Search Results

You are looking at 1 - 10 of 48 items for :

  • "terms of the probability" x
Clear All
Mr. Fabio Comelli and Mrs. Esther Perez Ruiz
A strand of research documents Chile’s copper dependence hence significant exposure to terms of trade shocks. Copper prices’ sharp decline and forecast uncertainty since the end of the commodity super-cycle has rekindled the debate on Chile’s adjustment capacity to external shocks. Following Malz (2014), this paper builds a time-varying measure of copper price uncertainty using options contracts. VAR analysis shows that the investment response to an uncertainty shock of average magnitude in the sample is strong and persistent: the cumulative fall in investment from trend at a one-year horizon ranges 2–5.8 percentage points; and it takes between 1½ and 2 years for investment to return to its trend level. Empirical ranges depend on alternative definitions for investment, uncertainty, and options’ maturing time.
Mr. Peter Isard

. If condition (1) did not hold, profitable market arbitrage opportunities could be exploited without incurring any risks. Investors also have the opportunity to leave their foreign currency positions uncovered at time t and to wait until time t+l to make arrangements to reconvert into domestic currency at the spot exchange rate s t+l . Unlike f t , the value of s t+l is unknown at time t, and so the attractiveness of holding an uncovered position must be assessed in terms of the probabilities of different outcomes for s t+l . The assumption of UIP postulates

Mr. Peter Isard

. If condition (1) did not hold, profitable market arbitrage opportunities could be exploited without incurring any risks. Investors also have the opportunity to leave their foreign currency positions uncovered at time t and to wait until time t+1 to make arrangements to reconvert into domestic currency at the spot exchange rate s t+1 . Unlike f t , the value of s t+1 is unknown at time t, so the attractiveness of holding an uncovered position must be assessed in terms of the probabilities of different outcomes for s t+1 . The assumption of UIP postulates that

Mr. Peter Isard
This note provides an overview of the uncovered interest parity assumption. It traces the history of the interest parity concept, summarizes evidence on the empirical validity of uncovered interest parity, and discusses the implications for macroeconomic analysis. The uncovered interest parity assumption has been an important building block in multiperiod and continuous time models of open economies, and although its validity is strongly challenged by the empirical evidence, its retention in macroeconomic models is supported on pragmatic grounds, at least for the time being, by the lack of much empirical support for existing models of the exchange risk premium.
International Monetary Fund. European Dept.

median and give a sense of methodological uncertainty. Then, the discussion can be cast in terms of the probability of the estimates to be within a particular range. The Russian economy appears to be close to full capacity, as the output gap is estimated to be (with 30 percent confidence) between 0.2 and 1 in 2013, and -0.6 and 0.2 in 2014. Figure 4. Output Gap in Russia (Percent) Source: IMF staff calculations. 22. The size of revisions is reduced when relying on a wide battery of methods . One advantage of building a probability distribution for the

International Monetary Fund. European Dept.
This Selected Issues paper estimates potential output and the output gap in Russia. Estimating potential output in Russia is difficult because its economy is large and complex, in transition, and dependent on oil. First, Russia presents large territorial and sectoral heterogeneity. Second, structural issues are difficult to estimate in transition economies. Third, the energy sector dominates exports and GDP, making Russia vulnerable to large terms of trade shocks. This paper estimates potential output taking into account these challenges and using a variety of methodologies. The results obtained show that the output gap in Russia exhibits high uncertainty.
Mr. Peter S. Heller

as to whether Dutch Disease constitutes a significant problem for low income countries. Part of the difficulty relates to insufficient experience with aid inflows that would constitute a very substantial share of total GDP (as might emerge from new aid initiatives related to the effort to achieve the Millennium Development Goals). Even if it does exist, Dutch Disease effects must be weighed against the long-term benefits of the associated spending, though these are not easy to measure in terms of the probability of successful outcome and social return. External

Mr. Alejandro D Guerson

simulations. The solution for σ is pinned down by setting a SF probability of