There are much economic and financial data which are restricted by some bounds, such as expenditure shares, unemployment, norminal interest rate, or target zone exchange rate. How to interpret and analyze time series whose behaviors can be well approximated by means of integrated processes, I(1), but are ¡§limited¡¨ in the sense that their range is constrained by fixed bounded is what this thesis develops. One method to analyze bounded variable of this paper is ¡§The Bounded Unit Root¡¨ which provided by Cavaliere (2005), and the other is using Gibbs sampling simulation and trying to recover the part of hidden variables. We would examin some empirical problems that has often been tackled in the literature and we give three time series which include Danish kron/Deutshe mark, Belgium Franc/ Deutshe mark, and Japan 1 mouth interbank interest rate for examples. We conclude that these three time series data are I(0) in classical unit root test framework, but are all I(1) in The Bounded Unit Root test framework. And the results of Gibbs sampling simulation are that Danish kron/Deutshe mark and Belgium Franc/ Deutshe mark are I(0), but Japan 1 mouth interbank interest rate is I(1).

Financial markets have become increasingly integrated, both domestically and internationally. Asset prices react to other asset price shocks both within and across asset classes. This paper presents a framework for analyzing the degree of financial transmission between money, bond and equity markets and exchange rates within and between the United States and Taiwan. The empirical model concentrates on monthly return over an 11-year period of 1995-2005 for seven asset prices: short-term interest rates, bond yield and equity market returns in both economies, as well as the exchange rate. The results are as followed: First, Johansen cointegration test indicates that there is one cointegrating equation between seven variables. This finding means that there is a long-run equilibrium relationship among the variables. Second, the error correction terms of the US short-term and long-term interest rates, Taiwan short-term interest rate and exchange rate are significant at the 95% level in the Vector Error Correction Model. The deviation from long-run equilibrium is corrected gradually through a series of partial short-run adjustments. The third key result of the paper is that there is a feedback relationship between the US short-term interest rate and equity market return by using the Granger Causality test. Also, the US short-term and long-term interest rates Granger-cause Taiwan short-term interest rates. This result underline that the US financial markets are the main driver of global financial markets.

With the liberalization of financial market, the prevalence of international trade and the prosperity of foreign exchange markets ,investors could hedge,speculate or interest arbitrage in markets. Therefore, market efficiency is worthy of investigation and analysis on the international finance extensively. According to simple market efficiency hypothesis, there would be a long-run relationship between spot exchange rate and forward exchange rate if the foreign exchange market is efficient. Under the circumstance, this study firstly tries to examine whether there is a long-run relationship or not between spot exchange rate and forward exchange rate by Linear Cointegration Theory. At the same time, the study tests Simple Market Efficiency Hypothesis is correct or not in practice. Next,in a non-linear threshold cointegrational way, it looks into whether there is an apparent threshold effect or not among variables, and the adjusting behavior in the long-run equilibrium process. The result of the study proves that there are an apparent threshold effect and inconsistent behaviors in the long-run equilibrium process.

In this study, different from previous studies, the explanatory power of Student-t distribution is compared to normal distribution by employing both standard GARCH and EGARCH models to dollar/ lira (USD/TRY) exchange rate. Then the impact of Central Bank of Republic of the Turkey&rsquo / s (CBRT) decisions and actions on both the level of exchange rate and the volatility is investigated. Moreover the relationship between volatility and market liquidity is examined using spot foreign exchange (FX) market volume as a proxy. The results reveal that, in contrast to preceding findings, Student-t could not capture the leptokurtic property better than normal distribution does. Furthermore, an increase in Turkish government benchmark bond rates, CBRT FX purchase interventions and announcement of suspending/ decreasing-the-amount-of FX auctions lead Turkish lira to depreciate. Because of the significant positive leverage effect, the results of GARCH and EGARCH variance equations differ so much. Thereby the results should be evaluated cautiously. In addition it is observed that, only EGARCH model gives significant results when the spot market trading volume is included in the models

In this thesis, effects of economic crises after 1990 on the Turkish insurance sector are analyzed with special emphasis on 1994, 2001 and 2008 crises. In the first step, EGARCH model is used to measure the exchange rate uncertainty. Then, a time series model for the aggregate analysis and a panel data model for the disaggregate analysis which both include the estimated exchange rate uncertainty together with other macroeconomic and firm specific variables are set up. The results indicate that aggregate and disaggregate analyses suggest different variables in explaining the premium production which is used as a proxy for the performance of the insurance sector. Nevertheless, the common conclusion was that the growth of premium production decelerates during the crisis periods at a varying degree depending on the year of crisis. 2001 crisis is found to be the crisis which has the most detrimental impact on the Turkish insurance sector. On the other hand, effects of the 2008 crisis are found to be relatively limited.

This thesis examines the relationship between the bilateral real exchange rate and the trade balances of 20 industries in which majority of the trade between Turkey and her leading partner Germany is carried out, both for the short and long run, in search of the existence of any J-curve effect. Using quarterly data over the period 1989:1-2011:3, the relationship is analyzed empirically through the bounds testing approach to cointegration and error correction modeling. The findings show that, although the pattern created by a depreciation does not follow the compl ete J curve in any of the industries, still the exchange rate as well as foreign and domestic real incomes are effective determinants of bilateral trade balance between Turkey and Germany in majority of the cases both in the short and in the long run. Moreover, this thesis provides strong support for the assertion that at the disaggregate level industries exhibit unique and distinct trade balance responses to exchange rate fluctuations, by showing that these responses vary significantly across different sectors both in the short and long run.

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