Long-horizon predictability is not a myth. We propose a new analytical standard error for predictive regressions that does not impose the null hypothesis that returns are unpredictable and exhibits substantial power gains relative to popular tests. Deriving the covariance matrix under the...

I propose a friction measure of bond round-trip liquidity costs that is robust to outliers and accounts for the idiosyncratic information behind trading decisions. Particularly effective with investment-grade bonds, the proposed measure displays properties consistent with the credit risk puzzle....

The paper uses an event study methodology to investigate which and how macroeconomic announcements affect commodity prices. Results show that gold is unique among commodities, with prices reacting to specific scheduled announcements in the United States and the Euro area (such as indicators of...

This paper presents a market-based framework for pricing Fund liquidity assistance that accounts for the credit risk and the insurance benefit involved in such operations. It is based on the isomorphic correspondence between Fund liquidity and common stock put options. Although only...

Most treasuries around the world sell their securities at auctions either directly or indirectly through an agent, usually the central bank. Although they can control both the rules and the timing of the auction, they may not be able to control the information and valuations of bidders. The...

Growth and inflation in Turkey have been volatile over the last two decades. It would, therefore, be useful to identify indicators that anticipate economic conditions and inflation. This paper investigates the predictive performance of economic indicators for inflation and real output growth in...

In light of the strong correlation between exchange rate movements and domestic prices in Turkey, it is important to assess the impact of the exchange rate on domestic prices, in particular as Turkey moves to an inflation targeting regime. This paper uses a recursive vector autoregression model...

This paper presents an empirical measure of disinflation credibility and discusses its evolution in Turkey since the 2001 crisis. The results indicate that credibility has improved markedly over this period, boding well for the future of disinflation in Turkey

Market determined interest rates are important indicators for monetary policy since they can give a measure of market expectations of future policy. Although previous work in the Bank has estimated yield curves from gilt prices and found that these give useful information about long-term...

This paper studies how stock market sentiment impacts corporate bond valuations. Using bond transactions from the Trading and Compliance Engine (TRACE), we find that sentiment is negatively related to bond yield spreads, with the impact being stronger after the onset of the recent credit crisis....