In this paper we modify the method of Blanchard and Quah (1989) in order to estimate a structural VAR model appropriate for a small open economy. In this way we identify shocks to output and prices in the members of the two monetary unions that make up the African CFA Franc Zone. The costs of monetary union membership will depend on the extent to which price and output shocks are correlated acr...

This paper reports empirical evidence that a neural network model is applicable to the prediction of foreign exchange rates. Time series data and technical indicators, such as moving average, are fed to neural networks to capture the underlying `rulesa of the movement in currency exchange rates. The exchange rates between American Dollar and "ve other major currencies, Japanese Yen, Deutsch Mar...

The adverse effect of currency volatility on international trade has prompted the inception of the European Monetary System (EMS) and other measures of international policy coordination aimed at reducing intracurrency variability. Until "Black Wednesday" in September 1992 the EMS had some sucess in this objective, but following pressure on the Italian Lira, other ERM currencies (viz. Sterling, ...

This paper investigates the purchasing power parity (PPP) hypothesis in Sri Lanka using exchange rates for six currencies during the recent float. Both univariate (Enders and Granger and Ng and Perron unit root tests) and multivariate techniques (asymmetric cointegration and errorcorrection models) are used in the empirical analysis. Enders and Granger unit root tests strongly support the PPP h...

In 2011, Switzerland announced a floor for the Swiss franc, and it immediately depreciated by 10 percent. Many argue that depreciations should not matter for Switzerland’s export basket because luxury brands and high value added products predominate, and these should compete on quality rather than price. We measure the sophistication of Swiss exports using Hausmann et al.’s (2007) and Kwan’s (2...

This paper investigates some common interest rate models for scenario generation in financial applications of stochastic optimization. We discuss conditions for the underlying distributions of state variables which preserve convexity of value functions in a multistage stochastic program. Oneand multi-factor term structure models are estimated based on historical data for the Swiss Franc. An ana...