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In this study, we use monthly G7 industrial production data, commodity price index data, and commodity currency exchange rate data in a dynamic factor model to examine the global economic factors useful for commodity price prediction. We differentiate between the dynamic factors by specifying a persistent factor and a non‐persistent factor, both as a single global factor using all data and as factors for each category of data. The in‐sample predictive performances of the three persistent factors together are better than the non‐persistent factors and the single global factors. Out‐of‐sample outcomes based on forecast combinations also support the presence of predictive information in the persistent factors for overall commodity prices and for most sub‐categories of commodity price indexes relative to their means. The gains in forecast accuracy are heterogeneous, ranging from 5% to 7% in the 1‐ to 6‐month horizon for overall commodity prices to a high of around 20% for fertilizers in the 12‐month horizon in the recent sample. We further show that the information in the persistent factors, especially in the commodity currency exchange rate‐based persistent factor, can be integrated with other global measures to further improve the predictive performances of the global measures. [ABSTRACT FROM AUTHOR]

ABSTRACT The FOREX market assessment is a big challenge for investors and global risk managers. However, the present study uses daily multicurrency exchange rate returns data from 2007 to 2022 to estimate the learning returns performance of the proposed model to find a safe‐haven currency for optimal investment strategy. The categorical returns are classified into good returns (GRs), bad returns (BRs) and no returns (NRs). Therefore, the present study needs to use a one‐hot‐encoding function to convert a categorical dataset into a numeric format with TensorFlow. The present study proposes a deep neural network‐based multilayer perceptron (DNN‐based MLP) with a backpropagation algorithm to estimate the learning returns performance of the proposed model to find a safe‐haven currency for optimal investment strategy. The findings showed that currency exchange rate return 2 (CERR2) is relatively a safe‐haven currency than currency exchange rate return 1 (CERR1) and currency exchange rate return 3 (CERR3). Moreover, the findings also showed that the proposed model gives optimal learning return performance. This study may assist FOREX investors to modify their investment strategies under shed light of findings of the study. In addition, the findings of the present study may also support global risk managers to revisit their hedging strategies. [ABSTRACT FROM AUTHOR]

Exchange rate modeling has always fascinated researchers because of its complex macroeconomic dynamics. This study documents the exchange rate dynamics of major emerging economies after accounting for their macroeconomic cycles and explores the Bayesian Vector Error Correction Model (VECM) Markov Regime switching model, which uses time‐varying transition probabilities. The main objective is to study the exchange rate dynamics of Brazil, Russia, India, China, and South Africa (BRICS) vis‐à‐vis the US dollar. The Bayesian setup uses two hierarchal shrinkage priors, the normal‐gamma (NG) prior and the Litterman prior, for parameters' estimation. These shrinkage priors allow for a more comprehensive assessment of the regime‐specific coefficients. The model performed well in differentiating between the two regimes for all currencies. The Russian ruble was identified to be the most depreciated currency, whereas the African Rand was the most appreciated. The evaluation of model features revealed that many regime‐specific coefficients differed significantly from their common mean. A forecasting exercise was then performed for the out‐of‐sample period to assess the model's performance. A significant improvement was observed over the basic random walk (RW) model and the linear Bayesian vector autoregression (BVAR) model. [ABSTRACT FROM AUTHOR]

Cambodia is one of the first two countries that adopted a retail central bank digital currency (CBDC) in October 2020. The design of the CBDC, called the Bakong, is a bit unique. We find a few design flaws that could potentially damage the central bank and then the Cambodian economy as a whole. We show some key statistics from our own survey in 2022 to support our arguments. The Bakong is offered in two currencies, the Khmer Riel (KHR) and the US dollar (USD), as Cambodia has been highly dollarized. We discuss theoretical predictions for the CBDC based on three kinds of substitutes: paper money, bank deposits, and foreign currencies. The third one is specific to the Bakong. Unlike a typical local currency CBDC, the USD Bakong may substitute for the KHR more. Moreover, it has been announced that the retail Bakong is legally not a liability of the central bank, but from the viewpoint of the underlying technology and economics, it is a central bank liability. [ABSTRACT FROM AUTHOR]

Illicit financial flows have been an issue of great concern over the past decades due to the challenge they present for economic development in Africa. Illicit financial flows undermine the productivity and growth of African economies as countries lose foreign exchange and tax revenues. Countries lose financial resources needed for development programs, hence undermining social service delivery and retarding poverty reduction. To effectively combat illicit financial flows, it is imperative to examine their determinants. This study seeks to examine the determinants of illicit capital movement in the China‐Africa trade through the mechanisms of trade misinvoicing over the period 1990–2019. The IMF's Direction of Trade Statistics (DOTS) database is used to estimate trade misinvoicing. Estimates using mirror trade data indicate that both exports of Africa to China and imports from China to Africa are mainly underinvoiced. The net effect shows that trade misinvoicing in the China‐Africa trade results in net illicit capital outflow for about 44% of countries in Africa. The results from panel data regressions indicate that tax evasion is one of the major factors behind misinvoicing in China‐Africa trade. In addition, corruption control is found to reduce export underinvoicing, while political stability reduces both export overinvoicing and import overinvoicing. Export misinvoicing increases with the presence of natural resources in the exporting country. Other factors associated with trade misinvoicing in China‐Africa trade include openness to trade, current account deficit, and real exchange rate. The study suggests ways to reduce trade misinvoicing in China‐Africa trade. [ABSTRACT FROM AUTHOR]

Against the backdrop of a proliferation of policy tools in recent years, there is ongoing policy uncertainty surrounding the suitability of capital flow management in mitigating systemic risk and financial disruptions. We study the effectiveness of macroprudential policies in managing extreme capital flow episodes (surges, stops, flight, and retrenchment), comparing them to capital controls and foreign exchange interventions. Using propensity score matching, based on a panel of 54 countries spanning 1990Q1 to 2020Q3, we find that macroprudential policy can reduce the likelihood of extreme capital flow episodes at least as effectively as capital controls or foreign exchange interventions. Their relative effectiveness, however, varies considerably across type of instrument, proliferation of tools, country income‐development level, and type of extreme capital flow episode. [ABSTRACT FROM AUTHOR]

Uncertainty and risk abound in supply chains. One such form of risk existing in global supply chains comes from volatility associated with currency fluctuations—Foreign Exchange (FX) risk. Although the study and practice of using financial hedging instruments are well documented, there are also emerging supply chain strategies firms may adopt for mitigating FX risk. The purpose of this multi‐method study is to investigate how supply chain professionals perceive and mitigate FX risk, as well as to measure how investing in supply chain flexibility strategies affect firm financial performance. Using a mixed‐method approach based on qualitative case studies and simulation experiments using the lens of Real Option Theory, we are able to show how investments in supply chain flexibility strategies can mitigate FX risk in terms of cash flows and profits. Theoretical, methodological, and managerial implications are provided for better understanding FX risk in the emerging supply chain finance discipline. [ABSTRACT FROM AUTHOR]

This paper examines the macroeconomic effects of unconventional monetary policies in Mongolia, a developing and commodity‐exporting economy. Within a Bayesian structural vector autoregression framework, central bank balance sheet, policy rate, demand, and supply shocks are identified using a combination of sign and zero restrictions. An expansionary balance sheet shock stimulates bank lending and M2, decreases interest rate spread, leads to a depreciation of the domestic currency, and increases output and consumer prices. The estimated output and consumer price effects are qualitatively similar to the effects of conventional monetary policy, while the impacts on the exchange rate and foreign exchange reserves are different. We also find favourable evidence for the delayed overshooting response of the exchange rate to the balance sheet shock and reveal that financial friction amplifies the effects of demand and supply shocks on the Mongolian economy. [ABSTRACT FROM AUTHOR]

Over 90% of exchange trading on crypto options has always been on the Deribit platform. This centralized crypto exchange only lists inverse products because they do not accept fiat currency. Likewise, other major crypto options platforms only list crypto–stablecoin trading pairs in so‐called direct options, which are similar to the standard crypto options listed by the CME except the US dollar is replaced by a stablecoin version. Until now a clear mathematical exposition of these products has been lacking. We discuss the sources of market incompleteness in direct and inverse options and compare their pricing and hedging characteristics. Then we discuss the useful applications of currency protected "quanto" direct and inverse options for fiat‐based traders and describe their pricing and hedging characteristics, all in the Black–Scholes setting. [ABSTRACT FROM AUTHOR]

Taiwan was the first developing country to adopt an export‐oriented trade strategy after World War II. The factors usually associated with big shifts in policy—a macroeconomic crisis, a change in political power or institutions, lobbying by export interests, pressure from international financial institutions—were not present; it was ideas that were key. In 1954, economist S. C. Tsiang proposed that Taiwan boost export earnings rather than squeeze import spending to deal with its chronic shortage of foreign exchange. He recommended a currency devaluation to establish a realistic exchange rate and a market‐based system of foreign exchange allocation to end the inefficient rationing by the government. Four years later, a policymaker, K. Y. Yin, fought for the adoption of Tsiang's proposal, helping to clear the way for Taiwan's phenomenal growth in trade. [ABSTRACT FROM AUTHOR]

This paper examines whether and how expectations have contributed to the turbulent path of the Turkish lira since 2008. We derive uncertainty measures surrounding gross domestic product (GDP) growth, inflation, the interest rate, and exchange rates based on survey data from Consensus Economics. Our results illustrate that forecasts have affected realized exchange rates and stock market returns via increased uncertainty. We also show that expectations regarding monetary policy have changed throughout the sample period. In line with, a gradual adjustment of expectations professionals have accounted for the violation of the Taylor rule. [ABSTRACT FROM AUTHOR]

This study incorporates the spans of sequences of continuous trades and reversal trades to investigate whether the currency liquidity is varying with the span of continuous trades or reversal trades. We highlight the dependency between the span of continuous trades and the realized bid‐ask spread to explain the currency liquidity dynamics using high‐frequency foreign exchange data. Our findings show that the spans of continuous trades play an important role in determining the market liquidity because a larger span of a continuous sequence puts a drain on the market liquidity and thereby consumes the funding liquidity, eventually increasing the bid‐ask spread. [ABSTRACT FROM AUTHOR]

Do market participants look into the past whilst framing the trading decisions today? Microstructure theory shows that participants increase bid‐ask spreads in response to macroeconomic news to account for asymmetric information and inventory costs. However, the role of perceptions or biases of the market participants in influencing the bid‐ask spread has been largely overlooked. This paper incorporates the role of 'Recurrence bias' in influencing trading decisions and therefore market volatility. Empirically, the model is tested using high‐frequency exchange rate data and time‐stamped news data on Indian rupee, which has seen sharp volatility in the period under study. Logit and GARCH analysis shows that volatility is positively linked to 'Recurrence Bias', which arises from the 'availability of mental models' to traders, created by past response of exchange rate to unexpected component of news. [ABSTRACT FROM AUTHOR]

Papua New Guinea (PNG) has faced a foreign exchange (forex) shortage since 2015. The Bank of PNG has resorted to forex rationing to protect reserves, leading to a large backlog of orders and import compression. This paper surveys the structure of PNGʼs forex market and analyses recent market conditions. We argue that a real exchange rate depreciation is required to restore currency convertibility. We develop a forex market model that features a backlog of unmet orders which suggests that a frontloaded depreciation is preferred to an often‐favored gradual adjustment. Empirical results indicate that the governmentʼs large budget deficits have contributed to the forex shortage, highlighting the need for greater fiscal restraint. In the longer term, we argue for more exchange rate flexibility and forex allocation through competitive auction. [ABSTRACT FROM AUTHOR]

This study investigates the effect of the exchange rate on foreign direct investment (FDI). The exchange rate effect manifests itself theoretically but remains ambiguous empirically. In the literature, (a) FDI is treated predominantly as a continuous variable, while the discrete nature of FDI decisions is neglected; (b) FDI data are in aggregated form, masking the true firm‐level exchange‐rate–FDI relationship; and (c) regression models adopted are ill‐suited to analyse exchange rate and FDI data as both of these display different time‐series properties. To overcome these problems, we propose the use of (i) a discrete choice model with a mixed logit application to capture discrete investment decisions and firm heterogeneity; (ii) cross‐section dimension to reduce the problem arising from the time‐series dimension; and (iii) firm‐level location choice data and real exchange rate data reflecting international price level differences so that (i) and (ii) are implemented. With these new features, we perform an empirical analysis using firm‐level data on the location choice of Chinese outward FDI during 2005–2016. Our estimation results detect a significant exchange rate effect not accounted for previously, explaining why the evidence for the effect has been mixed across studies. [ABSTRACT FROM AUTHOR]

Using intraday EUR–USD and JPY–USD data in both electronic futures and spot markets, we examine the important role played by order flow in price discovery and in intermediating the exchange‐rate reactions to macroeconomic news. We find that, after considering the order flows of futures and spot markets, the futures market dominates price discovery when compared with the spot market, confirming that order flows have a permanent impact on prices, even more so in futures markets. Furthermore, announcement surprises in gross domestic product, jobless claims, and nonfarm payroll affect both order flows and exchange‐rate changes. [ABSTRACT FROM AUTHOR]

While illicit capital flight is a major concern of policymakers in developing countries, there is only little research on the possible link between capital flight and development aid. In this paper, we address the issue for Nepal, a stereotypical financially closed developing economy that is highly dependent on resources from abroad. Distinguishing features of our approach are the use of a narrowly defined proxy of capital flight, based on trade cost‐adjusted mirror trade statistics, and the focus on the foreign‐exchange cash component of development aid. We document a robust partial correlation between aid and outward capital flight that is economically and statistically significant. Interestingly, this positive correlation is not observable for remittances, an alternative form of foreign‐exchange inflows where the capital flight motivation is absent. Furthermore, it is visible in the FX cash component but not in broader aid definitions that include in‐kind transfers, or in multilateral and IMF loans. Finally, when comparing the subcomponents of export underinvoicing and import overinvoicing, only the latter is driving our results. [ABSTRACT FROM AUTHOR]

This article investigates determinants of deepening dollarization and the relationship between exchange rate and inflation across foreign exchange regimes and degrees of dollarization. To this end, the fixed effect models are adopted using 28 country‐level panel incorporating countries that have experienced dollarization from 1995 to 2016. The overall estimation results show that first, high inflation, less flexible exchange rate movements, the sluggish real economy and the inadequacy of the institutional environments are contributing factors to intensify the dollarization. Secondly, the estimation results using the de‐dollarization country group indicates that real appreciation of the domestic currency is an important factor in mitigating the degree of dollarization while the increasing effects of inflation on dollarization are more pronounced in the dollarized economies. Finally, high dollarization or a high depreciation rate of the domestic currency tends to increase inflation, and those effects are found to have more significant in the dollarized economies, while real depreciation is a factor contributing to lowering inflation. [ABSTRACT FROM AUTHOR]

According to a report from The Cable website, Nigeria's anti-corruption agency, the Economic and Financial Crimes Commission (EFCC), has frozen over 300 accounts for alleged illegal forex trading. The EFCC chairperson stated that these accounts were engaging in activities worse than the cryptocurrency exchange Binance, which the agency is prosecuting. Additionally, the Central Bank of Nigeria (CBN) has allowed international oil firms to repatriate 50% of their forex earnings upfront, in an effort to boost investor confidence and entice foreign oil companies to increase exploration and production. Furthermore, Nigeria plans to remove the local naira currency from cryptocurrency platforms to tackle forex manipulation, and embassies and high commissions are now mandated to use the naira instead of foreign currencies for visa services. [Extracted from the article]

The objective of this article is to examine the sustainability of long‐run economic growth in Saudi Arabia over the period 1970–2016. It also discusses the changes in explanatory variables (such as investment, government consumption expenditure, household consumption expenditure, final consumption expenditure, exports, imports, fuel exports, oil prices, oil production, resource rents, the share of agriculture and mining sectors in total output, terms of trade, exchange rate and foreign direct investment inflows) associated with substantial jumps in the trend growth. The study employs a statistical approach of Bai and Perron (Econometrica, 1998, 66, 47–78; Journal of Applied Econometrics, 2003, 18, 1–22) and subjective approach of Hausmann, Pritchett, and Rodrik (Journal of Economic Growth, 2005, 10, 303–329) to identify the significant up‐breaks and down‐breaks in the trend growth. Further, the study subjectively determines the growth regimes of booms and recessions in the Saudi Arabian economy. The statistical results of the article can be summarised as follows: we found four significant breaks in the growth trend of Saudi Arabia that occurred in the years 1978, 1985, 1992 and 2002. The article argues that the long‐run growth trend of Saudi Arabia is characterised by rapid, moderate, stagnation and collapse growth regimes over the past four decades. In addition, the article found that strong growth regimes are associated with improvements in investment, aggregate consumption expenditure, exchange rate, foreign investment inflows, fuel exports and imports. On the other hand, growth collapses are associated with a decline in these factors, along with an increase in resource rents, oil prices, oil production and adverse terms of trade. These latter results indicate the presence of a resource curse in the economy of Saudi Arabia. [ABSTRACT FROM AUTHOR]

The research seeks to assess whether the Indian capital market is following a sustainable equilibrium relationship with gold, oil and currency exchange in long and short intervals or not. The study uses autoregressive distributed lag (ARDL)‐unrestricted error correction model (UECM) Bounds test over 25 years from 1990 to 2016. The result indicates that equity indices are cointegrated and has a relationship for a long run with gold and currency exchange. Volatility in gold prices and currency exchange affects equity performance for a long and short interval of time. Only oil price movements affect the currency exchange rate in long‐run. No other variable makes any impact on it in short‐run. The outcome supports gold that appeared as an alternative investment asset class in the investors' community. The report features the necessity to structure policies so that currency exchange gestures and financial return volatility can be monitored and controlled with gold and oil prices as instruments. [ABSTRACT FROM AUTHOR]

The Bank of Papua New Guinea has maintained an active policy of foreign exchange (FX) market intervention. This monetary tool is associated with a depreciating currency and a worsening shortage of foreign currencies in the domestic market, suggesting that at most the policy instrument leans against existing FX‐market pressure. However, the one‐sided sales of central bank securities (or bills) engender an appreciation of the rate and an easing of the shortage in the domestic FX market. Supported by empirical evidence, we demonstrate that the one‐sided sales of central bank bills perform like an instrument of monetary policy for FX‐market stability in the presence of persistent nonremunerated excess bank reserves. [ABSTRACT FROM AUTHOR]

We study the effects of foreign exchange hedging on corporate innovation. According to the information asymmetry hypothesis, corporate hedging reduces firms' information asymmetry, alleviates managers' career concerns, and helps investors better monitor managers, which enhances innovation. According to the market pressure hypothesis, hedging imposes short‐term earnings pressure on managers as a result of mark‐to‐market hedge accounting, discouraging innovation. Using 32,194 observations of 5847 nonfinancial firms from 1998 to 2006, we document results that support the information asymmetry hypothesis. Hedged firms invest more heavily in innovative projects, generate more patents, and have more patent citations. To address endogeneity concerns, we employ both difference‐in‐differences and instrumental variable regressions and explicitly test for reverse causality. [ABSTRACT FROM AUTHOR]

Background: Kron et al (Mycoses, 64, 2021, 86) found cost savings for the use of the innovative pharmaceutical isavuconazole in the inpatient setting in Germany (Bismarck‐based healthcare system). Little is known about the reimbursement of innovative pharmaceuticals in the inpatient setting of Beveridge‐based healthcare systems. Objectives: The aim of this study was to evaluate the market access process and reimbursement of isavuconazole, exemplary for innovative pharmaceuticals, in England and Spain. Patients/Methods: Market access processes of both countries were described. Focussing on typical patient clusters for isavuconazole treatment, reimbursement data regarding inpatients with (i) allogeneic haematopoietic stem cell transplantation or (ii) acute myeloid leukaemia was considered. Data were publicly available and of high topicality (England 2020/2021, Spain 2018). Discounting and a currency conversion to Euro were applied. Results: This study showed that market access processes of both countries are broadly similar. Further, full reimbursement of isavuconazole as an innovative pharmaceutical may lead to reduction in resource utilisation. Without medication costs, isavuconazole can thus result in cost savings for both patient clusters due to a reduction in length of stay. Conclusions: Expenses for innovative pharmaceuticals may be balanced or even lead to cost savings due to a reduction in length of stay. The latter contributes to a greater patient benefit. For both healthcare system, the analyses highlighted drugs' cost‐effectiveness and assessing its added value into reimbursement decisions is highly relevant. [ABSTRACT FROM AUTHOR]

In this study, we examine the effect of external commercial borrowings on investment of the firms in the wake of currency depreciation by drawing the firm‐level data from India. Despite steep growth in dollar debt and its critical implications for firms and macroeconomic stability, the issue was not explored before. This article attempt to fills this gap and contribute to the literature on dollar debt and open economy macroeconomics. We estimate the panel regression to quantify the balance sheet and competitiveness effects. We show that currency depreciation does not adversely affect the investment of those firms that borrow in foreign currency. The findings of the study imply that the gradualist approach to liberalization and prudential policy measures laid by regulatory bodies were effective. We also find that firms that incur dollar debt do not possess adequate natural hedge against exchange rate volatility. This finding calls for the mandatory hedging by firms to immune the economy from the contagion effect. The development of offshore derivatives markets is indispensable for such hedging. The findings also call for the availability of easy and cheaper domestic credit to the corporate sector to lessen the over‐reliance on external commercial borrowings. [ABSTRACT FROM AUTHOR]

In this paper, we show that forward premiums are significant predictors of innovations in currency spot rates, and currency forward rates lead to price discovery during normal trading periods. Conversely, currency spot rates lead to price discovery during volatile periods. This finding is linked to investors' overreaction to information, which in turn induces jumps in the currency spot rate; positive jumps weaken the contribution of the forward rate to price discovery and their informational efficiency. We also find that the forward premium puzzle is linked to jump‐driven pricing inefficiencies. [ABSTRACT FROM AUTHOR]

This article investigates the impact of the internationalisation of emerging market currencies on original sin, which is the inability of emerging countries to borrow abroad in local currency. The objective is to assess the role of measures of internationalisation on the currency structure of debt for a set of emerging market countries. We show the favourable impact of the internationalisation process on original sin for the period 2005–2018 using two different measures with a dynamic panel data empirical analysis. The main determinants are the foreign exchange (FX) turnover of the currencies, the economic size of the issuing country, and the Volatility Index (VIX). In this way, we highlight network effects between the functions of a currency. The tests also highlight the existence of inertia in the use of a currency for financial transactions. Finally, the results provide evidence on the role of derivative instruments in supporting the use of emerging market currencies in bond markets. [ABSTRACT FROM AUTHOR]

At the beginning of the 2000s, Latin America countries experienced rising commodities prices and, in turn, foreign investors shifted part of their portfolio composition toward the region. Unlike past episodes, more integrated financial markets allowed international players to invest in a wider range of financial instruments, usually related to composite commodity indexes. We investigate the macroeconomic implications of such innovative practices, focusing in particular on currency swings, by adopting a stock‐flow consistent (SFC) framework. The element of novelty of our contribution consists in depicting a financial sector, which issues Commodity‐Linked Notes (CLNs) to be sold to households in the developed country. [ABSTRACT FROM AUTHOR]

The Central Bank of Libya has proposed a 27% tax on the official exchange rate of foreign currencies until the end of 2024, causing controversy in parliament. The tax would be added to the exchange rate and could be reduced based on the state's revenues. While some members of parliament support the tax as a means of stabilizing the exchange rate, others reject it, calling it unjust and a cover for looting. Prime Minister Abdulhamid Al-Dbeibah has also expressed his rejection of the tax, stating that the country's economic situation is good and there is no need for such measures. However, the Central Bank governor, al-Siddiq al-Kabir, has cast doubt on the prime minister's assessment, warning against promoting a rosy picture of the economy and stating that the country's usable foreign currency reserve is estimated at $28 billion, not $84 billion as claimed by the prime minister. [Extracted from the article]

This paper introduces a new correlation measure called perspective correlation measure as a complement to the existing objective correlation measure to detect contagion. Incorporating the effects of currency returns on correlation estimates, we first demonstrate theoretically that the correlation experienced by two investors given a country pair can be different. This is because the correlation measures are inherently distinctive, determined purely from the point of view of the investor, the foreign exchange returns between the two countries for the investment period and the currency in which the investor counts his or her returns. The same has been evidenced from an empirical examination of weekly closing stock index returns data from January 1996 to December 2017 for India and its three developed counterparts, namely, the US, the UK and Japan. Our results indicate that India does not offer diversification benefits to developed country investors but the converse is true. [ABSTRACT FROM AUTHOR]

We study the implied volatilities of three foreign exchange (FX) option markets: EUD/USD, GBP/USD, and AUD/USD. We find that they are distinct from each other. The implied volatilities of the EUD/USD market tend to be more U‐shaped than those of other markets. Local volatility models such as the constant elasticity of variance (CEV) model and stochastic volatility models, such as the Heston model, may fail to capture this type of convexity. We choose a stochastic‐local volatility model to obtain an implied volatility formula for the corresponding FX options. The formula is given by the CEV formula with additional terms reflecting the (pure) stochastic volatility nature of FX rates. Based on this result, we show that the stochastic‐local volatility model is a suitable universal choice for the pricing of these FX options. [ABSTRACT FROM AUTHOR]

This paper aims to explain the growth of the Cuban production sector between 1975 and 2014 by considering both demand and supply factors simultaneously. The research provides new empirical data on this topic through the application of a simultaneous equation model that considered the effect on the product of internal and external constraints most relevant to the Cuban economy, and the impacts of these over time. Its results confirm that the growth of the Cuban production sector was primarily limited by two factors: On the one hand, an overly centralized regulatory framework that reduces the global efficiency of the Cuban economy; and, on the other hand, a foreign exchange deficit that restricts its import capacity and the sustained growth of the Cuban capital stock. Therefore, the Cuban production sector's growth could be fostered by both a greater decentralization of its regulatory framework and the implementation of industrial and commercial policies geared to make Cuban exports more competitive. [ABSTRACT FROM AUTHOR]