Search

Purpose: This paper aims to assess the quality of interest rate forecasts for the money markets in Argentina, Brazil, Chile, Mexico and Venezuela for the period between 2001 and 2019. Future interest rate trends are of key significance for many business-related decisions. Thus, reliable interest rate forecasts are essential, for example, for banks that make profits by carrying out maturity transformations. Design/methodology/approach: The data that we analyze were collected by Consensus Economics through a monthly survey with over 120 renowned economists and were published between 2001 and 2019 in the journal Latin American Consensus Forecasts. The authors use the Diebold-Mariano test, the sign accuracy test, the TOTA coefficient and the unbiasedness test to determine the precision and biasedness of the forecasts. Findings: The research reveals that the forecasting work carried out in Brazil, Chile and Mexico is remarkably successful. The quality of forecasts from Argentina and Venezuela, on the other hand, is significantly poorer. Originality/value: Over 50 studies have already been published with regard to the accuracy of interest rate forecasts, emphasizing the importance of the topic. However, interest rate forecasts for Latin American money markets have hardly been considered thus far. The paper closes this research gap. Overall, the analyzed database amounts to a total of 209 forecast time series with 28,451 individual interest rate forecasts. This study is thus far more comprehensive than all previous studies. [ABSTRACT FROM AUTHOR]

Purpose - The purpose of this paper is to investigate whether the Australian equity market is informationally efficient in the semi-strong form with regard to interest rates and the exchange rate shocks during the period 1994-2006. Design/methodology/approach - There is evidence that the data are non-normal and that autoregressive conditional heteroskedasticity (ARCH) effects exist and in such circumstances, standard estimation methods are not reliable. A new method introduced by Hacker and Hatemi-J which is robust to non-normality and the presence of ARCH is applied. Findings - The results show the Australian equity market is not informationally efficient with regard to either the interest rate or the exchange rate. Originality/value - The empirical findings, in contrast to several previous studies, imply that the possibility for arbitrage profits in the equity market might exist. [ABSTRACT FROM AUTHOR]

Purpose - This purpose of this paper is to investigate the existence of cointegration and causality between the stock market price indices of Thailand and its major trading partners (Australia, Hong Kong, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, the UK and the USA), using monthly data spanning December 1987 to December 2005. Design/methodology/approach - This paper used both the Engle-Granger two-step procedure (assuming no structural breaks) and the Gregory and Hansen test (allowing for one structural break) provide no evidence of a long-run relationship between the stock prices of Thailand and these countries. Findings - Based on the empirical results obtained from these two residual-based cointegration tests, potential long-run benefits exist from diversifying the investment portfolios internationally to reduce the associated systematic risks across countries. However, in the short-run, three unidirectional Granger causalities run from the stock returns of Hong Kong, the Philippines and the UK to those of Thailand, pair-wise. Furthermore, there are two unidirectional causalities running from the stock returns of Thailand to those of Indonesia and the USA. Empirical evidence was also found of bidirectional Granger causality, suggesting that the stock returns of Thailand and three of its neighbouring countries (Malaysia, Singapore and Taiwan) are interrelated. Originality/value - No previous study examines the possibility that the pair-wise long-run relationship between the stock prices of Thailand and those of both emerging and developed markets may have been subject to a structural break. [ABSTRACT FROM AUTHOR]

Purpose - Since the last review article by McKenzie, the literature has experienced a surge in the number of empirical articles. These new contributions, coupled with those that were overlooked by McKenzie, set the stage for this review. Many of the recent studies have been empirical in nature and these deserve specific attention. Thus, this paper aims to survey and review all of the studies by paying attention to the attributes outlined in the text. Design/methodology/approach - This paper examines the vast empirical literature, up to 2005, to assess the main trends in modeling and estimating these trade flows at the aggregate, bilateral, and sectoral levels. Findings - The increase in exchange-rate volatility since 1973 has had indeterminate effects on international export and import flows. Although it can be assumed that an increase in risk may lead to a reduction in economic activity, the theoretical literature provides justifications for positive or insignificant effects as well. Similar results have been found in empirical tests. While modeling techniques have evolved over time to incorporate new developments in econometric analysis, no single measure of exchange-rate volatility has dominated the literature. Originality/value - An argument put forward by the opponents of the floating exchange rates is that such rates introduce uncertainty into the foreign exchange market, which could deter trade flows. However, a theoretical argument is put forward by some to show that uncertainty could also boost trade flows if traders increase their trade volume to offset any decrease in future revenue due to exchange rate volatility. The empirical literature reviewed in this paper supports both views. [ABSTRACT FROM AUTHOR]

Purpose - To investigate whether monetary volatility in the US exerts any asymmetric impact on output volatility over the period 1974-2002. Design/methodology/approach - For the empirical purposes, the analysis makes use of the multi-variable GARCH (MVGARCFI), which allows not only the presence of volatility clustering but also the presence of asymmetries in that volatility clustering. Findings - The empirical findings suggest that money supply volatility exerts a significant asymmetric influence on output volatility, i.e. the variance of output changes more due to positive changes than negative changes of money supply volatility. Originality/value - The paper investigates, for the first time, the presence of any asymmetric impact of the volatility of money on the volatility of output in the case of the US. [ABSTRACT FROM AUTHOR]

Purpose - The purpose of this paper is to reassess the relative impact of labour market regulation on economic performance. Inflexible labour markets combined with high welfare costs are often thought to be the main cause of low growth in Europe. Design/methodology/approach - This paper compares the impact of labour market regulation to that of macroeconomic policies (such as fiscal policy, monetary policy, macroeconomic cost management) and to that of investment into future growth (such as research, education and the diffusion of technology). We develop for this purpose a highly stylised model explaining economic growth; we suggest a synthetic measure of performance and use data for the US and Europe for the empirical test. Findings - The main result is that regulation impacts on growth, the impact of regulatory change is, however, less easy to demonstrate. The impact of macro economic policy can be demonstrated first by the more growth oriented monetary and fiscal policy in the US and the success of some European countries in bringing private and public costs in line with productivity and tax revenues. However, boosting investment into future growth by encouraging research, education and technology diffusion seems to be the most important determinant of performance. Research limitations/implications - As to the limits of this paper, we have to acknowledge that our analysis refers to a short time period, a small number of countries and uses a highly stylised model. Practical implications - If the results can be replicated for larger data sets and by more elaborated technical methods, the findings have an important policy implication: country strategies relying only on deregulation, without complementary macroeconomic policy and without strategy to boost "growth drivers" are suboptimal. This questions the policy advice given by some economists and economic think tanks, which call for deregulation as main policy strategy and then expect market forces to boost growth quickly and without specific policy measures. Originality/value - The attempt to assess the relative impact of the three policy areas is specific to this paper; most other papers focus on one policy area only. [ABSTRACT FROM AUTHOR]

Purpose - To test the Miller Price Optimism Model using a new proxy for heterogenous expectations and to examine if high differential stocks behave like glamour stocks and low differential stocks behave like value stocks. Design/methodology/approach - Whisper/analyst forecast differentials were measured for a sample of stocks, combined into portfolios and held for one month. If the Miller model was supported, high differential stocks were expected to have lower portfolio returns than low differential stocks due to the greater divergence between optimistic whisper forecasts and rational analysts consensus forecasts. Findings - High differential quintiles had significantly lower future returns than low differential quintiles supporting the Miller model. High differential stocks resembled glamour stocks while low differential stocks behaved like value stocks. Research limitations/implications - These results pertain to the ultra-short time horizon of two months prior to the earnings announcement. Future research should replicate this study for a longer 3-12 month time horizon. Practical implications - Ultra short-term investors should hold glamour stocks and long term investors should hold value stocks. Rising volatility suggests that investors should define the time horizon for holding assets. Originality/value - It is one of only two studies that directly uses earnings forecasts as a proxy for heterogenous expectations. It adds to the sparse literature on whisper forecasts. It may be used by academicians studying price optimism effects and institutional investors following stock returns during earnings announcements. [ABSTRACT FROM AUTHOR]

This paper examines and dissects eight popular conjectures about exchange rates. The conjectures are: there exists a systematic linkage between economic fundamentals and exchange rates; flexible exchange rates are unstable due to destabilising speculation; flexible exchange rates are excessively volatile; the foreign exchange market is efficient; purchasing power parity holds; volatile exchange rates are harmful to trade; depreciateing exchange rates trigger a "vicious" inflammatory circle; and countries with current account deficits have depreciating exchange rates. The main message is that there is weak theoretical and empirical support for the majority of the conjectures. Only one proposition, relative PPP has strong empirical support but its policy relevance is weakened by the difficulty of interpreting departures from PPP. The remaining group for which there is inconclusive support presents the greatest challenge to research and policy as it includes the first conjecture. [ABSTRACT FROM AUTHOR]