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Interest Differentials (interest + differential)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

The real exchange rate and real interest differentials: the role of nonlinearities

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2005
Nelson C. Mark
Abstract Recent empirical work has shown the importance of nonlinear adjustment in the dynamics of real exchange rates and real interest differentials. This work suggests that the tenuous empirical linkage between the real exchange rate and the real interest differential might be strengthened by explicitly accounting for these nonlinearities. We pursue this strategy by pricing the real exchange rate by real interest parity. The resulting first-order stochastic difference equation gives the real exchange rate as the expected present value of future real interest differentials which we compute numerically for three candidate nonlinear processes. Regressions of the log real US dollar prices of the Canadian dollar, deutschemark, yen and pound on the fundamental values implied by these nonlinear models are used to evaluate the linkage. The evidence for linkage is stronger when these present values are computed over shorter horizons than for longer horizons. Copyright © 2005 John Wiley & Sons, Ltd. [source]

International Capital Mobility in the Short Run and the Long Run: A Daily Data Study for Japan, Singapore and Taiwan*

ASIAN ECONOMIC JOURNAL, Issue 1 2008
Han-Min Hsing
F32; F41; G15 Using daily data from between 1993 and 2003, covered interest differential and cointegration tests are applied to examine short-run and long-run international capital mobility for Japan, Singapore and Taiwan, and, for comparison purposes, the UK. Despite the high short-run mobility in Japan (Singapore and Taiwan), being slightly (significantly) lower than in the UK, perfect long-run mobility exists in all three Asian economies, especially when the Asian currency crisis is excluded. Different short-run and long-run mobility implies the existence of a response lag in the financial market. As expected, although the impulse response reaches the significant long-run equilibrium level shortly after the shock in the UK, lagged responses appear in the three Asian economies, particularly in Singapore and Taiwan. [source]

Explaining trading volume in the euro

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 1 2006
Janusz Brzeszczynski
Abstract Following the introduction of the euro in 1999, daily trade volume began a downward trend until early 2002, after which daily volume started to trend upward. A model of weekly trades suggests that changes in momentum as well as the carry trade motives of interest differentials are significant explanatory factors. Daily data examination reveals that Fridays have lower activity, and Tuesdays greater activity than average. At the intradaily level, trading is very low before and after London business hours. Within the London business day, trade activity is higher in 5-min intervals when a ,big figure' is breached. This is consistent with stop-loss or take-profit motives for trading. Copyright © 2006 John Wiley & Sons, Ltd. [source]

The real exchange rate and real interest differentials: the role of nonlinearities

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2005
Nelson C. Mark
Abstract Recent empirical work has shown the importance of nonlinear adjustment in the dynamics of real exchange rates and real interest differentials. This work suggests that the tenuous empirical linkage between the real exchange rate and the real interest differential might be strengthened by explicitly accounting for these nonlinearities. We pursue this strategy by pricing the real exchange rate by real interest parity. The resulting first-order stochastic difference equation gives the real exchange rate as the expected present value of future real interest differentials which we compute numerically for three candidate nonlinear processes. Regressions of the log real US dollar prices of the Canadian dollar, deutschemark, yen and pound on the fundamental values implied by these nonlinear models are used to evaluate the linkage. The evidence for linkage is stronger when these present values are computed over shorter horizons than for longer horizons. Copyright © 2005 John Wiley & Sons, Ltd. [source]

A Perspective on Modelling the Australian Real Trade Weighted Index since the Float

AUSTRALIAN ECONOMIC PAPERS, Issue 1 2003
Shakila Aruman
Since the deregulation of the Australian dollar market in December 1983, considerable effort has been devoted by the central bank to understanding movements in the value of the currency. As the Reserve Bank of Australia (RBA) has a pivotal role to play in currency markets, attention has been focussed on the modelling techniques used by the Bank's researchers in this process. This paper examines the ancestral development of the current model of the Australian Trade Weighted Index (rtwi) used at the RBA, as specified in Beechey et al. (2000). Estimates and forecasting evaluations of the various models imply that only the relationships between the rtwi, the terms of trade and interest differentials hold consistently, providing the empirical foundation for the current RBA model. [source]