Smoothing Volatility Targeting

Inflation targeting and exchange rate volatility smoothing: A two-target, two-instrument approach ¬リニ

a r t i c l e i n f o This paper introduces a strategy to model a small open economy, whose central bank has established two simultaneous policy objectives: an inflation target, and a maximum limit for nominal exchange rate volatility. In line with the Tinbergen–Aoki condition, the monetary authority establishes two policy instruments, one for accomplishing each target: the monetary policy rate...

Volatility Forecasting with Smooth Transition Exponential Smoothing

Adaptive exponential smoothing methods allow smoothing parameters to change over time, in order to adapt to changes in the characteristics of the time series. This paper presents a new adaptive method for predicting the volatility in financial returns. It enables the smoothing parameter to vary as a logistic function of user-specified variables. The approach is analogous to that used to model t...

Exponential Smoothing, Long Memory and Volatility Prediction

Extracting and forecasting the volatility of financial markets is an important empirical problem. Time series of realized volatility or other volatility proxies, such as squared returns, display long range dependence. Exponential smoothing (ES) is a very popular and successful forecasting and signal extraction scheme, but it can be suboptimal for long memory time series. This paper discusses po...

Smoothing Wavelets for the Statistical Analysis of Financial Volatility

Inflation Targeting, Learning and Q Volatility in Small Open Economies

This paper examines the welfare implications of managing asset-price with consumer-price inflation targeting by monetary authorities who have to learn the laws of motion for both inflation rates. The central bank can reduce the volatility of consumption as well as improve welfare more effectively if it adopts state-contingent Taylor rules aimed at inflation and Qgrowth targets in this learning ...