Expectations Of Future Changes Research Articles

Expectations and exchange rates in a Keynes–Harvey model: an analysis of the Brazilian case from 2002 to 2017

This paper investigates the statistical relationship between the future expectations of the exchange rate and GDP growth and the current nominal exchange rate in Brazil during the period 2002–2017. The theoretical framework on which the paper is based is a decision-making model grounded in Keynes (1921; 1936) and Harvey (2006; 2009a), from which the paper's empirical model emerges. This model is tested empirically with autoregressive distributed lag models to identify short- and long-term statistical relationships in time series. The empirical estimations suggest that expectations of future changes in both the exchange rate and GDP growth have a statistically significant relationship with the current nominal exchange rate in Brazil, just as the Keynes–Harvey model predicts.

Phytoplankton strategies for photosynthetic energy allocation.

Phytoplankton physiology is dynamic and highly responsive to the environment. Phytoplankton acclimate to changing environmental conditions by a complex reallocation of carbon and energy through metabolic pathways to optimize growth. Considering the tremendous diversity of phytoplankton, it is not surprising that different phytoplankton taxa use different strategies to partition carbon and energy resources. It has therefore been satisfying to discover that general principles of energetic stoichiometry appear to govern these complex processes and can be broadly applied to interpret phytoplankton distributions, productivity, and food web dynamics. The expectation of future changes in aquatic environments brought on by climate change warrants gathering knowledge about underlying patterns of photosynthetic energy allocation and their impacts on community structure and ecosystem productivity.

Perturbation Methods for Markov-Switching DSGE Models

The macroeconomic environment often changes repeatedly over time, and often in a recurring manner. For example, the economy may switch between periods of high and low growth, or monetary policy may switch between periods of strong versus weak responses to inflation. An important question for economists is how to model the presence of these switches, and to capture how expectations about switches in the future may impact economic behavior. ; This paper develops a methodology for solving dynamic stochastic general equilibrium (DSGE) models in the presence of switching environments. The approach allows for features of the economy to change over time, and for consumers, firms, or policymakers to internalize the expectations of future changes on their behavior. ; the procedure. In one example, the economy switches between a high and low growth periods. In the second example, the monetary authority changes how strongly it responds to deviations of inflation from its inflation target. Both examples highlight that expectations of future changes impact behavior in important ways.

TECHNOLOGY KNOWLEDGE: HIGH SCHOOL SCIENCE TEACHERS’ CONCEPTIONS OF THE NATURE OF TECHNOLOGY

In-depth interviews guided by video elicitations examined 30 high school science teachers’ conceptions of technology and by extension how these conceptions reflected dimensions of nature of technology. Altogether, 64 % of the teachers characterized their schools and departments as aggressive–moderate adopters with generous access and support for technological tools. In comparison, 30 % noted that their school lagged behind due to funding and lack of infrastructure. Definitions of technology revealed emphasis on technology as artifact, overwhelming optimism on the purpose and function of technology to improve and make life easier and as representation of advancement in civilization. In tandem, teachers were most drawn to two video scenarios—medical and everyday tool videos because it reflected notions of progression and expectations of future changes; heightened awareness of the multitude of available technologies; and perceived relevance with classroom content. Perhaps most telling in these findings was that few teachers were drawn to the classroom video scenario, and only three teachers highlighted the technology–science–school science connection. These findings have implications for holistic understandings of technologies, which may inform how science teachers perceive and enact technologies in their science classrooms.

Effects of speculation and interest rates in a “carry trade” model of commodity prices

The paper presents and estimates a model of the prices of oil and other storable commodities, a model that can be characterized as reflecting the carry trade. It focuses on speculative factors, here defined as the trade-off between interest rates on the one hand and market participants' expectations of future price changes on the other hand. It goes beyond past research by bringing to bear new data sources: survey data to measure expectations of future changes in commodity prices and options data to measure perceptions of risk. Some evidence is found of a negative effect of interest rates on the demand for inventories and thereby on commodity prices and positive effects of expected future price gains on inventory demand and thereby on today's commodity prices.

List price and sales prices of residential properties during booms and busts

This paper investigates the relationship between the list and sale price of residential properties over the housing cycle. In down or normal markets the list price generally exceeds the sales price; however, when the housing market is strong, homes sell for more than their list price. This observation is not consistent with the assumptions made in the standard model of home sellers’ search behavior. We consider alternative models. In one, sellers set list prices based on their expectations of future changes in sales prices and the arrival rate of buyers; however, demand shocks occur. This model partially explains our data from the Belfast, U.K. housing market, but it fails to predict the list to sales price ratio during a sustained housing boom. We next describe a model where sellers’ endogenously select their search mechanism depending on the strength of the housing market. We find support for the conjecture that sellers switch to an auction-like model during housing booms. There also is evidence that during a downturn in the market, sellers’ list prices are sticky.

Combining demographic and land-use dynamics with local communities perceptions for analyzing socio-ecological systems: a case study in a mountain area of Italy

Abstract: Rural communities are facing increasing social heterogeneity and organization complexity consequently to land use changes, demographic dynamics and globalization processes. Members of the communities should have a direct perception of their own territories, recognizing any positive or negative change that may occur. A better knowledge of these processes may be achieved by investigating local community awareness and perspectives. A research was carried out in a rural and mountainous area of Central Italy with the following aims: (i) to highlight demographic dynamics and land use changes that affected the area during the last decades; (ii) to assess local communities’ perceptions and awareness of their own territories; (iii) to verify and validate a research methodology by evaluating the resilience of socio-ecological systems. The study area involved four municipalities that were analyzed considering the historical changes of demographic data and land-use system. A questionnaire was submitted to a sample of local population. The questionnaire was aimed to investigate the following issues: (i) level and quality of participation and communication within the community life; (ii) awareness of environmental resources of the territories; (iii) socio-cultural opportunities and expectations of future changes within the communities. In each municipality, different behaviors and needs emerged according to the age of the inhabitants. In spite of that, awareness of social, cultural and environmental constraints/potentialities emerged in all the communities. Communication capability seems a key factor to reinforce both the social capital and the resilience of the territories. Thus, sharing of experience and knowledge could play a major role in developing an efficient governance of the occurring territorial changes. Finally, the study highlights that serious efforts should be spent especially to satisfy expectations of young people concerning the territorial development. This latter seems a prerequisite for the maintenance of the system resilience.

Combining demographic and land-use dynamics with local communities perceptions for analyzing socio-ecological systems: a case study in a mountain area of Italy

Rural communities are facing increasing social heterogeneity and organization complexity consequently to land use changes, demographic dynamics and globalization processes. Members of the communities should have a direct perception of their own territories, recognizing any positive or negative change that may occur. A better knowledge of these processes may be achieved by investigating local community awareness and perspectives. A research was carried out in a rural and mountainous area of Central Italy with the following aims: (i) to highlight demographic dynamics and land use changes that affected the area during the last decades; (ii) to assess local communities’ perceptions and awareness of their own territories; (iii) to verify and validate a research methodology by evaluating the resilience of socio-ecological systems. The study area involved four municipalities that were analyzed considering the historical changes of demographic data and land-use system. A questionnaire was submitted to a sample of local population. The questionnaire was aimed to investigate the following issues: (i) level and quality of participation and communication within the community life; (ii) awareness of environmental resources of the territories; (iii) socio-cultural opportunities and expectations of future changes within the communities. In each municipality, different behaviors and needs emerged according to the age of the inhabitants. In spite of that, awareness of social, cultural and environmental constraints/potentialities emerged in all the communities. Communication capability seems a key factor to reinforce both the social capital and the resilience of the territories. Thus, sharing of experience and knowledge could play a major role in developing an efficient governance of the occurring territorial changes. Finally, the study highlights that serious efforts should be spent especially to satisfy expectations of young people concerning the territorial development. This latter seems a prerequisite for the maintenance of the system resilience.

The response of glaciers to intrinsic climate variability: observations and models of late-Holocene variations in the Pacific Northwest

AbstractDiscriminating between glacier variations due to natural climate variability and those due to true climate change is crucial for the interpretation and attribution of past glacier changes, and for the expectations of future changes. We explore this issue for the well-documented glaciers of Mount Baker in the Cascades Mountains of Washington State, USA, using glacier histories, glacier modeling, weather data and numerical weather model output. We find that natural variability alone is capable of producing kilometer-scale excursions in glacier length on multi-decadal and centennial timescales. Such changes are similar in magnitude to those attributed to a global Little Ice Age. The null hypothesis, that no climate change is required to explain the glacier fluctuations in this setting, cannot be rejected. These results for Mount Baker glaciers are also consistent with an earlier study analyzing individual glaciers in Scandinavia and the Alps. The principle that long-timescale fluctuations of glacier length can be driven by short-timescale fluctuations in climate reflects a robust and fundamental property of stochastically forced physical systems with memory. It is very likely that this principle also applies to other Alpine glaciers and that it therefore complicates interpretations of the relationship between glacier and climate history. However, the amplitude and timescale of the length fluctuations depends on the details of the particular glacier geometry and climatic setting, and this remains largely unevaluated for most glaciers.

Overreaction of yield spreads and movements of Brazilian interest ratest

This paper tests the rational expectations hypothesis (REH) for Brazil from July 1996 to December 2001. For any pair of maturities between one day and one year, it shows that the yield spread between a longer-term and a shorterterm interest rate is an imprecise predictor of the short-term movements in the longer-term interest rate and of the long-term movements in the shorter-term interest rate. Moreover, yield spreads highly correlated with the rational expectations forecasts of future changes in the shorter-term rate, but significantly more volatile than these, suggest the rejection of the REB. The alternative hypothesis of overreaction of the yield spread to the expectation of future changes in the shorter-term rate seems a reasonable explanation to these findings, and can be rationalized by a monetary policy of interest rate smoothing.

Identifying the Sources of the Predictive Ability of the Yield Spread

This paper aims at identifying the sources of the predictive power of the nominal yield spread for economic activity. For this purpose, we analyse the relationship between the yield spread and future GDP growth in an economy subject to three types of structural disturbances: Supply shocks, monetary shocks and shocks to term premia. The theoretical model extends the work of Harvey (1988) and Hu (1993), which attributes the correlation between the real term structure and future output growth to intertemporal consumption smoothing, by allowing short-term price stickiness in the economy. Sticky prices imply that economic disturbances generate expectations of future changes in output and inflation, thus allowing for intertemporal substitution effects and changes in both the real and the nominal term structure. We derive analytical solutions of the covariance between the nominal yield spread and future output growth and show that this covariance is not independent of the type of economic disturbances. Using data for the U.S. over the period 1957:1 - 2002:4, we find empirical evidence that the predictive power of the yield spread is due to supply shocks. In contrast, monetary shocks and term premia shocks generate a negative correlation between the yield spread and future economic activity, explaining why, at times, the predictive power of the yield spread may break down.

Exchange rate expectations and risk premium in the Singapore/US dollar exchange rate: evidence from survey data

Survey data on the expectations of the Singapore/US dollar exchange rate are employed to evaluate (i) the role of exchange rate expectations in the pricing of the forward exchange rate, (ii) the rationality of foreign exchange market expectations and (iii) the nature of expectation formation mechanisms. The analyses indicate that movements in the forward discount mainly reflect expectations of future changes in the exchange rate and expectations of the market are not rational. In addition, expectations are best characterized as regressing toward the equilibrium PPP exchange rate The views expressed in this paper are solely the authors' and do not necessarily reflect those of the Monetary Authority of Singapore

The Sir John Hammond Memorial Lecture Current and Future Problems

The accomplishments of United Kingdom agriculture and the changing government policies which have accompanied them are briefly discussed, leading to expectations of future change. The constraints on animal production are outlined, particularly those which affect consumption of animal products. It is concluded that the scientific validity of many official recommendations and expressed views are highly questionable. One specific example, among others discussed, is the COMA recommendations of 1984 to reduce consumption of fat and saturated fatty acids by the whole population so to reduce coronary heart disease and mortality. Recent work, which is briefly reviewed, shows the contention cannot be sustained on scientific grounds while direct, controlled experimentation with many thousands of subjects shows that intervention has not reduced mortality. This recommendation should be withdrawn.

Taxation and the Cost of Capital

The way in which taxation affects corporate financial policy, and the level of investment through the structure of the cost of capital, is still a bone of contention. Various specifications of the cost of capital have been used in econometric models (for example, Jorgenson [3]) although in a recent theoretical paper Stiglitz [10] has claimed that, ignoring uncertainty, the cost of capital is simply the rate of interest.3 In this paper we shall analyse the effect of personal and corporate taxation on both the firm's choice of financial policy and its investment decision. We shall see that the latter is influenced by the former because the cost of capital depends upon the optimal financial policy. The results have implications for the specification of the neoclassical investment model which has come to play such an important part in the econometric study of investment behaviour, because the cost of capital is a good deal more complicated than most of this work allows for. Another problem which will be examined is how expectations of future changes in tax rates affect the firm's policy. In recent years governments have often announced tax changes in advance, and increasing attention is being paid to the use of announcements of future tax changes as a policy tool in its own right. These announcement effects can have a significant impact on investment behaviour. To make it easier to see the role of taxation we shall assume a world of perfect certainty. There are three justifications for this neglect of uncertainty. First, when tax changes are announced in advance, expectations that these changes will take place are held with a very high degree of certainty. Secondly, this assumption makes our results directly comparable with those of the neoclassical investment model. Finally, in a world of certainty we know that the firm will, if it is acting in the shareholders' interests, maximize the market value of the stock. But in a world of uncertainty which does not have a complete set of Arrow-Debreu markets it is not clear just what the firm should be trying to maximize. This is because shareholders have different subjective beliefs about what the best policy is, and there are no contingent commodity markets for them to hedge on. If one shareholder believes that the firm would make enormous profits by drilling for oil in the North Sea and nobody else believes that this would be successful, then for this shareholder the optimal policy is to drill even though the market value of the firm's stock would slump in the short run.4 Section 2 discusses a model of the valuation of the company and the way in which this is influenced by taxation. This brings out the interaction between the systems of personal and corporate taxation. In Section 3 we analyse the firm's optimal financial policy where it has a choice between financing investment by using retentions, borrowing, or

Inflation, Rational Expectations and the Term Structure of Interest Rates

In a number of recent papers [11] [12],2 it has been shown that, for the United States, the behaviour of the term structure of interest rates can be explained remarkably well by combining the Preferred Habitat version of the Expectation Theory with a simple and readily tractable model of the formation of expectations, a model in which expected future rates are represented by a linear function of past rates. The purpose of the present paper is to generalize that approach and to strengthen the evidence supporting it in two major directions. First, we endeavour to broaden and refine the earlier analysis by making proper allowance for one additional factor, which is entirely consistent with the spirit of the model but was not duly taken into account, namely the effect of expectations of future changes in the price level. Evidence is provided that this additional factor is empirically important and that by allowing for it one can obtain a significant improvement in fit as well as a reduction in the serial correlation of the residual error. Some further improvement can also be achieved by introducing a variable intended to measure the effect of changes in the uncertainty about the future course of interest rates on the risk premium. Our second goal is to provide independent evidence in support of both the expectation theory and of our model of expectation formation and of the determinants of the risk premium, by exploring the relation between our model and the expectation To this end we first derive expressions for the (in the least square sense) linear forecast of all future rates, conditional upon the past history of rates of interest and rates of inflation. We show that the relation between the long rate and the history of short rates and prices which is estimated in the process of fitting our term structure equation is broadly similar to the relation that would hold if, in fact, (1) the long rate were an average of expected future rates-as called for by the expectation hypothesis-and (2) the expected future rates tended to represent optimal forecasts-as called for by the rational expectation hypothesis. These results provide strong evidence in support of both hypotheses, and of our term structure model built on them. Further

The Fundamental Determinants of the Interest Rates

This paper assesses the fundamental determinants of changes in the long-term interest rate. Most recent studies of bond rates have emphasized the term structure relations between the bond rate and short-term interest rates.1 Although we recognize that the individual investor is very much influenced by arbitrage opportunities between different maturities, we wish to look behind the intercorrelated structure of interest rates to the economic forces that shift the entire level of interest rates. The result of our analysis is a synthesis of Keynes' theory of liquidity preference and Fisher's model of the role of anticipated inflation. Our estimates also show the importance of the public debt and of investors' expectations of future changes in the interest rate. We begin our study (section I) by considering a very simple, but nevertheless effective, liquidity preference theory. This is then generalized in a variety of ways by subsequent sections. Section II introduces the important effects of expected inflation, emphasized by Irving Fisher as early as 1896, but generally ignored by economists in more recent years. In section III, the liquidity preference theory is extended to a more general portfolio balance model by introducing privately held government debt. Section IV explicitly considers the implications of expected interest rate changes. Finally, section V examines flow disturbances that may cause the interest rate to depart from the equilibrium level. In sections I through V, the analysis deals with the average yield to maturity on Moody's Aaa corporate bonds, i.e., high grade bonds that are already several years old and have approximately 25 years to maturity. The yield to maturity includes a capital gain (or loss) if the current market price of the bond is less than (or greater than) the redemption value. No allowance is made for the special tax status of capital gains and the resulting distortion in yields during periods of substantial changes in coupon rates. To remedy this, section VI applies the generalized liquidity preference inflation model of section V to the yield on newly issued Moody's Aaa bonds instead of the yield on seasoned bonds. Section VII uses the generalized liquidity preference inflation equation to decompose the change in interest rates since 1954 into the separate effects of the several variables. A concluding section summarizes the results. The estimates generally relate to the 62 quarters from 1954:1 through 1969:2. The use of this period avoids the special characteristics imposed on the bond market by government behavior before the Treasury accord and unpegging of interest rates in 1951. Further details about the definitions of the variables used and the methods of estimation are discussed in the sections that follow.