International macroe.. - Free

More documents

Recommendations

Info

192CHAPTER 6. FOREIGN EXCHANGE MARKET EFFICIENCYThe updated probabilities p 0t =P(δ 0 |∆f t ,...,∆f 1 ) are called the posteriorprobabilities. An equivalent way to obtain the posterior probabilitiesisp 0,1 =p 0,2 =.p 0t =p 0 P(∆f 1 |δ 0 )p 0 P(∆f 1 |δ 0 )+p 1 P(∆f 1 |δ 1 ) ,p 0,1 P(∆f 2 |δ 0 )p 0,1 P(∆f 2 |δ 0 )+p 1,1 P(∆f 2 |δ 1 ) ,p 0,t−1 P(∆f t |δ 0 )p 0,t−1 P(∆f t |δ 0 )+p 1,t−1 P(∆f t |δ 1 ) .How long is the learning period? To start things off, you need to specifyan initial prior probability, p 0 =P(δ = δ 0 ). 11 Let δ 0 =0, δ 1 =1,andlet v have a discrete probability distribution with the probabilities,P(v = −5) =66 3 P(v = −1) =11 2 P(v =3)=663P(v = −4) =66 3 P(v =0)=11 2 P(v =4)=663P(v = −3) =66 3 P(v = 1) =11 2 P(v =5)=663P(v = −2) =11 1 P(v =2)=111We generate the distribution of posterior probabilities, learningtimes, and forecast error autocorrelations by simulating the economy2000 times. Figure 6.3 shows the median of the posterior probabilitydistribution when the initial prior is 0.95. The distribution of learningtimes and autocorrelations is not sensitive to the initial prior. Thelearning time distribution is quite skewed with the 5, 50, and 95 percentilesof the distribution of learning times being 1, 14, and 66 periodsrespectively. Judging from the median of the distribution, Bayesianupdaters quickly learn about the true economy. Since the forecast errorsare serially correlated only during the learning period, we calculatethe autocorrelation of the forecast errors only during the learning period.The median autocorrelations at lags 1 through 4 of the forecast11 Lewis’s approach is to assume that learning is complete by some date T>t 0 inthe future at which time p 0,T = 0. Having pinned down the endpoint, she can workbackwards to Þnd the implied value of p 0 that is consistent with learning havingbeen completed by T .
6.6. NOISE-TRADERS 19310.90.80.70.60.50.40.30.20.101 2 3 4 5 6 7 8 9 10 11 12 13 14 15PeriodFigure 6.3: Median posterior probabilities of δ = δ 0 when truth is δ = δ 1with initial prior of 0.95.errors computed from the Þrst 14 periods are -0.130, -0.114, -0.098, and-0.078.This simple example serves as an introduction to rational learningin peso-problems. However, the rapid rate at which learning takes placesuggests that a single regime switch is insufficient to explain systematicforecast errors observed over long periods of time as might be the case inforeign exchange rates. If the peso problem is to provide a satisfactoryexplanation of the data a model with richer dynamics with recurrentregime shifts, as outlined in Evans [47], is needed.⇐(124)6.6 Noise-TradersWe now consider the possibility that some market participants are notfully rational. Mark and Wu [102] present a model in which a mixture
Page 2:
To Shirley, Laurie, and Leslii
Page 8 and 9:
CONTENTSvii11 Balance of Payments C
Page 10 and 11:
2 CHAPTER 1. SOME INSTITUTIONAL BAC
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
10 CHAPTER 1. SOME INSTITUTIONAL BA
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
24 CHAPTER 2. SOME USEFUL TIME-SERI
Page 34 and 35:
Page 36 and 37:
Page 38 and 39:
Page 40 and 41:
Page 42 and 43:
Page 44 and 45:
Page 46 and 47:
Page 48 and 49:
Page 50 and 51:
Page 52 and 53:
Page 54 and 55:
Page 56 and 57:
Page 58 and 59:
Page 60 and 61:
Page 62 and 63:
Page 64 and 65:
Page 66 and 67:
Page 68 and 69:
Page 70 and 71:
Page 72 and 73:
Page 74 and 75:
Page 76 and 77:
Page 78 and 79:
Page 80 and 81:
Page 82 and 83:
Page 84 and 85:
Page 86 and 87:
Page 88 and 89:
80 CHAPTER 3. THE MONETARY MODEL3.1
Page 90 and 91:
82 CHAPTER 3. THE MONETARY MODEL604
Page 92 and 93:
84 CHAPTER 3. THE MONETARY MODEL0 <
Page 94 and 95:
86 CHAPTER 3. THE MONETARY MODELexc
Page 96 and 97:
Page 98 and 99:
90 CHAPTER 3. THE MONETARY MODELThe
Page 100 and 101:
92 CHAPTER 3. THE MONETARY MODEL=
Page 102 and 103:
94 CHAPTER 3. THE MONETARY MODELSub
Page 104 and 105:
96 CHAPTER 3. THE MONETARY MODELTab
Page 106 and 107:
98 CHAPTER 3. THE MONETARY MODELthe
Page 108 and 109:
Page 110 and 111:
102 CHAPTER 3. THE MONETARY MODELMo
Page 112 and 113:
104 CHAPTER 3. THE MONETARY MODELwh
Page 114 and 115:
106 CHAPTER 4. THE LUCAS MODEL(76)
Page 116 and 117:
108 CHAPTER 4. THE LUCAS MODELsubje
Page 118 and 119:
110 CHAPTER 4. THE LUCAS MODELeach
Page 120 and 121:
112 CHAPTER 4. THE LUCAS MODELcompl
Page 122 and 123:
114 CHAPTER 4. THE LUCAS MODELdenot
Page 124 and 125:
116 CHAPTER 4. THE LUCAS MODELc yt
Page 126 and 127:
118 CHAPTER 4. THE LUCAS MODELIn eq
Page 128 and 129:
120 CHAPTER 4. THE LUCAS MODELn t =
Page 130 and 131:
122 CHAPTER 4. THE LUCAS MODELRearr
Page 132 and 133:
124 CHAPTER 4. THE LUCAS MODELTable
Page 134 and 135:
126 CHAPTER 4. THE LUCAS MODEL4.5 C
Page 136 and 137:
128 CHAPTER 4. THE LUCAS MODELTable
Page 138 and 139:
130 CHAPTER 4. THE LUCAS MODELdisco
Page 140 and 141:
132 CHAPTER 4. THE LUCAS MODEL1.02A
Page 142 and 143:
134 CHAPTER 4. THE LUCAS MODELAppen
Page 144 and 145:
136 CHAPTER 4. THE LUCAS MODELProbl
Page 146 and 147:
138 CHAPTER 5. INTERNATIONAL REAL B
Page 148 and 149:
140 CHAPTER 5. INTERNATIONAL REAL B
Page 150 and 151: 142 CHAPTER 5. INTERNATIONAL REAL B
Page 170 and 171: 162CHAPTER 6. FOREIGN EXCHANGE MARK
Page 216 and 217: 208 CHAPTER 7. THE REAL EXCHANGE RA
Page 238 and 239: 230 CHAPTER 8. THE MUNDELL-FLEMING
Page 250 and 251:
242 CHAPTER 8. THE MUNDELL-FLEMING
Page 252 and 253:
Page 254 and 255:
Page 256 and 257:
Page 258 and 259:
Page 260 and 261:
Page 262 and 263:
Page 264 and 265:
Page 266 and 267:
Page 268 and 269:
Page 270 and 271:
Page 272 and 273:
264CHAPTER 9. THE NEW INTERNATIONAL
Page 274 and 275:
Page 276 and 277:
Page 278 and 279:
Page 280 and 281:
Page 282 and 283:
Page 284 and 285:
Page 286 and 287:
Page 288 and 289:
Page 290 and 291:
Page 292 and 293:
Page 294 and 295:
Page 296 and 297:
Page 298 and 299:
Page 300 and 301:
Page 302 and 303:
Page 304 and 305:
Page 306 and 307:
Page 308 and 309:
Page 310 and 311:
Page 312 and 313:
Page 314 and 315:
Page 316 and 317:
308 CHAPTER 10. TARGET-ZONE MODELSa
Page 318 and 319:
310 CHAPTER 10. TARGET-ZONE MODELSt
Page 320 and 321:
312 CHAPTER 10. TARGET-ZONE MODELSC
Page 322 and 323:
314 CHAPTER 10. TARGET-ZONE MODELSl
Page 324 and 325:
316 CHAPTER 10. TARGET-ZONE MODELST
Page 326 and 327:
318 CHAPTER 10. TARGET-ZONE MODELSa
Page 328 and 329:
320 CHAPTER 10. TARGET-ZONE MODELSM
Page 330 and 331:
322 CHAPTER 10. TARGET-ZONE MODELSt
Page 332 and 333:
324 CHAPTER 10. TARGET-ZONE MODELS
Page 334 and 335:
326 CHAPTER 10. TARGET-ZONE MODELS
Page 336 and 337:
328 CHAPTER 11. BALANCE OF PAYMENTS
Page 338 and 339:
Page 340 and 341:
Page 342 and 343:
Page 344 and 345:
Page 346 and 347:
Page 348 and 349:
Page 350 and 351:
Page 352 and 353:
Page 354 and 355:
Page 356 and 357:
Page 358 and 359:
Page 360 and 361:
Page 362 and 363:
Page 364 and 365:
Page 366 and 367:
358 AUTHOR INDEXFama, E.F., 161, 16
Page 368 and 369:
Subject IndexAAbsorption, 16, 230AI
Page 370 and 371:
362 SUBJECT INDEXEfficient capital
Page 372 and 373:
364 SUBJECT INDEXMethod of undeterm
Page 374 and 375:
366 SUBJECT INDEXRisk neutrality, 9
Page 376:
368 SUBJECT INDEXImpulse response a
show all

International macroe.. - Free

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?