nep-ifn New Economics Papers
on International Finance
Issue of 2007‒11‒03
four papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis By Essahbi Essaadi; Jamel Jouini; Walih Khallouli
  2. A Re-examination of the Real Interest Parity Condition Using Threshold Cointegration By Cooray, Arusha
  3. The High-Frequency Response of the EUR-US Dollar Exchange Rate to ECB Monetary Policy Announcements By Christian Conrad; Michael J. Lamla
  4. The Speed of Euro Adoption By Columba, Francesco

  1. By: Essahbi Essaadi (Unité d'Analyse Quantitative Appliquée (UAQUAP)-ISG Tunis and GATE (UMR 5824 CNRS),); Jamel Jouini (F.S.E.G.N., E.S.S.A.I. and L.E.G.I., Université 7 Novembre de Carthage, Tunisie, GREQAM, Université de la Méditerranée, France); Walih Khallouli (Unité d'Analyse Quantitative Appliquée (UAQUAP) and ESSEC, Université de Tunis, Tunisie)
    Abstract: In this paper, we are interested in testing for contagion caused by the Thai bath collapse in July 1997. In line with earlier work, shift-contagion is defined as a structural change in the international propagation mechanisms of financial shocks. We adopt the Bai and Perron’s (1998) structural break approach to detect the endogenous break points in the pair-wise time-varying correlations between Thailand and seven Asian stock market returns. Our approach allows solving the misspecification problem of crisis window. Our results indicate the existence of shift-contagion in the Asian crisis caused by the crisis in Thailand.
    Keywords: sequential selection procedure, shift-contagion, time-varying correlation
    JEL: C22 G15
    Date: 2007–10
  2. By: Cooray, Arusha (School of Economics and Finance, University of Tasmania)
    Abstract: Threshold cointegration is employed in this study to test the real interest parity condition between the UK and the US. Evidence supports the asymmetric adjustment of real interest rates. The threshold error correction models indicate that negative deviations from long run real interest parity are eliminated faster than positive deviations.
    Keywords: real interest parity, threshold cointegration, threshold error correction, asymmetric adjustment, non-linear adjustment
    Date: 2007–02
  3. By: Christian Conrad (Department of Management, Technology, and Economics, ETH Zurich); Michael J. Lamla (Department of Management, Technology, and Economics, ETH Zurich)
    Abstract: We investigate the impact of the European Central Bank's monetary policy an- nouncements on the level and volatility of the EUR-US Dollar exchange rate em- ploying an AR-FIGARCH specification. Using high-frequency data we estimate the individual and complementary effects of the release of the interest rate decision, the ECB's introductory statement and the question and answer session. Surprise interest rate changes explain the movements in the exchange rate immediately after press release. During the introductory statement, communication with respect to future price developments is most relevant and has two important functions: (i) it explains the previously announced decision and (ii) it serves as a guide for the future path of monetary policy.
    Keywords: European Central Bank, monetary policy announcements, communication, exchange rate, expectations, long memory GARCH processes
    JEL: C22 E52 E58 F31
    Date: 2007–09
  4. By: Columba, Francesco
    Abstract: This paper estimates the speed and determinants of euro adoption across Italian provinces by exploiting the natural experiment in early 2002 when euro and lira dually circulated as legal tender. A unique data set with daily observations on the net flows of euro banknotes from the branches of the Bank of Italy, province by province, is used. The speed of euro adoption differs according to the availability of transaction technology and demographic characteristics. Lessons for countries adopting a new currency are obtained.
    Keywords: currency; euro; financial innovation; monetary transition
    JEL: E51 E42
    Date: 2007

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