121 |
Essays on Dutch Disease and exchange rate pass-through : evidence from Canadian manufacturing industriesShakeri, Mohammad 13 April 2010
The dissertation consists of three essays on Dutch Disease and exchange rate pass-through.
Dutch Disease refers to the adverse effects of the natural resource booms on the tradable sectors
(manufacturing industries) which may occur mainly through the subsequent appreciation of the real exchange rate.<p>
The first essay aims to investigate whether Canadian manufacturing industries have experienced
Dutch Disease over the period 1992-2007 as a result of the oil boom. After a review of the literature and discussion of the theoretical considerations, the paper presents a two part
empirical analysis to estimate the short- and long-run Dutch Disease effects for the Canadian
manufacturing industries at three, four and few cases of five-digit levels of NAICS (about 80 industries), using quarterly data. The first part of the empirical analysis estimates the relationship between real exchange rate and energy prices as well as the other related factors
and the second part estimates the effect of real exchange rate on output of the manufacturing industries. Based on these two estimated relationships, the Dutch Disease effect is derived
by calculating the effect of energy prices on output of the manufacturing industries. The
results indicate that the direction and magnitude of the Dutch Disease effect varies substantially
across industries likely, as theory explains, because of differences in market structure in
terms of the market power. Specifically, 53 out of the 80 industries suffer from the Dutch Disease
with the elasticity of -0.18 in average, while Dutch Disease is beneficial for 24 industries
with the elasticity of 0.21 in average. The simulation results reveal that, among the industries suffering (benefiting) from the Dutch Disease, each industry could have more annual output growth by 0.93 (-1.07) percent in average if energy prices remained at its level in 1992. This simulated value for the whole sample is 0.30 percent which is significant compared to 2.8
percent as the average of annual industrial production growth during 1992-2007.<p>
The second and third essays together aim to model and estimate the degree of exchange rate pass-through into Canadian producer prices in manufacturing industries. The second essay, as a theoretical one, presents a literature review and contributes to the literature by developing a relatively more general theoretical framework. The provided model, which extends Yangs model (1997) by incorporating the role of the tradable inputs, is able to show all the major determinants of exchange rate pass-through together, while the previous studies have only analyzed the role of one or some of these factors. Specifically, the theoretical model
indicates that the exchange rate pass-through should be between one and zero, while it is
positively affected by the share of tradable inputs in total cost, and the domestic firms' market share and negatively by the elasticity of marginal cost with respect to output. The sign for
the degree of substitutability among the variants is not theoretically clear and remains as an empirical question.<p>
Finally, the third essay presents the empirical framework for estimation of the exchange rate pass-through and its determinants in Canadian manufacturing industries. In this essay, the short- and long-run exchange rate pass-through elasticities to the domestic producer prices are estimated for the industries at three, four and few cases of five-digit levels of NAICS (about 100 industries), using quarterly data from 1992-2007. Then, the pass-through variation across industries is explained by regressing the estimated pass-through elasticities on the variables that are hypothesized to affect the pass-through elasticities according to the developed theoretical model. The results indicate that incomplete pass-through is observed in most cases although its magnitude is different across industries. The average short- and long-run pass-through elasticities are 0.24 and 0.36 respectively. The share of intermediate materials, as the tradable inputs, in production costs (with positive effect) and the elasticity
of marginal cost with respect to output (with negative effect) are the most important determinants of the exchange rate pass-through across industries.
|
122 |
Benefits and costs of hedging the CAD/USD exchange rate and its effect on mitigating CWB Wheat Pool account deficit probabilitiesActon, Douglas Richard 12 January 2009
The CWB has the stated objective of increasing producer returns through maximizing sales revenue and minimizing operating costs. To maximize producer returns the CWB derives value from single-desk selling, price pooling and the initial price guarantee.<p>
The initial price allows the CWB to offer a price floor to producers which is guaranteed by the Federal government. This guarantee has come under review in recent World Trade Organization (WTO) negotiations with opponents stating that the Federal government is unfairly subsidizing producers. Therefore developing methods to hedge the initial payment and remove the CWB dependency on the Federal government guarantee has taken on considerable importance.<p>
Hedging the initial price has two components, the first is commodity risk, and the second is currency risk. Commodity risk basically consists of the risk that wheat prices decrease significantly from the announcement of the initial payment resulting in a wheat pool account deficit. Currency risk relates to the risk of the Canadian dollar (CAD) increasing vis-à-vis the United States dollar (USD) resulting in lower wheat prices. This is due to the fact most sales are made in USD, necessitating the conversion of USD for CAD in order to pay Canadian producers. Given recent increases in exchange rate volatility this later risk is important. <p>
The goal of this study is to evaluate the currency risk present in the initial payment and to examine alternate means of mitigating this risk. A number of call option strategies will be evaluated to determine its ability to reduce the probability of a wheat pool account deficit by offsetting the effect of a rising CAD.<p>
The policy variables analyzed in the thesis are the initial payment as a percentage of the Pool Return Outlook for wheat and the strike price of the call options purchased. Therefore the study will examine the effect of inputting varying initial payment levels and different strike prices for the call options in the model. This will allow for quantifiable insight into cost versus risk reduction comparisons. These comparisons will be useful in determining the most efficient mode of action for the CWB.
|
123 |
Essays on Monetary Coordination, Exchange Rate Volatility and Interfirm NetworksLiu, Qing 19 January 2009 (has links)
This dissertation consists of three independent essays in Macroeconomics. The first essay analyzes monetary coordination between currency areas. It is shown that search frictions can generate the deviations from the law of one price and that each country is tempted to exploit these deviations by inflation. Monetary coordination eliminates the inefficiency caused by inflation. The welfare gains from coordination increase when the two economies become more integrated. In contrast to traditional models, the need for coordination exists even after each country is allowed to directly tax foreign holdings of its currency.
The second essay studies the behavior of exchange rates in an environment with search frictions. In contrast to traditional models, even without any nominal rigidity, the model can generate enough volatility of exchange rates found in the data. The changes in the behavior of exchange rates under different regimes are also examined in this essay. The model shows a sharp increase in the volatility of exchange rates when moving from a pegged to a floating exchange regime, while there is no such systematic change in fluctuations of output or consumption. Moreover, the co-movements of output and consumption across countries are higher under a fixed rate regime than under a flexible rate regime. These results are consistent with empirical findings.
The final essay focuses on the competition between groups of allied firms. In the essay we propose a model of group fitness and develop an approach to evaluate the fitness of groups and the utility of their member firms. A group has high fitness if member firms have four features: (i) high capacity, (ii) being embedded in dense relationships, (iii) holding complementary resources and (iv) having limited competition and conflict. We illustrate the effectiveness of our model and methodology by applying it to the airline groups between 1997 and 2002. By examining what really happened to the airline groups afterwards, we found that the predictions based on the comparison between the fitness scores of actual groups formed and those of the corresponding population constructed are reasonably accurate, and that the implications based on the ranking of individual firm utility within each group are generally supported.
|
124 |
The Relationship between Stock Prices and Exchange Rates in SwedenXu, Yue January 2011 (has links)
This paper empirically investigates the exchange rate effects of Swedish krona against euro (SEK/Euro) on stock prices in Sweden. The sample period for the study has been taken from March, 2001 to March, 2011 using monthly nominal exchange rate of SEK/Euro and monthly closing values of OMX Stockholm All Share (OMXPI) Index. The developed unit root test and cointegration technique have been applied for the research. It was found that both data series were nonstationary and integrated of order 1. The test result also showed there was no cointegrating relationship between stock prices and exchange rates. Further investigation into their contemporaneous relationship highlighted a statistically significant negative linear relationship between the said variables, suggesting that an appreciation of the Swedish krona against euro leads to a contemporaneous increase in the value of the Swedish stock market.
|
125 |
Has a J-curve been present in Argentina? : An Analysis of the Real Effective Exchange Rate and the Current Account / Has a J-curve been present in Argentina? : An Analysis of the Real Effective Exchange Rate and the Current AccountSchönbeck, Mathilda January 2008 (has links)
This study analyses how the real effective exchange rate affected the current account in Argentina between the years 1978 and 2006 divided into three sub-periods. Theory concerning the subject, the so called J-curve that the current account should immediately be reduced after a devaluation, thereafter recovering and in the end becoming larger than it was initially. This study has been unable find all the three stages of the J-curve, at best only the first two were found. In the first two periods – 1978 to 1990 and 1991 to 2000 – a real depreciation seemed to have an instant negative impact on the current account and then a positive trend could be seen. For the third sub-period of 2001 – 2006, there was even less evidence supporting a J-curve, although the small number of observations may be driving this results.
|
126 |
Error correction model estimation of the Canada-US real exchange rateYe, Dongmei 18 January 2008 (has links)
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.
|
127 |
Benefits and costs of hedging the CAD/USD exchange rate and its effect on mitigating CWB Wheat Pool account deficit probabilitiesActon, Douglas Richard 12 January 2009 (has links)
The CWB has the stated objective of increasing producer returns through maximizing sales revenue and minimizing operating costs. To maximize producer returns the CWB derives value from single-desk selling, price pooling and the initial price guarantee.<p>
The initial price allows the CWB to offer a price floor to producers which is guaranteed by the Federal government. This guarantee has come under review in recent World Trade Organization (WTO) negotiations with opponents stating that the Federal government is unfairly subsidizing producers. Therefore developing methods to hedge the initial payment and remove the CWB dependency on the Federal government guarantee has taken on considerable importance.<p>
Hedging the initial price has two components, the first is commodity risk, and the second is currency risk. Commodity risk basically consists of the risk that wheat prices decrease significantly from the announcement of the initial payment resulting in a wheat pool account deficit. Currency risk relates to the risk of the Canadian dollar (CAD) increasing vis-à-vis the United States dollar (USD) resulting in lower wheat prices. This is due to the fact most sales are made in USD, necessitating the conversion of USD for CAD in order to pay Canadian producers. Given recent increases in exchange rate volatility this later risk is important. <p>
The goal of this study is to evaluate the currency risk present in the initial payment and to examine alternate means of mitigating this risk. A number of call option strategies will be evaluated to determine its ability to reduce the probability of a wheat pool account deficit by offsetting the effect of a rising CAD.<p>
The policy variables analyzed in the thesis are the initial payment as a percentage of the Pool Return Outlook for wheat and the strike price of the call options purchased. Therefore the study will examine the effect of inputting varying initial payment levels and different strike prices for the call options in the model. This will allow for quantifiable insight into cost versus risk reduction comparisons. These comparisons will be useful in determining the most efficient mode of action for the CWB.
|
128 |
Essays on Dutch Disease and exchange rate pass-through : evidence from Canadian manufacturing industriesShakeri, Mohammad 13 April 2010 (has links)
The dissertation consists of three essays on Dutch Disease and exchange rate pass-through.
Dutch Disease refers to the adverse effects of the natural resource booms on the tradable sectors
(manufacturing industries) which may occur mainly through the subsequent appreciation of the real exchange rate.<p>
The first essay aims to investigate whether Canadian manufacturing industries have experienced
Dutch Disease over the period 1992-2007 as a result of the oil boom. After a review of the literature and discussion of the theoretical considerations, the paper presents a two part
empirical analysis to estimate the short- and long-run Dutch Disease effects for the Canadian
manufacturing industries at three, four and few cases of five-digit levels of NAICS (about 80 industries), using quarterly data. The first part of the empirical analysis estimates the relationship between real exchange rate and energy prices as well as the other related factors
and the second part estimates the effect of real exchange rate on output of the manufacturing industries. Based on these two estimated relationships, the Dutch Disease effect is derived
by calculating the effect of energy prices on output of the manufacturing industries. The
results indicate that the direction and magnitude of the Dutch Disease effect varies substantially
across industries likely, as theory explains, because of differences in market structure in
terms of the market power. Specifically, 53 out of the 80 industries suffer from the Dutch Disease
with the elasticity of -0.18 in average, while Dutch Disease is beneficial for 24 industries
with the elasticity of 0.21 in average. The simulation results reveal that, among the industries suffering (benefiting) from the Dutch Disease, each industry could have more annual output growth by 0.93 (-1.07) percent in average if energy prices remained at its level in 1992. This simulated value for the whole sample is 0.30 percent which is significant compared to 2.8
percent as the average of annual industrial production growth during 1992-2007.<p>
The second and third essays together aim to model and estimate the degree of exchange rate pass-through into Canadian producer prices in manufacturing industries. The second essay, as a theoretical one, presents a literature review and contributes to the literature by developing a relatively more general theoretical framework. The provided model, which extends Yangs model (1997) by incorporating the role of the tradable inputs, is able to show all the major determinants of exchange rate pass-through together, while the previous studies have only analyzed the role of one or some of these factors. Specifically, the theoretical model
indicates that the exchange rate pass-through should be between one and zero, while it is
positively affected by the share of tradable inputs in total cost, and the domestic firms' market share and negatively by the elasticity of marginal cost with respect to output. The sign for
the degree of substitutability among the variants is not theoretically clear and remains as an empirical question.<p>
Finally, the third essay presents the empirical framework for estimation of the exchange rate pass-through and its determinants in Canadian manufacturing industries. In this essay, the short- and long-run exchange rate pass-through elasticities to the domestic producer prices are estimated for the industries at three, four and few cases of five-digit levels of NAICS (about 100 industries), using quarterly data from 1992-2007. Then, the pass-through variation across industries is explained by regressing the estimated pass-through elasticities on the variables that are hypothesized to affect the pass-through elasticities according to the developed theoretical model. The results indicate that incomplete pass-through is observed in most cases although its magnitude is different across industries. The average short- and long-run pass-through elasticities are 0.24 and 0.36 respectively. The share of intermediate materials, as the tradable inputs, in production costs (with positive effect) and the elasticity
of marginal cost with respect to output (with negative effect) are the most important determinants of the exchange rate pass-through across industries.
|
129 |
The relationship between oil price and US Dollar/Norwegian Krone nominal exchange rate.Feng, Qin January 2012 (has links)
This paper empirically investigates the cointegrated relationship between oil price and nominal exchange rate of US Dollar/ Norwegian Krone (USD/NOK) which is covering a time period from 2001 to 2011. The Augmented Dickey-Fuller test, Engle-Granger test and Error Correction Mechanism are employed for this research. This paper concludes that there is a cointegrated relationship between oil price and nominal exchange rate of USD/NOK in the long term.
|
130 |
Structural Breaks and GARCH Models of Exchange Rate Return Volatility¡GAn Empirical Research of Asia & Pacific CountriesZeng, Han-jun 25 June 2010 (has links)
Since the Bretton Woods System collapsed, the volatility of the exchange rate return has been an important and concerned issue in financial domain. The purpose of this paper is to investigate the empirical relevance of stricture breaks for the volatility of the exchange rate return, and we use both in-sample and out-of-sample tests. GARCH(1,1) Model is considered to be the representative quantitative method for analyzing the volatility of asset returns, as a result, we picked GARCH(1,1) as natural benchmarks in this article. In addition, we cogitated the structure breaks in this paper, and used ICSS(Iterated Cumulative Sums of Squares) algorithm to test the points of structural breaks. The results of empirical analysis show that there are significant evidences of structural breaks in the unconditional variance for six of eight US exchange rate return series, which implying unstable GARCH processes for these exchange rates. We also find those competing models that accommodating structural breaks will have higher predictive ability. Pooling forecasts from different models that allow for structural breaks in volatility appears to offer a reliable method for improving volatility forecast accuracy given the uncertainty surrounding the timing and size of the structural breaks.
|
Page generated in 0.0812 seconds