This article identifies the best models for forecasting the volatility of daily exchange returns of developing countries. An emerging consensus in the recent literature focusing on industrialized countries has noted the superior performance of the Fractionally Integrated Generalized Autoregressive Conditionally Heteroscedastic (FIGARCH) model in the case of industrialized countries, a result that is reaffirmed here. However, we show that when dealing with developing countries' data the IGARCH model results in substantial gains in terms of the in-sample results and out-of-sample forecasting performance. (authors' abstract)

This paper applies a cross-sectional regression analysis of 83 countries over the period 2009-11 in order to examine the role played by the exchange-rate regime in explaining how countries fared in terms of economic growth recovery following the recent financial crisis. After controlling for income categorization, regime classification, using alternative regime definitions, and accounting for various other determinants, the paper finds a significant relationship between the regime choice and the recovery performance, where those countries with more flexible arrangements fared better. These results were conditional on the regime classification scheme and the income level, implying an asymmetric effect of the regime during the recovery period between high and low income countries. The paper also finds that proxies for initial conditions as well as trade and financial channels were highly significant determinants of the growth performance during the recovery period.

Cette thèse s'inscrit dans les débats sur le rôle du régime de change et de la règle de politique monétaire. Elle développe une analyse empirique sur les 17 pays du Moyen-Orient et d'Afrique du Nord (MOAN). A contre-courant de l'idée répandue d'une supériorité des régimes extrêmes, ces pays ont souvent opté en faveur de régimes de change intermédiaires. Ceci soulève deux questions : d'une part, quels sont les facteurs qui expliquent ce choix particulier ? D'autre part, comment se situent les performances macroéconomiques qui en résultent ? Dans cette recherche, nous apportons des éléments de réponse sur ces deux interrogations. Le premier chapitre traite de la question du choix du régime de change. Les principaux facteurs que la théorie suggère pour expliquer le choix du régime sont testés empiriquement. L'analyse confirme le rôle des facteurs qui relèvent de l'hypothèse de la peur du flottement. Dans le deuxième chapitre, nous évaluons l'impact de ce choix sur la performance en termes d'inflation. L'adoption d'un régime de changes fixe est souvent motivée par la recherche d'une plus grande maîtrise de l'inflation mais l'efficacité de cette stratégie n'est pas garantie. L'analyse empirique indique que la modération de l'inflation est plus liée à la stabilité de facto du taux de change qu'à l'annonce d'un régime de change fixe. L'incidence de la flexibilité du taux de change sur la croissance économique est analysée dans le troisième chapitre. La théorie conventionnelle attribue des propriétés stabilisatrices aux taux de change flexibles mais la variation du taux de change peut être une source de volatilité macroéconomique. La dollarisation des dettes publiques et privées explique la peur du flottement observée dans certains pays du MOAN et réduit la possibilité de recourir à cet instrument. Le quatrième chapitre fournit une évaluation de la politique monétaire et de taux de change dans le cas de la Syrie dans la décennie des années 2000. / This thesis lies within the debate about the role of the exchange rate regime and the monetary policy. It develops an empirical analysis in 17 countries of the Middle East and North Africa (MENA). Contrary to the widespread tenet of the superiority of corner regimes, MENA countries have often chosen intermediate regimes. This raises two questions: first what are the reasons for the choice of an intermediate regime? Second how do these countries perform in macroeconomic terms? In this research we bring about material for answering these two questions. The first chapter deals with the choice of the exchange rate regime. We test the main factors suggested by the theory. The empirical analysis confirms the role of factors that are related to the fear of floating hypothesis. In the second chapter we assess the impact on inflation of the choice of an exchange rate regime. The adoption of a fixed exchange rate regime is often motivated by the desire to keep inflation under control, although the success is not guaranteed. The empirical analysis shows that low inflation is rather associated to a de facto stable exchange rate than a formal fixed exchange rate. The third chapter analyses the effect of exchange rate flexibility on growth. The conventional theory states that flexible exchange rates have a stabilizing effect. But an excess in exchange rate volatility may undermine the real macroeconomic performance. In fact the dollarisation of public and private debts generates the fear of floating observed in MENA countries, and reduces the capacity to resort to this instrument. The fourth chapter develops an assessment of monetary and exchange rate policy in Syria in the 2000 decade.

This paper considers Bayesian estimation of the threshold vector error correction (TVECM) model in moderate to large dimensions. Using the lagged cointegrating error as a threshold variable gives rise to additional difficulties that are typically solved by relying on large sample approximations. Relying on Markov chain Monte Carlo methods we circumvent these issues by avoiding computationally prohibitive estimation strategies like the grid search. Due to the proliferation of parameters we use novel global-local shrinkage priors in the spirit of Griffin and Brown (2010). We illustrate the merits of our approach in an application to five exchange rates vis-á-vis the US dollar and assess whether a given currency is over or undervalued. Moreover, we perform a forecasting comparison to investigate whether it pays off to adopt a non-linear modeling approach relative to a set of simpler benchmark models. / Series: Department of Economics Working Paper Series

This research investigates the information content of the translation information resulting from exchange rate fluctuations. Two hypotheses are examined. The dollar movement hypotheses investigate whether there is a positive relationship between security valuation and the translation information and whether the market assigns different weights to translation gains and losses in both the depreciating and appreciating exchange rate environments. The geographic concentration hypothesis tests whether the market's response to the translation information is geographically sensitive. Prior research on SFAS No. 8 and SFAS No. 52 has concentrated on the price and trading volume responses to the deliberations and issuance of these two accounting statements. Soo and Soo (1994) examine the long-term effect of the disclosure requirement under SFAS No. 52 on MNEs' security prices from 1981 to 1987. However, they fail to address two important issues pertinent to the MNE research--the effects of exchange rate changes and the geographic concentration. The dollar movement hypotheses provide strong evidence that under both the appreciating and depreciating exchange rate environments, a positive relationship exists between security returns and the translation information when MNEs disclose translation losses in stockholders' equity. The findings also provide evidence for a positive or at least non-negative relationship between security returns and the translation information when MNEs disclose translation gains. The findings provide evidence that the positive relationship is greater in appreciating than in depreciating exchange rate environment for losses, but no evidence of such a difference exists for gains. The evidence also indicates that the market reacts more to the translation information when translation losses are reported than when translation gains are reported in both exchange rate environments. The examination of the impact of the geographic concentration of MNEs' foreign operations provides limited evidence to support the geographic concentration hypothesis. One possible explanation for the weak findings is that the larger degree of the aggregation of some of the geographic disclosures prevents the market from impounding the geographic information.

The exchange rates of currencies of different countries show higher volatility than it could be explained by the volatility of the fundamental variables. There are introduced different models which try to describe the behavior of these exchange rates in this Diploma Thesis. Their comparison is made with respect to the ability to capture the volatility of the empirically observed data. The behavior of exchange rates may also be influenced by interventions of the state institutions and therefore we introduced models which allow the effect of such regulatory interventions. These models were applied on real data. The properties of the model predictions of exchange rates were compared and evaluated with respect to their ability to explain the volatility of the empirical data. At the summary of my work one of the models has been used to simulate the behavior of the exchange rate during the application of different intervention strategies of the Central Bank. Powered by TCPDF (www.tcpdf.org)

This thesis examines the relationship between the real exchange rate and trade balance in eight countries with different level of development for the period 1991- 2012. Using merely exchange rate to improve the trade balance refers to price- competitiveness and relies on the satisfaction of Marshall-Lerner condition. Additionally, we articulate the influence of other underlying factors, defined as "non- price competitiveness", proxied with capital stock variable. A Vector Error Correction Model, based on Johansen's Methodology was implemented in our two econometric specifications. The key findings of the classical trade model indicate that M-L condition is met in five countries and devaluation of domestic currency would improve their trade balance in long run. VECM results from second model, which extended the traditional imperfect substitutes framework to include non-price competitiveness factor, shows pronounced influence of product quality on trade balance, capital stock variable being significant in most of the cases. The results show that trade balance reacts to both changes in relative prices and product differentiation, thus non-price competitiveness factors must not be neglected by policy makers. Our findings also indicate the existence of J-curve pattern, as reflected by short-run...

This thesis analyzes the incomplete exchange rate pass-through effect on Mongolian economy and its implication on monetary policy under foreign and domestic shocks. The analysis is carried out in a small open economy New Keynesian DSGE model proposed by Monacelli (2005), where incomplete exchange rate pass-through is introduced via nominal rigidities on import prices. In order to accomplish the goal, we firstly derive the solutions of the model, calibrate the parameters, and finally simulate the impulse responses. Moreover, SVAR estimation is achieved to estimate the pass-through. Four main results are obtained. First, the exchange rate pass-through into import price and inflation is 0.69% and 0.49% respectively in short run, implying incomplete pass-through in Mongolia. Second, the exchange rate acts as a shock absorber for domestic productivity and foreign demand shock, but as a shock amplifier for domestic demand shock. Third, in case of incomplete pass-through the central bank of Mongolia is required to adjust the nominal interest rate more under the productivity shock, but less for the domestic and foreign demand shock. Finally, deviations from the law of one price contributes considerably to the variability of the output gap under the low pass-through. Therefore, considering incomplete pass-through in...

In this thesis we provide an updated empirical evidence on the linkage between an exchange rate and foreign direct investments (FDI). On the sample of 40 developing countries receiving FDI flows from five developed OECD econo- mies, we analyse how the strength of exchange rates, exchange rate volatility and currency regime affect FDI. Applying the Hausman-Taylor instrumental variable approach over the analysed period from 1991 to 2010, we have not found unanimous support on the role of exchange rates in influencing FDI. In the thesis, we document that over the last two decades, bilateral exchange rate volatility decreased and this can be assigned to its less-likely influence on FDI. In addition, based on the results of the analysis, we cannot confirm the wealth effect hypothesis that supposes an increase of FDI after real depreciation of developing country's currency. We ascribe this outcome to the development of average real exchange rates of developing countries that exhibited considerable strenghtening during the analysed period. We also find that de facto bilateral fixing of the currencies might be beneficial for FDI flows. The reasoning might lie in the reduction of transaction costs that is linked to credible exchange rates.

The aim of this thesis is to analyze the performance of nonlinear threshold models in forecasting the exchange rate of Czech koruna against EUR. Data for this study were obtained from Statistical Data Warehouse of European Central Bank (ECB) website, from Czech National Bank (CNB) Board decisions minutes and from the press releases of Governing Council of ECB. The data set was split into two periods - from 1999 until November, 2013 when CNB started to use interventions and from November, 2013 until April, 2016. Models used in the thesis are Self-Exciting Threshold Auto Regressive (SETAR) models with one and two thresholds and two Threshold Auto Regres- sive (TAR) models with different threshold variables - meetings of CNB Board as dummy variable and average volatility over recent periods. The forecasting results indicate that SETAR models did not outperform Random Walk in any period. TAR models offered promising results in the period before interventions and surprisingly failed in the period during interventions. This study supports the general belief of exchange rates being difficult to forecast and that it holds in case of Czech koruna as well. JEL Classification F12, F21, F23 H25, H71, H87 Keywords forecasting, exchange rate, time series, nonlin- earity, SETAR, TAR Author's e-mail zaka.one@gmail.com...