Final Exam Answers Exchange Rate Economics
|
|
- Arron McCarthy
- 6 years ago
- Views:
Transcription
1 Kiel Insiu für Welwirhschaf Advanced Sudies in Inernaional Economic Policy Research Spring 2005 Menzie D. Chinn Final Exam Answers Exchange Rae Economics This exam is 1 ½ hours long. Answer all quesions. Use equaions and figures if helpful. [Because of he omission in Quesion 1.2, he exam is graded ou of 80 poins] 1. Porfolio Balance model. [20 minues] Suppose he risk premium (rp) on euro denominaed asses is given by: rp = 1 1 β α + β x where x is he share of euro denominaed asses in he world (assume here are only wo currencies, he US$ and he euro). 1.1 (10 minues) In he conex of his model, wha do you hink will happen if one s assessmen of he size of fuure Unied Saes Governmen budge deficis rises (and hose of he euro zone governmens remain he same)? Define he risk premium as he addiional reurn necessary o induce he holding of a paricular asse. This means one drops explicily he uncovered ineres rae pariy condiion. Hence: rp i Eu i US e s + 1 (1) where depreciaion expeced beween ime and +1, based on ime informaion, is expressed as: e s ε ( s ) s (2) One hen obains he following diagram: rp rp(x) rp 0 rp 1 1/β α x 1 x 0 x -α/β Here x is he share of he oal porfolio ha is euro denominaed. If x=α, hen he risk premium is zero. However, if x=x 0, hen in some sense, he ineres raes on euro asses mus be higher in order o
2 compensae individuals for he fac ha hey are holding greaer amouns of euro asses han hey would like (consisen wih no risk premium). Wha does α equal? In a mean-variance framework (familiar o hose of you who know he capial asse pricing model, or CAPM, for sock reurns), α is a funcion of he degree of risk aversion, and he exen o which real reurns on euro asses are correlaed wih he dollar reurns on US dollar denominaed asses. The quesion asks abou wha happens if he budge defici and hence he deb denominaed in dollars rises above wha is currenly expeced. Then in he fuure, he x should fall o x 1 (remember, his is all from he Euro area residen s perspecive), so he risk premium on euro denominaed asses should fall. Bu since he value of a bond depends upon he value i is expeced o have in he fuure, he value oday of US bonds should fall, while hose of euro area bonds should rise. 1.2 (10 minues) If he variance of relaive reurns on he wo asses rises, in US$ erms, wha do you hink is he quaniaive magniude of he effec you indicae in your answer o quesion 1.1? [Since I accidenally omied rises in he quesion, I made he oal number of poins allocaed o problem 1 equal 10, giving exra credi if anybody answered he quesion assuming eiher rises or falls.] In he mean-variance framework β -1 = ρω. Ω is he variance of reurns in euro erms; bu i is also he variance of reurns in USD erms, so when his rises, he slope is fla, hen β -1 rises and asses become less subsiuable. Graphically, his means he rp(x) curve roaes couner-clockwise. rp 0 rp rp(x) Ω large rp(x) Ω small rp 1 1/β α x 1 x 0 x -α/β Noice ha now, any change in x now causes a larger change in he risk premium. 2. Purchasing power pariy. [20 minues] Define he real exchange rae for he US dollar agains he Thai bah as: * Q ( S P ) / P (1) where S is measured in US$/bah, P and P* are price indices (namely, CPI in he US and Thailand, wih a base year of 1995=100). One obains he following picure: 2
3 XTH*CPITH/CPIUS Figure 1: Real US$/Thai bah exchange rae (CPI deflaed). Source: IMF, Inernaional Financial Saisics, auhors calculaions. 2.1 (10 minues) Can one conclude from his picure ha he Thai bah was overvalued, in absolue purchasing power pariy erms, in a he end of 1996? Explain why or why no. No, one canno conclude ha, according o absolue PPP, he Thai bah was overvalued in Tha is because he price variable is no a price of a bundle of goods, bu raher a price index, which equals 100 in a paricular base year. One could conclude ha Q was high relaive o he average value of Q over he sample period; bu ha using ha crierion is consisen wih he concep of relaive PPP. 2.2 (10 minues) Now consider his diagram which plos he real exchange rae as he number of bundles of goods evaluaed a US prices, required o purchase a single bundle of goods evaluaed a Thai prices. In oher words, P and P* are now measured for idenical bundles of goods (i.e., food accouns for he same proporion in each bundle, ec.). 1.0 Unied Saes Thailand THPPP 1 Figure 2: Price levels for bundles of goods in US and Thailand (US=1.0). Source: World Bank, World Developmen Indicaors. 3
4 Can one conclude ha he Thai bah was overvalued by absolue purchasing power pariy in 1996? Why or why no? Here, he prices are for (heoreically) idenical bundles of goods, expressed in a common currency, hence one can make assessmens of absolue purchasing power pariy. However, now wih his daa, one can conclude ha by his crierion, he Thai bah was undervalued (he dollar was overvalued) in This couner-inuiive resul suggess ha absolue PPP may no be very useful for deermining exchange rae misalignmen for many quesions. 3. Compeing models of he exchange rae. [20 minues oal] Consider he graph of he (rade-weighed) value of he euro, agains a broad baske of currencies Nominal value of he euro Real (CPI-deflaed) value of he euro 80 99:01 99:07 00:01 00:07 01:01 01:07 02:01 02:07 TWCEEU_ECB_BR TWCQEU_ECB_BR Figure 3: (Broad) Trade weighed effecive exchange raes for he euro, nominal and real. Source: European Cenral Bank. Wha model (or models) of he exchange rae does his figure suppor? Use equaions o suppor your argumen. This figure suppors boh models of he exchange rae. In oher words, he high correlaion beween nominal and real exchange raes is consisen wih eiher a real business cycle model of he exchange rae, as in Sockman s approach, or he sicky price moneary models of Dornbusch and Frankel. The high covariaion beween he nominal and real exchange rae can arise for (a leas) wo reasons: (i) moneary shocks in he presence of sicky nominal prices or (ii) real shocks in he conex of perfec price flexibiliy. Consider firs he following ideniy: * * s= p p q = s p+ p If p and p* are fixed in he very shor run, bu he common currency relaive price, q, is no, hen definiionally s and q will covary. This sicky price assumpion is common in he Dornbusch (1976) and Frankel (1979) models. On he oher hand, consider he Lucas model: px(, s M) py() s esm (,, N) = = p (, s N) y M N η p ξ y () s 4
5 In his case, he exchange rae e can move because of money shocks or real shocks (he laer include he goods-endowmens ζ and η, as well as he p y (s) which may or may no move depending on hese goodsendowmens and he uiliy funcion). If real shocks are large relaive o he nominal shocks (here shocks o M and N), hen e will end o covary wih p y. Bu p y is he real exchange rae, alhough i is assumed ha he home counry and he foreign produce differen goods. 4. Presen value models. [30 minues] 4.1 (15 minues) Solve for he presen value relaion of he nominal exchange rae in he flexible price moneary model, assuming no bubbles, and ha he fundamenals follow a random walk (wihou drif) process. Show your work. 5
6 4.2 (5 minues) Show ha in his case ha he change in he exchange rae equals he change in he fundamenals. Clearly, from equaion (19) above, aking he oal differenial yields: ds = dm ~ In oher words, since he level of he spo exchange rae depends upon he curren level of fundamenals, hen he change in he spo rae depends upon he change in curren fundamenals. Since all fuure fundamenals move up (or down) by exacly he same amoun ha he curren fundamenals changed by. 4.3 (10 minues) Obain a general expression for he change in he exchange rae oday as a funcion of he change in he fundamenals oday, and he discouned value of fundamenals in he fuure. Can you explain why he expression you obain in 4.2 is so simple? Consider he presen value no bubbles formulaion of he spo exchange rae: s 1 λ ~ = E M λ 1+ λ 1 λ ~ s = E M λ 1+ λ (1) (2) Subracing (1) from (2) yields: 1 λ ~ ~ s 1 s = E M E M + ( λ 1+ λ ) (3) 1 λ s+ 1 s = ( M ~ + M ~ ~ ~ 1 ) + E+ M+ + E M+ + ( ) (4) 1 λ + 1 λ Noice ha he change in he spo exchange rae is equal o he presen discouned value of differences in expeced fundamenals, as well as he curren change in he fundamenals. When he fundamenals follow a random walk, hen all he erms afer he summaion operaor in (4) sum o zero. Kielasp_final
Section 4 The Exchange Rate in the Long Run
Secion 4 he Exchange Rae in he Long Run 1 Conen Objecives Purchasing Power Pariy A Long-Run PPP Model he Real Exchange Rae Summary 2 Objecives o undersand he law of one price and purchasing power pariy
More informationANSWER ALL QUESTIONS. CHAPTERS 6-9; (Blanchard)
ANSWER ALL QUESTIONS CHAPTERS 6-9; 18-20 (Blanchard) Quesion 1 Discuss in deail he following: a) The sacrifice raio b) Okun s law c) The neuraliy of money d) Bargaining power e) NAIRU f) Wage indexaion
More informationSpring 2011 Social Sciences 7418 University of Wisconsin-Madison
Economics 32, Sec. 1 Menzie D. Chinn Spring 211 Social Sciences 7418 Universiy of Wisconsin-Madison Noes for Econ 32-1 FALL 21 Miderm 1 Exam The Fall 21 Econ 32-1 course used Hall and Papell, Macroeconomics
More informationMacroeconomics II A dynamic approach to short run economic fluctuations. The DAD/DAS model.
Macroeconomics II A dynamic approach o shor run economic flucuaions. The DAD/DAS model. Par 2. The demand side of he model he dynamic aggregae demand (DAD) Inflaion and dynamics in he shor run So far,
More informationProblem Set 1 Answers. a. The computer is a final good produced and sold in Hence, 2006 GDP increases by $2,000.
Social Analysis 10 Spring 2006 Problem Se 1 Answers Quesion 1 a. The compuer is a final good produced and sold in 2006. Hence, 2006 GDP increases by $2,000. b. The bread is a final good sold in 2006. 2006
More informationEconomics 301 Fall Name. Answer all questions. Each sub-question is worth 7 points (except 4d).
Name Answer all quesions. Each sub-quesion is worh 7 poins (excep 4d). 1. (42 ps) The informaion below describes he curren sae of a growing closed economy. Producion funcion: α 1 Y = K ( Q N ) α Producion
More informationFINAL EXAM EC26102: MONEY, BANKING AND FINANCIAL MARKETS MAY 11, 2004
FINAL EXAM EC26102: MONEY, BANKING AND FINANCIAL MARKETS MAY 11, 2004 This exam has 50 quesions on 14 pages. Before you begin, please check o make sure ha your copy has all 50 quesions and all 14 pages.
More informationProblem 1 / 25 Problem 2 / 25 Problem 3 / 11 Problem 4 / 15 Problem 5 / 24 TOTAL / 100
Deparmen of Economics Universiy of Maryland Economics 35 Inermediae Macroeconomic Analysis Miderm Exam Suggesed Soluions Professor Sanjay Chugh Fall 008 NAME: The Exam has a oal of five (5) problems and
More informationUCLA Department of Economics Fall PhD. Qualifying Exam in Macroeconomic Theory
UCLA Deparmen of Economics Fall 2016 PhD. Qualifying Exam in Macroeconomic Theory Insrucions: This exam consiss of hree pars, and you are o complee each par. Answer each par in a separae bluebook. All
More informationCHAPTER CHAPTER18. Openness in Goods. and Financial Markets. Openness in Goods, and Financial Markets. Openness in Goods,
Openness in Goods and Financial Markes CHAPTER CHAPTER18 Openness in Goods, and Openness has hree disinc dimensions: 1. Openness in goods markes. Free rade resricions include ariffs and quoas. 2. Openness
More informationINSTITUTE OF ACTUARIES OF INDIA
INSIUE OF ACUARIES OF INDIA EAMINAIONS 23 rd May 2011 Subjec S6 Finance and Invesmen B ime allowed: hree hours (9.45* 13.00 Hrs) oal Marks: 100 INSRUCIONS O HE CANDIDAES 1. Please read he insrucions on
More informationOnline Appendix. Using the reduced-form model notation proposed by Doshi, el al. (2013), 1. and Et
Online Appendix Appendix A: The concep in a muliperiod framework Using he reduced-form model noaion proposed by Doshi, el al. (2013), 1 he yearly CDS spread S c,h for a h-year sovereign c CDS conrac can
More informationLecture 23: Forward Market Bias & the Carry Trade
Lecure 23: Forward Marke Bias & he Carry Trade Moivaions: Efficien markes hypohesis Does raional expecaions hold? Does he forward rae reveal all public informaion? Does Uncovered Ineres Pariy hold? Or
More informationMacroeconomics. Part 3 Macroeconomics of Financial Markets. Lecture 8 Investment: basic concepts
Macroeconomics Par 3 Macroeconomics of Financial Markes Lecure 8 Invesmen: basic conceps Moivaion General equilibrium Ramsey and OLG models have very simple assumpions ha invesmen ino producion capial
More informationFinancial Econometrics (FinMetrics02) Returns, Yields, Compounding, and Horizon
Financial Economerics FinMerics02) Reurns, Yields, Compounding, and Horizon Nelson Mark Universiy of Nore Dame Fall 2017 Augus 30, 2017 1 Conceps o cover Yields o mauriy) Holding period) reurns Compounding
More informationYou should turn in (at least) FOUR bluebooks, one (or more, if needed) bluebook(s) for each question.
UCLA Deparmen of Economics Spring 05 PhD. Qualifying Exam in Macroeconomic Theory Insrucions: This exam consiss of hree pars, and each par is worh 0 poins. Pars and have one quesion each, and Par 3 has
More informationQuestion 1 / 15 Question 2 / 15 Question 3 / 28 Question 4 / 42
Deparmen of Applied Economics Johns Hopkins Universiy Economics 602 Macroeconomic Theory and olicy Final Exam rofessor Sanjay Chugh Fall 2008 December 8, 2008 NAME: The Exam has a oal of four (4) quesions
More informationThe macroeconomic effects of fiscal policy in Greece
The macroeconomic effecs of fiscal policy in Greece Dimiris Papageorgiou Economic Research Deparmen, Bank of Greece Naional and Kapodisrian Universiy of Ahens May 22, 23 Email: dpapag@aueb.gr, and DPapageorgiou@bankofgreece.gr.
More information1. To express the production function in terms of output per worker and capital per worker, divide by N: K f N
THE LOG RU Exercise 8 The Solow Model Suppose an economy is characerized by he aggregae producion funcion / /, where is aggregae oupu, is capial and is employmen. Suppose furher ha aggregae saving is proporional
More informationThe Mathematics Of Stock Option Valuation - Part Four Deriving The Black-Scholes Model Via Partial Differential Equations
The Mahemaics Of Sock Opion Valuaion - Par Four Deriving The Black-Scholes Model Via Parial Differenial Equaions Gary Schurman, MBE, CFA Ocober 1 In Par One we explained why valuing a call opion as a sand-alone
More informationECONOMIC GROWTH. Student Assessment. Macroeconomics II. Class 1
Suden Assessmen You will be graded on he basis of In-class aciviies (quizzes worh 30 poins) which can be replaced wih he number of marks from he regular uorial IF i is >=30 (capped a 30, i.e. marks from
More informationFundamental Basic. Fundamentals. Fundamental PV Principle. Time Value of Money. Fundamental. Chapter 2. How to Calculate Present Values
McGraw-Hill/Irwin Chaper 2 How o Calculae Presen Values Principles of Corporae Finance Tenh Ediion Slides by Mahew Will And Bo Sjö 22 Copyrigh 2 by he McGraw-Hill Companies, Inc. All righs reserved. Fundamenal
More informationMA Advanced Macro, 2016 (Karl Whelan) 1
MA Advanced Macro, 2016 (Karl Whelan) 1 The Calvo Model of Price Rigidiy The form of price rigidiy faced by he Calvo firm is as follows. Each period, only a random fracion (1 ) of firms are able o rese
More informationEconomic Growth Continued: From Solow to Ramsey
Economic Growh Coninued: From Solow o Ramsey J. Bradford DeLong May 2008 Choosing a Naional Savings Rae Wha can we say abou economic policy and long-run growh? To keep maers simple, le us assume ha he
More informationOrigins of currency swaps
Origins of currency swaps Currency swaps originally were developed by banks in he UK o help large cliens circumven UK exchange conrols in he 1970s. UK companies were required o pay an exchange equalizaion
More informationBalance of Payments. Second quarter 2012
Balance of Paymens Second quarer 2012 Balance of Paymens Second quarer 2012 Saisics Sweden 2012 Balance of Paymens. Second quarer 2012 Saisics Sweden 2012 Producer Saisics Sweden, Balance of Paymens and
More informationCENTRO DE ESTUDIOS MONETARIOS Y FINANCIEROS T. J. KEHOE MACROECONOMICS I WINTER 2011 PROBLEM SET #6
CENTRO DE ESTUDIOS MONETARIOS Y FINANCIEROS T J KEHOE MACROECONOMICS I WINTER PROBLEM SET #6 This quesion requires you o apply he Hodrick-Presco filer o he ime series for macroeconomic variables for he
More informationMarket and Information Economics
Marke and Informaion Economics Preliminary Examinaion Deparmen of Agriculural Economics Texas A&M Universiy May 2015 Insrucions: This examinaion consiss of six quesions. You mus answer he firs quesion
More informationAppendix B: DETAILS ABOUT THE SIMULATION MODEL. contained in lookup tables that are all calculated on an auxiliary spreadsheet.
Appendix B: DETAILS ABOUT THE SIMULATION MODEL The simulaion model is carried ou on one spreadshee and has five modules, four of which are conained in lookup ables ha are all calculaed on an auxiliary
More informationBond Prices and Interest Rates
Winer erm 1999 Bond rice Handou age 1 of 4 Bond rices and Ineres Raes A bond is an IOU. ha is, a bond is a promise o pay, in he fuure, fixed amouns ha are saed on he bond. he ineres rae ha a bond acually
More informationPortfolio investments accounted for the largest outflow of SEK 77.5 billion in the financial account, which gave a net outflow of SEK billion.
BALANCE OF PAYMENTS DATE: 27-11-27 PUBLISHER: Saisics Sweden Balance of Paymens and Financial Markes (BFM) Maria Falk +46 8 6 94 72, maria.falk@scb.se Camilla Bergeling +46 8 6 942 6, camilla.bergeling@scb.se
More informationOutput: The Demand for Goods and Services
IN CHAPTER 15 how o incorporae dynamics ino he AD-AS model we previously sudied how o use he dynamic AD-AS model o illusrae long-run economic growh how o use he dynamic AD-AS model o race ou he effecs
More informationIntroduction. Enterprises and background. chapter
NACE: High-Growh Inroducion Enerprises and background 18 chaper High-Growh Enerprises 8 8.1 Definiion A variey of approaches can be considered as providing he basis for defining high-growh enerprises.
More informationAggregate Demand Aggregate Supply 1 Y. f P
ublic Aairs 974 Menzie D. Chinn Fall 202 Social Sciences 748 Universiy o Wisconsin-Madison Aggregae Demand Aggregae Supply. The Basic Model wih Expeced Inlaion Se o Zero Consider he hillips curve relaionship:
More information(1 + Nominal Yield) = (1 + Real Yield) (1 + Expected Inflation Rate) (1 + Inflation Risk Premium)
5. Inflaion-linked bonds Inflaion is an economic erm ha describes he general rise in prices of goods and services. As prices rise, a uni of money can buy less goods and services. Hence, inflaion is an
More information2. Quantity and price measures in macroeconomic statistics 2.1. Long-run deflation? As typical price indexes, Figure 2-1 depicts the GDP deflator,
1 2. Quaniy and price measures in macroeconomic saisics 2.1. Long-run deflaion? As ypical price indexes, Figure 2-1 depics he GD deflaor, he Consumer rice ndex (C), and he Corporae Goods rice ndex (CG)
More informationExam 1. Econ520. Spring 2017
Exam 1. Econ520. Spring 2017 Professor Luz Hendricks UNC Insrucions: Answer all quesions. Clearly number your answers. Wrie legibly. Do no wrie your answers on he quesion shees. Explain your answers do
More informationTwo ways to we learn the model
Two ways o we learn he model Graphical Inerface: Model Algebra: The equaion you used in your SPREADSHEET. Corresponding equaion in he MODEL. There are four core relaionships in he model: you have already
More informationEVA NOPAT Capital charges ( = WACC * Invested Capital) = EVA [1 P] each
VBM Soluion skech SS 2012: Noe: This is a soluion skech, no a complee soluion. Disribuion of poins is no binding for he correcor. 1 EVA, free cash flow, and financial raios (45) 1.1 EVA wihou adjusmens
More informationSan Francisco State University ECON 560 Summer 2018 Problem set 3 Due Monday, July 23
San Francisco Sae Universiy Michael Bar ECON 56 Summer 28 Problem se 3 Due Monday, July 23 Name Assignmen Rules. Homework assignmens mus be yped. For insrucions on how o ype equaions and mah objecs please
More informationAn Introduction to PAM Based Project Appraisal
Slide 1 An Inroducion o PAM Based Projec Appraisal Sco Pearson Sanford Universiy Sco Pearson is Professor of Agriculural Economics a he Food Research Insiue, Sanford Universiy. He has paricipaed in projecs
More informationIncorporating Risk Preferences into Real Options Models. Murat Isik
Incorporaing Risk Preferences ino Real Opions Models Mura Isik Assisan Professor Agriculural Economics and Rural Sociology Universiy of Idaho 8B Ag Science Building Moscow, ID 83844 Phone: 08-885-714 E-mail:
More informationLecture: Autonomous Financing and Financing Based on Market Values I
Lecure: Auonomous Financing and Financing Based on Marke Values I Luz Kruschwiz & Andreas Löffler Discouned Cash Flow, Secion 2.3, 2.4.1 2.4.3, Ouline 2.3 Auonomous financing 2.4 Financing based on marke
More informationCHAPTER CHAPTER26. Fiscal Policy: A Summing Up. Prepared by: Fernando Quijano and Yvonn Quijano
Fiscal Policy: A Summing Up Prepared by: Fernando Quijano and vonn Quijano CHAPTER CHAPTER26 2006 Prenice Hall usiness Publishing Macroeconomics, 4/e Olivier lanchard Chaper 26: Fiscal Policy: A Summing
More informationECO 301 MACROECONOMIC THEORY UNIVERSITY OF MIAMI DEPARTMENT OF ECONOMICS PRACTICE FINAL EXAM Instructor: Dr. S. Nuray Akin
ECO 301 MACROECONOMIC THEORY UNIVERSITY OF MIAMI DEPARTMENT OF ECONOMICS PRACTICE FINAL EXAM Insrucor: Dr. S. Nuray Akin Name: ID: Insrucions: This exam consiss of 12 pages; please check your examinaion
More informationMacroeconomics II THE AD-AS MODEL. A Road Map
Macroeconomics II Class 4 THE AD-AS MODEL Class 8 A Road Map THE AD-AS MODEL: MICROFOUNDATIONS 1. Aggregae Supply 1.1 The Long-Run AS Curve 1.2 rice and Wage Sickiness 2.1 Aggregae Demand 2.2 Equilibrium
More informationEstimating Earnings Trend Using Unobserved Components Framework
Esimaing Earnings Trend Using Unobserved Componens Framework Arabinda Basisha and Alexander Kurov College of Business and Economics, Wes Virginia Universiy December 008 Absrac Regressions using valuaion
More informationRevisiting exchange rate puzzles
Revisiing exchange rae puzzles Charles Engel and Feng Zhu Absrac Engel and Zhu (207) revisi a number of major exchange rae puzzles and conduc empirical ess o compare he behaviour of real exchange raes
More informationMacroeconomics. Typical macro questions (I) Typical macro questions (II) Methodology of macroeconomics. Tasks carried out by macroeconomists
Macroeconomics Macroeconomics is he area of economics ha sudies he overall economic aciviy in a counry or region by means of indicaors of ha aciviy. There is no essenial divide beween micro and macroeconomics,
More informationTHE TWO-PERIOD MODEL (CONTINUED)
GOVERNMENT AND FISCAL POLICY IN THE TWO-PERIOD MODEL (CONTINUED) MAY 25, 20 A Governmen in he Two-Period Model ADYNAMIC MODEL OF THE GOVERNMENT So far only consumers in our wo-period framework Inroduce
More informationA Simple Method for Consumers to Address Uncertainty When Purchasing Photovoltaics
A Simple Mehod for Consumers o Address Uncerainy When Purchasing Phoovolaics Dr. Thomas E. Hoff Clean Power Research 10 Glen C. Napa, CA 94558 www.clean-power.com Dr. Rober Margolis Naional Renewable Energy
More informationMay 2007 Exam MFE Solutions 1. Answer = (B)
May 007 Exam MFE Soluions. Answer = (B) Le D = he quarerly dividend. Using formula (9.), pu-call pariy adjused for deerminisic dividends, we have 0.0 0.05 0.03 4.50 =.45 + 5.00 D e D e 50 e = 54.45 D (
More informationProblem 1 / 25 Problem 2 / 25 Problem 3 / 30 Problem 4 / 20 TOTAL / 100
Deparmen of Economics Universiy of Maryland Economics 325 Inermediae Macroeconomic Analysis Final Exam Professor Sanjay Chugh Spring 2009 May 16, 2009 NAME: TA S NAME: The Exam has a oal of four (4) problems
More informationMathematical methods for finance (preparatory course) Simple numerical examples on bond basics
Mahemaical mehods for finance (preparaory course) Simple numerical examples on bond basics . Yield o mauriy for a zero coupon bond = 99.45 = 92 days (=0.252 yrs) Face value = 00 r 365 00 00 92 99.45 2.22%
More informationCURRENCY CHOICES IN VALUATION AND THE INTEREST PARITY AND PURCHASING POWER PARITY THEORIES DR. GUILLERMO L. DUMRAUF
CURRENCY CHOICES IN VALUATION AN THE INTEREST PARITY AN PURCHASING POWER PARITY THEORIES R. GUILLERMO L. UMRAUF TO VALUE THE INVESTMENT IN THE OMESTIC OR FOREIGN CURRENCY? Valuing an invesmen or an acquisiion
More informationOPTIMUM FISCAL AND MONETARY POLICY USING THE MONETARY OVERLAPPING GENERATION MODELS
Kuwai Chaper of Arabian Journal of Business and Managemen Review Vol. 3, No.6; Feb. 2014 OPTIMUM FISCAL AND MONETARY POLICY USING THE MONETARY OVERLAPPING GENERATION MODELS Ayoub Faramarzi 1, Dr.Rahim
More informationSupplement to Chapter 3
Supplemen o Chaper 3 I. Measuring Real GD and Inflaion If here were only one good in he world, anchovies, hen daa and prices would deermine real oupu and inflaion perfecly: GD Q ; GD Q. + + + Then, he
More informationEconomics 602 Macroeconomic Theory and Policy Problem Set 9 Professor Sanjay Chugh Spring 2012
Deparmen of Applied Economics Johns Hopkins Universiy Economics 602 Macroeconomic Theory and Policy Prolem Se 9 Professor Sanjay Chugh Spring 2012 1. Sock, Bonds, Bills, and he Financial Acceleraor. In
More informationR e. Y R, X R, u e, and. Use the attached excel spreadsheets to
HW # Saisical Financial Modeling ( P Theodossiou) 1 The following are annual reurns for US finance socks (F) and he S&P500 socks index (M) Year Reurn Finance Socks Reurn S&P500 Year Reurn Finance Socks
More informationExternal balance assessment:
Exernal balance assessmen: Balance of paymens Macroeconomic Analysis Course Banking Training School, Sae Bank of Vienam Marin Fukac 30 Ocober 3 November 2017 Economic policies Consumer prices Economic
More informationComments on Marrying Monetary Policy with Macroprudential Regulation: Exploring the Issues by Nakornthab and Rungcharoenkitkul
Commens on Marrying Moneary Policy wih Macroprudenial Regulaion: Exploring he Issues by Nakornhab and Rungcharoenkikul By Andrew Filardo, BIS Prepared for he Bank of Thailand Inernaional Symposium 2010
More informationStylized fact: high cyclical correlation of monetary aggregates and output
SIMPLE DSGE MODELS OF MONEY PART II SEPTEMBER 27, 2011 Inroducion BUSINESS CYCLE IMPLICATIONS OF MONEY Sylized fac: high cyclical correlaion of moneary aggregaes and oupu Convenional Keynesian view: nominal
More informationTHE US CURRENT ACCOUNT DEFICIT: A RE-EXAMINATION OF THE ROLE OF PRIVATE SAVING
THE US UENT AOUNT DEFIIT: A E-EXAMINATION OF THE OLE OF IATE SAING harles Engel esearch Discussion aper 5-9 November 5 eserve Bank of Ausralia Deparmens of Economics and Finance, Universiy of isconsin,
More informationSTATIONERY REQUIREMENTS SPECIAL REQUIREMENTS 20 Page booklet List of statistical formulae New Cambridge Elementary Statistical Tables
ECONOMICS RIPOS Par I Friday 7 June 005 9 Paper Quaniaive Mehods in Economics his exam comprises four secions. Secions A and B are on Mahemaics; Secions C and D are on Saisics. You should do he appropriae
More informationAn enduring question in macroeconomics: does monetary policy have any important effects on the real (i.e, real GDP, consumption, etc) economy?
ONETARY OLICY IN THE INFINITE-ERIOD ECONOY: SHORT-RUN EFFECTS NOVEBER 6, 20 oneary olicy Analysis: Shor-Run Effecs IS ONETARY OLICY NEUTRAL? An enduring quesion in macroeconomics: does moneary policy have
More informationMonetary Instrument Problem Revisited: The Role of Fiscal Policy. Abstract. Soyoung Kim University of Illinois at Urbana Champaign
Moneary Insrumen Problem Revisied: The Role of Fiscal Policy Soyoung Kim Universiy of Illinois a Urbana Champaign Absrac The moneary insrumen problem is examined in an endowmen economy model wih various
More informationUnemployment and Phillips curve
Unemploymen and Phillips curve 2 of The Naural Rae of Unemploymen and he Phillips Curve Figure 1 Inflaion versus Unemploymen in he Unied Saes, 1900 o 1960 During he period 1900 o 1960 in he Unied Saes,
More informationCapital Flows, Capital Controls, and Exchange Rate Policy
Capial Flows, Capial Conrols, and Exchange Rae Policy David Cook Hong Kong Universiy of Science and Technology Michael B. Devereux * Hong Kong Insiue of Moneary Research Universiy of Briish Columbia CEPR
More informationAsymmetry and Leverage in Stochastic Volatility Models: An Exposition
Asymmery and Leverage in Sochasic Volailiy Models: An xposiion Asai, M. a and M. McAleer b a Faculy of conomics, Soka Universiy, Japan b School of conomics and Commerce, Universiy of Wesern Ausralia Keywords:
More informationThis specification describes the models that are used to forecast
PCE and CPI Inflaion Differenials: Convering Inflaion Forecass Model Specificaion By Craig S. Hakkio This specificaion describes he models ha are used o forecas he inflaion differenial. The 14 forecass
More informationThursday July 23, 2009 MS&E247s International Investments Handout #13 Page 1 of 16
MS&E247s Inernaional Invesmens Handou #13 Page 1 of 16 Reading Assignmens for his Week TTh 3:15-4:30 Gaes B01 Thursday, July 23, 2009 Final Exam MS&E 247S Fri Aug 14 2009 12:15PM-3:15PM Gaes B01 Or Saurday
More informationForecasting and Monetary Policy Analysis in Emerging Economies: The case of India (preliminary)
Forecasing and Moneary Policy Analysis in Emerging Economies: The case of India (preliminary) Rudrani Bhaacharya, Pranav Gupa, Ila Panaik, Rafael Porillo New Delhi 19 h November This presenaion should
More informationBalance of Payments. Third quarter 2009
Balance of Paymens Third quarer 2009 Balance of Paymens Third quarer 2009 Saisics Sweden 2009 Balance of Paymens. Third quarer 2009 Saisics Sweden 2009 Producer Saisics Sweden, Balance of Paymens and
More informationLi Gan Guan Gong Michael Hurd. April, 2006
Ne Inergeneraional Transfers from an Increase in Social Securiy Benefis Li Gan Guan Gong Michael Hurd April, 2006 ABSTRACT When he age of deah is uncerain, individuals will leave bequess even if hey have
More informationSynthetic CDO s and Basket Default Swaps in a Fixed Income Credit Portfolio
Synheic CDO s and Baske Defaul Swaps in a Fixed Income Credi Porfolio Louis Sco June 2005 Credi Derivaive Producs CDO Noes Cash & Synheic CDO s, various ranches Invesmen Grade Corporae names, High Yield
More informationProposed changes to the compilation of zone aggregates for monetary aggregates and other variables in the OECD Main Economic Indicators publication
Proposed changes o he compilaion of zone aggregaes for moneary aggregaes and oher variables in he OECD Main Economic Indicaors publicaion Summary The Main Economic Indicaors (MEI) has radiionally published
More informationUncovered interest parity and policy behavior: new evidence
Economics Leers 69 (000) 81 87 www.elsevier.com/ locae/ econbase Uncovered ineres pariy and policy behavior: new evidence Michael Chrisensen* The Aarhus School of Business, Fuglesangs Alle 4, DK-810 Aarhus
More informationMicroeconomic Sources of Real Exchange Rate Variability
Microeconomic Sources of Real Exchange Rae Variabiliy By Mario J. Crucini and Chris Telmer Discussed by Moren O. Ravn THE PAPER Crucini and Telmer find ha (a) The cross-secional variance of LOP level violaions
More informationa) No constraints on import- export, no limit on reservoir, all water in the first period The monopoly optimisation problem is:
Monopoly and rade Monopoly conrol impors, bu akes expor price as given. a No consrains on impor- expor, no limi on reservoir, all waer in he firs period he monopoly opimisaion problem is: Max p ( x x +
More informationTopic 6: Financial Integration and Interest Rate Parity Part 1: Backround on interest rate parity conditions
Topic 6: Financial Inegraion and Ineres Rae Pariy Par : Backround on ineres rae pariy condiions In his lecure we sudy some puzzles in inernaional financial markes, regarding he relaionship beween ineres
More informationJarrow-Lando-Turnbull model
Jarrow-Lando-urnbull model Characerisics Credi raing dynamics is represened by a Markov chain. Defaul is modelled as he firs ime a coninuous ime Markov chain wih K saes hiing he absorbing sae K defaul
More informationOptimal Tax-Timing and Asset Allocation when Tax Rebates on Capital Losses are Limited
Opimal Tax-Timing and Asse Allocaion when Tax Rebaes on Capial Losses are Limied Marcel Marekwica This version: January 15, 2007 Absrac Since Consaninides (1983) i is well known ha in a marke where capial
More informationAid, Policies, and Growth
Aid, Policies, and Growh By Craig Burnside and David Dollar APPENDIX ON THE NEOCLASSICAL MODEL Here we use a simple neoclassical growh model o moivae he form of our empirical growh equaion. Our inenion
More informationFiscal policy & public debt.
Fiscal policy & public deb. Plan of oday s lecure Definiions Public deb dynamics Fiscal policy & aggregae demand a shor reminder. The size of he public secor in XX cenury. Kraj 93 920 937 960 970 980 990
More informationModels of Default Risk
Models of Defaul Risk Models of Defaul Risk 1/29 Inroducion We consider wo general approaches o modelling defaul risk, a risk characerizing almos all xed-income securiies. The srucural approach was developed
More informationa. If Y is 1,000, M is 100, and the growth rate of nominal money is 1 percent, what must i and P be?
Problem Se 4 ECN 101 Inermediae Macroeconomics SOLUTIONS Numerical Quesions 1. Assume ha he demand for real money balance (M/P) is M/P = 0.6-100i, where is naional income and i is he nominal ineres rae.
More informationThe Global Factor in Neutral Policy Rates
The Global acor in Neural Policy Raes Some Implicaions for Exchange Raes Moneary Policy and Policy Coordinaion Richard Clarida Lowell Harriss Professor of Economics Columbia Universiy Global Sraegic Advisor
More informationPRESS RELEASE EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR - FIRST QUARTER August 2012
1 Augus 212 PRESS RELEASE EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR - FIRST QUARTER 212 In he firs quarer of 212, he annual growh rae 1 of households gross disposable income
More information*Corresponding author Keywords: CNH, Currency Intervention Index, Central Bank Reaction Function, Exchange Rate Intervention.
016 3rd Inernaional Conference on Advanced Educaion and Managemen (ICAEM 016) ISBN: 978-1-60595-380-9 Exchange Rae Inervenion by Cenral Bank: Based on he Influence of he Hong Kong Offshore RMB Exchange
More informationElton, Gruber, Brown, and Goetzmann. Modern Portfolio Theory and Investment Analysis, 7th Edition. Solutions to Text Problems: Chapter 21
Elon, Gruber, Brown, and Goezmann oluions o Tex Problems: Chaper Chaper : Problem We can use he cash lows bonds A and B o replicae he cash lows o bond C. Le YA be he racion o bond A purchased and YB be
More informationProcess of convergence dr Joanna Wolszczak-Derlacz. Lecture 4 and 5 Solow growth model (a)
Process of convergence dr Joanna Wolszczak-Derlacz ecure 4 and 5 Solow growh model a Solow growh model Rober Solow "A Conribuion o he Theory of Economic Growh." Quarerly Journal of Economics 70 February
More information4452 Mathematical Modeling Lecture 17: Modeling of Data: Linear Regression
Mah Modeling Lecure 17: Modeling of Daa: Linear Regression Page 1 5 Mahemaical Modeling Lecure 17: Modeling of Daa: Linear Regression Inroducion In modeling of daa, we are given a se of daa poins, and
More informationINSTITUTE OF ACTUARIES OF INDIA
INSTITUTE OF ACTUARIES OF INDIA EXAMINATIONS 05 h November 007 Subjec CT8 Financial Economics Time allowed: Three Hours (14.30 17.30 Hrs) Toal Marks: 100 INSTRUCTIONS TO THE CANDIDATES 1) Do no wrie your
More informationSMALL MENU COSTS AND LARGE BUSINESS CYCLES: AN EXTENSION OF THE MANKIW MODEL
SMALL MENU COSTS AND LARGE BUSINESS CYCLES: AN EXTENSION OF THE MANKIW MODEL 2 Hiranya K. Nah, Sam Houson Sae Universiy Rober Srecher, Sam Houson Sae Universiy ABSTRACT Using a muli-period general equilibrium
More informationReal Exchange Rate Adjustment In and Out of the Eurozone. Martin Berka Michael B. Devereux Charles Engel
Real Exchange Rae Adjusmen In and Ou of he Eurozone Marin Berka Michael B. Devereux Charles Engel 5 h Bi-Annual Bank of Canada/European Cenral Bank conference on Exchange Raes: A Global Perspecive, ECB,
More informationVolatility and Hedging Errors
Volailiy and Hedging Errors Jim Gaheral Sepember, 5 1999 Background Derivaive porfolio bookrunners ofen complain ha hedging a marke-implied volailiies is sub-opimal relaive o hedging a heir bes guess of
More informationOptimal Early Exercise of Vulnerable American Options
Opimal Early Exercise of Vulnerable American Opions March 15, 2008 This paper is preliminary and incomplee. Opimal Early Exercise of Vulnerable American Opions Absrac We analyze he effec of credi risk
More information, where P is the number of bears at time t in years. dt (a) Given P (i) Find
CALCULUS BC WORKSHEET ON LOGISTIC GROWTH Work he following on noebook paper. Do no use your calculaor. 1. Suppose he populaion of bears in a naional park grows according o he logisic differenial equaion
More informationWatch out for the impact of Scottish independence opinion polls on UK s borrowing costs
Wach ou for he impac of Scoish independence opinion polls on UK s borrowing coss Cosas Milas (Universiy of Liverpool; email: cosas.milas@liverpool.ac.uk) and Tim Worrall (Universiy of Edinburgh; email:
More informationLabor Cost and Sugarcane Mechanization in Florida: NPV and Real Options Approach
Labor Cos and Sugarcane Mechanizaion in Florida: NPV and Real Opions Approach Nobuyuki Iwai Rober D. Emerson Inernaional Agriculural Trade and Policy Cener Deparmen of Food and Resource Economics Universiy
More information