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Research Interests: Economics, Monetary Economics, Foreign Direct Investment, Applied Economics, Kalman Filter, and 14 moreNegative Affect, Random Walk, Money and Finance, Rational Expectations, Rational Expectation, Exchange rate, Currency, Taylor rule, Positive Affect, Output Gap, GDP Growth, potential output, Output Growth, and Finance and Investment Banking
In August 1993 the European Monetary System (EMS) collapsed due to speculative attacks on almost all participating currencies. The relatively small fluctuation margins of ±2.25% for the bilateral rates were (at least temporarily) enlarged... more
In August 1993 the European Monetary System (EMS) collapsed due to speculative attacks on almost all participating currencies. The relatively small fluctuation margins of ±2.25% for the bilateral rates were (at least temporarily) enlarged to 15%, except for the Dutch guilder/Deutschmark (DM) rate.
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Research Interests: Economics, Econometrics, Euro Area, Risk Aversion, Social Science Research Network, and 14 moreStochastic Volatility, Pension, Interest Rate, Indexation, Extended Kalman Filter, Yield Curve, Term Structure, Pension Fund, Solvency, Short Rate Model, Discrete time, Structural Break, Factor model, and Term Structure Models
Research Interests: Materials Science, Economics, Monetary Economics, Kalman Filter, Portfolio, and 15 moreNegative Affect, Social Science Research Network, Rational Expectations, Rational Expectation, Exchange rate, Taylor rule, Positive Affect, Output Gap, Growth rate, E, C, F, Current Account, potential output, and Output Growth
In this paper, the monetary transmission mechanism within the European Monetary Union is investigated. The impulse response functions and forecast error variance decompositions of a structural vector error correction model (SVECM) are... more
In this paper, the monetary transmission mechanism within the European Monetary Union is investigated. The impulse response functions and forecast error variance decompositions of a structural vector error correction model (SVECM) are compared with those of a New Keynesian theoretical model. The identifying restrictions of the SVECM are directly derived from the theoretical model. Two permanent shocks are identified, one having only nominal, and one having only real effects. The three transitory shocks comprise a short term interest rate shock, an aggregate demand shock and a money demand shock. The main conclusions are that permanently reducing the inflation objective depresses output in the first year, but has no real effects in the long run. Regarding output variability, the results indicate that aggregate demand shocks are most important during the first year, after which aggregate supply shocks dominate.
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Research Interests: Mathematics, Economics, Econometrics, Econometric Theory, Parameter estimation, and 13 moreImpulse response, Vector Autoregression, Cointegration, Moving average, Variance decomposition, Interest Rate, Vector Error Correction Model, Confidence Interval, Impulse Response Function, Structural model, Autoregressive model, Cointegration Analysis, and Asymptotic distribution
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The measurement of risks associated with options is a complex business for a number of reasons. Firstly, option prices tend to be influenced in a non-linear manner by several variables. Unanticipated changes in the price or volatility of... more
The measurement of risks associated with options is a complex business for a number of reasons. Firstly, option prices tend to be influenced in a non-linear manner by several variables. Unanticipated changes in the price or volatility of the underlying security or changes in interest rates are just some examples of these factors affecting risk measurement. Another reason why option-related risks are difficult to measure is that such risks should be examined in relation to other positions. The nature of the risks involved in options are clarified in order to help assess whether the various capital adequacy requirements proposed are reasonable. Four different bank capital adequacy schemes are examined.
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One of the major puzzles of the economic profession is the pricing of exchange rates. Despite the development of numerous theories, the actual behaviour of exchange rates, especially in the short run, is not well understood. This article... more
One of the major puzzles of the economic profession is the pricing of exchange rates. Despite the development of numerous theories, the actual behaviour of exchange rates, especially in the short run, is not well understood. This article evaluates several popular exchange rate theories and presents new results of a model developed at de Nederlandsche Bank. This model gives a prominent role to growth differentials. An application to the eurodollar shows these can explain the depreciation of the euro only partly. Sentiment seems to be important as well.
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In the nineties, the number of currency crises has been high, both in the industrial world and among emerging countries. An important characteristic of many of these crises is that they started in one country but very soon affected others... more
In the nineties, the number of currency crises has been high, both in the industrial world and among emerging countries. An important characteristic of many of these crises is that they started in one country but very soon affected others as well. Currency crises seemed to be contagious. In this article, it is investigated whether the interdependence of capital flows to Asian countries was affected by the crisis in Thailand. It will be shown that the transmission of capital flows to Indonesia and Korea was affected by the Asian crisis, whereas for the Philippines no significant change in the interdependence could be detected.
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ABSTRACT In this paper, it is investigated to what extent optimal investment policy by Dutch pension funds is affected by changes in regulation. It turns out that a complete market valuation method increases the cost of the defined... more
ABSTRACT In this paper, it is investigated to what extent optimal investment policy by Dutch pension funds is affected by changes in regulation. It turns out that a complete market valuation method increases the cost of the defined benefit pension relative to a fixed discount rate method, as high pension premiums are to be payed exactly when expected future returns are the lowest. In practice, this timing problem does not seem to be severe for Dutch pension funds as solvency requirements are only applied to guaranteed pension rights, whereas a major part of pension benefits (indexation) is conditional. Moreover, a fixed interest rate may still be used to calculate pension premiums. Regarding the asset mix, the optimal duration of bonds in portfolio seems higher than currently observed, both under market valuation and under a fixed discount rate method. The new regulatory rules only slightly reduce the attractiveness of equity investment.
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Research Interests: Economics, Monetary Economics, Econometrics, Demand for Money, European Economic Integration, and 12 moreImpulse response, Rational Expectation, Taylor rule, First Year, European Monetary Union, Variance decomposition, Inflation Cosmology, Theoretical Model, Vector Error Correction Model, Impulse Response Function, Aggregate Demand, and Money demand
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This study investigates the consequences of dynamics in the term structure of Dutch interest rates for the accurateness of value-at-risk models. Therefore, value-at-risk measures are calculated using historical simulation,... more
This study investigates the consequences of dynamics in the term structure of Dutch interest rates for the accurateness of value-at-risk models. Therefore, value-at-risk measures are calculated using historical simulation, variance-covariance and Monte Carlo simulation methods. For a ten days holding period, the best results were obtained for a combined variance-covariance Monte Carlo method using a term structure model with a normal distribution and GARCH specification. Term structure models with a t-distribution or with cointegration performed much worse.
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ABSTRACT This note argues that the narrow exchange rate margins acted as a target for self-fulfilling speculative attacks leading to the "collapse" of the European Monetary System in August 1993. Exchange rate and... more
ABSTRACT This note argues that the narrow exchange rate margins acted as a target for self-fulfilling speculative attacks leading to the "collapse" of the European Monetary System in August 1993. Exchange rate and interest rate behaviour after the collapse suggests that, by not immediately using their regained monetary freedom, authorities have been able to signal their commitment to stable exchange rates and regained much of their credibility.
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Research Interests: Materials Science, Economics, Monetary Economics, Foreign Direct Investment, Kalman Filter, and 15 morePortfolio, Negative Affect, Social Science Research Network, Rational Expectations, Rational Expectation, Exchange rate, Taylor rule, Positive Affect, Output Gap, Growth rate, E, C, F, potential output, and Output Growth
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weiminx.htm Changes in nominal interest rates must be due to either movements in real interest rates, expected inflation, or the inflation risk premium. We develop a term structure model with regime switches, time-varying prices of risk,... more
weiminx.htm Changes in nominal interest rates must be due to either movements in real interest rates, expected inflation, or the inflation risk premium. We develop a term structure model with regime switches, time-varying prices of risk, and inflation to identify these components of the nominal yield curve. We find that the unconditional real rate curve in the U.S. is fairly flat
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Defined benefit pension plans and regulation