Using median-unbiased estimation based on Augmented-Dickey-Fuller (ADF) regressions, recent research has questioned the validity of Rogoff's "remarkable consensus" of 3-5 year half-lives of deviations from PPP. The confidence intervals of these half-life estimates, however, are extremely wide,...

Gram-Charlier expansion have become popular in Finance as a generalization over the normality assumption. Even though Gram-Charlier expansions allow for a certain flexibility over skewness and kurtosis they have the unfortunate drawback of sometimes yielding negative densities. The goal of this...

This paper uses a risk-averse formulation of the uncovered interest rate parity to determine exchange rates through interest rate differentials, and ultimately extract currency risk premia. The method proposed consists of developing an affine Arbitrage-Free class of dynamic Nelson-Siegel term...

The 2008 financial crisis has rekindled interest in the issue of early warning signals (EWS) of financial distress. It has also triggered renewed interest in the literature on currency crises, with many countries, especially among emerging market economies, experiencing severe exchange market...

In this paper, we consider an alternative perspective to China's exchange rate policy. We study a semi-open economy where the private sector has no access to international capital markets but the central bank has full access. Moreover, we assume limited financial development generating a large...

Based on a dynamic open-economy macroeconomic model, this paper aims at understanding the contribution of domestic financial underdevelopment to foreign reserve accumulation in some emerging market economies, especially in China. It is argued that foreign reserve accumulation is part and parcel...

In this study we compare the quality and information content of risk neutral densities obtained by various methods. We consider a non-parametric method based on a mixture of log-normal densities, the semi-parametric ones based on an Hermite approximation of Madan and Milne, or based on an...

This study identifies common features of currency crises in 15 emerging countries over the period 1980-1998. By analyzing such features, we build an early-warning system aimed at predicting looming crises in probabilistic terms.

The Gram-Charlier expansion, where skewness and kurtosi directly appear as parameters, has become popular in Finance as a generalization of the normal density. We show how positivity constraints can be numerically implemented, thereby guaranteeing that the expansion defines a density. The...

The paper discusses the issue of estimating short- and long-run exchange rate pass-through to import prices in euro area countries and reviews some problems with the measures recently proposed in the literature. Theoretical considerations suggest a long-run Engle and Granger cointegrating...