Roberta Colavecchio | University of Hamburg (original) (raw)
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Papers by Roberta Colavecchio
Applied Economics, 2014
ABSTRACT
Applied Economics, 2014
ABSTRACT
We employ a money-based early warning model in order to analyse the risk of a low in ‡ation regim... more We employ a money-based early warning model in order to analyse the risk of a low in ‡ation regime in the euro area, Japan and the US. The model speci…cation allows for three di¤erent in ‡ation regimes: Low, Medium and High in ‡ation, while state transition probabilities vary over time as a function of monetary variables. Using Bayesian techniques, we estimate the model with data from the early 1970s up to the present. Our analysis suggests that the risks of a Low in ‡ation regime in the euro area have been increasing in the course of the last six quarters of the sample; moreover, money growth appears to play a signi…cant role in the assessment of such risks. Evidence for Japan and the US, on the other hand, shows that the inclusion of a monetary indicator variable does not susbstantially change the assessment of the risk of a Low in ‡ation regime in either of the two countries.
We contribute to the empirical debate on the role of money in monetary policy by analysing the fe... more We contribute to the empirical debate on the role of money in monetary policy by analysing the features of the relationship between money growth and in ‡ation in a Bayesian Markov Switching framework for a set of four countries, the US, the UK, the Euro area and Japan, over an estimation period spanning from 1960 to 2012. We …nd that the relationship between money growth and in ‡ation appears to be nonlinear, as our estimation results identify multiple in ‡ation regimes displaying clear and diversi…ed features; moreover, as part of the model´s information set, money growth plays a determinant role in the allocation of regimes. We show that observing monetary developments does (slightly) improve the signal of entering a high in ‡ation regime but the in ‡uence of money on such signal seems to be relevant mainly in the 70s and the early 80s, i.e. in periods featuring exceptionally high rates of in ‡ation. Our evidence con…rms that the relationship between money and in ‡ation appears to be relatively weak during periods featuring low and stable in ‡ation.
China Economic Review, 2008
This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese ... more This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese non-deliverable forward market and seven of its Asia-Pacific counterparts over the period January 1998 to March 2005. To account for the time-variability of conditional correlation, a dynamic correlation structure is included in the volatility model specification. The empirical results demonstrate that the renminbi non-deliverable forward (NDF) has been a driver of various Asian currency markets but that such co-movements exhibit a substantial degree of heterogeneity. As to the determinants of the magnitude of these co-movements, we test the relevance of potential factors and find that it is the degree of real and financial integration, in particular, that exerts the largest influence on volatility transmission.
Rivista italiana degli economisti, 2006
Abstract In this paper we review and estimate Taylor-type reaction functions of the ECB for the f... more Abstract In this paper we review and estimate Taylor-type reaction functions of the ECB for the first five years of EMU. We find economically plausible specifications indicating that the ECB has attached a large and stabilizing weight to inflation but no significant weight to ...
In May 2003 the European Central Bank (ECB) announced a revised monetary policy strategy. Althoug... more In May 2003 the European Central Bank (ECB) announced a revised monetary policy strategy. Although the ECB stressed that the revision would not have implied any fundamental change in their decisions, this remains to be verified empirically. Therefore, this paper tries to answer the question whether the strategy revision induced a structural break in the ECB policy reaction function. To this end, we estimate several Taylor-type reaction functions and conduct a structural change using both recursive parameter estimates and structural change tests. We find that the ECB has been following a stabilizing rule and that there is no clear-cut evidence in favor of a break after the revision, even though some signals of instability show up, particularly in June 2003.
Available at SSRN 1365968, 2008
The UIP theorem has had very little empirical support over the past 25 years. Moreover, it has be... more The UIP theorem has had very little empirical support over the past 25 years. Moreover, it has been shown that high-rate currencies have tended to appreciate and low-rate currencies to depreciate, the reverse of theory. The failure of UIP has been no secret to participants in currency markets, where the carry trade, which is essentially a bet against UIP, has become a very popular investment strategy, underpinned by low exchange rate volatility and persistent interest rate differentials. In this paper, I investigate the role that exchange rate volatility plays in the failure of UIP and hence in the build-up of yen carry trade positions. I specify a Markov-switching version of the UIP equation with time-varying transition probabilities. Empirical evidence indicates the presence of a so-called "carry trade" regime, whose features are compatible with the presence of carry trade activities. Moreover, it is confirmed that both an increase in exchange rate volatility and a decrease in expected interest rate differentials lead to a higher probability of carry trade unwinding. Finally, the inclusion of a time-varying risk premium as additional regressor in the UIP equation leaves the results unchanged, indicating the robustness of the nature of the relationship between exchange rate volatility and carry trades.
Available at SSRN 1512533, 2008
Carry trades are speculative activities which involve simultaneously going short a low-rate curre... more Carry trades are speculative activities which involve simultaneously going short a low-rate currency and long a high-rate currency. They are profitable as long as the gains from interest rate differentials are not offset by exchange rate movements. In this paper I investigate the dynamic relationships amongst exchange rate changes, interest rate spreads and carry trades by means of a Markov-switching vector autoregression model. I use regime-dependent impulse response functions to assess (1) how and to what extent shocks to the interest rate differential and the bilateral exchange rate affect the yen carry trade; (2) the consequences of the unwinding of the yen carry trade on the dollar-yen exchange rate. Empirical evidence indicates the presence of a so-called "carry trade" regime, whose timing is consistent with the yen carry trade episodes identified in the literature. Moreover, only when the system is in the "carry trade" regime a shock in the carry-to-risk ratio has a positive and significant effect on the net short positions in Japanese yen and the depreciation of the yen against the dollar is strong and persistent. Finally, a rising carry-to-risk ratio, which in turn reveals an increase in the attractiveness of carry trades, leads to a significant depreciation of the yen only when the system is in the "carry-trade" regime.
University of Hamburg, …, 2011
We analyze cross-household inflation dispersion in Europe using "fictitious" monthly inflation ra... more We analyze cross-household inflation dispersion in Europe using "fictitious" monthly inflation rates for several household categories (grouped according to income levels, household size, socio-economic status, age) for the period from 1997 to 2008. Our analysis is carried out on a panel of 23 up to 27 household-specific inflation rates per country for 15 countries. In the first part of the paper, we employ time series and related non-stationary panel approaches to shed light on cross-country differences in inflation inequality with respect to the number of driving forces in the panel. In particular, we focus on the degree of persistence of the household-specific inflation rates and their the adjustment behaviour towards the inflation rate of a "representative household". In the second part of the paper, we pool over the full sample of all countries and test if and by how much certain household categories across Europe are more prone to significant inflation differentials and significant differences in the volatility of inflation. Furthermore we search for the presence of clusters with respect to inflation susceptibility. On the national level, we find evidence for the existence of one main driving factor driving the non-stationarity of the panel and evidence for a single co-integration vector. Persistence of deviations, however, is high, and the adjustment speed towards the "representative household" is low. Even if there is no concern about a long-run stable distribution, at least in the short-to medium run deviations tend to last. On the European level, we find small but significant differences (mainly along income levels), we can separate 5 clusters and two main driving forces for the differences in the overall panel. All in all, even if differences are relatively small, they are not negligible and persistent enough to represent a serious matter of debate for economic and social policy. The positions do not necessarily reflect those of other persons in the institutions the authors might be affiliated with. Thanks to Ingrid Grössl and seminar participants at DG-ECFIN for helpful comments. Thanks to Daniel Triet, Artur Tarassow and Phillip Poppitz for outstanding research assistance. All remaining errors are ours.
Journal of Asian Economics, 2007
Mit 1,7 oder 1,8 Prozent wird die deutsche Wirtschaft 2010 und 2011 wachsen. Der Arbeitsmarkt ble... more Mit 1,7 oder 1,8 Prozent wird die deutsche Wirtschaft 2010 und 2011 wachsen. Der Arbeitsmarkt bleibt stabil, ebenso die Preise. Die Haushaltsdefizite sind enorm. Um die Schuldenbremse zu ziehen und den Stabilitätspakt einzuhalten, sind erhebliche Konsolidierungsanstrengungen nötig. Für Steuersenkungen gibt es nicht den geringsten Spielraum -aber an Steuererhöhungen besteht erhöhter Bedarf.
DIW …, 2009
Weltwirtschaft: Erholung auf wackeligem Fundament/Deutschland: Nur langsam aus der Talsohle/Geldp... more Weltwirtschaft: Erholung auf wackeligem Fundament/Deutschland: Nur langsam aus der Talsohle/Geldpolitik und Finanzmärkte: Kreditklemme vorbeugen/Finanzpolitik: Einnahmen steigern und Ausgaben kürzen/Die wichtigsten Daten der Volkswirtschaftlichen ...
Applied Economics, 2014
ABSTRACT
Applied Economics, 2014
ABSTRACT
We employ a money-based early warning model in order to analyse the risk of a low in ‡ation regim... more We employ a money-based early warning model in order to analyse the risk of a low in ‡ation regime in the euro area, Japan and the US. The model speci…cation allows for three di¤erent in ‡ation regimes: Low, Medium and High in ‡ation, while state transition probabilities vary over time as a function of monetary variables. Using Bayesian techniques, we estimate the model with data from the early 1970s up to the present. Our analysis suggests that the risks of a Low in ‡ation regime in the euro area have been increasing in the course of the last six quarters of the sample; moreover, money growth appears to play a signi…cant role in the assessment of such risks. Evidence for Japan and the US, on the other hand, shows that the inclusion of a monetary indicator variable does not susbstantially change the assessment of the risk of a Low in ‡ation regime in either of the two countries.
We contribute to the empirical debate on the role of money in monetary policy by analysing the fe... more We contribute to the empirical debate on the role of money in monetary policy by analysing the features of the relationship between money growth and in ‡ation in a Bayesian Markov Switching framework for a set of four countries, the US, the UK, the Euro area and Japan, over an estimation period spanning from 1960 to 2012. We …nd that the relationship between money growth and in ‡ation appears to be nonlinear, as our estimation results identify multiple in ‡ation regimes displaying clear and diversi…ed features; moreover, as part of the model´s information set, money growth plays a determinant role in the allocation of regimes. We show that observing monetary developments does (slightly) improve the signal of entering a high in ‡ation regime but the in ‡uence of money on such signal seems to be relevant mainly in the 70s and the early 80s, i.e. in periods featuring exceptionally high rates of in ‡ation. Our evidence con…rms that the relationship between money and in ‡ation appears to be relatively weak during periods featuring low and stable in ‡ation.
China Economic Review, 2008
This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese ... more This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese non-deliverable forward market and seven of its Asia-Pacific counterparts over the period January 1998 to March 2005. To account for the time-variability of conditional correlation, a dynamic correlation structure is included in the volatility model specification. The empirical results demonstrate that the renminbi non-deliverable forward (NDF) has been a driver of various Asian currency markets but that such co-movements exhibit a substantial degree of heterogeneity. As to the determinants of the magnitude of these co-movements, we test the relevance of potential factors and find that it is the degree of real and financial integration, in particular, that exerts the largest influence on volatility transmission.
Rivista italiana degli economisti, 2006
Abstract In this paper we review and estimate Taylor-type reaction functions of the ECB for the f... more Abstract In this paper we review and estimate Taylor-type reaction functions of the ECB for the first five years of EMU. We find economically plausible specifications indicating that the ECB has attached a large and stabilizing weight to inflation but no significant weight to ...
In May 2003 the European Central Bank (ECB) announced a revised monetary policy strategy. Althoug... more In May 2003 the European Central Bank (ECB) announced a revised monetary policy strategy. Although the ECB stressed that the revision would not have implied any fundamental change in their decisions, this remains to be verified empirically. Therefore, this paper tries to answer the question whether the strategy revision induced a structural break in the ECB policy reaction function. To this end, we estimate several Taylor-type reaction functions and conduct a structural change using both recursive parameter estimates and structural change tests. We find that the ECB has been following a stabilizing rule and that there is no clear-cut evidence in favor of a break after the revision, even though some signals of instability show up, particularly in June 2003.
Available at SSRN 1365968, 2008
The UIP theorem has had very little empirical support over the past 25 years. Moreover, it has be... more The UIP theorem has had very little empirical support over the past 25 years. Moreover, it has been shown that high-rate currencies have tended to appreciate and low-rate currencies to depreciate, the reverse of theory. The failure of UIP has been no secret to participants in currency markets, where the carry trade, which is essentially a bet against UIP, has become a very popular investment strategy, underpinned by low exchange rate volatility and persistent interest rate differentials. In this paper, I investigate the role that exchange rate volatility plays in the failure of UIP and hence in the build-up of yen carry trade positions. I specify a Markov-switching version of the UIP equation with time-varying transition probabilities. Empirical evidence indicates the presence of a so-called "carry trade" regime, whose features are compatible with the presence of carry trade activities. Moreover, it is confirmed that both an increase in exchange rate volatility and a decrease in expected interest rate differentials lead to a higher probability of carry trade unwinding. Finally, the inclusion of a time-varying risk premium as additional regressor in the UIP equation leaves the results unchanged, indicating the robustness of the nature of the relationship between exchange rate volatility and carry trades.
Available at SSRN 1512533, 2008
Carry trades are speculative activities which involve simultaneously going short a low-rate curre... more Carry trades are speculative activities which involve simultaneously going short a low-rate currency and long a high-rate currency. They are profitable as long as the gains from interest rate differentials are not offset by exchange rate movements. In this paper I investigate the dynamic relationships amongst exchange rate changes, interest rate spreads and carry trades by means of a Markov-switching vector autoregression model. I use regime-dependent impulse response functions to assess (1) how and to what extent shocks to the interest rate differential and the bilateral exchange rate affect the yen carry trade; (2) the consequences of the unwinding of the yen carry trade on the dollar-yen exchange rate. Empirical evidence indicates the presence of a so-called "carry trade" regime, whose timing is consistent with the yen carry trade episodes identified in the literature. Moreover, only when the system is in the "carry trade" regime a shock in the carry-to-risk ratio has a positive and significant effect on the net short positions in Japanese yen and the depreciation of the yen against the dollar is strong and persistent. Finally, a rising carry-to-risk ratio, which in turn reveals an increase in the attractiveness of carry trades, leads to a significant depreciation of the yen only when the system is in the "carry-trade" regime.
University of Hamburg, …, 2011
We analyze cross-household inflation dispersion in Europe using "fictitious" monthly inflation ra... more We analyze cross-household inflation dispersion in Europe using "fictitious" monthly inflation rates for several household categories (grouped according to income levels, household size, socio-economic status, age) for the period from 1997 to 2008. Our analysis is carried out on a panel of 23 up to 27 household-specific inflation rates per country for 15 countries. In the first part of the paper, we employ time series and related non-stationary panel approaches to shed light on cross-country differences in inflation inequality with respect to the number of driving forces in the panel. In particular, we focus on the degree of persistence of the household-specific inflation rates and their the adjustment behaviour towards the inflation rate of a "representative household". In the second part of the paper, we pool over the full sample of all countries and test if and by how much certain household categories across Europe are more prone to significant inflation differentials and significant differences in the volatility of inflation. Furthermore we search for the presence of clusters with respect to inflation susceptibility. On the national level, we find evidence for the existence of one main driving factor driving the non-stationarity of the panel and evidence for a single co-integration vector. Persistence of deviations, however, is high, and the adjustment speed towards the "representative household" is low. Even if there is no concern about a long-run stable distribution, at least in the short-to medium run deviations tend to last. On the European level, we find small but significant differences (mainly along income levels), we can separate 5 clusters and two main driving forces for the differences in the overall panel. All in all, even if differences are relatively small, they are not negligible and persistent enough to represent a serious matter of debate for economic and social policy. The positions do not necessarily reflect those of other persons in the institutions the authors might be affiliated with. Thanks to Ingrid Grössl and seminar participants at DG-ECFIN for helpful comments. Thanks to Daniel Triet, Artur Tarassow and Phillip Poppitz for outstanding research assistance. All remaining errors are ours.
Journal of Asian Economics, 2007
Mit 1,7 oder 1,8 Prozent wird die deutsche Wirtschaft 2010 und 2011 wachsen. Der Arbeitsmarkt ble... more Mit 1,7 oder 1,8 Prozent wird die deutsche Wirtschaft 2010 und 2011 wachsen. Der Arbeitsmarkt bleibt stabil, ebenso die Preise. Die Haushaltsdefizite sind enorm. Um die Schuldenbremse zu ziehen und den Stabilitätspakt einzuhalten, sind erhebliche Konsolidierungsanstrengungen nötig. Für Steuersenkungen gibt es nicht den geringsten Spielraum -aber an Steuererhöhungen besteht erhöhter Bedarf.
DIW …, 2009
Weltwirtschaft: Erholung auf wackeligem Fundament/Deutschland: Nur langsam aus der Talsohle/Geldp... more Weltwirtschaft: Erholung auf wackeligem Fundament/Deutschland: Nur langsam aus der Talsohle/Geldpolitik und Finanzmärkte: Kreditklemme vorbeugen/Finanzpolitik: Einnahmen steigern und Ausgaben kürzen/Die wichtigsten Daten der Volkswirtschaftlichen ...