States Dollars Research Articles

Time Series Analysis of the Connection between Exchange Rate of EUR/USD, Bond Yields, and Trade Growth

In the context of the growing importance of global trade, the US dollar plays a crucial role as the currency for international transactions. The exchange rate of the dollar and the monetary policies of other countries influence each other. This study delves into the connection among the exchange rate of Euro/United States dollar (EUR/USD), the 10-year government bond rates with the international trade growth rates of 20 European countries from January 1991 to December 2016. By employing descriptive statistics, correlation analysis, regression modeling, and time series analysis, this research aims to uncover the underlying dependencies and predictive insights among these financial variables. The results indicate that the EUR/USD exchange rate has an insignificant impact on bond yields (R = 0.003), suggesting that other factors such as monetary policy, inflation expectations, and market liquidity play more significant roles. However, a weaker currency is linked to lower growth rates is shown by a strong negative correlation for the exchange rate and trade growth rates (R = 0.210). The multivariate regression model shows that bond yields and trade growth rates together explain 44.5% of the exchange rate variations, highlighting the interconnections among these economic variables. These findings highlight the necessity for policymakers to take these interconnected factors into account when developing economic and monetary policies to ensure stable and sustainable economic growth.

The Effect of International Currency Crises on the Balance of Payments: Evidence From Jordan

The effect of the international currency crises on the Jordanian balance of payments (BoP) between Q1-2000 and Q4-2017 was investigated in this paper. The currency crises are represented by the various exchange rates (ER) for the Japanese Yen, United States (US) Dollar, Euro Member Countries, China Renminbi, and the United Kingdom (UK) Pound with the Jordanian Dinar. In approximating the potential short-run and long-run associations among the different ER variations and the BoP, the ARDL bounds testing technique was employed. The empirical findings revealed that variation in the ER rate for EUR/JOD had a positive significant impact on the BOP for the short-run and long-run relation, whereas, opposingly, for the JPY/JOD, it had a negative significant impact on the BoP in the short-run and long-run relations. For other currencies, the results varied. Therefore, to reduce the effect of currency fluctuations and resultant crises on the BoP, over-reliance on the promotion and importation of goods and domestic export products should be avoided. As such, in the context of the Jordanian economy, the country needs to diversify. Accordingly, this can only be achieved if the economy is expanded along with advancing and developing entrepreneurial innovation supported by fiscal disciplines.

Dynamic conditional score models: a review of their applications

ABSTRACTIn this paper, applications of dynamic conditional score (DCS) models are reviewed and those models are discussed in relation to classical time series models from the literature. DCS models are robust to outliers, which improves their statistical performance compared to classical models. Three applications are presented in order to compare the statistical performances of DCS and classical models in three very different contexts: (i) The QAR (quasi-autoregressive) plus Beta-t-EGARCH (exponential autoregressive conditional heteroscedasticity) model is presented, which is a score-driven expected return plus volatility model. This model is used for daily returns on the DAX (Deutscher Aktienindex) equity index for the period of January 1988 to December 2017. (ii) The score-driven local level and seasonality plus Beta-t-EGARCH model is presented, which is used for daily AFN/USD (Afghan Afghani/United States Dollar) currency exchange rates for the period of March 2007 to July 2017. (iii) The Seasonal-t-QVAR (quasi-vector autoregressive) model is presented, which is a score-driven multivariate dynamic model of location. For this model, monthly US inflation rate and US unemployment rate are used for the period of January 1948 to December 2017. For all applications, the statistical performance of each DCS model is superior to that of a corresponding classical alternative.

Forecasting implied volatility in foreign exchange markets: a functional time series approach

ABSTRACTWe utilise novel functional time series (FTS) techniques to characterise and forecast implied volatility in foreign exchange markets. In particular, we examine the daily implied volatility curves of FX options, namely; Euro/United States Dollar, Euro/British Pound, and Euro/Japanese Yen. The FTS model is shown to produce both realistic and plausible implied volatility shapes that closely match empirical data during the volatile 2006–2013 period. Furthermore, the FTS model significantly outperforms implied volatility forecasts produced by traditionally employed parametric models. The evaluation is performed under both in-sample and out-of-sample testing frameworks with our findings shown to be robust across various currencies, moneyness segments, contract maturities, forecasting horizons, and out-of-sample window lengths. The economic significance of the results is highlighted through the implementation of a simple trading strategy.

LONG-TERM CONSTRUCTION CONTRACTS—SOME ISSUES IN RELATION TO THE TAXATION OF FINANCIAL ARRANGEMENTS RULES

The Gorgon gas development project has an estimated cost of A$11 billion, the Bayu-Undan gas project has an estimated cost of A$4.2 billion and the Otway Basin gas project has an estimated cost of A$1.1 billion. The specialised equipment, technology and labour required for these costly oil and oas infrastructure projects must usually be sourced internationally and as such their costs are typically denominated in United States (US) dollars. Due to the value and long term nature of these projects, associated foreign exchange gains and losses are often significant.From an Australian income tax perspective, the treatment of foreign exchange gains and losses has been particularly uncertain and inconsistent for many years. As a result, taxation legislation in this area has recently undergone significant change. The new Taxation of Financial Arrangements legislation introduced in December 2003, has raised some complex and practically challenging concepts in relation to foreign exchange gains and losses on long term construction contracts. This paper will address two such concepts, namely forex realisation event 4 and the short-term foreign exchange rules. In particular, it will consider some of the potential compliance risk areas and how they can be managed when applying these concepts to long term construction contracts.

Some Determinants of Canadian Municipal and Provincial Bond Flotations in the United States

T HIS is an empirical study of what determines the flotation of Canadian municipal and provincial bonds denominated in States dollars. The determinants of foreignpay flotations are important for two reasons: (1) States purchases of these flotations result in a significant inflow of capital to Canada from the States; and (2) a large part of States portfolio investment abroad is States purchases of new Canadian securities denominated in States dollars. This paper presents an analysis of individual issue data in order to establish the determinants. Many empirical studies of international portfolio investment have been conducted. Some of them are based largely on the Canadian-United States flows while others concentrate on the aggregate flows in and out of the States.' They are founded completely on aggregate economic data and are devoted to the analysis of time series. This paper is the first study to the author's knowledge that uses micro-economic data and cross-section analysis to investigate portfolio capital flows. If Canadian bond issuers behave rationally they will float their securities to enable their costs for any given issue to be minimized. These costs include both underwriting fees and interest payments. If the security is floated in the States and is denominated in States dollars, a subjective adjustment factor is included in the cost calculations to incorporate exchange rate risks. When Canadian issuers do make use of the States capital market to raise capital, they are expressing their preference for this market over the domestic market for these issues.2 During any given period does the States capital market appeal to a particular group of Canadian issuers or is the economic incentive to raise funds abroad spread evenly across Canadian issuers? If the incentive to raise funds abroad is equally great for each Canadian issuer, then foreign-pay issues will be selected from domestically floated issues by a random process; they will have no characteristics which distinguish them from domestic flotations. Alternatively, foreign flotations may appeal to a distinguishable group of issuers. If so, then what are the characteristics differentiating these issuers from domestic issuers? In part II of this paper foreign bond flotations are found to be statistically distinguishable from domestic bond flotations, and their differentiating characteristics are discussed. What factors give rise to the groupings observed in part II? The Canadian capital market may subject issues with certain characteristics to cost premiums so that the States market is especially attractive to these issues. Alternatively, the States market may offer these issues particular cost advantages. Thus, the grouping arises as a result of market characteristic configurations in Canada and in the States. * This article is based on the author's doctoral dissertation, United States Investment in Canadian Securities, 1958-1965, Harvard University, 1969 (unpublished). The research for this dissertation was financed by the Ford Foundation and by the National Science Foundation. The author accepts complete responsibility for the views expressed in the paper. 'For example see Robert Baguley, International Capital Flows and Canadian Monetary and Fiscal Policies, 1951-1962, unpublished Ph.D. dissertation, Harvard University, 1969; Gerald K. Helliner, Connections Between the States' and Canadian Capital Markets, 19521960, Yale Economic Essays, II (No. 2, 1962), pp. 351400; William Branson, Financial Capital Flows in the U.S. Balance of Payments (Amsterdam: North-Holland Press, 1968). 2 The distinction between the States capital market and the Canadian capital market is one between two regional markets. Each market is part of the world capital market but has characteristics which differentiate it from other components of the world market. This paper discusses the movement of capital from one regionally defined market to another.