Paul Boothe

The statistical distribution of exchange rates: Empirical evidence and economic implications

The abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non-normal distributions, including the Student, the stable Paretian and mixtures of distributions. This paper compares the empirical fits of three non-normal candidates and the normal distribution for daily changes in the logarithms of exchange rates, using maximum likelihood estimation of the parameters and chi-square goodness-of-fit tests. The Student and mixture of two normals provide the best fits, but there is evidence that the distribution parameters may vary over time.

Foreign exchange market efficiency tests: Implications of recent empirical findings

Abstract The recent empirical literature on the efficiency of the foreign exchange market has been characterized by strikingly contradictory conclusions drawn from similar empirical evidence. These contradictions result because (1) different maintained hypotheses are held and (2) different criteria ( e.g. , micro- versus macroeconomic) are used to judge the evidence. In this survey we organize the empirical literature under several headings: the presence of risk premiums, empirical regularities in regression tests, profitable trading rules, and advanced econometric techniques. In integrating this material, we consider the implications of the current evidence for investors, forecasters, policy-makers, and theorists.

Comparing exchange rate forecasting models : Accuracy versus profitability

Abstract In this paper we compare the rankings of alternative exchange rate forecasting models using two different evaluation criteria: forecast accuracy and profitability in forward market speculation. Either or both of these criteria may be useful to the practitioner depending on the forecasting application. We use both time-series and static and dynamic structural models to construct forecasts for the Canadian dollar/U.S. dollar and German mark/U.S. dollar exchange rates over the period 1976 :12–1984: 9. Our results confirm earlier findings that simple time-series models such as the random walk rank highest in forecast accuracy. The random walk also ranks high in terms of profitability for the German mark, but for the Canadian dollar the profitability rankings are quite different than the accuracy results. For both currencies we find that some models are very profitable in forward speculation, which is evidence against the speculative efficiency hypothesis but may be consistent with the existence of risk premia in foreign exchange markets.

Interest Parity, Cointegration, and the Term Structure in Canada and the United States

In this paper, the author uses a simple but powerful technique to examine two models of the term structure for an open economy. Cointegration tests using two data sets for Canada and the United States support the open economy model based on uncovered interest parity as an explanation for the Canadian term structure of interest rates. Support for the generalized-present-value model is, at best, mixed. This lack of support may be attributable to low test power due to the authors smaller sample or to differences in the periods examined.

Flumazenil in drug overdose : Randomized, placebo-controlled study to assess cost effectiveness

OBJECTIVE To investigate cost effectiveness of administration of flumazenil to patients presenting with suspected acute drug overdose. DESIGN Double-blind, prospective, placebo-controlled randomized study. SETTING University teaching hospital. PATIENTS Forty-three adults presenting with suspected drug overdose and having a Glasgow Coma Scale (GCS) score of <13. Patients with known benzodiazepine/tricyclic ingestion were excluded. INTERVENTIONS Intravenous administration of flumazenil (up to 2 mg) or placebo. MEASUREMENTS AND MAIN RESULTS Individual patient costs were assessed and data aggregated for each treatment group. Major diagnostic and therapeutic interventions were recorded and between group comparisons performed. Clinical response to study drug administration was assessed by obtaining pre- and post-drug GCS scores and observation of the patient for at least 180 mins for signs of resedation. Aggregate cost or number of major diagnostic and therapeutic interventions were not different between groups. Patients randomized to the flumazenil group showed a marked increase in GCS score (7.4 to 11.8) compared with those in the placebo group (8.2 to 8.6). CONCLUSION Use of flumazenil in intentional drug overdose of unknown etiology is not cost effective.

Asset returns and government budgets in a small open economy: Empirical evidence for Canada

Abstract In this paper we test the validity of the Ricardian Equivalence Hypothesis by examining the relationship between the term structure of asset returns and macroeconomic policy variables. Our study extends the work of Plosser (1982, 1987) to the Canadian case, adapting his analysis to the small open economy. The empirical results we obtain are consistent with the debt-neutrality proposition of the Ricardian Equivalence Hypothesis.

Unstable Money Demand and the Monetary Model of the Exchange Rate

In this paper, the authors investigate the importance for the monetary model of exchange rate determination of J. Frankel (1979) of allowing unrestricted dynamics and of accounting for shifts in the demand for money due to financial innovation. Based on estimation and simulation results for the Canada-U.S. bilateral exchange rate over the 1970-85 period, the aut hors find strong evidence in favor of a generalized approach to dynamic specification, but find that the shif t adjustment of official money supply data has only minor implications for the empirical results. Moreover, neither modification is sufficient to generate a monetary model that is well supported by the data.

Debt Management Objectives for a Small Open Economy

In this paper the authors examine the consequences of using cost minimization as the goal of public debt management in a small open economy (SOE). Authorities are assumed to minimize interest costs subject to constraints on their ability to refinance at different maturities, and the information conditioning expectations of future interest rates. A numerical simulation model and a highly disaggregated Canadian data set for the period 1967-87, are used in the analysis. The results presented indicate that, conditional on the SOE assumption, savings do result from following a cost-minimizing strategy. Savings decline as authorities are increasingly constrained in their refinancing choices. However, even the gains in moderately-constrained cases suggest that cost minimization is worthy of serious consideration by authorities. Copyright 1992 by Ohio State University Press.

Reforming fiscal federalism for global competition : a canada-Australia comparison

Despite fairly similar beginnings, the Australian and Canadian federations have evolved quite differently. The goal of this volume is to examine the effects of increasing global competition on fiscal reform.

A Specification Test for Models Estimated by GLS

We develop a new specification test which can easily be applied to regression models that have been estimated by generalized least squares. The test is a variant of the F-test. It is derived for the general case, and also, in more detail, for the commonly encountered case of models with AR(1) errors. Two empirical examples are presented, one of them involving a well-known model of exchange rate determination.