In this paper we consider forecasting daily exchange rate returns using neutral network models (NNs). Based on simulations, we argue (i) that neglected GARCH does not lead to spuriously successful NNs and (ii) that if there is nonlinearity in the conditional mean, NNs will exploit this for...

There has been serious suspicion of a spurious rejection of the unit roots in panel studies of PPP due to the failure to control cross-sectional dependence. This article presents evidence of mean-reversion in industrial country real exchange rates in a set up that accounts for cross-sectional...

Seignorage is the capital gain generated by the creation of reserve money. The literature on seignorage shows that countries with highly developed and deep financial systems generate few resources relative to national income (or government revenue) from seignorage. By contrast, countries with...

This paper analyses the rationale of interventions in foreign exchange markets in Sub-Saharan Africa and reviews exchange rate theory and balance of payments management and its application to African countries. It analyses the liberalization of foreign exchange markets and the impact of these...

The paper investigates the potential effects of the exchange rate regime on the conditional volatilities and international correlations on bond and stock markets. The analysis is essentially empirical. It focuses on the recent experience of the EMS, and examines the behavior of domestic daily...

The paper examines to what extent a high public debt implies high vulnerability of a fixed exchange regime to currency crises. We combine a model of optimal debt repudiation, through inflation-devaluation, with a stochastic balance of payments crisis model.

This paper uses currency option data from the BMF, the Commodities and Futures exchange in Sao Paulo, Brazil, to investigate market expectations on the Brazilian Real-U.S. dollar exchange rate from October 1994 through March 1999. Using options data, we derive implied probability density...