A DSGE model is used to examine whether including the exchange rate in the central bank’s policy rule can improve economic performance. Smoothing the exchange rate helps both financiallyrobust economies and financially-vulnerable emerging economies in handling risk premium shocks and, given a small weight placed on the exchange rate, the effects on inflation and output volatility are minimal wi...

This paper contributes to the expanding literature on unconventional monetary policies. So far, much of the literature has focused on advanced economies. This may be natural because the United States and the European Union are the sources of the current crisis. However, many emerging markets have also been affected by the current crisis, and their central banks have employed unconventional poli...

The purpose of this paper is to explain the causes of long-run movements in the parallel market premium in the pre-and-post revolution Iranian economy. The paper suggests that the premium is affected by both real and monetary shocks. Non-spurious co-integration results indicate that negative oil revenue shocks and a revolution-induced exogenous capital outflow caused the parallel market paralle...

Using a nonlinear structural Vector Autoregression model based on the general no-arbitrage condition, we examine the empirical relation between macroeconomic shocks and the foreign exchange risk premiums. We find that when the predictable excess returns from currency speculation are interpreted as time-varying risk premiums, more than 80% of its volatility can be accounted for by the same funda...

This paper studies the implications of model uncertainty under stochastic volatility model for equilibrium asset pricing. We derive the equilibrium equity premium and risk-free rate in a pureexchange economy with one representative agent who is averse not only to risk but also to model uncertainty. The results show that robustness increases the equilibrium equity premium while lowers the risk-f...

Recently, there has been a significant increase in the number of UK television shows in which viewers call into the show using a premium-rate telephone service. At one level it could be argued that in these instances viewers are participating in a lottery. Viewers are typically asked to call a premium-rate telephone line to answer a simple question. Winners are then chosen from all those viewer...

Insurance demand is driven by many factors, but for the emerging economies, one of the most significant historical drivers of growth has been income per capita. Based on a simple forecasting approach, we project that insurance penetration in the BRICS economies could increase at a rate of between 1.6 and 4.2% per year over the coming decade, depending on the country, due to rising per capita in...

Professors Hwang, Chang and Wu are to be congratulated for this interesting paper. The authors study ex ante insurance guaranty schemes. In particular, capital forbearance mechanism and stochastic interest rate are incorporated in their model, and an explicit formula for the risk-based premium of the insurance guaranty fund is derived. I am especially interested in Section 2.3 and Appendix A. I...

Insurance The de facto paid premium in the (German) private health insurance depends on the insurance payments in the past (claim's experience). In case the insured does not make use of the insurance contract and accepts his health costs, he receives a defined premium refund – based on the monthly premium – the following year. The insured should therefore trade off between the premium refund an...