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Europe > Switzerland

You are looking at 1 - 3 of 3 items for :

  • Type: Journal Issue x
  • Econometrics x
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Cover IMF Working Papers
Country and Industry Dynamics in Stock Returns
Mr. Luis Catão
and
Mr. Allan Timmermann
A perennial question in international finance is to what extent stock returns are influenced by country-location, as opposed to industry-affiliation, factors. This paper develops a novel methodology to measure these effects, in which portfolios mimicking "pure" country and industry factors are first constructed and their joint dynamics then modeled as regime-switching processes. Estimation using global firm-level data allows us to identify well-defined volatility states over the past thirty years and shows that the contribution of the industry factor becomes systematically more prominent during high global volatility states, while the country factor contribution declines. Using the model's estimates, we find that portfolio diversification possibilities vary considerably across economic states.
Keywords:
WP; industry portfolio; country portfolio; volatility State; Diversification; Risk; Volatility States; Regime Switching; International Financial Markets; country effect; industry factor; industry state process; Stocks; Market capitalization; Stock markets; Public expenditure review; Time series analysis; Global; Europe
Cover IMF Working Papers
The Effects of Monetary and Fiscal Policy on Aggregate Demand in a Small Open Economy: An Application of the Structural Error Correction Model
Mr. Tetsuya Konuki
This paper empirically analyzes the short-run effects of monetary and fiscal policy on aggregate demand, using the two-step structural error correction method. This method has an advantage over the standard reduced-form error correction method in providing a meaningful interpretation for impulse responses. The results are in sharp contrast to those of the traditional Mundell-Fleming and Dornbusch models: after the monetary (fiscal) policy is relaxed, the home currency depreciates (appreciates) for a substantial period of time, and the aggregate demand first expands (contracts) then gradually returns toward its original path.
Keywords:
WP; aggregate demand; fiscal policy; open economy; Monetary and fiscal policy; structural error correction models; nominal exchange rate; Phillips-curve price adjustment equation; equation method; aggregate demand function; GMM estimation; expansionary monetary policy shock; aggregate demand specification; magnifying depreciation; fiscal policy disturbance; level of significance; money demand shock; aggregate demand to monetary and fiscal policy shock; Real exchange rates; Exchange rates; Fiscal stimulus; Demand for money
Cover IMF Working Papers
Long: Horizon Exchange Rate Predictability?
Mr. Lorenzo Giorgianni
and
Mr. Jeremy Berkowitz
Several authors have recently investigated the predictability of exchange rates by fitting a sequence of long-horizon error-correction regressions. By considering the implied vector error-correction model, we show that little is to be gained from estimating such regressions for horizons greater than one time period. We also show that in small to medium samples the long-horizon procedure gives rise to spurious evidence of predictive power. A simulation study demonstrates that even when using this technique on two independent series, estimates, diagnostic statistics and graphical evidence incorrectly suggest a high degree of predictability of the dependent variable.
Keywords:
WP; exchange rate; error-correction term; slope coefficient; Diebold-Mariano statistic; horizon exchange rate predictability; LS t-statistics; spot rate; Exchange rates; Vector error correction models