, rather than prices, do most of the adjusting. |
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Remarks:
The paper can be downloaded at:
http://mba.vanderbilt.edu/fmrc/papers/wp9730.htm |
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Regional Trading Agreements: The Implications for Chilean Economic Growth
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Author:
Thomas F. Rutherford, University of Colorado
David Tarr, The World Bank
Book: |
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Year:
March 19, 1998 |
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Chile currently faces three broad trade policy options, apart from the status quo. The first option is for Chile to continue to implement its membership of MERCOSUR, a customs union between several South American countries, including Brazil, Argentina, Paraguay, and Uruguay. The second is for it to continue to press for membership in NAFTA. Although transitory instability of financial markets in Mexico and the failure of fast-track negotiating authority in the United States Congress have stalled negotiations for Chile's accession to NAFTA, many observers believe that this option is still viable in the medium run. The final trade policy option that Chile always has available is unilateral liberalization of tariffs on a non-discriminatory basis. This option represents a unilateral action that Chile can take without any need for agreements with other countries. |
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Remarks:
The paper can be downloaded at: http://debreu.colorado.edu/~tomruth/chile/paper.html |
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An Economy-Wide Analysis on Effects of APEC Agricultural Trade Liberalization and Special Treatment Proposals.
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Author:
Hsu, Shih Hsun; Hsu, Bin Hsin
Book: Academia Economic Papers |
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Year:
1999 Vol: 27(4), pages 511-42. |
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The agricultural trade liberalization proposal raised a lot of debates in recent APEC meetings. Major food importing countries, e.g., Japan, South Korea, mainland China and Taiwan proposed to have a special treatment for their agricultural sector to be not included in the APEC trade liberalization list. This paper uses the standard GTAP model and database (version 3) to examine the likely long-term effects of A EC agricultural trade liberalization and special treatment proposals. Results clearly demonstrate why Japan, South Korea, mainland China and Taiwan are against including their agricultural sector in an APEC trade liberalization framework.
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Asian Pacific Economic Cooperation and China (in Chinese)
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Author:
Lu Jianren
Book: Asian Pacifric Economic Cooperation and China. |
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Year:
1997 |
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This book introduces the relaitionship between APEC and China. |
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Remarks:
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Liberalization, growth and the Asian financial crisis: Lessons for developing and transitional economies in Asia
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Author:
Ariff,Mohamed; Khalid,Ahmed M.
Book: Cheltenham, U.K. and Northampton, Mass.: Elgar; distributed by American International Distribution Corporation, Williston |
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Year:
2000 Vol: pages xix, 520.
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Provides a long-term historical perspective on economic reforms and developments in thirteen Asian countries. Provides an overview of the economic and financial liberalization steps undertaken by thirteen Asian countries over three decades. Traces the genesis of the Asian financial crisis to events and structural weaknesses in the financial sectors of a few fast-growth economies, all of which had severe financial fragility. Studies the experiences of the early reforming countries--South Korea, Malaysia, Singapore, Indonesia, Taiwan, and Thailand; two communist countries that are returning to market forces--China and Vietnam; and some hesitant reformers--Bangladesh, India, Pakistan, the Philippines, and Sri Lanka. Uses an econometric model and evidence from Malaysia, the Philippines, Singapore, South Korea, and Thailand to analyze the impact of financial liberalization on different sectors of the economy. Draws lessons for developing and transitional economies. Ariff is Professor of Finance in the Mt. Eliza Business School at Monash University. Khalid is Assistant Professor in the Department of Economics at the National University of Singapore. Select bibliography; index.
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A Dynamic Two-Sector Model for Analyzing the Interrelation between Financial Development and Industrial Growth
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Author:
Wang,Eric C.
Book: International-Review-of-Economics-and-Finance |
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Year:
2000 Vol: 9(3),pages 223-41. |
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Motivated by Feder's two-sector model concerning exports and growth, this article intends to propose a dynamic framework, which bases on the production function theory and consists of two versions of the two-sector (the financial sector and the real sector) model, for analyzing the interrelation between financial development and economic growth in terms of intersectoral externalities. The approach is applied as a prototype to the case of financial liberalization and industrial growth in Taiwan using deflated annual data for 1961-96. Growth equations are derived and the externality series are estimated. Regressions incorporating the economic/financial variables as well as a linear spline in time variable are set up for testing the externality series. The results show that the financial-supply-leading version is more prevailing in the studied case. The externality series of the supply-leading version are highly related to the financial variables, while those of the demand-following version are related to real variables that affect the industrial production.
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The Impact of Liberalization and Foreign Investment in Colombia's Financial Sector
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Author:
Barajas,Adolfo; Steiner,Roberto; Salazar,Natalia
Book: Journal-of-Development-Economics |
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Year:
2000 Vol: 63(1),pages 157-96. |
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This study analyzes financial liberalization measures undertaken in 1990, of which an opening to foreign investment was a major component. After a brief description of the major changes in legislation on foreign investment, we compare performance of foreign-owned vs. domestic banks, first using a descriptive approach, then in a more systematic manner using econometric analysis. Panel data estimations reveal that financial liberalization in general had a beneficial impact on bank behavior in Colombia, by increasing competition, lowering intermediation costs and improving loan quality. Although the positive contribution of foreign entry may be overstated in recent studies by not controlling for other liberalization factors, foreign (and domestic) entry beginning in 1990 did improve bank behavior by enhancing operative efficiency and competition. However, the greater competition may have resulted in increased risk and a subsequent deterioration in loan quality, particularly among domestic banks.
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Technical Analysis from A to Z Second Edition
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Author:
Steven B. Achelis
Book: Technical Analysis from A to Z Second Edition |
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Year:
2000-2001 |
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Technical Analysis from A to Z begins with a concise yet thorough introduction to technical analysis. It then explains the intricacies of more than 140 technical indicators. The explanations provide an overview, an example, and details on calculating the indicators.
The Second Edition adds:
- All new illustrations (more than 200 charts)
- 40 new indicators (more than 140 in all)
- Detailed explanations to calculate the indicators |
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Remarks:
You can know the details at: http://www.atozbook.com/ |
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Technical Trading Rule Profitability and Foreign Exchange Intervention
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Author:
LeBaron, Blake
Book: Journal of International Economics |
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Year:
1999 Vol: 49(1), pages 125-43.
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There is reliable evidence that simple rules used by traders have some predictive value over the future movement of foreign exchange prices. This paper will review some of this evidence and discuss the economic magnitude of this predictability. The profitability of these trading rules will then be analyzed in connection with central bank activity using intervention data from the Federal Reserve. The objective is to find out to what extent foreign exchange predictability can be confined to periods of central bank activity in the foreign exchange market. The results indicate that after removing periods in which the Federal Reserve is active, exchange rate predictability is dramatically reduced. |
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Simple Technical Trading Rules and the Stochastic Properties of Stock Returns
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Author:
Brock, William; Lakonishok, Josef; LeBaron, Blake
Book: Brock, William; Lakonishok, Josef; LeBaron, Blake
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Year:
1992 Vol: 47(5), pages 1731-64. |
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This paper tests two of the simplest and most popular trading rules--moving average and trading range break--by utilizing the Dow Jones Index from 1897 to 1986. Standard statistical analysis is extended through the use of bootstrap techniques. Overall, their results provide strong support for the technical strategies. The returns obtained from these strategies are not consistent with four popular null models: the random walk, the AR(1), the GARCH-M, and the Exponential GARCH. Buy signals consistently generate higher returns than sell signals, and further, the returns following buy signals are less volatile than returns following sell signals. Moreover, returns following sell signals are negative, which is not easily explained by any of the currently existing equilibrium models.
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Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach
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Author:
Christopher Neely, Paul Weller and Robert Dittmar
Book: |
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Year:
August 1997 |
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Using genetic programming techniques to find technical trading rules, the authors find strong evidence of economically significant out-of-sample excess returns to those rules for each of six exchange rates ($/DM, $/¥, $/SF, $/£, ¥/DM, SF/£), over the period 1981-1995. Further, then the $/DM rules were allowed to determine trades in the other markets, there was a significant improvement in performance in all cases except for the ¥/DM. Betas calculated for the returns according to four international benchmark portfolios provide no evidence that the returns to these rules are compensation for bearing systematic risk. Bootstrapping results on the $/DM indicate that the trading rules are detecting patterns in the data that are not captured by standard statistical models.
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Remarks:
The paper is downloadable at:
http://www.stls.frb.org/docs/research/wp/96-006c.pdf |
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Foreign Exchange Market Trading Volume and Federal Reserve Intervention
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Author:
Alain Chaboud, Federal Reserve, Board of Governors
Book: |
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Year:
July 1999 |
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The authors find a large positive correlation between daily trading volume in currency futures
markets and foreign exchange intervention by the Federal Reserve over the period 1979-1996. Neither contemporaneous nor predicted volatility can fully account for the increases in trading activity. Whether or not the intervention operation is publicly reported appears to be an
important determinant of trading volume. |
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Remarks:
This paper is downloadable at:
http://www.unet.brandeis.edu/~blebaron/wps/volpap.pdf |
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Are changes in foreign exchange reserves well correlated with official intervention?
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Author:
Christopher J. Neely
Book: Review - Federal Reserve Bank of St. Louis |
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Year:
Sept/Oct 2000 Vol: Vol. 82, Iss. 5; pg. 17, 15 pgs |
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This review is writtne by Christopher J. Neely, a senior economist at the Federal Reserve Bank of St. Louis. It's about why countries hold international reserves, correlations between Central Bank intervention and changes in reserves. |
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Remarks:
This article is downloadable at:
http://www.stls.frb.org/docs/publications/review/00/09/0009cn.pdf |
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The Foreign-Exchange Costs of Central Bank Intervention: Evidence from Sweden
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Author:
Boo Sjöö and Richard J. Sweeney
Book: |
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Year:
September 1999 |
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This study presents evidence on risk-adjusted profits for the Swedish central bank. Estimated profits can
be quite sensitive as to whether rates of return are risk-adjusted or not, and how the risk-adjustment is done. Various
ways of adjusting for abnormal returns, and extracting buy-sell signals, are tried. Results, on daily data, support the view that Riksbank intervention did not make risk-adjusted losses over the period 1986-1990. The results might be
challenged as arising from inappropriate risk adjustment. |
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Remarks:
The full text is downloadable at:
http://www.msb.georgetown.edu/faculty/sweeneyr/wp/JIMFPA44.pdf |
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The Use of Technical Analysis in the Foreign Exchange Market
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Author:
Taylor, Mark P. and Allen, Helen
Book: Journal of International Money and Finance |
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Year:
1992 Vol: 11(3), pages 304-14.
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Technical, or chartist, analysis of financial markets involves providing forecasts or trading advice on the basis of largely visual inspection of past prices, without regard to any underlying economic or "fundamental" analysis. This paper reports the results of a questionnaire survey, conducted on behalf of the Bank of England, among chief foreign exchange dealers based in London in November 1988. Amongst other findings, it is revealed that at least 90 percent of respondents place some weight on this form of non-fundamental analysis when forming views at one or more time horizons. There is also a skew toward reliance on technical, as opposed to fundamentalist, analysis at shorter horizons, which becomes steadily reversed as the length of horizon considered is increased. A very high proportion of chief dealers view technical and fundamental analysis as complementary forms of analysis and a substantial proportion suggest that technical advice may be self-fulfilling.
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Does Central Bank Intervention Stabilize Foreign Exchange Rates?
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Author:
Catherine Bonser-Neal
Book: Federal Reserve Bank of Kansas City |
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Year:
|
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This paper is written by Catherine Bonser-Neal. It's about the exchange rate volatility, its causes and its consequence, how it measures, how central bank intervention affects the volatility, etc. |
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Remarks:
The paper is downloadable at:
http://www.kc.frb.org/publicat/econrev/pdf/1q96bons.pdf |
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Evaluating Chart-Based Technical Analysis: The Head-and-Shoulders Pattern in Foreign Exchange Markets
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Author:
Chang, Kevin; Osler, Carol L.
Book: Federal Reserve Bank of New York Research Paper |
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Year:
1994 Vol: 9414, pages 30..
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This paper evaluates rigorously the preductive pewer of the head-and-shoulders pattern which is one of the standard patterns used by chart-based technical analysts. We apply this trading rule to daily dollar exchange rates during the floating rate period (March 1973-June 1994). To do so we use an objective, computer-implemented algorithm to identify head-and-shoulders patterns, basing the algorithm on criteria recommended in published technical analysis manuals. The resulting profits, replicable in real-time, are then compared with the hypothesis of a random walk. Results: The head-and-shoulders trading rule appears to have some predictive power for the mark and yen but not the Canadian dollar, Swiss franc, French franc, or pound. Profits for the mark and yen are large but extremely risky.
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Support for Resistance: Technical Analysis and Intraday Exchange Rates
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Author:
Osler, Carol
Book: Federal Reserve Bank of New York Economic Policy Review |
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Year:
2000 Vol: 6(2), pages 53-68..
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"Support" and "resistance" levels--points at which an exchange rate trend may be interrupted and reversed--are widely used for short-term exchange rate forecasting. Nevertheless, the levels' ability to predict intraday trend interruptions has never been rigorously evaluated. This article undertakes such an analysis, using support and resistance levels provided to customers by six firms active in the foreign exchange market. The author offers strong evidence that the levels help to predict intraday trend interruptions. However, the levels' predictive power is found to vary across the exchange rates and firms examined.
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Further evidence on technical analysis and profitability of foreign exchange intervention
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Author:
Simón Sosvilla-Rivero, Julián Andrada-Félix and Fernando Fernández-Rodríguez
Book: |
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Year:
1999 |
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In this paper the authors present new evidence on the positive correlation Between returns from technical trading rules and periods of central bank intervention. To that end, they evaluate the profitability of a trading strategy based on nearest-neighbour (nonlinear) predictors, which may be viewed as a generalisation of graphical methods widely used in financial markets. The authors use daily data on the US Dollar/Deutsche mark and US Dollar/Japanese Yen covering the 1 February 1982-31 December 1996 period. The results suggest that the exclusion of days of US intervention implies a substantial reduction in all profitability indicators (net returns, ideal profit measure, Sharpe ratio and directional forecast), being the reduction grater in the US Dollar-Deustchmark case than in the US Dollar-Japanese yen case. |
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Remarks:
The text is downloadable at:
ftp://ftp.fedea.es/pub/Papers/1999/DT99-01.pdf |
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Sterilized Central Bank Intervention in the Foreign Exchange Market
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Author:
Paolo Vitale
Book: |
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Year:
Feb 1997 |
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In this paper we study the signalling role of sterilised central bank intervention. Through a market micro-structure framework, we show that in some circumstances sterilised intervention may represent an independent tool of policy and an instrument to influence exchange rates. Central bank intervention in the foreign exchange market also has important effects on the efficiency and liquidity of the market, the volume of trading and the conditional volatility of the exchange rate. Our results also question the general opinion that visible intervention should be preferred to secret one.
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Remarks:
The full text is downloadable at:
http://fmg.lse.ac.uk/download/fmgdps/dp0259.pdf |
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Treasury and Federal Reserve Foreign Exchange Operations
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Author:
Kos,-Dino and Schwarz,-Krista
Book: Federal-Reserve-Bulletin |
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Year:
June 2001 Vol: 87(6), pages 394-99.
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During the first quarter of 2001, the dollar appreciated 7.3 percent against the euro and 10.3 percent against the yen in an atmosphere of increased market uncertainty about the extent and duration of global economic slowing. On a trade-weighted basis, the dollar ended the quarter 7.4 percent stronger against an index of major currencies. The U.S. monetary authorities did not intervene in the foreign exchange markets during the quarter.
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Remarks:
The text is downloadable at:
http://www.federalreserve.gov/pubs/bulletin/2001/0601forex.pdf |
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The Rise and Fall of Foreign Exchange Market Intervention as a Policy Tool
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Author:
Schwartz,-Anna-J.
Book: Journal-of-Financial-Services-Research |
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Year:
December 2000 Vol: 18(2-3), December 2000, pages 319-39..
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The premise of the paper is that the fervor for foreign exchange market intervention by U.S., and European monetary authorities has ebbed in recent years. A pattern of initial belief in the effectiveness of foreign exchange market intervention has recently been eroded, as is revealed by the absence of intervention in circumstances that in earlier times would have invoked it. Only the Bank of Japan among central banks of the developed world has not thus far abandoned its faith that intervention can change the relative value of the yen as determined by market forces to conform with its notion of what that value should be. To explain why U.S. and European monetary authorities no longer believe that intervention is a tool that works, the author reviews the equivocal record of past episodes, the inconclusive results of empirical research, and the problems of implementation that intervention advocates ignore.
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Government Intervention and Adverse Selection Costs in Foreign Exchange Markets
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Author:
Naranjo, Andy and Nimalendran, M.
Book: Review-of-Financial-Studies; 13(2), Summer 2000, pages 453-77.
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Year:
Summer 2000 |
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An important group of traders in the foreign exchange market is governments who often adhere to a foreign exchange rate policy of occasional interventions with otherwise floating rates. In this article we provide a theoretical model and empirical evidence that government foreign exchange interventions create significant adverse selection problems for dealers. In particular, our model shows that the adverse selection component of the foreign exchange spread is positively related to the variance of unexpected intervention and that expected intervention has no impact on the spread. After controlling for inventory and order processing costs, we find that bid-ask spreads increase with U.S. dollar and German deutsche mark foreign exchange rate intervention during the period 1976-94. Furthermore, when the intervention is decomposed into expected and unexpected components, we find a statistically and economically significant increase in spreads with the variance of unexpected intervention, while expected intervention has no significant impact on spreads.
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Remarks:
The text is found in EconLit. It can be found after clicking 'check for CUHK holdings' |
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Experience and Practical Issues Concerning Foreign Exchange Operations
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Author:
Matthew Boge, Miranda Cheng, Teh Bee Khiw, Saw Teng Lam Ahmad Razi, Ronald Zeno Abenoja, Lim Soon Chong, Edward Robinson, Pichit Phattaravimolporn, and Alisara Smerasuta
Book: EMEAP Study on Exchange Rate Regimes |
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Year:
June 2001 |
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This paper looks at several practical aspects concerning the operations of
central banks in the foreign exchange market. It covers: 1) the relationship between the operation of exchange rate regimes and why central banks may want to intervene in the market, 2) the coordinating intervention with monetary policy; 3) measuring the success of foreign exchange operations; and 4)how intervention operations are conducted. |
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Remarks:
The full text is downloadable at:
http://www.emeap.org:8084/exchange/chap1.pdf |
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Untitled Document
References related to Equity and Bonds
(53 references
are shown.)
Untitled Document
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Contagious Currency Crises
|
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Author:
Barry Eichengreen, Andrew K. Rose, Charles Wyplosz
Book: NBER Working Paper |
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Year:
July 1996 Vol: No. W5681 |
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This paper is concerned with the fact that the incidence of speculative attacks tends to be temporally correlated; that is, currency crises appear to pass contagiously from one country to another. The paper provides a survey of the theoretical literature, and analyzes the contagious nature of currency crises empirically. Using thirty years of panel data from twenty industrialized countries, we find evidence of contagion. Contagion appears to spread more easily to countries which are closely tied by international trade linkages than to countries in similar macroeconomic circumstances.
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Remarks:
The paper is downloadable at: http://nberws.nber.org/papers/W5681 |
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Contagion and Trade: Why Are Currency Crises Regional?
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Author:
Reuven Glick, Andrew K. Rose
Book: NBER Working Paper |
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Year:
November 1998 Vol: No. W6806 |
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Currency crises tend to be regional; they affect countries in geographic proximity. This suggests that patterns of international trade are important in understanding how currency crises spread, above and beyond any macroeconomic phenomena. We provide empirical support for this hypothesis. Using data for five different currency crises (in 1971, 1973, 1992, 1994, and 1997) we show that currency crises affect clusters of countries tied together by international trade. By way of contrast, macroeconomic and financial influences are not closely associated with the cross-country incidence of speculative attacks. We also show that trade linkages help explain cross-country correlations in exchange market pressure during crisis episodes, even after controlling for macroeconomic factors.
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Remarks:
Paper in PDF format is downloadable at: http://nberws.nber.org/papers/W6806 |
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Technical Analysis from A to Z Second Edition
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Author:
Steven B. Achelis
Book: Technical Analysis from A to Z Second Edition |
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Year:
2000-2001 |
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Technical Analysis from A to Z begins with a concise yet thorough introduction to technical analysis. It then explains the intricacies of more than 140 technical indicators. The explanations provide an overview, an example, and details on calculating the indicators.
The Second Edition adds:
- All new illustrations (more than 200 charts)
- 40 new indicators (more than 140 in all)
- Detailed explanations to calculate the indicators |
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Remarks:
You can know the details at: http://www.atozbook.com/ |
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External Shocks, Purchasing Power Parity, and the Equilibrium Real Exchange Rate
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Author:
Shantayanan Devarajan, Jeffrey D. Lewis, and Sherman Robinson
Book: The World Bank Economic Review
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Year:
January 1993 Vol: Volume 7, Number 1 |
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Two approaches are commonly used to determine the equilibrium real exchange rate in a country after external shocks: purchasing power parity (PPP) calculations and the Salter-Swan, tradables-nontradables model. There are theoretical and empirical problems with both approaches, and tensions between them. In this article we resolve these theoretical and empirical difficulties by presenting a model which is a generalization of the Salter-Swan model and which incorporates imperfect substitutes for both imports and exports. Within the framework of this model, the definition of the real exchange rate is consistent both with that of the PPP approach and with that of the Salter-Swan model (suitably extended). Our model, however, is capable of capturing a richer set of phenomena, including terms of trade shocks and changes in foreign capital inflows. It also provides a practical way to estimate changes in the equilibrium real exchange rate, requiring little more information than is required to do PPP calculations. The results are consistent with those of multisector computable general equilibrium models, which generalize the trade specification of the small model.
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Remarks:
The full text of this article is not available on-line. Many past issues of the WBER can be purchased for $13 per issue at: http://www.worldbank.org/research/journals/wber/revjan93/external.htm |
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International price comparisons based on purchasing power parity
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Author:
Michelle A. Vachris and James Thomas
Book: Monthly Labor Online review |
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Year:
October 1999 Vol: Vol. 122, No. 10 |
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This paper is interesting and you may understand more about PPP via studying daily cases:
magine you are planning a trip to France and would like to figure out how much currency you will need during your visit. You would need to know how much in French francs it would cost for incidentals such as meals, sightseeing, and souvenirs. What information would be helpful to you in making your estimate? You could check the price of, say, a lunch in your hometown and then convert that figure into francs using the exchange rate. This type of estimate would not be very accurate, however, because it is likely that a lunch in your hometown costs relatively more or less than a lunch in France. A better estimate would be based on the price of a lunch in France.
Similarly, if you were opening a subsidiary company in Japan, how would you determine the salaries for your employees? Again, using the exchange rate to convert the salary you would pay in the United States into yen would not be accurate. To adequately compensate employees moving overseas, you would need information about the cost of living in Japan.
Finally, if a government or international organization were comparing national expenditures across different countries, merely collecting the gross domestic products (GDPs) of the countries and using exchange rates to convert them into a single currency would not yield an accurate comparison. Again, the comparison based on exchange rates does not take into account differing prices among the countries.
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Remarks:
The paper can be downloaded at: http://stats.bls.gov/opub/mlr/1999/10/art1exc.htm |
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Official Exchange Rate Arrangements and Real Exchange Rate Behavior
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Author:
David C. Parsley and Helen A. Popper
Book: Journal of Money, Credit and Banking |
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Year:
March 2000 |
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Here is the abstract of the paper:
We study the behavior of real exchange rates under various official designations of exchange rate arrangements. Examining many currencies, we find important differences across the designations. Most notably, real exchange rate mean reversion is fastest when nominal exchange rates are officially pegged. We also find a large nonlinear effect: adjustment is fastest when the real exchange rate deviates greatly from its mean. This nonlinear effect is also most striking among officially pegged currencies. Finally, we find that nominal exchange rates, rather than prices, do most of the adjusting. |
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Remarks:
The paper can be downloaded at:
http://mba.vanderbilt.edu/fmrc/papers/wp9730.htm |
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Regional Trading Agreements: The Implications for Chilean Economic Growth
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Author:
Thomas F. Rutherford, University of Colorado
David Tarr, The World Bank
Book: |
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Year:
March 19, 1998 |
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Chile currently faces three broad trade policy options, apart from the status quo. The first option is for Chile to continue to implement its membership of MERCOSUR, a customs union between several South American countries, including Brazil, Argentina, Paraguay, and Uruguay. The second is for it to continue to press for membership in NAFTA. Although transitory instability of financial markets in Mexico and the failure of fast-track negotiating authority in the United States Congress have stalled negotiations for Chile's accession to NAFTA, many observers believe that this option is still viable in the medium run. The final trade policy option that Chile always has available is unilateral liberalization of tariffs on a non-discriminatory basis. This option represents a unilateral action that Chile can take without any need for agreements with other countries. |
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Remarks:
The paper can be downloaded at: http://debreu.colorado.edu/~tomruth/chile/paper.html |
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Idiosyncratic Tastes in a Two-Country Optimizing Model: Implications of a Standard Presumption
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Author:
Warnock, Francis E.
Book: Board of Governors of the Federal Reserve System, International Finance Discussion Paper |
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Year:
1998 Vol: 631, pages 21 |
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International spillovers and exchange rate dynamics are examined in a two-country dynamic optimizing model that allows for idiosyncratic tastes across countries. Specifically, there is a home-good bias in consumption patterns: at given relative prices the ratio of home goods consumed to foreign goods consumed is higher in the home country. The setup nests Obstfeld and Rogoff (1995), who assume identical tastes. Allowing for idiosyncratic tastes produces results that differ from Obstfeld and Rogoff's: expansionary monetary policy increases home utility by more, the positive spillovers of a fiscal expansion are reduced, and both short-run and long-run deviations from consumption-based purchasing power parity (PPP) are possible. The model's predictions are broadly consistent with those from the Frenkel, Razin and Yuen (1996) version of the two-country Mundell-Fleming model and with observed behavior of real and nominal exchange rates.
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Does PPP Hold between Asian and Japanese Economies? Evidence Using Panel Unit Root and Panel Cointegration
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Author:
Azali, M.; Habibullah, M. S.; Baharumshah, A. Z.
Book: Japan and the World Economy |
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Year:
2001 Vol: 13(1), pages 35-50. |
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This paper presents an empirical analysis of panel unit root and panel cointegration tests of long-run absolute purchasing power parity (PPP) for seven Asian developing economies (ADE). The evidence shows that the panel parametric and non-parametric tests either with a trend term or without a trend term support the hypothesis of cointegration between the bilateral exchange rates and relative prices against the selected foreign country--Japan.
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Exchange Controls, Political Risk and the Eurocurrency Market: New Evidence from Tests of Covered Interest Rate Parity
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Author:
Cody, Brian J.
Book: International Economic Journal |
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Year:
1990 Vol: 4(2), pages 75-86.
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This study employs daily data to examine the effects on Eurocurrency and onshore returns of the May 21, 1981 imposition of exchange controls by French President Mitterand. Prior to this time, transaction costs explain the average onshore deviations from covered parity; however, these averages ignore short-lived political risk premia which emerged just before the imposition of controls. As expected, there is no evidence of political risk on Eurocurrency markets. Yet when exchange controls were in effect, premia in excess of transaction costs surfaced on nonfranc Eurocurrency deposits at the time of devaluations of the franc within the EMS.
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Forward and Spot Exchange Rates
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Author:
Fama, Eugene F.
Book: Journal of Monetary Economics |
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Year:
1984 Vol: 14(3), pages 319-38.
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In this study Fama decomposes the forward premium into a risk premium and an expected depreciation premium based on the information set available. By constructing a statistical model on this relation, he finds the relative importance of the risk premium and the expected depreciation premium. |
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Exchange Rate Forecasting Techniques, Survey Data, and Implications for the Foreign Exchange Market
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Author:
Frankel, Jeffrey A.; Froot, Kenneth
Book: International Monetary Fund Working
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Year:
1990 Vol: Paper: WP/90/43, pages 26. |
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This paper examines the dynamics of the foreign exchange market. The first half addresses a number of key questions regarding the forecasts of future exchange rates made by market participants, by means of updated estimates using survey data. Here the authors follow most of the theoretical and empirical literature in acting as if all market participants share the same expectation. The second half then addresses the possibility of heterogeneous expectations, particularly the distinction between "chartists" and "fundamentalists," and the implications for trading in the foreign exchange market and for the formation of speculative bubbles.
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A Multivariate GARCH Model of Risk Premia in Foreign Exchange Markets
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Author:
Malliaropulos, Dimitrios
Book: Economic Modelling |
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Year:
1997 Vol: 14(1), pages 61-79. |
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This paper investigates the existence of time-varying risk premia in deviations from uncovered interest parity based on the market capital asset pricing model. The empirical analysis is conducted using a broad data set of seven major currencies against the US dollar, and a world equity index in order to approximate the benchmark portfolio. The conditional covariance matrix of excess returns is modelled as a multivariate GARCH process. The results indicate significant conditional systematic risk. Estimated conditional beta coefficients are very similar across currencies and behave uniformly over time. The explanatory power of the model is significantly higher compared to the constant beta CAPM specification. Furthermore, estimation results suggest that (1) expected excess returns are less volatile in foreign exchange markets compared to stock markets, and (2) including nominal dollar assets in international equity portfolios can reduce overall portfolio risk.
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An Alternative Approach to Testing Uncovered Interest Parity
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Author:
Bhatti, Razzaque H.; Moosa, Imad A.
Book: Applied-Economics-Letters |
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Year:
1995 Vol: 2(12), pages 478-81.
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Supportive evidences of UIP hypothesis through a cointegration analysis. The authors compare the Treasury bill rates denominated in 11 currencies to the U.S. dollar, and find a long-run relationship in all cases. |
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Uncovered Interest Parity in Crisis: The Interest Rate Defense in the 1990s
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Author:
Flood, Robert P; Rose, Andrew K.
Book: |
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Year:
2001 Vol: This paper is available online at http://haas.berkeley.edu/~arose/UIPC.pdf |
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This paper tests for uncovered interes parity (UIP) using daily data for twenty-three developing and developed countries through the crisis-strewn 1990s. The authors find that UIP works better on average in the 1990s than previous eras in the sense the slope coefficient from a regression of exchange rate changes on interest differentals yields a positive coefficient (which is sometimes insignificantly different from unity). UIP works systematically worse for fixed and flexible exchange countries than for crisis countries, but we find no significant differences between rich and poor countries. Finally, the authors find evidence that varies considerably across countries and time, but is usually weakly consistent with an effective "interest defense" of the exchange rate. |
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Aid, Policies, and Growth
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Author:
Burnside, Craig, and David Dollar
Book: American Economic Review |
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Year:
2000 Vol: Vol. 90, No. 4, pp. 847-868. |
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The paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth per capita GDP. The paper finds that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies. Good policies are ones that are themselves important for growth. The quality of policy has only a small impact ont eh allocation of aid. Their results suggest that aid would be more effective if it were more systematically conditioned on good policy. |
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Technical Trading Rule Profitability and Foreign Exchange Intervention
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Author:
LeBaron, Blake
Book: Journal of International Economics |
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Year:
1999 Vol: 49(1), pages 125-43.
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There is reliable evidence that simple rules used by traders have some predictive value over the future movement of foreign exchange prices. This paper will review some of this evidence and discuss the economic magnitude of this predictability. The profitability of these trading rules will then be analyzed in connection with central bank activity using intervention data from the Federal Reserve. The objective is to find out to what extent foreign exchange predictability can be confined to periods of central bank activity in the foreign exchange market. The results indicate that after removing periods in which the Federal Reserve is active, exchange rate predictability is dramatically reduced. |
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Simple Technical Trading Rules and the Stochastic Properties of Stock Returns
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Author:
Brock, William; Lakonishok, Josef; LeBaron, Blake
Book: Brock, William; Lakonishok, Josef; LeBaron, Blake
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Year:
1992 Vol: 47(5), pages 1731-64. |
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This paper tests two of the simplest and most popular trading rules--moving average and trading range break--by utilizing the Dow Jones Index from 1897 to 1986. Standard statistical analysis is extended through the use of bootstrap techniques. Overall, their results provide strong support for the technical strategies. The returns obtained from these strategies are not consistent with four popular null models: the random walk, the AR(1), the GARCH-M, and the Exponential GARCH. Buy signals consistently generate higher returns than sell signals, and further, the returns following buy signals are less volatile than returns following sell signals. Moreover, returns following sell signals are negative, which is not easily explained by any of the currently existing equilibrium models.
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Politics and the Effectiveness of Foreign Aid
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Author:
Boone, Peter
Book: European Economic Review |
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Year:
1996 Vol: 40(2), pages 289-329.
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Critics of foreign aid programs have long argued that poverty reflects government failure. In this paper the author tests predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes. The study finds that aid does not significantly increase investment, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government. The impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive. But liberal political regimes and democracies, ceteris paribus, have on average 30% lower infant mortality than the least free regimes. This may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs. An implication is that short-term aid targeted to support new liberal regimes 'may' be a more successful means of reducing poverty than current programs.
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Aid and Growth in Sub-Saharan Africa: The Recent Experience
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Author:
Levy, Victor
Book: European Economic Review; |
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Year:
1998 Vol: 32(9), pages 1777-95.
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This paper presents some quantitative evidence on the relationship between foreign aid and economic growth in the low income countries of Sub-Saharan Africa. Two key findings are presented. First, aid is positively and significantly correlated with investment and economic growth in Africa. Second, fix capital formation contributed to the rate of growth. The second result, which emerges from analyzing time series data, is somewhat surprising given the disappointing economic performance of African countries since the early 1970s.
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Estimating Aid-Allocation Criteria with Panel Data
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Author:
Trumbull, William N.; Wall, Howard J.
Book: Economic Journal |
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Year:
1994 Vol: 104(425),pages 876-82.
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In 1990, the net amount of economic aid, or official development assistance, to all recipients from all multilateral and bilateral sources was about $62 billion, an amount that exceeded the GDPs of Greece and Portugal. Despite the size of this yearly transfer there has been no rigors modeling and estimation of the criteria by which it occurs. As a result, there is little agreement about the extent to which ODA is allocated according to the needs of the recipient countries. The purpose of this paper is to develop a rigorous theoretical model of ODA allocation that can be used to provide consistent estimates of the importance of recipient needs.
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Aid, the Public Sector and the Market in Less Developed Countries
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Author:
Paul Mosley, John Hudson, Sara Horrell
Book: The Economic Journal |
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Year:
1987 Vol: Vol. 97, No. 387. pp. 616-641.
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The authors found in this study that it is impossible to establish any statistically significant correlation between aid and the growth rate of GNP in developing countries. The suggest to explain this phenomenon by the possible leakages of funds into non-productive expenditure in the public sector and of the transmission of negative price effects to the private sector. In the end, they suggested the donors to judge the effectiveness of their aids in a country by parameters in their model and to concentrate their aids to highly effective countries. |
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East Asian Monetary Cooperation
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Author:
Chalongphob Sussangkarn
Book: available online at http://www.info.tdri.or.th/chals.pdf |
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Year:
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This article gives the necessity of promoting the monetary cooperation in east Asia. The author also provides his supports for the establishment of an Asian Monetary Fund. In addition, he/she suggests the focuses of Asian monetary cooperation. |
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Does Foreign Exchange Intervention Work?
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Author:
Kathryn M. Dominguez and Jeffrey A. Frankel
Book: Book Title:
Does Foreign Exchange Intervention Work? |
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Year:
September 1993 |
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Following the Versailles G-7 summit of 1982, most government officials and academic analysts downplayed the potential impact of exchange market intervention unless such intervention was permitted to affect national monetary policies. This study challenges the conventional wisdom. Using previously unavailable data on daily intervention by the US Federal Reserve and the German Bundesbank, the authors find to the contrary that even "sterilized" intervention can have an effect, especially if it is known to the markets. Implications are drawn for intervention policy and its role in the international coordination process. |
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Measuring the Profitability and Effectiveness of Foreign Exchange Market Intervention: Some Canadian Evidence
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Author:
John Murray, Mark Zelmer, and Shane Williamson
Book: Technical Report No. 53 |
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Year:
March 1990 |
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When the major industrial countries decided to move to a system of managed flexible exchange rates following the collapse of the Bretton Woods system, many observers thought that this would reduce, if not eliminate, the need for official foreign exchange market intervention. During the past fifteen years, however, intervention in most countries, including Canada, has risen steadily in both frequency and intensity.
This paper presents new empirical evidence on the profitability and effectiveness of Canadian intervention from 1975 to 1988. The results suggest that the government's foreign exchange operations have been very profitable and have tended to be stabilizing, in the sense that authorities were typically pushing the exchange rate towards its long-run trend and helping to reduce short-run volatility in the market.
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Remarks:
We can order printed copies of this paper at no charge from:
Publications Distribution, Bank of Canada
234 Wellington Street, Ottawa, Canada K1A 0G9
E-mail: publications@bank-banque-canada.ca
Telephone: 613-782-8248
Fax: 613-782-8874
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Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?
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Author:
Lucio Sarno and Mark P Taylor
Book: |
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Year:
February 2001 |
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This paper is provided by Centre for Economic Policy Research. In this Paper we assess the progress made by the profession in understanding whether and how exchange rate intervention works. To this end, we review the theory and evidence on official intervention, concentrating primarily on work published within the last decade or so. Our reading of the recent literature leads us to conclude that, in contrast with the profession's consensus view of the 1980s, official intervention can be effective, especially through its role as a signal of policy intentions, and especially when it is publicly announced and concerted. We also note, however, an apparent empirical puzzle concerning the secrecy of much intervention and suggest an additional way in which intervention may be effective but which has so far received little attention in the literature, namely through its role in remedying a coordination failure in the foreign exchange market. |
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Remarks:
The full text can be downloaded at http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=2690 |
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Foreign Exchange Intervention, Policy Objectives and Macroeconomic Stability
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Author:
Paolo Vitale
Book: |
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Year:
July 2001 |
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Within a simple model of monetary policy for an open economy, it studies how foreign exchange intervention may be used to condition agents' beliefs of the objectives of the policymakers. Differently from cheap talk foreign exchange intervention guarantees a unique equilibrium. Foreign exchange intervention does not bring about a systematic policy gain, such as an increase in employment or a reduction in the inflationary bias. It can, however, stabilise the national economy, for it drastically reduces the fluctuations of employment and output. Foreign exchange intervention is profitable, but a trade-off exists between these profits and the stability gain it brings about. Finally, an important normative conclusion of our analysis is that foreign exchange intervention and monetary policy should be kept separated, in that a larger stability gain is obtained when these two instruments of policy making are under the control of different governmental agencies. |
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Remarks:
The full text is downloadable at
http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=2886 |
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The Practice of Central Bank Intervention: Looking Under the Hood
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Author:
Christopher J. Neely
Book: |
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Year:
October 2000 |
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This article first reviews methods of foreign exchange intervention and then presents evidenceocusing on survey resultsn the mechanics of such intervention. Types of intervention, instruments, timing, amounts, motivation, secrecy and perceptions of efficacy are discussed.
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Remarks:
The paper can be downloaded at:
http://www.stls.frb.org/docs/research/wp/2000-028.pdf |
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The Temporal Pattern of Trading Rule Returns and Central Bank Intervention: Intervention Does Not Generate Technical Trading Rule Profits
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Author:
Christopher J. Neely
Book: |
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Year:
November 2000 |
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It is provided by the Federal Reserve Bank of St. Louis. This paper characterizes the temporal pattern of trading rule returns and official intervention for Australian, German, Swiss and U.S. data to investigate whether intervention generates technical trading rule profits. High frequency data show that abnormally high trading rule returns precede German, Swiss and U.S. intervention, disproving the hypothesis that intervention generates inefficiencies from which technical rules profit. Australian intervention precedes high trading rule returns, but trading/intervention patterns make it implausible that intervention actually generates those returns. Rather, intervention responds to exchange rate trends from which trading rules have recently profited.
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Remarks:
This paper is downloadable at:
http://www.stls.frb.org/docs/research/wp/2000-018C.pdf |
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Intraday Technical Trading in the Foreign Exchange Market
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Author:
hristopher J. Neely and Paul A. Weller
Book: |
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Year:
January 2001 |
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It is provided by the Federal Reserve Bank of St. Lois. This paper examines the out-of-sample performance of intraday technical trading strategies selected using two methodologies, a genetic program and an optimized linear forecasting model. When realistic transaction costs and trading hours are taken into account, we find no evidence of excess returns to the trading rules derived with either methodology. Thus, our results are consistent with market efficiency. We do, however, find that the trading rules discover some remarkably stable patterns in the data.
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Remarks:
This paper is downloaded at:
http://www.stls.frb.org/docs/research/wp/99-016B.pdf |
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Technical Analysis and Central Bank Intervention
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Author:
Christopher Neely and Paul Weller
Book: |
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Year:
Feburary 2000 |
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This paper extends the genetic programming techniques developed in Neely, Weller and Dittmar (1997) to provide some evidence that information about U.S. foreign exchange intervention can improve technical trading rules?profitability for two of four exchange rates over part of the out-of-sample period. Rules tend to take positions contrary to official intervention and are unusually profitable on days prior to intervention, indicating that intervention is intended to check or reverse predictable trends. Intervention seems to be more successful in checking predictable trends in the out-of-sample (1981-1998) period than in the in-sample (1975-1980) period. We conjecture that instability in the intervention process prevents more consistent improvement in the excess returns to rules. We find that the improvement in performance results from more precise estimation of the information in the past exchange rate series, rather than from information about contemporaneous intervention.
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Remarks:
This paper is downloadable at:
http://www.stls.frb.org/docs/research/wp/97-002c.pdf |
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International Economic Order and Asia-Pacific Cooperation: A View from the Philippines
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Author:
Alburo, Florian A.
Book: Philippine Review of Economics and Business |
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Year:
1995 Vol: 32(2), pages 115-33..
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This paper discusses how the Philippines can productively fit in to the emerging international economic environment. Current Philippine trade and investment policies are examined. The international economic order and Asia-Pacific cooperation are discussed in the context of the ASEAN, APEC and GATT. Modalities of cooperation and its direction are described, and prospects for the Philippines in relation to the international economic order are laid out.
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Pacific Bloc Stalled Over US-China Rift WHO SETS TRADE RULES?
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Author:
Book: Christian Science Monitor |
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Year:
1994 |
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China opposes efforts to create a free-trade zone among the economies of APEC's 18 members by the year 2020 because, in the world's fastest-growing region, Beijing says the Chinese economy is still developing and poorer countries should not suffer if tariff barriers drop. "We believe the development of APEC should ... reflect the rich varieties of the Asian-Pacific region while giving proper preference to members of developing countries," Dai Bingguo, vice foreign minister, said in a news briefing.
Beijing says it won't stand for the tougher US stance toward China while other countries have been let off the hook with only vague promises to comply with GATT requirements in agriculture and other sectors. Increasingly angry over the GATT obstacles, Chinese officials charge privately that the US is blocking their GATT admission to counterbalance domestic political damage from the most-favored-nation (MFN) decision last May.
"The speed of cooperation of APEC should proceed accordingly, but a speedy success should be avoided," says Mr. Dai, the vice foreign minister. "China attaches great attention to the function of APEC and wishes APEC could play a more active role in promoting cooperation in the Asian-Pacific region."
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Untitled Document
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Tokyo's View of APEC
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Author:
Cole, Richard A
Book: International Business |
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Year:
1994 Vol: Vol. 7, Iss. 3; pg. 139, 2 pgs |
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While US President Bill Clinton has been clear that he wants the Asia-Pacific Economic Cooperation (APEC) strengthened so it can be used as a tool to open Asian markets, Japan does not think much of the idea. Japan is in a tricky position. It has a strong interest in ensuring Asia's stability, both economically and militarily, and knows US participation is required for this. Security wise it sees the US as a much needed balance against North Korea and China. Japan is also aware of neighboring Asian countries' distaste for intervention by the US, with its tendency to dominate. Therefore, it sees itself as a broker between the two. Japan feels it is fulfilling its role as a leader by brokering agreements out of the limelight. The current structure of APEC - with its closed-door consideration of issues, consensus decision making and nonthreatening policy statements - fits the Japanese way of doing things and they like it.
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The Politics of Emerging Pacific Cooperation
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Author:
Donald Crone
Book: Pacific Affairs |
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Year:
1992 Vol: Vol. 65, No. 1., pp. 68-83.
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A number of political factors are examined that underlie the recent delineation of a political and economic group in the Pacific centered on the Asia-Pacific Economic Cooperation conference (APEC). These include changes in domestic policies in several ot the participants; the move toward regional trading blocs in other world areas; contentions over defining potential membership of the group; and competition for influence among overlapping international organizations in the Pacific.
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Japan in APEC: The problematic leadership role
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Author:
Deng, Yong
Book: Asian Survey |
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Year:
1997 Vol: Vol. 37, Iss. 4; pg. 353, 15 pgs |
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Japan's problematic leadership role in the Asia-Pacific Economic Co-operation (APEC) forum is examined.
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Does Financial Liberalization Spur Growth?
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Author:
Geert Bekaert
Campbell R. Harvey
Christian Lundblad
Book: |
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Year:
2001 |
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This paper shows that equity market liberalizations, on average, lead to a one percent increase in annual real economic growth over a five-year period. The liberalization effect is not spuriously accounted for by macro-economic reforms and does not reflect a business cycle effect. Although financial liberalizations further financial development, measures of financial development fail to fully drive out the liberalization effect. The investment/GDP ratio increases post liberalization, with the investment partially financed by foreign capital inducing worsened trade balances. Differentiating across liberalizing countries, a large secondary school enrollment, a small government sector and an Anglo-Saxon legal system tend to enhance the liberalization effect. Finally, the conditional convergence effect is larger once financial liberalization is accounted for. |
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8245.
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TAMING GLOBAL FINANCIAL FLOWS
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Author:
Kavaljit Singh
Book: TAMING GLOBAL FINANCIAL FLOWS
Challenges and Alternatives in the Era of Financial Globalization: A
Citizen's Guide
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Year:
July 2000 |
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The global financial system, this book argues, is in turmoil. Financial
liberalization has led to phasing out of regulatory mechanisms over the
movement of huge sums involved in currency speculations, new financial
products, offshore financial centers, secretive hedge funds and 'hot
money' flows to emerging markets. The result is a degree of volatility in
financial markets which threatens the orderly running of national
economies. This book explains and analyses the constantly changing and
complex world of global financial flows, and calls for radical reforms in
a system that is now more susceptible to the whims of market sentiment
than the economic policies of governments. The author enunciates certain
guiding principles in order to create a more stable international
financial architecture and recommends a series of concrete measures. This
most timely and useful follow-up to his very successful previous book, The
Globalization of Finance: A Citizen's Guide, contributes greatly to public
understanding of the intricacies of global finance and to the
possibilities of effective action by peoples' movements campaigning for a
more just and sound financial system.
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Remarks:
Kavaljit Singh is the Coordinator of the Public Interest Research Centre
in New Delhi. He has been writing on global finance and developmental
issues in journals and newspapers in India and abroad. He is the author of
The Globalization of Finance: A Citizen's Guide (DAGA, IPSR Books, Madhyam
Books and Zed Books, 1999). Apart from several English language editions,
the book has been translated and published in nine Asian languages. His
previous books on foreign capital include TNCs and India (with Jed Greer,
PIRG, 1995) and The Reality of Foreign Investments (Madhyam Books, 1997).
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Capital Account Liberalization, Financial Depth and Economic Growth
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Author:
Michael W. Klein, Giovanni Olivei
Book: NBER WORKING PAPER |
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Year:
1999 Vol:
NBER Working Paper No. W7384
(Issued in October 1999)
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This paper shows a statistically significant and economically relevant effect of open capital accounts on financial deepness and economic growth in a cross-section of countries over the period 1986 to 1995. Countries with open capital accounts over some or all of this period had a significantly greater increase in financial depth than countries with continuing capital account restrictions, and they also enjoyed greater economic growth. There results, however, are largely driven by the developed countries in the sample. The observed failure of capital account liberalization to promote financial deepness among developing countries suggests potentially important policy implications concerning the desirability of liberalizing the capital account.
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China's WTO Accession Would Boost US Ag Export & Farm Income
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Author:
Book: |
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Year:
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Remarks:
http://www.ers.usda.gov/publications/agoutlook/mar2000/ao269e.pdf |
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China's WTO Accession Boost US Ag Exports and Farm Income
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Author:
Book: Agricultural Outlook
Economic Research Service/USDA |
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Year:
March 2000 |
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This article is about the impact of China's accession into WTO on US agricultural exports. The article has mentioned the barriers reduced because
of the accession, the projected statistical data on China's agricultural imports are provided. |
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Remarks:
This article is downloadable in pdf format at the site: http://www.ers.usda.gov/publications/agoutlook/mar2000/ao269e.pdf |
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Emerging Stock Markets, Portfolio Capital Flows and Long-Term Economic Growth: Micro and Macroeconomic Perspectives
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Author:
Singh,Ajit; Weisse,Bruce A.
Book: University of Cambridge Discussion Papers in Accounting and Finance |
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Year:
1998 Vol: AF40 pages 28. |
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The paper examines two major components of financial liberalization, stock market development and portfolio capital flows, in the context of LDCs. The paper considers microeconomic and macroeconomic perspectives on their implications for long-term development and economic growth. It concentrates on (i) the role of stock markets in financing corporate growth; (ii) the implications of stock market volatility for resource allocation and productive efficiency; and (iii) the interactions between the foreign exchange and stock markets in the context of economic shocks. Its policy recommendations are that LDCs should promote bank-based systems, influence the scale and composition of capital inflows, and prevent a market for corporate control from emerging.
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The WTO After Seattle
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Author:
Jefferey J. Schott
Book: The WTO After Seattle (edited by Jefferey J. Schott) |
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Year:
2000 Vol: pages 3 - 40 |
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This book was written after the Seattle Collapse of WTO. It explores the reasons for the failure to launch a new trade round in Seattle. For the further progress of WTO negotiations, it provides the interests of major nations in WTO, the suggested issues to pursue for the aim of a new round, and the improvement istitution issues for WTO. |
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Technical Analysis from A to Z Second Edition
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Author:
Steven B. Achelis
Book: Technical Analysis from A to Z Second Edition |
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Year:
2000-2001 |
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Technical Analysis from A to Z begins with a concise yet thorough introduction to technical analysis. It then explains the intricacies of more than 140 technical indicators. The explanations provide an overview, an example, and details on calculating the indicators.
The Second Edition adds:
- All new illustrations (more than 200 charts)
- 40 new indicators (more than 140 in all)
- Detailed explanations to calculate the indicators |
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Remarks:
You can know the details at: http://www.atozbook.com/ |
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Technical Trading Rule Profitability and Foreign Exchange Intervention
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Author:
LeBaron, Blake
Book: Journal of International Economics |
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Year:
1999 Vol: 49(1), pages 125-43.
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There is reliable evidence that simple rules used by traders have some predictive value over the future movement of foreign exchange prices. This paper will review some of this evidence and discuss the economic magnitude of this predictability. The profitability of these trading rules will then be analyzed in connection with central bank activity using intervention data from the Federal Reserve. The objective is to find out to what extent foreign exchange predictability can be confined to periods of central bank activity in the foreign exchange market. The results indicate that after removing periods in which the Federal Reserve is active, exchange rate predictability is dramatically reduced. |
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Simple Technical Trading Rules and the Stochastic Properties of Stock Returns
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Author:
Brock, William; Lakonishok, Josef; LeBaron, Blake
Book: Brock, William; Lakonishok, Josef; LeBaron, Blake
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Year:
1992 Vol: 47(5), pages 1731-64. |
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This paper tests two of the simplest and most popular trading rules--moving average and trading range break--by utilizing the Dow Jones Index from 1897 to 1986. Standard statistical analysis is extended through the use of bootstrap techniques. Overall, their results provide strong support for the technical strategies. The returns obtained from these strategies are not consistent with four popular null models: the random walk, the AR(1), the GARCH-M, and the Exponential GARCH. Buy signals consistently generate higher returns than sell signals, and further, the returns following buy signals are less volatile than returns following sell signals. Moreover, returns following sell signals are negative, which is not easily explained by any of the currently existing equilibrium models.
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Filter rules and stock market trading profits
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Author:
Fama, E.F. and Blume, M.
Book: Journal of Business |
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Year:
1966 Vol: 39, 226-241 |
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The authors studies the profitability of filter rules for the U.S. stock market as a test of random walk or efficient market. |
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The profitability of technical trading rules in the Asian stock markets
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Author:
Bessembinder, H. and Chan, K.
Book: Pacific-Basin Finance Journal |
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Year:
1995 Vol: 3(2-3), 257-284 |
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The authors assess whether some simple forms of technical analysis can predict stock price movement in Asian markets. They find the rules to be quite successful in the emerging markets of Malaysia, Thailand and Taiwan. The rules have less explanatory power in more developed markets such as Hong Kong and Japan. On average for their sample, mean percentage changes in stock indices on days that the rules emit buy signals exceed means on days that the rules emit sell signals by 0.095% per day, or about 26.8% on an annualized basis. They estimate ``break-even'' round-trip transactions costs (which would just eliminate gains from technical trading) to be 1.57% on average. They also find that technical signals emitted by U.S. markets have substantial forecast power for Asian stock returns beyond that of own-market signals. This is consistent with the reasoning that the technical rules identify periods when global equilibrium expected returns deviate substantially from their unconditional mean. |
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A Note on the Weak Form Efficiency of Capital Markets: The Application of Simple Technical Trading Rules to UK Stock Prices--1935 to 1994
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Author:
Hudson, Robert; Dempsey, Michael; Keasey, Kevin
Book: Journal-of-Banking-and-Finance |
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Year:
1994 Vol: 20(6), pages 1121-32.
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Brock et al. (1992) found technical trading rules to have predictive ability with regards to the Dow Jones Index. The current paper considers whether this result can be replicated on UK data. The paper also considers whether investors could earn excess returns from technical analysis in a costly trading environment. The paper concludes that although the technical trading rules examined do have predictive ability in terms of UK data, their use would not allow investors to make excess returns in the presence of costly trading.
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Simple technical trading rule by using moving average
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Author:
Mak, Billy S.C.
Book: Hong Kong Economic Papers |
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Year:
1996 Vol: 24, 55-68 |
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Using the Hang Seng Index from January 1981 to December 1992, the author finds the profit for some of the trading rules but the selection of moving average window is very crucial in generating profit. |
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Profits on technical trading rules and time-varying expected returns: evidence from Pacific-Basin equity markets
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Author:
Ito,Akitoshi
Book: Pacific-Basin Finance Journal |
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Year:
1999 Vol: (7)3-4, pp. 283-330
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This study evaluates the profitability of technical trading rules in Pacific-Basin equity markets by using equilibrium asset pricing models with time-varying expected returns. Specifically, this study uses asset pricing models under complete integration, mild segmentation [Errunza, V., Losq, E., Padmanablan, P., 1985. International asset pricing under mild segmentation hypothesis. Journal of Banking and Finance, 16, 949--972.], and complete segmentation in assessing trading rule profits. The same set of technical rules that Brock et al. [Brock, W., Lakonishok, J., LeBaron, B., 1992. Simple technical trading rules and the stochastic properties of stock returns, Journal of Finance, 47, 1731--1764.] examine are applied to the Japanese, U.S., Canadian, Indonesian, Mexican and Taiwanese equity indices. The results from the standard tests indicate that the technical rules have significant forecast power for all countries, except for the U.S. However, the results from the bootstrap tests indicate that some equilibrium asset pricing models (mainly, the asset pricing model under mild segmentation) are consistent with the observed trading rule returns for Japan, the U.S., the recent period of Canada and Taiwan. The overall results indicate that taking into account the time-varying expected returns is important to evaluate the profitability of the technical trading rules.
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The Stability of moving average technical trading rules on the Dow Jones Index
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Author:
LeBaron
Book: Derivative Use, Trading and Regulation |
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Year:
2000 Vol: 5, 324-338 |
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Using the US Dow Jones Industrial Average Index, the author found that technical trading rule profits have fallen recently. |
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Data-Snooping, Technical Trading Rule Performance, and the Bootstrap
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Author:
Sullivan, Ryan; Timmermann, Allan; White, Halbert
Book: Journal-of-Finance |
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Year:
1999 Vol: 54(5), pages 1647-91. |
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In this paper the authors utilize White's Reality Check bootstrap methodology (White [1999]) to evaluate simple technical trading rules while quantifying the data-snooping bias and fully adjusting for its effect in the context of the full universe from which the trading rules were drawn. Hence, for the first time, the paper presents a comprehensive test of performance across all technical trading rules examined. The authors consider the study of Brock, Lakonishok, and LeBaron (1992), expand their universe of 26 trading rules, apply the rules to 100 years of daily data on the Dow Jones Industrial Average, and determine the effects of data-snooping.
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