This study builds on the paper by Arquette, Brown, and Burdekin (2008) and asks whether the factors which they find to be significant in influencing the differential between the share prices of Chinese securities traded on their home market in Shanghai versus share prices observed offshore in Hong Kong and New York have varying degrees of influence when compared across industries. This paper focuses on Chinese companies listed on both the Shanghai and Hong Kong Stock Exchanges and finds that the proxy variables of expected exchange rate change, relative market sentiment, and relative company sentiment are significant in determining the average discount observed and that their effects do indeed vary significantly from industry to industry.

Since 1992, India has grown as a global player in the finance world. In spite of its success, India has not been able to rid itself of potentially harmful practices. One such practice is the issuing of Participatory Notes (PN) to foreign investors, so that they can anonymously purchase securities or derivatives listed on the Indian Stock Exchanges. This instrument came into public view when it accounted for approximately 50% of all foreign portfolio assets in India. Since then, the laws regarding PNs have evolved to become a more transparent version of the old rules. Although PN levels are not close to as high as 2007, a rising trend in PNs has been observed from September to November 2012. Regulation may have helped figure out who the end PN holder is, but it has not helped mitigate the inherent volatility that some scholars argued PNs had. This paper follows previous researchers claims to try to resolve the issue using rigorous econometric analysis. It uses the Vector Auto Regression (VAR) Model to find the coefficient of change in Participatory Note volume when regressed against the U.S. Dollar Indian Rupee Nominal Exchange Rate. Although the model’s results are interpreted, a problem of serial correlation existed in the model, thus impairing the results.

Islamic banking is currently one of the fastest growing segments of the financial market industry, operating in over 75 countries through 300 institutions. While past literature has established the development of financial institutions as a determinant of economic growth, research on the correlation of the diffusion of Islamic banking with economic growth is limited. This study seeks to add to the literature by empirically analyzing the economic growth determinative power of Islamic banks. Confirming past research, Muslim prevalence in a population is found to be the most significant determinant of the diffusion of Islamic banks. Using this exogenous instrument in 2SLS regressions, results show that Islamic banks are not significantly correlated with economic growth. Most notably, including the Islamic banking instrument affects the strength of beta-convergence. Basic Solovian specifications show that convergence occurs; countries with higher initial GDP per capita grow more slowly. After accounting for the intensity of Islamic banking, this effect becomes much less statistically significant, suggesting that some of the effect of convergence may operate through the propensity to adopt Islamic banking. Empirical analysis disaffirms the hypothesis that Islamic banks minimize the explanatory power of legal origin on economic growth due to their independent implementation of Shariah law; the results show that accounting for Islamic banks has no effect on the determinative power of legal origin. Finally, the correlation of Islamic banking and financial deepening is largely dependent on legal origin, resulting in negative effects for countries with British legal origin and positive for those with French legal origin.

High interest rate currencies tend to appreciate despite what is be implied by the uncovered interest parity. It is thought that the uncovered interest parity does not hold due to various risks, costs, liquidity issues, and monetary policies. There have been extensive studies into the cause of this phenomenon yet none have examined the period before the formation of the Federal Reserve in 1913. This study examines whether or not the uncovered interest parity holds between the UK, the US, France, Germany, the Netherlands, Belgium, Italy, Spain, and Portugal during this time period to determine if the absence of capital controls and monetary policies allow for the uncovered interest parity to hold. In the end, none of the 213 regressions testing all the country pairs across varying horizons came close to providing support for the uncovered interest parity.

This thesis examines two closely related issues: (1) the ability of imperfect information models to explain some aspects of business cycle dynamics, and (2) the interaction between central bank communications and monetary policy. These issues are related because central bank communications can only be studied in models with imperfect information. In chapter 1, I investigate the ability of a noisy rational expectations model to generate plausible macroeconomic dynamics. The model allows for imperfect, heterogeneous information, and signal extraction from endogenous variables. I find that imperfect information significantly improves the model's ability to generate persistent, hump-shaped responses to a transitory monetary policy shock. This is achieved without the need for mechanical frictions. In addition, the model generates realistic inflation forecast errors. Chapter 2 explores the relationship between central bank statements about future policy and the degree of commitment. I allow the central bank to make (possibly vague) statements about its expected future policy. I begin by assuming that the central bank adopts a loss function which internalizes the bygone costs of deviating from such a pre-announced policy action. The resulting policy is a convex combination of pure discretion and full commitment. As the precision of central bank statements increases, this policy converges to the full commitment policy. I then show that this type of commitment to internalize bygone costs is sustainable only for moderate degrees of precision. Chapter 3 studies the impact of central bank communications about the state of the economy. In particular, I examine the extent to which increased central bank transparency creates a meaningful trade-off between beneficially conveying fundamental information and adversely contaminating observed data with the central bank's opinion. This question is addressed in a variant of the model from chapter 1. In this environment, both the central bank and private agents learn about the state of the economy from observations of endogenous variables. By making the central bank learn from endogenous variables, I am able to study the impact of communications precision on the bank's signal extraction problem.

Using the error correction model, we link the long-run behavior of the Canada-US real exchange rate to its short-run dynamics. The equilibrium real exchange rate is determined by the energy and non-energy commodity prices over the period 1973Q1-1992Q1. However such a single long-run relationship does not hold when the sample period is extended to 2004Q4. This breakdown can be explained by the break point which we find at 1993Q3. At the break point, the effect of the energy price shocks on Canadas real exchange rate turns from negative to positive while the effect of the non-energy commodity price shocks is constantly positive. We find that after one year 40.03% of the gap between the actual and equilibrium real exchange rate is closed. The Canada-US interest rate differential affects the real exchange rate temporarily. The Canadas real exchange rate depreciates immediately after a decrease in Canadas interest rate and appreciates next quarter but not by as much as it has depreciated.

The impact of conflict and violence on foreign direct investment (FDI) is not a topic that has been done justice by the literature, and what few studies exist have contradictory results. This paper studies the impact that transnational terrorism has on FDI inflows by economic sector, in developed countries. Results indicate a statistically significant negative correlation between terrorist events and total FDI inflows. Amongst a list of 12 broad industrial sectors, FDI inflows for manufacturing, trade and repair, and construction were found to have a statistically significant negative correlation with terrorist events.

A gravity model is used to evaluate the effects of currency union on intra-regional trade of ECOWAS (Economic Community of West African States) member states. The panel data used includes bilateral observations for fourteen years spanning 1994 through 2006 for 16 countries. Controlling for determinants and deterrents of trade, I find the presence of a currency union three times as likely to increase intra-regional trade between ECOWAS member countries. In addition, I find that the effect on trade creation has been steadily falling since 1994.

This thesis examines two closely related issues: (1) the ability of imperfect information models to explain some aspects of business cycle dynamics, and (2) the interaction between central bank communications and monetary policy. These issues are related because central bank communications can only be studied in models with imperfect information. In chapter 1, I investigate the ability of a noisy rational expectations model to generate plausible macroeconomic dynamics. The model allows for imperfect, heterogeneous information, and signal extraction from endogenous variables. I find that imperfect information significantly improves the model's ability to generate persistent, hump-shaped responses to a transitory monetary policy shock. This is achieved without the need for mechanical frictions. In addition, the model generates realistic inflation forecast errors. Chapter 2 explores the relationship between central bank statements about future policy and the degree of commitment. I allow the central bank to make (possibly vague) statements about its expected future policy. I begin by assuming that the central bank adopts a loss function which internalizes the bygone costs of deviating from such a pre-announced policy action. The resulting policy is a convex combination of pure discretion and full commitment. As the precision of central bank statements increases, this policy converges to the full commitment policy. I then show that this type of commitment to internalize bygone costs is sustainable only for moderate degrees of precision. Chapter 3 studies the impact of central bank communications about the state of the economy. In particular, I examine the extent to which increased central bank transparency creates a meaningful trade-off between beneficially conveying fundamental information and adversely contaminating observed data with the central bank's opinion. This question is addressed in a variant of the model from chapter 1. In this environment, both the central bank and private agents learn about the state of the economy from observations of endogenous variables. By making the central bank learn from endogenous variables, I am able to study the impact of communications precision on the bank's signal extraction problem.

Using the error correction model, we link the long-run behavior of the Canada-US real exchange rate to its short-run dynamics. The equilibrium real exchange rate is determined by the energy and non-energy commodity prices over the period 1973Q1-1992Q1. However such a single long-run relationship does not hold when the sample period is extended to 2004Q4. This breakdown can be explained by the break point which we find at 1993Q3. At the break point, the effect of the energy price shocks on Canadas real exchange rate turns from negative to positive while the effect of the non-energy commodity price shocks is constantly positive. We find that after one year 40.03% of the gap between the actual and equilibrium real exchange rate is closed. The Canada-US interest rate differential affects the real exchange rate temporarily. The Canadas real exchange rate depreciates immediately after a decrease in Canadas interest rate and appreciates next quarter but not by as much as it has depreciated.