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The information base of the study is the time series of the daily exchange rate of the currency pair USD/JPY, the US 10-year Treasury bond (TB 10), the Japanese government bond 10-year (JGB 10), the volatility index (VIX) of the Chicago Board Options Exchange (CBOE), which calculated by Bloomberg. Study period: December 1, 2015 (the date the Federal Reserve raised interest rates, which initiated a new regime - began easing its ZIRP zero interest rate policy) to December 29, 2023. The relationship between monetary policy and the currency pair USD/JPY is evaluated using 3 approaches: 1) a rally dynamic system based on the standard theory of nonlinear differential equations aimed at eliminating psychological noise (1/f noise, pink noise, trend noise with spectrum capacity); 2) regression of instrumental variables with heteroskedasticity aimed at managing unobservable sources of variability; 3) an event tracking method to measure anomalous asset price response, analyzing the daily price action of USD/JPY to detect market-related fluctuations in the exchange rate and separate the impact of general market trends from related differences in interest rates. The study found that the US Federal Reserve's (Fed's) monetary policy only occasionally affects the USD/JPY exchange rate, and it changes mainly when monetary policy deviates from expected future trajectories. Within the studied period, this happened only 3 times: growth on December 16, 2015; emergency rate reduction due to COVID-19 on March 15, 2020; and the first increase of 75 basis points on June 15, 2022 (the article estimates the impact of each of these episodes on the exchange rate). Statements by the Fed on monetary policy affect the price dynamics of the USD/JPY pair in the short term (since short-term psychological expectations play a decisive role in shaping the dynamics of the currency market), but not often (if the statement on monetary policy is consistent with market forecasts, it is practically will not affect exchange rates). The Fed's adoption of tools such as "forward guidance" and official statements to inform the future course of monetary policy indirectly affects the price dynamics of USD/JPY. The price action of USD/JPY was driven by the fundamentals of the difference in interest rates between the US and Japanese bonds, which are influenced by the monetary policy of the US Federal Reserve and the Bank of Japan (BoJ). In 2023, it could be hard to attempt to challenge FX intervention except to curb "excess volatility and disorderly movements in exchange rates" like the Minister of Finance's (MoF) 2022 intervention. [ABSTRACT FROM AUTHOR]

We analyse how macroprudential policies in a panel of emerging economies affect spillovers from changes in long-term government bond yields in the United States. We show that a tightening in foreign exchange (FX) related macroprudential policy tools, in particular, limits to FX positions, helps to temporarily shield emerging economies from interest rate spillovers. No such effect is observed for non-FX related macroprudential actions. [ABSTRACT FROM AUTHOR]

This study analyzes how exchange rate risk exposure and foreign industry competition affect Chinese industries. Using the data from 2005 to 2018, the authors find that industry competition from the US has a statistically significant influence on 33.3 percent of Chinese industries. Unsurprisingly, tradable goods benefit more from depreciation of the Renminbi against the US dollar. Counterintuitively, only 20 percent of the industries supported by the 'Made in China 2025' initiative is sensitive to US industrial competition. In addition, on average Chinese industries face international competition from few developed countries, such as the Netherlands; and depreciation of RMB against the Japanese yen is hurting Chinese industries on average. Developing countries, however, exert marginal competition effects on their Chinese counterparts in the sample period. [ABSTRACT FROM AUTHOR]

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We investigate the consistency under inversion of jump diffusion processes in the foreign exchange market. That is, if the EUR/USD exchange rate follows a given type of dynamics, under which conditions will USD/EUR follow the same type of dynamics? After giving a numerical description of this property, we establish a suitable local volatility structure ensuring consistency. We subsequently introduce jumps and analyze both constant and random jump size. While in the first scenario consistency is automatically satisfied, the second case is more involved. A fairly general class of admissible densities for the jump size in the domestic measure is determined. [ABSTRACT FROM AUTHOR]

Remarkable transformation of the U.S. international investment position occurred over the last 40 years. U.S. net foreign assets were larger than combined net foreign assets of all other creditors. By 1990, foreign-owned U.S. securities and real assets were larger than U.S. owned foreign securities and assets. This change occurred without the U.S. Treasury borrowing in foreign currency and few U.S. firms borrowing, reflecting a surge in foreign purchases of U.S. securities. Inferences from the currency composition of portfolio changes of those who acquired U.S. dollar securities suggest that foreign savers took the initiative on cross-border investment inflows. The U.S. could not have developed a larger capital account surplus after 1980 unless a similar increase in the U.S. current account deficit occurred. The primary factor that led to the U.S. current account deficit increase was the surge in U.S. stocks and other asset prices, resulting in a U.S. household wealth surge and consumption boom. The foreign saving inflow displaced domestic saving. In addition, an increase in the price of the U.S. dollar led to expenditure-switching from U.S. goods to increasingly less expensive foreign goods. When investor demand for U.S. dollar securities declined, the U.S. dollar price fell in 1992, 2002, and 2020 and the price of U.S. dollar securities declined. The paper discusses the source of the change in the U.S. international investment position, the flow of foreign saving to the U.S., cyclical variability in the foreign saving flow to the U.S., and the potential impact of an adjustable parity arrangement. [ABSTRACT FROM AUTHOR]

We establish currency as an important factor shaping global portfolios. Using a new security-level data set, we demonstrate that investor holdings are biased toward their own currencies to such an extent that countries typically hold most of the foreign-debt securities denominated in their currency. While large firms issue in foreign currency and borrow from foreigners, most firms issue only in local currency and do not directly access foreign capital. These patterns hold broadly across countries except for the United States, as foreign investors hold significant shares of US dollar bonds. The share of dollar-denominated cross-border holdings surged after 2008. [ABSTRACT FROM AUTHOR]

This paper studies the dynamic relationship between demand for the US Treasury yields and cross-currency swap (CCS) bases since the 2008 global financial crisis. Using a three-factor non-Gaussian-term structure model for the US Treasuries, an estimated short-rate premium in the yield curve tends to move in tandem with and lead the euro and Japanese yen CCS bases against the US dollar. The dynamics between the premium and CCS bases are found to be co-integrated, suggesting a long-run equilibrium between them. Empirically, the premium is found to be positively related to demand for Treasuries. This is consistent with recent studies in which factors including the strength of the US dollar, the demand for dollar funding and banks' balance-sheet structures play important roles in determining the CCS bases. These factors increase demand for US Treasuries (high-quality US dollar assets) by investors searching for safe dollar assets and banks with higher leverages due to increased demand for dollar funding. The findings in this paper contribute to explaining the widespread failure of covered interest parity in foreign exchange swap markets. [ABSTRACT FROM AUTHOR]

Heavy Metal was first published in March 1977, and offered a crucial gateway for European bande dessinée in the United States. Advertised as "The Illustrated Fantasy Magazine from France", it presented creators such as Moebius, Bilal and Tardi to a wide American readership for the first time. This article investigates the circumstances and origins of the industrial project. It first seeks to revisit and reconcile conflicting narratives regarding the origin of the agreement between Les Humanoïdes Associés, Métal Hurlant's publisher, and 21st Century Communication, the National Lampoon's parent company, by suggesting that the dominant account of a happy coincidence need be nuanced. The article then focuses on the genealogy of this agreement and on the systemic elements which made it imaginable in the first place. It argues that Heavy Metal should be understood as the result of a decades-long process of international exchanges in the comics world, at the personal but also the industrial level; Harvey Kurtzman, René Goscinny and Mad magazine feature prominently in this history. Though singular, Heavy Metal should also be understood as a product of these accelerating reciprocal exchanges in the 1970s. [ABSTRACT FROM AUTHOR]

We develop an equilibrium model in which exchange rates, stock prices, and capital flows are jointly determined under incomplete foreign exchange (forex) risk trading. Incomplete hedging of forex risk, documented for U.S. global mutual funds, induces the following price and capital flow dynamics: Higher returns in the home equity market relative to the foreign equity market are associated with a home currency depreciation. Net equity flows into the foreign market are positively correlated with a foreign currency appreciation. The model predictions are strongly supported at daily, monthly, and quarterly frequencies for 17 OECD countries vis-à-vis the United States. Correlations are strongest after 1990 and for countries with higher equity market capitalization relative to ODP, suggesting that the observed exchange rate dynamics is indeed related to equity market development. [ABSTRACT FROM AUTHOR]

This paper provides an explanation for "delayed overshooting" puzzle based on foreign exchange policy's reaction to monetary policy, for Canada in which ample interactions between monetary and foreign exchange policies are found. Foreign exchange policy reaction mitigates the initial effects of monetary policy shocks on the exchange rate. As the effects of the monetary policy shocks are more prolonged than that of the foreign exchange policy reaction, the maximum effect is found in delay. [ABSTRACT FROM AUTHOR]

This study analyzes whether expectations about uncertainty of the global and U.S. economy emanate from the natural dynamics of the U.S. based rational economic fundamentals, or stem from irrational outlook not attributable to any known risk factors. The findings suggest that both the U.S. and the global economic uncertainty expectations are significantly driven by the U.S. economy and stock market related rational factors namely, economic growth, economic risk premium and excess returns. The three Fama and French factors have significant impact on the U.S. economic uncertainty expectations but insignificant role for global economic uncertainty expectations. Foreign currency movements play a significant role for the global economic uncertainty. The impact of the rational factors is higher for the U.S. economic uncertainty expectations than on the global economic uncertainty expectations. Lastly, there exists a positive feedback effect of the U.S. and global and economic uncertainty expectations. Overall, to a significant extent, the expectations of the U.S. economic uncertainty are well captured by the risk factors suggested in the asset pricing literature. [ABSTRACT FROM AUTHOR]

The article examines the how United States monetary policy effects the policies of other countries. The authors build upon previous research into foreign reaction functions to U.S. money growth. They contend an increase in U.S. money growth may provoke the same action elsewhere and trigger global inflation. The results of a model constructed by the authors indicates that inflation and real output growth influence foreign economies, and that the U.S. has a special impact on the global economy, despite the change from fixed to floating exchange rates.

The article focuses on the role of inter-temporal budget constraints in the United States. The article also provides implications of government budget constraint for the behavior of monetary and fiscal authorities. It is explained that inter-temporal balance of payments equilibrium requires that the current net stock of foreign assets equal the discounted present value of current and expected future current account deficits. The article creates a necessary and sufficient condition for intertemporal budget balance under the assumption that the expected real rate of interest is constant and it is then compared to other tests of present value relationships.

The article focuses on cash management and potential gains from foreign currency diversification. It states that in the 1970s, a combination of falling fixed exchange rates and fluctuating currency values led to investment opportunities to increase cash management returns. It states that total returns and exchange rate capital gains and losses were calculated from 17 countries from 1970 to 1978, and that 12 of the foreign nations had a higher total return than the U.S. Treasury bill rate. It calculates the standard deviation of each currency and the correlation matrix of the other 16 countries, using the basic total returns from the perspective of the U.S.

This article focuses on the role of vehicle currencies in the determination of the structure of international exchange in the United States, focusing on the relationship between the payment flows of other countries. The author refers to payment flows as the structure of payments, and currency market transactions as the structure of exchange. The relationship between transaction costs, the extent of triangular arbitrage, and the deviation of cross-rates from direct exchange rates are discussed. The author displays that currencies of economically dominant countries can assume the vehicle currency role. The article also explains why a country's currency can exist as an international exchange medium when that country experiences a decline in commercial importance.

This article develops a new framework for measuring financial and real economic linkages between countries. Using United States and United Kingdom data from 1957 to 1989, we find closer financial linkages after the Bretton Woods currency arrangement was abandoned and Britain suspended exchange controls. In a pair-wise application to fifteen countries over a shorter period, we also find that news about future dividend growth is more highly correlated between countries than contemporaneous output measures. This suggests that there are lags in the international transmission of economic shocks and that contemporaneous output correlation may understate the magnitude of integration. [ABSTRACT FROM AUTHOR]

This article explores the fundamental factors that affect cross-country stock return correlations. Using transactions data from 1988 to 1992, we construct overnight and intraday returns for a portfolio of Japanese stocks using their NYSE-traded American Depository Receipts (ADRs) and a matched-sample portfolio of U.S. stocks. We find that U.S. macroeconomic announcements, shocks to the Yen/Dollar foreign exchange rate and Treasury bill returns, and industry effects have no measurable influence on U.S. and Japanese return correlations. However, large shocks to broad-based market indices (Nikkei Stock Average and Standard and Poor's 500 Stock Index) positively impact both the magnitude and persistence of the return correlations. [ABSTRACT FROM AUTHOR]

The paper focuses on two countries, Japan and the U.S., to test the integration of capital markets. In Japan, the enactment of the Foreign Exchange and Foreign Trade Control Law in December of 1980 amounted to a true regime switch that virtually eliminated capital controls. Using multifactor asset pricing models, we show that the price of risk in the U.S. and Japanese stock markets was different before, but not after, the liberalization. This evidence supports the view that governments are the source of international capital market segmentation. [ABSTRACT FROM AUTHOR]

In this paper the risks and returns on U.S. banks' foreign currency positions are analyzed in a portfolio setting when both exchange rate and foreign interest rate risks are present. It is shown that U.S. banks could achieve considerable reductions in risk by optimally selecting their foreign currency positions. Actual foreign currency portfolio returns generated from expected exchange rate changes and exchange rate surprises were positive on average but those generated from interest rate surprises were negative. Although the total portfolio returns were positive, on a risk-adjusted basis bank return performance was relatively poor. Nevertheless, despite this relatively poor performance, the risk of ruin or failure for a "representative bank" from foreign currency activities was found to be approximately zero when judged in comparison to the capital funds available to large money center banks to cushion such losses. [ABSTRACT FROM AUTHOR]

Based on a new options transactions data base from the Philadelphia Stock Exchange Foreign Currency Options Market, this paper examines the importance of the effect of nonsynchronous prices and transaction costs on the usual option market efficiency tests. The tests conducted are based on the transaction cost adjusted early exercise and put-call parity pricing boundaries applicable to the American foreign currency options market. The test results show that the put-call parity boundary tests are sensitive to both nonsynchronous prices and transaction costs. The early exercise boundary tests are sensitive to transaction costs but are not very sensitive to simultaneity of the option price and the underlying spot price. Under the no-transaction costs scenario, a large number of early exercise boundary violations is found even when simultaneous spot and option prices are used. These violations disappear when actual transaction costs are taken into account. [ABSTRACT FROM AUTHOR]

For almost a decade, commencing with the Nixon devaluation in late 1971, controversy has surrounded the role of the U.S. multinational corporations (MNC's) vis a vis the exchange position of the dollar. Arguments range from whether the firms can affect exchange rates, whether they have affected exchange rates, to whether one should care if they do affect exchange rates. In this paper, I will briefly summarize a continuing study involving both extensive and repeated interviews with the chief international financial officers of major U.S. MNC's and the evaluation of financial data regarding the foreign exchange (FX) positions of the firms. Then, I will focus on the firms during five “crisis” periods in the foreign exchange markets, investigating whether the firms' currency levels and changes in those levels for various currencies can be seen as reinforcing or smoothing exchange rate fluctuations. [ABSTRACT FROM AUTHOR]

The efficiency of the Canadian-U.S. exchange market for the current float is examined more extensively than previously. Semi-strong-form tests which admit the lagged spot rate as a predictor are considered in addition to the standard weak-form test. These stronger tests reject the joint null hypothesis of an efficient exchange market and no risk premium for the period ending in October 1976, although not for the entire period. For almost every year the current spot rate provided a better forecast of the future spot rate than did the current forward rate. [ABSTRACT FROM AUTHOR]

The common theme running through the three papers prepared for this session is the nature and effectiveness of the international balance-of-payments adjustment process. Klein projects the effect of exchange-rate changes on national balance-of-payments positions. Kenen assumes fixed exchange rates and simulates the effects on the U.S. balance of payments of changes in U.S. monetary and fiscal policy. Adler and Stevens analyze the relationship between foreign direct investment by U.S. firms and U.S. exports, and then use their model to simulate the effect of several kinds of policy measures (exchange-rate, tariff and tax-rate changes) on that key aspect of the adjustment process. [ABSTRACT FROM AUTHOR]

The thoughts presented in this paper were developed during the first stage of an ongoing research project. This project is designed to shed light on the management of the size and exchange composition of financial assets and liabilities in the U.S. multinational companies (MNCs). The study also intends to analyze the impact of these policies on the international and national financial markets. The first phase of the study has been to interview financial officers associated with the international aspect of the business at the parent-company level. Fifty-five companies have participated in these interviews. The objectives at this point were to grasp a better understanding of what management means by foreign exchange risk and what its attitudes towards it are. By gaining an insight into the answer to these questions we hope to establish a framework to analyze the quantitative data furnished to us by these companies as well as to begin to develop some working hypotheses as to the impact of the MNCs on the financial markets. [ABSTRACT FROM AUTHOR]

The article examines the validity of long-run purchasing power parity (PPP) under the current float in the U.S. by employing a powerful test. Data on real exchange rates between the U.S. and eighteen Organization for Economic Cooperation and Development (OECD) countries was gathered and the null hypothesis was tested on it to find that each series contains a unit root against the alternative hypothesis that the various series are stationary. PPP states that the nominal exchange rate is proportional to the relative price ratio so that the real exchange rate is constant over time.

The article explores the economic and statistical significance of currency substitution, particularly examining the instances between the Canadian and American dollar. The generalized method of moments (GMM) procedure is used by the author along with small, open economic modeling to directly estimate the elasticity of substitution and the individual currency shares in producing money services. Results of analysis between the United States and Canada reflect minimal substitution. Additional estimates of relative risk aversion, subjective discount factors, and consumption shares in the utility function are also evaluated.

Develops a method for pricing options on stochastic volatility/jump diffusion process under systematic jump and volatility risk in the United States. Parameters implicit in deutsche mark (DM) options; Analysis of the Philadelphia Stock Exchange foreign currency options; Compatibility between the implicit volatilities and the dollar/DM futures prices.

The rapid growth of the multinational corporation has brought severe criticism from organized labor. Labor's major concern evolves from growing unemployment and the growth of MNC's foreign affiliates. This article develops the views of both MNC's and organized labor on the effect of multinational corporations on domestic employment; imports, exports; the domestic economy through direct foreign investment; and transfer of technology. [ABSTRACT FROM AUTHOR]

This study is a research analysis of the persistent balance of payments problem of the U.S. Because the American companies are more competitive in the high technology industries, the computer manufacturing business is used as the vehicle for this research. [ABSTRACT FROM AUTHOR]

SFAS No. 52 requires that the financial statements of operations whose functional currencies are those of countries with low or moderate inflation rates be translated using the current-rate method. Financial statements of operations in highly inflationary economies are required to be translated using procedures similar to those set forth in SFAS No. 8. This article presents empirical evidence in support of the FASB decision regarding operations in highly inflationary economies and also in support of the FASB decision to differentiate between foreign operations on the basis of the foreign inflation rate. [ABSTRACT FROM AUTHOR]

The article discusses the effects of economic turbulence on financial accounting and reporting rules. Extreme economic turbulence does not allow time for consensus building and government authorities need to act promptly in establishing new rules. The foreign currency translation of 1971 is a situation where the U.S. Financial Accounting Standards Board was forced to act promptly, promulgating accounting rules before a consensus had time to evolve. The after-effects of the Board's prompt action is still being felt as late as 1983 and they are not all positive.

FASB No. 8—‘Accounting for the Translating of Foreign Currency Transactions and Foreign Currency Financial Statements’—has been called everything from inadequate to misleading; but U.S.-based multinational companies must live with it. The author examines the translation process and the effect of FASB No. 8 on reported financial statements, and spotlights operating and accounting changes—and attendant problems—induced in MNCs by its use. [ABSTRACT FROM AUTHOR]

The article discusses the Triffin plan for the internationalization of the foreign exchange component of monetary reserves worldwide. The Triffin plan was developed by Robert Triffin and published in the paper "Tomorrow's Convertibility: Aims and Means of International Policy" in the Banca Nasionale del Lavoro Quarterly Review in 1959. However, Triffin changes his views on this topic several times in 1960 and afterward. He states that reserves, which include gold and foreign exchange in cents, declined since 1954.

The article discusses how anti-recessionary policies involving low interest rates might put pressure on the foreign reserve position of the United States by bringing about a conversion of foreign-held dollar balances in gold. The article also examines the influence of monetary and fiscal measures on current account. The article's general conclusion is that those movements in foreign holdings between gold and dollar assets throughout the years, which could be attributed to interest-rate changes, account for only a small fraction of total foreign dollar holdings.

The article discusses issues related to the restoration of Great Britain's sterling as a world currency and London, England as an international financial center. Emphasis is placed on an examination of the ideas put forth by A.C.L. Day in his book "The Future of Sterling." Day advocates for the re-emergence of the pound sterling as a world currency, and also for a payments union whose members would compose all non-dollar countries. The author discusses Day's ideas and generally finds them lacking.

The article examines how well purchasing power parity (PPP) theory explains long-term variations in exchange rates. Several variants of PPP exist, but the one tested here declares price changes to be the primary--but not exclusive--determinant of the exchange rate. The author evaluates this claim by analyzing the U.S. exchange rate with currencies from seven industrialized nations for the intervals 1900-1904 and 1963-1967. Results are supportive of PPP. One implication is that a country with high, chronic inflation relative to its trading peers must suffer deflation, devalue its currency, or convince those peers to themselves follow inflationary policies.

This article focuses on the non-dollar revenues and expenses of corporations in the U.S. the author states that in computing the dollar equivalent of foreign currency operating earnings, the objective was defined as results which would have obtained had each transaction affecting periodic income actually been executed in dollars. He explains that if there are many individual transactions, resort to average rates is necessitated by practical considerations. The article reports that the average monthly rate should be applied to sales revenues and expenditures for both current expenses and inventories.

The era in which the U.S. was the overwhelmingly dominant economic entity in the world is at an end; the U.S. is today a giant among giants. The ambitions and priorities of the U.S. must therefore be adjusted, and certain propositions which have hitherto been accepted must be renounced or amended. [ABSTRACT FROM AUTHOR]

The author reports on the inadequacies which exist in traditional foreign exchange translation, the process of translating foreign currency into units of the U.S. dollar on financial reports. The place in which management plays in the translating of foreign currencies due to reasons of financial accounting is discussed. Changes which have occurred regarding the fluctuations of foreign currencies between the 1930s and the 1960s is mentioned. According to the article, a price level factor is part of foreign exchange translations.

The relationship between stock prices and the trade balance can be either negative or positive, depending on the signs of the wealth effect channel and the exchange rate channel. While previous studies examined this relationship in a time-invariant framework, we employ a time-varying approach so as to examine the dynamic correlations of trade balance and stock prices in the United States over the period 1792-2013. The results of our empirical analysis, which remain robust to alternative specifications, reveal that correlations between the trade balance and stock prices in the United States are indeed not constant, but evolve heterogeneously overtime. In particular, the correlations are, in general, significantly positive between 1800 and 1870, while significantly negative thereafter. The policy implications of these findings are then discussed. [ABSTRACT FROM AUTHOR]

Cushman suggested that impact of exchange rate volatility declines after the inclusion of the third-country effect. Like Cushman, when we use a linear analysis, we confirm his results. However, when we engage in asymmetric effects of exchange rate volatility which requires including nonlinear adjustment of volatility measures, the findings show more support to both exchange rate volatility influence and the third-country effect. Therefore, we propose that in examining exchange rate volatility effect on trade, consideration must be given to not just asymmetric effects of exchange rate volatility but also asymmetric effects of the third-country effect. We demonstrate these findings using monthly data from 54 Malaysian industries that export to the US and 63 Malaysian industries that import from the US. [ABSTRACT FROM AUTHOR]