Browsing by Subject "Exchange Rates"
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Item Essays in Applied Macroeconomics: Asymmetric Price Adjustment, Exchange Rate and Treatment Effect(2009-05-15) Gu, JingpingThis dissertation consists of three essays. Chapter II examines the possible asymmetric response of gasoline prices to crude oil price changes using an error correction model with GARCH errors. Recent papers have looked at this issue. Some of these papers estimate a form of error correction model, but none of them accounts for autoregressive heteroskedasticity in estimation and testing for asymmetry and none of them takes the response of crude oil price into consideration. We find that time-varying volatility of gasoline price disturbances is an important feature of the data, and when we allow for asymmetric GARCH errors and investigate the system wide impulse response function, we find evidence of asymmetric adjustment to crude oil price changes in weekly retail gasoline prices Chapter III discusses the relationship between fiscal deficit and exchange rate. Economic theory predicts that fiscal deficits can significantly affect real exchange rate movements, but existing empirical evidence reports only a weak impact of fiscal deficits on exchange rates. Based on US dollar-based real exchange rates in G5 countries and a flexible varying coefficient model, we show that the previously documented weak relationship between fiscal deficits and exchange rates may be the result of additive specifications, and that the relationship is stronger if we allow fiscal deficits to impact real exchange rates non-additively as well as nonlinearly. We find that the speed of exchange rate adjustment toward equilibrium depends on the state of the fiscal deficit; a fiscal contraction in the US can lead to less persistence in the deviation of exchange rates from fundamentals, and faster mean reversion to the equilibrium. Chapter IV proposes a kernel method to deal with the nonparametric regression model with only discrete covariates as regressors. This new approach is based on recently developed least squares cross-validation kernel smoothing method. It can not only automatically smooth the irrelevant variables out of the nonparametric regression model, but also avoid the problem of loss of efficiency related to the traditional nonparametric frequency-based method and the problem of misspecification based on parametric model.Item The effect of the currency movements on stock markets(Texas A&M University, 2006-04-12) Zohrabyan, TatevikThis paper uncovers the relationship between stock markets and exchange rates in seven countries by employing stable aggregate currency (SAC) for the period of 1973- 2004. Ordinary Least Squares (OLS) regression, time series methods, and directed acyclic graphs are applied to the daily data on stock market indices and exchange rates. The findings based on regression analysis show that exchange rate exposure of stock markets is statistically significant when stock indexes in SAC are used. Using an innovation accounting technique, we confirm that stock markets and exchange rates are correlated. Moreover, in most cases stock markets are more exogenous than foreign currency markets, which explains the relatively high percentage of uncertainty in the foreign currency market. Overall, SAC-based models give relatively more accurate and robust results than those which employ stock indices in local currencies, because it is more accurate to convert both variables into the same denominator.Item The Net Effect of Exchange Rates on Agricultural Inputs and Outputs(2012-10-19) Johnson, Myriah D.For more than thirty years, studies about the effect of the exchange rate on exports have been conducted. However, few have considered the combined effect of the exchange rate on imported inputs into the agricultural system and the exports of final agricultural products those inputs produce. This work contributes to the agricultural economics literature by combining those effects. A current concern is for the net effect as the total value and quantity of inputs imported has increased. This research examines the effect of the exchange rate on imported inputs into the corn, wheat, and beef cattle production systems, breaking it down to a producer's budget, examining how the exchange rate affects profitability. Vector Autoregression (VAR) and Bayesian Averaging of Classical Estimates (BACE) models were estimated to evaluate the effects. Daily and weekly price data were used for corn, wheat, feeder steers, ethanol, diesel, ammonia, urea, di-ammonium phosphate, and the exchange rate. A VAR model was estimated to model the relationship between the variables. After having incongruous test results in determining the lag length structure it was decided that a BACE model would be approximated. After estimating the BACE model, the price responses of the commodities to the exchange rates were estimated. The price responses were used in demonstrating the effect of the exchange rate on a producer's profitability. It was determined that, generally, a strengthening exchange rate has a negative impact on prices. It was also found that the exchange rate has a greater impact on prices now than it did 14 years ago, implying that the exchange rate now has a greater affect on profitability. A one percent increase in the value of the dollar led to a decline in profitability ranging from $0.02/bu in wheat to $0.56/cwt in feeder steers. However, agricultural producers should not be overly concerned about a lower valued dollar from the perspective of their agricultural business.