Data for final term project (in form of Excel) 丁淑妤 10292026

Data Resources:
Economic Growth : http://www.theglobaleconomy.com/indicators_data_export.php

FDI: https://research.stlouisfed.org/fred2/series/BPFADI03IDA637N/downloaddata

GFCF: http://www.indexmundi.com/facts/indonesia/gross-fixed-capital-formation

INFLATION: https://research.stlouisfed.org/fred2/series/FPCPITOTLZGIDN/downloaddata

NOMINAL EXC: http://www.ers.usda.gov/datafiles/Agricultural_Exchange_Rate_Data_Set/Country_Spreadsheets/nominalannualcountryexchangerates_1_.xls


All the Data can be downloaded in this link
https://drive.google.com/folderview?id=0B2ADo8y1yHFCV2RqbjN6aXFUMmc&usp=sharing

Exchange Rate and Economic Growth in Pakistan (1975-2011)

Author  : Arslan Ahmad, Najid Ahmad, Sharafat Ali

Source  : Journal of Basic and Applied Scientific Research, 3(8)740-746, 2013

Publication Date: September 2013

Abstract:
This paper investigates the impact of inflation, nominal exchange rate, FDI and capital stock on economic growth of Pakistan by using time series data for the period of 1975-2011. Augmented Dickey Fuller (ADF) test is applied to check the stationary of variables. All variables found stationary at level. So Ordinary Least Squares method is applied to check the relation between dependent variable (GDP) and independent variables (Exchange rate, FDI, capital stock). The results of OLS show that inflation and exchange rate has negative and significant affect economic growth of Pakistan. Capital stock (GFCF) does not significantly affect economic growth. Foreign direct investment has positive and significant effect on economic growth of Pakistan. Our model is free from hetroskedasticity and autocorrelation with satisfactory functional form that suggests the stability of the model. The CUSUM and CUSUMSQ are showing that the model is structurally stable within the 5% of critical bounds.

Keywords: Economic Growth, FDI, Inflation, Pakistan

Publication Type: Journal Article
(https://mpra.ub.uni-muenchen.de/49395/1/MPRA_paper_49395.pdf)

ISSN: 2090-4304

Authors’s Email: Email: najid_2iqbal@yahoo.com

國際金融學習記事 (Learning Notes) 丁淑妤 10292026

2015/10/19

Tools (methods) for econometric modeling in Int. Finance

1.       Classical assumption on residuals of OLS (Gauss – Markov theorem)
à to ensure the randomness of OLS residuals
à in multiple regression: X and Z should be independent

2.       Testing classical assumptions on residuals
à   E(u_t) = 0 (ignored if there is an intercept in OLS)

è Cov(u_t,u_t-j) = 0  for j¹1 (no autocorrelation in u_t)

è Var(u_t) = s_u for all t (Homoskedasticity)

è Jarque-Bera (JB) test (Test if the residual is normally distributed)

3.       Doornick-Hansen test (for multivariate normality)

4.       Statistical significance testing P-values
- Choose the certain a (level of significance), for example 5%
- If p-value > a, fail to reject Ho
- If p-value  < a, reject Ho

5.       Testing for no-autocorrelation (Q Tests)
à H0: there is no autocorrelation among residuals (u_t) up to lag p
       -   If reject H0, there exists autocorrelation among u_t and u_t-j 

-   If fail to reject H0,  no autocorrelation among u_t and u_t-j

6.       Testing for homeskedasticity (Q² tests)
à H0: there is no ARCH-type heteroscedasticity among residuals (u_t) up to lag p
       -  If reject H0,  there exists (ARCH-type) heteroskedasticity among u_t
       -  If fail to reject H0,  homeskedasticity, no (ARCH-type) heteroskedasticity among u_t

7.       JB Normality test on residuals
ex: Jarque-bera test = 0.310095, with P-Value 0.856374 we can say that P-Value of JB test suggest failure to reject HO. It means that “residuals are normally distributed”

Notes:
* Check OLS residuals before estimating the result of OLS in order to get BLUE estimates
BLUE means: Best, Liniear, Unbiased, Estimators.
* make sure that there are no autocorrelation, homoscesadticity, in small sample (N<30)
* Implication of the autocorrelation in residuals à Estimated coefficients are not BLUE
* Possible rescues for problems in OLS diagnosis
   - Re-estimate OLS with “robut standard errors”
   - model/Time sereies/AR(1)
   - Re-specify the model

News Related to International Finance:

1.       Discordant Financial Messages From China Spur Global Unease
(http://www.nytimes.com/2015/10/20/business/international/discordant-financial-messages-from-china-spur-global-unease.html?_r=0)

2.       Federal Reserve Beige Book Reveals Strong US Dollar Is Restraining Manufacturing Activity

(http://www.ibtimes.com/federal-reserve-beige-book-reveals-strong-us-dollar-restraining-manufacturing-2141667)

國際金融學習記事 丁淑妤 10292026

2015/10/12

Bilateral Versus Trade Weighted Exchange Rate

-          

     The effective or trade-weighted exchange rate of currency A is a weighted average of its exchange rate against currencies A,B,C,D,E...

-          

      Buying versus selling rate

Micro-structure study à bid/ask rate

Market mecanism à the use of money exchange which used by buyers or sellers with open system value to produce the best goods or service.

*Floating rates à exchange rate at any moment determined by net demand for currency
*Fix rate à monetary authority intervenes by buying up excess supply or satisfying excess demand
*Manage floating
*Balance of payment ; current account, capital account, and resrve change
*Exchange rate since world war, consist of:
                - Bretton woods (1944-68)
                - Breakdown (1968-73)
                - Floating era (1973 onward)
                - EMU (1998 onward)
                - Increasing importance of Asian exchange rates 2000 onward

Speculative efficiency

*rethink efficiency I,II,III
*rational expectation hypothesis
*simons

Level K thinking

OLS for tool (method) in econometric
OLS is linear approximation of relationships among variables y = B1 + B2 X

3 Kinds of testing exists in OLS:
- checking validness of OLS “healthy conditions”
- testing the underpinning theory
- testing for statistical significance

News related to international finance :

1.  Fed policymakers downplay divisions on U.S. rate hike

(http://finance.yahoo.com/news/fed-policymakers-downplay-divisions-u-022532684.html)

2. China’s State Sector: Bigger Than Ever

(http://www.bloomberg.com/news/articles/2015-10-15/china-s-state-sector-bigger-than-ever)

國際金融學習記事 丁淑妤

2014.10.20

Monetary approach

Determination of ex. Rate

Free capital market
1) One country model:

        The formulation:

PPP : P = Sp*

M = K= M^S = M^d = kpr replace ‧p=sp

→   S = M^S/ k‧p*‧y

2) Two country model

S = domestic $/foreign $)

     p* = rest of the world

     S^~: Effective exchange rate

The formulation :

 Domestic :  M^S = M^d = k*p*y

Foreign :   M^S*= M^d* = k* ‧ p*‧ y*

     Combine :  PPP :  P = sp*

               S =p*/p = (MS /MS*) / {(k /k*)‧(y/y*)}

3) Function : relationship

     y = f(x)

     observe x ↑ y ↑

 y (↓)

ex: S= M^Si/kp*y

   S= f(ms,k,p*y)

 Functional Forms:

    1. Spec Form        

    2. Unknown Form

ex: Demand Func

D = f(p, .....) 

4) Non-linearity

l   in independent variables:

  y = b0 + b1x + b2x²+ c1x + c2x² + ····· +d1x‧x2 ← (interaction terms)

l   in parameters:

  y = b0 + g(z)x1 + g(z)x2 + ·····

5) Rate of Change 

 Growth Rate : yt，gt = dlny= ΔYt / Yt

(rate of ) return

               UIRP : Uncovered Interest Rate Parity

Denotionsit : t  domestic interest rate

it* : t foreign  interest rate

st :  Spot rate in t

st+1 :  Spot rate ahead of 1-period

UIP : (1 + it ) = (1 + it*) ‧St+1/St

$ 1 → (1 + it)    it -利率

     6) Investment strategies

  1. → it(1+i)

  2.USD   → 1 + it*

 Strategy 1:  (1 + it) ／per NTD

            2: 1/St‧(1 + it*)‧St+1 per/ NTD

International finance news :
1.Toughest Bank Rules Underpin Sweden Stress Test Supremacy (2014.10.27)
2. Delay of Shanghai-HK connect scheme casts doubt on inclusion of "A" shares in MSCI EM index - exec (2014.10.27)

2014.10.13

1.1)     S=Spot exchange rate             

E=1/S(USD/NTD)

S ↑ => depreciation)

S ↓ =>appreciation)

(under frexible ex market)

 RMB         

-          Revaluation

-          Evaluation

1.2)     Markets

l   Spot market

l   Future market

l   Forward market

l   Options

l   SWAP

1.3)     Focus of international finance

l   Exchange rate view (short run)

l   Macro- econ impact rate determination (long run)

l   Micro portfolio model

l   Financial crisis

l   Integration

1.4)     Why capital flows over the world?

1.5)     Exchange rate 

PPP= p= sp*

M^d = kpy

 P=sp*  => S = s/ p*

    M^s = M^d =kpy

     M = k(sp*)y

     M = ksp*y

     S= M^s / (kp*y)

1.6)     Monetany approach to ex rate determination 

       M^s = M^d =k.p.y => P = M^s/(ky)

     M^s* = M^d* =k*.p*.y* => p* = M^s*/(k*.y*)

            Assumption: P = sp*

            S= p/p*=( M^s/ky)/ ( M^s*/k*y*) =( M^s/ M^s*)/((k/k*).(y/y*)

International Finance News
1. Libor Scandal: Deutsche Bank 'Braces Itself' For $1bn US And UK Fine (2014.10.24)
2. Winners and losers in Europe's bank stress test (2014.10.26)

2014.10.06

1. Economy economic

2.  Low of one price (LOP)

3.  Exchange rate determination

4.  Big   data

5.  Coursera

6.  Flipped Classroom

International finance news :

1. Normalisation of US rate structure positive for India’s economic outlook: Glenn Maguire, ANZ (2014.08.07)

2. BOC's US$6.5bn AT1 leads the way (2014.10.18)

2014.09.29

國際金融學習記事-阮霸安海

2013.1.07
UK economy 'contracted in fourth quarter'
American Express cuts 5,400 jobs
Greece unemployment hits highest rate in European Union

2012.12.31

US unemployment rate holds steady in December at 7.8%Germany retail sales higher in 2012

Swiss bank Wegelin to close after US tax evasion fine

2012.12.24

A Better Way to Rank NFL Teams, From a New Zealander

Interest Rates and Jobs—the Fed Watches Unemployment

Outside the Beltway, the Good News on Debt

2012.12.14
Chapter 9 共整合與誤差修正模型

　　　　   Engle-Granger cointegration test
　　　　   Johansen cointegration test
　　　　   Vector error correction model
                   Gretl 軟體 : Johansen cointegration test

Europe Could Benefit From Less, Not More, Commonality

Interest Rates Near Zero Put Savers in a Bind

Afraid of Unemployment, Americans Cling to Their Jobs

2012.12.10
Chapter 9 : 共整合與誤差修正模型

　            整合變數的定義和整合變數加總性質

                共整合定義和其經濟意義與長期均衡

                誤差修正模型

Asia stocks wane as US budget talks drag on

In China, a Real Estate Bust Threatens Investment Trusts

Italy's Jobs-and-Pollution Showdown

2012.12.03
1. 單根的定義
2. DF和ADF的單根檢定，但根檢定殘差
3. 使用grelt來單根檢定
UK economic contraction 'less than thought' for 2012
Australia's central bank cuts main interest rate to 3%
US charges 'Big Four' accountants over China

2012.11.26
1. 非定態時間序列模型

　- 辨別時間趨勢與隨機趨勢, Random Walk 模型的種類,單根檢定
2. 複習 DGP、White noise、定態條件
3. 補充：特性根與特性方程式證明

Eurozone unemployment rate hits new high in October

India's economic growth rate slows to 5.3%

US economic growth rate revised up to 2.7%

2012.11.23
UK public sector borrowing worse than expected in October
Japan exports fall for fifth consecutive month
Bank of England split on quantitative easing impact

2012.11.12
    我報告的ppt有太多字，對臺灣不太了解爲什麽要用臺灣，臺灣1970年是固定的匯率如果要做可以用資料從1980年。

Greece secures short-term finance
UK inflation rate rises to 2.7% in October
Japan economy contracts as global slowdown hits exports

2012.11.5
        看十二同學錄影期中報告，老師提不好的方面給下禮拜的人修改。

UK 'faces depression until 2014'
Greece austerity vote: Will it secure Greece's future ?
HSBC raises money laundering provisions by $800m


2012.10.30
        時間序列分析
        Chapter 1 ：時間序列分析的基礎
             - TS 預測 〉經濟模型結構 。
             -  ARMA , ARIMA ------> 驗証理論（PPP，CIRP），預測。

1. AR模型（Autoregressive Model )

                           用函數形式來表現：  Y_t=f_(y-1)

     2. 蛛網理論，結構式與縮減式：

                           P_t=a₀+a₁p_t-1

     3. AR(1) 模型的收斂值和經濟長期均衡之關係 ：

                           定態=平均=收歛

     4. 加入誤差觀念的AR(1)模型

                             Y_t⁼ a₀+a₁y_t-1+ɛ_t           

        Chapter 2 ：Box-Jenkins的ARMA模型

     1.白噪音是定態     

             符合三個定義：1.期望值為 0 

                                         2.變異數為固定常數  

                                         3.自我共變數等於0

     2.ARMA(p,q)模型

                           Y_t⁼ a₀+Ʃa₁y_t-1+ɛ_t

     _{3.定態與安定條件}

     _{4.用ACF和PACF判斷落後期數}

Eurozone unemployment jumps to fresh high
India interest rates on hold as bank reserve ratio cut
Greece recession and debt problems even worse

2012.10.23
        Chapter 3 :Financial market in the open economy
             - 定態和非定態（Statimarity and Non-statimarity）
             - Uncovered interest rate parity ( UIRP )
                    + The domestic strategy 1 NDT ==> 1+r NDT (  從 t ----> 到（t+1）有 r = 利率，）
                                                        1 NDT ===〉1/（1+r）（從（t+1）時間-----〉回到 t 時間）
                    + The foreign strategy (1+r)xS^{r
                    + Equilibrium : the bottom line : The risk premium, Risk averters}
                                      r = r*+ △s^e
                     
              - Covered interest rate parity ( CIRP)
                    + ( 1+r ) = ( 1 + r* ) F/S
                    + The spot and forward exchange 
                                                         s^r = f ( forward exchanges )
                    + The forward premium 
                                                         r = r* + f 
              - Covered interest rate parity - the facts
              - Efficient markets 
                               + Unbiasedness , Efficient market
              - Fisher equation

Greece to get bailout extension, says finance minister
Bank of America sued for $1bn for alleged mortgage fraud
http://www.bbc.co.uk/news/business-20053768 2012.10.15
        Chapter 2 : Prices in the open economy: Purchasing Power Parity
             - PPP extensions
                     + Balassa Samuelson Model
                     + Trade costs and adjustment to PPP
                     + Iceberg Model
                     + Incomplete pass through and pricing to market

EU summit: France says bank deal helps eurozone fusion
Bank of Scotland fined £4.2m over Halifax mortgage errors
China's economy slows but data hints at rebound

2012.10.8

        Chapter 2 : Prices in the open economy: Purchasing Power Parity

             - Exchange Rate Determination.

             - The law of one price (LOP) in the domestic economy and in the open economy

             - Purchasing power parity ( PPP )

             - Real exchange rate and PPP exchange rate\

JP Morgan boss says US housing market has turned the corner
Singapore economy contracts 1.5% but avoids recession
IMF's Christine Lagarde backs more time for Greece

2012.10.1

1. 介紹國際金融
2. Chapter 1：Introduction

               - Exchange rate

               - Demand for currency

               - The market for foreign currency

    Jobless Rate Falls to 7.8%, Lowest Level of Obama’s Term

    ECB holds eurozone interest rate at 0.75%

    Iran's rial hits an all-time-low against the US dollar

2012.9.27

1. 歐洲 French unemployment tops 3 million as economy struggles
2. 大陸Fight halts production at Foxconn plant in China
3. 英國UK bank body bows out of Libor

2012.9.24

1. Gretl軟體介紹和使用教學。
2. 討論時間及作業說明。

2012.9.17

1. 期初測驗。
2. 課程大綱說明。
3. yaya網站介紹