We employ a multivariate BEKK GARCH model which allows news to affect conditional volatility in an asymmetric manner. The asymmetric model outperforms the standard symmetric model, implying that efficient financial decision makers should not treat good and bad news as homogenous. We estimate the conditional variance and covariance of the Japanese yen, Swiss franc and British pound vis-à-vis the...

We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine influence of detected on financial markets. find that, controlling for Reserve’s actions sentiment policy texts, positive tone voices Reserve chairs leads significant increases share prices. Other variables also respond vocal cues from chairs. Hence, how...

We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable “salary” component indexed to the aggregate wage bill and to aggregate dividends. Tying a manager’s compensation to th...

This paper concentrates on stability properties of heterogeneous agent models which include trend traders. So far, papers have only described the models’ behaviour in the very long run. I propose an explanation for the phenomenon that computer simulations of these models regularly converge if certain parameter constellations are used. In particular, insights of physics concerning time-delayed f...

We use a dynamic factor model to provide a semi-structural representation for 101 quarterly US macroeconomic series. We find that (i) the US economy is well described by a number of structural shocks between two and six. Focusing on the four-shock specification, we identify, using sign restrictions, two non-policy shocks, demand and supply, and two policy shocks, monetary and fiscal. We obtain ...

This study investigates an adjustment process in the bilateral trade balances of five countries within the Caribbean, with their largest trading partner, namely the United States. Unlike previous studies, this study controls for oil prices which play a vital role in the countries’ trade balances. A panel econometric technique was utilized using annual data over the period 19802012. Analysis of ...

In this study a regime switching approach is applied to estimate the chartist and fundamentalist (c&f) exchange rate model originally proposed by Frankel and Froot (1986). The empirical results suggest that this model does successfully explain daily DM/Dollar forward exchange rate dynamics from 1982 to 1998. Moreover, our findings turned out to be relative robust by estimating the model in subs...

This paper investigates the interrelation and information flows between the Won–Dollar spot and offshore forward, i.e., NDF markets. In particular, this paper focuses on the impact of the reform in the Korean exchange rate systems, which occurred in December 1997 in response to the currency crisis, on the relation between the two markets. Using the augmented GARCH formulation, this paper finds ...

We construct a two-country DSGE model with multiple stages of processing and localcurrency staggered price-setting to study cross-country quantity correlations driven by monetary shocks. The model embodies a mechanism that propagates a monetary surprise in the home country to lower the foreign price level while restraining the home price level from rising too quickly; and, it does so through re...