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published_or_final_version / Economics and Finance / Master / Master of Economics

published_or_final_version / Economics and Finance / Master / Master of Economics

<p>Since the 1980s China had different exchange rate regimes. For example, in 1981, a dual-exchange rate system was introduced, with the official exchange rate applying to non-trade-related foreign exchange transactions and the depreciated internal settlement rate (ISR) applying to trade related transactions. This system was discontinued in 1985, but after the establishment of special economic zones to boost the country&rsquo / s export performance, the dual-exchange rate system was reintroduced in 1986. In 1994 the country informed the IMF that it will be switching to a managed floating exchange rate system and this was the official policy for almost ten years. However, de facto, the country chose to peg its currency to the USD during all these years (whilst Japan was the most important trading partner).</p> <p><br /> The report provides a descriptive analytical overview of how China in this era of globalization and with the importance of the World Trade Agreement, managed to keep its currency pegged to the USD over such a long period of time. The most important factors explaining this choice were identified as the desire to stimulate export-let economic growth, the risk related to capital mobility, financial sector liberalization, relative price level stability, dollarization and politics.</p>

This dissertation empirically and theoretically investigates three interrelated issues of market anomalies in interest rates derivatives and foreign exchange rates. The first essay models the spot exchange rate as a decomposition of permanent and transitory components. Unlike extant analysis, the transitory component could be stationary or explosive. The second essay examines the market efficiency hypothesis in the foreign exchange markets and relates the rejection of forward rate unbiasedness hypothesis to the existence of risk premium not to the failure of rational expectation. The third essay examines the behavior of short-term riskless rate and models the risk free rate as a nonlinear trend stationary process. While addressing these issues, these essays account for: (1) finite sample bias; (2) Unit root and other nonstationary behaviors; (3) the role of nonlinear trend; and (4) the interrelations between different behaviors. Several new results have been gleaned from our analysis; we find that: (1) the spot exchange rates display a very slow mean aversion behavior, which implies the failure of the purchasing power parity; (2) there are positive autocorrelations across the long horizons overlapping returns increases overtime and then begin to decline at a very long horizon period; (3) the short-term riskless rate displays a nonlinear trend stationary process which is closer to driftless random walk behavior; (4) modifying the mean reverting shortterm interest rates models to a nonlinear trend stationary shows an extreme improvement and outperforms all suggested models; (5) the traditional tests for rational expectations and market efficiency in the foreign exchange markets are subject to size distortions; (6) we relate the rejection of market efficiency in the foreign exchange markets documented across most currencies to the existence of risk premium not to the rejection of rational expectation hypothesis.

A Thesis submitted to the Faculty of Commerce of the University of the Witwatersrand, Johannesburg, for the degree of Doctor of Philosophy December 1978 / The breakdown of the system of fixed exchange rates, which occurred in the western world in the early 1970s, has exerted marked effects upon the exchange rate policies adopted by South Africa. In particular, it has resulted in the local monetary authorities practising a more active policy concerning the exchange rate value of the rand. The purpose of this thesis is to describe and analyze the exchange rate policies of the Renublic during the period from 1971 to 1977, and to offer recommendations For change. The research procedure followed involved extensive gathering of information from published literature, together with confidential information disclosed to the writer by the Deputy Governor of the Reserve Bank. The thesis is divided into four sections. Section A reviews the traditional exchange rate policy adopted by the South African authorities, and their long-standing support for fixed but adjustable exchange rates in the international monetary system. Section B incorporates on historical review and analysis of changes in the exchange rate for the rand which have materialised since 1971. Section C focuses attention upon the attitudes of the local authorities over the issue of reform of the exchange rate regime in the international monetary system in the past few years. Section D is devoted to an analysis of specific policy issues which have arisen in the conduct of exchange rate policy in South Africa, and highlights areas where improvements could be made. All four chapters in this Section were submitted as evidence to the current Commission of Inquiry into the Monetary System and Monetary Policy in South Africa. One important conclusion of the study is that the more flexible exchange rate policy adopted in South Africa has had very limited success in affecting positively the current account of the balance of payments. Conversely exchange rate policy appears to have been more successful in improving the position on tht capital account. (iv) Another conclusion concerns deficiencies which exist in the provision of foreign exchange facilities, and particularly in regard to forward exchange. In some respects South African policy is characterized by exchange rates and facilities which bear little relation to market conditions. It is recommended that j mor># competitive market in foreign exchange should be established in both spot and forward transactions.

Chiang Lok Man Cally. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2004. / Includes bibliographical references (leaves 29-31). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Literature Review --- p.4 / Chapter 2.1 --- Studies against the trading rule profits --- p.4 / Chapter 2.2 --- Studies for the trading rule profits --- p.5 / Chapter 3 --- Data Descriptions and Methodology --- p.8 / Chapter 4 --- Empirical Results --- p.14 / Chapter 4.1 --- First trading rule --- p.14 / Chapter 4.2 --- Second trading rule --- p.19 / Chapter 4.3 --- Comparison between the two trading rules --- p.23 / Chapter 5 --- Other Related Results --- p.25 / Chapter 6 --- Conclusions --- p.27 / Reference --- p.29 / Figure 1 - 12 --- p.32 / Table 1 - 14 --- p.44

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This dissertation is concerned with the examination of some widely employed nonlinear exchange rate models. In particular, its aim is to assess how well non-linear statistical models accommodate the theoretical implications contained in economic models and how well they are able to capture the empirical properties of the data. Chapter 2 gives a brief background to the concept of PPP and discusses the role of transaction costs in economic models, making it necessary to model exchange rates within a non-linear framework. Parametric as well as non-parametric statistical techniques are applied to a long time-series data set to give an indication of the empirical validity of non-linearity in real exchange rates. Wide threshold bands are found to be a common characteristic of real exchange rate data. Chapter 3 studies the fitness of the ESTAR model for real exchange rate modelling. It is shown that wide threshold bands in the empirical data necessitate a small transition function parameter in the exponential regime weighting function, leading to difficulties in the meaningful interpretation of regimes. When this occurs, it is also shown that the ESTAR model is weakly identified over the range of the sample data that one generally works with. These results are illustrated on an empirical data set by replicating the often cited study of Taylor et al. (2001). In Chapter 4 and Chapter 5 a number of non-linear models are evaluated. Simulation experiments indicate that LM style tests that are commonly employed in the literature to test for ESTAR non-linearity have a very low probability of rejecting the false null hypothesis of linearity when the true data generating process is in fact the ESTAR model of Taylor et al. (2001). It is further shown that, contrary to the claims of the recent study by Rapach and Wohar (2006), long-horizon forecasts from the ESTAR model converge to the unconditional mean of the series, so that there is no gain in utilising the ESTAR model for long-horizon forecasts. Studying the Markov switching model of Bergman and Hansson (2005) reveals that the model does not generate any non-linearity as predicted from economic models.