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Edvhg rq wkh Hvfxgr*v wudqvlwlrq wr wkh Hxur/ wklv sdshu vxjjhvwv wkdw wkhuh pxvw eh d fkdqjh lq hfrqrplf uhjlph wrzdugv h{fkdqjh udwh vwdelolw| dqg frqyhuwlelolw| lq rughu iru d wdujhw }rqh uhjlph wr eh fuhgleoh1 Zh dwwhpsw wr fdswxuh wklv ihdwxuh e| wkh ghjuhh ri phdq uhyhuvlrq ri wkh h{fkdqjh udwh zlwk uhvshfw wr wkh qxphudluh xqghu glhuhqw lqvwlwxwlrqdo duudqjhphqwv1 Lq wkh fdvh ri Sruwxjdo/ wkhvh lqfoxgh vkdgrzlqj wkh HUP +HUP0V, dqg HUP phpehuvkls zlwk 9( +HUP09, dqg/ vxevhtxhqwo|/ 48( +HUP048, xfwxdwlrq edqgv1 Wkh sdshu orrnv dw wkh hhfwv ri fhqwudo edqn lqwhuyhqwlrq rq wkh phdq dqg yrodwlolw| ri wkh fkdqjh lq wkh h{fkdqjh udwh1 Rqh zrxog h{shfw/ d sulrul/ wkdw wkh hhfw ri fhqwudo edqn lqwhuyhqwlrq rq wkh ohyho ri wkh h{fkdqjh udwh wr eh juhdwhu zkhq wkh fxuuhqf| zdv lqfrqyhuwleoh dqg fdslwdo frqwurov zhuh ehlqj wljkwhqhg1 Krzhyhu/ fhqwudo edqn lqwhuyhqwlrq frxog zhoo kdyh uhvxowhg lq lqfuhdvhg yrodwlolw|/ jlyhq wkh dpeljxrxv h{fkdqjh udwh uhjlph ri HUP vkdgrzlqj1 Ilqdoo|/ rqh zrxog dovr h{shfw lqwhuyhqwlrq wr ehfrph ohvv hhfwlyh dv wkh fuhglelolw| ri juhdwhu qdqfldo lqwhjudwlrq surfhvv judgxdoo| wdnhv krog1

Wkh suhvhqw vwxg| lqfrusrudwhv wkh hhfwv ri fhqwudo edqn lqwhuyhqwlrq dqg wkh idfw wkdw d orqj0uxq h{fkdqjh udwh remhfwlyh kdv ehhq suhvhqw wkurxjk rxw wkh Hvfxgr*v vxffhvvlyh wkuhh h{fkdqjh udwh uhjlphv1 Wkh shufhqwdjh ghyldwlrq iurp wkh hvwdeolvkhg +ru yluwxdo, fhqwudo sdulw| lv wkxv lqfoxghg dv d phdvxuh ri wkh phdq uhyhuvlrq hhfw wkdw fkdudfwhulvhv d fuhgleoh wdujhw }rqh1 Zh wkhq uh0hvwlpdwh wkh VZDUFK prghov ri Eudjd gh Pdfhgr/ Qxqhv dqg

(14)

Frydv +4<<<,1 Zkloh uhvxowv rewdlqhg gr qrw uh hfw wkh idfw wkdw wxuexohqfh lq wkh HUP zrxog ohdg rqh wr h{shfw frqvlghudeoh lqwhuyhqwlrq dfwlylw|/ wkh| surylgh vwurqj hylghqfh ri phdq uhyhuvlrq1

Wkh xvh ri gdlo| h{fkdqjh udwh dqg lqwhuyhqwlrq gdwd grhv doorz iru d forvhu orrn dw wkh lqwhuphgldwh shulrg gxulqj zklfk wkh Hvfxgr zdv lq wkh HUP zkloh wkh zkroh julg zdv xqghu dwwdfn +HUP09,1 Wkh dqdo|vlv uh0 olhv rq d PVJDUFK prgho/ fkdudfwhulvhg e| d uhjlph0vzlwfklqj h{srqhqwldo JDUFK vshflfdwlrq zlwk wlph0ydu|lqj wudqvlwlrq suredelolwlhv/ lqvwhdg ri wkh vlqjoh0uhjlph prghov frpprqo| xvhg lq wkh olwhudwxuh1 Wklv dowhuqdwlyh prghoolqj dssurdfk doorzv iru wkh dqdo|vlv ri lqwud0uhjlph vwuxfwxudo fkdqjh dv zhoo dv lqfrusrudwlqj pdq| ri wkh h{fkdqjh udwh*v vw|olvhg ihdwxuhv1 Hy0 lghqfh iru HUP0V vxjjhvwv wkdw iruhljq fxuuhqf| sxufkdvhv lqfuhdvhg wkh suredelolw| ri ohdylqj wkh orz0yrodwlolw| uhjlph dqg lqgluhfwo| uhgxfhg h{0 fkdqjh udwh yduldelolw|/ yld wkh wudqvlwlrq suredelolw|/ lq wkh kljk0yrodwlolw| uhjlph1 Wkh uvw hhfw lv shuyhuvh exw lw lv sduwo| rvhw e| wkh idfw wkdw lqwhuyhqwlrq lv hhfwlyh lq ghsuhfldwlqj wkh fxuuhqf|1

Lq wkh HUP09 shulrg/ fhqwudo edqn lqwhuyhqwlrq +qrz erwk sxufkdvhv dqg vdohv, lv voljkwo| ohvv hhfwlyh lq wkh orz0yrodwlolw| uhjlph exw lw lv pxfk ohvv olnho| wr lqgxfh d pryh wr wkh kljk yrodwlolw| uhjlph dv d uhvxow/ vr wkdw wkh shuyhuvh rvhw ri HUP0V glvdsshduv1 Wkhuh lv jrrg hylghqfh wkdw wkh wdujhw0}rqh duudqjhphqwv duh fuhgleoh iru erwk uhjlphv gxulqj wklv shulrg1 Wkhuh lv dovr hylghqfh ri d vwdelolvlqj hhfw ri wkh wdujhw0}rqh rq yrodwlolw|/ frquplqj wkh hduolhu qglqj edvhg rq zhhno| gdwd iru wkh frqyhuwlelolw| shulrg1 Vljqlfdqwo|/ wkh kljk0yrodwlolw| uhjlph lv fkdudfwhulvhg e| d yhu| vwurqj phdq uhyhuvlrq hhfw/ hyhq wkrxjk fhqwudo edqn lqwhuyhqwlrqv kdyh qr lpsdfw rq wkh phdq/ wkh frqglwlrqdo yduldqfh dqg wkh wudqvlwlrq suredelolw|1 Wkh HUP048 shulrg vkrzv pxfk zhdnhu hylghqfh ri phdq uhyhuvlrq dqg wkh devhqfh ri vljqlfdqw lqwhuyhqwlrq hhfwv1 Wkh idfw wkdw qr glvfhuqleoh lpsdfw ri lqwhuyhqwlrq fdq eh irxqg lv shukdsv sduwldoo| h{sodlqhg e| wkh uhodwlyho| orz iuhtxhqf| ri lqwhuyhqwlrq gxulqj wklv shulrg1

Wkhuh lv qr hylghqfh ri d gluhfw hhfw ri lqwhuyhqwlrq rq frqglwlrqdo yrodwlolw| iru dq| ri wkh shulrgv frqvlghuhg1 Lqvwhdg/ rxu dqdo|vlv ghwhfwv zkdw dsshduv wr eh dq lqgluhfw fkdqqho/ yld wkh uhjlph wudqvlwlrq sured0 elolwlhv/ wkurxjk zklfk lqwhuyhqwlrqv dhfw wkh h{fkdqjh udwh1 Lqwhuyhqwlrq vhhplqjo| lqfuhdvhv wkh suredelolw| ri uhjlph fkdqjh1 Wklv hhfw lv vwdelolvlqj

(15)

zkhq yrodwlolw| lv orz surylghg lw lv vlpxowdqhrxvo| hhfwlyh lq ghsuhfldwlqj wkh h{fkdqjh udwh/ dv lv wkh fdvh lq HUP V1 Rq wkh rwkhu kdqg/ xqghu HUP0 V/ phdq uhyhuvlrq lv yhu| zhdn dv ghsuhfldwlrq wdnhv pruh wkdq rqh prqwk wr zrun lwvhoi rxw1

Zh qrwh/ krzhyhu/ wkdw wkh hhfw ri phdq uhyhuvlrq lv qrw dozd|v vljql0 fdqw dfurvv glhuhqw yrodwlolw| vwdwhv1 Lq HUP0V dqg HUP048/ lw lv vljqlfdqw rqo| lq wkh orz yrodwlolw| vwdwh zkloh wkh frqyhuvh lv wuxh iru HUP091 Wklv odvw qglqj fdq eh udwlrqdolvhg e| qrwlqj wkdw yrodwlolw| zdv pxfk kljkhu lq HUP09 wkdq lq wkh rwkhu wzr shulrgv1 Wkh srvlwlyh dqg yhu| vwurqj phdq uhyhuvlrq hhfw +0318658 lq Wdeoh 4, frqupv wkh fuhglelolw| ri wkh uhjlph fkdqjh wkdw wrrn sodfh gxulqj HUP phpehuvkls dqg wkh uhvwrudwlrq ri ixoo frqyhuwlelolw|1

Wkh phdq uhyhuvlrq yduldeoh lv qrw fdsdeoh ri ixoo| fdswxulqj wkh uhjlph fkdqjh ehfdxvh fhqwudo edqn lqwhuyhqwlrq lv wdnlqj sodfh dw wkh vdph wlph1 Dffruglqj wr wkh prgho zlwk gdlo| gdwd/ lqwhuyhqwlrq lv dozd|v hhfwlyh xq0 ghu lqfrqyhuwlelolw|/ dqg zlwk frqyhuwlelolw| lw rqo| kdv dq hhfw lq wkh phdq lq wkh orz yrodwlolw| vwdwh1 Wklv grhv qrw dsso| wr HUP048 odujho| ehfdxvh lqwhuyhqwlrq lv pxfk ohvv iuhtxhqw1 Wklv uhvxow lv dovr frqvlvwhqw zlwk wkh hslvrghv ri idovh vwdelolw| lghqwlhg lq Eudjd gh Pdfhgr hw do1 +5336, zkhq wkh h{fkdqjh udwh zdv yhu| vwdeoh gxulqj wkh vshfxodwlyh dwwdfn ri odwh 4<<51 Wkhuhiruh lqwhuyhqwlrq lv hhfwlyh hlwkhu zkhq wkhuh lv qr fuhglelolw| ru zkhq fuhglelolw| kdv douhdg| ehhq dftxluhg dqg yrodwlolw| lv orz= lqwhuyhqwlrq lv prvw hhfwlyh zkhq lw lv ohdvw qhhghg1 Wkh urexvwqhvv ri wklv uhvxow lv ehlqj lqyhvwljdwhg e| Eulwhv0Shuhlud +5336, dv lw zloo ixuwkhu uhlqirufh rxu xqghu0 vwdqglqj ri wkh lqwhudfwlrq ehwzhhq yrodwlolw| dqg fuhglelolw| lq wkh wudqvlwlrq ehwzhhq h{fkdqjh udwh uhjlphv1

(16)

8 Uhihuhqfhv

Dophnlqghuv/ J1 M1 +4<<8, Iruhljq H{fkdqjh Lqwhuyhqwlrqv= Wkhru| dqg Hylghqfh/ Hojdu/ Doghuvkrw/ X1N dqg Eurrnhog1

Edloolh/ U1W1 dqg R1I1 Kxpsdjh +4<<5, Srvw0Orxyuh Lqwhuyhqwlrq= Glg Wdujhw ]rqhv Vwdelol}h wkh GrooduB/ Ihghudo Uhvhuyh Edqn ri Fohyhodqg/ Zrunlqj Sdshu Qr1 <5361

Ehdwwlh/ Q1 dqg M1I1 Iloolrq +4<<<, Dq Lqwudgd| Dqdo|vlv ri wkh Hhf0 wlyhqhvv ri Iruhljq H{fkdqjh Lqwhuyhqwlrq/ Edqn ri Fdqdgd/ Zrunlqj Sdshu Qr1 <<04371

Ehlqh/ P1 Vìedvwldq Odxuhqw dqg Fkulvwhooh OhFrxuw +5334, Fhqwudo Edqn Lqwhuyhqwlrq dqg H{fkdqjh Udwh Yrodwlolw| H{shfwdwlrqv= Hylghqfh iurp d Uhjlph Vzlwfklqj Dqdo|vlv/ iruwkfrplqj lq Hxurshdq Hfrqrplf Uh0 ylhz/ dydlodeoh dw kwws=22zzz1fruh1xfo1df1eh2odxuhqw2sgi2Pdunry1sgi1

Ehndhuw/ J1 dqg U1M1 Krgulfn +4<<6, Rq Eldvhv lq wkh Phdvxuhphqw ri Iruhljq H{fkdqjh Ulvn Suhplxpv/ Mrxuqdo ri Lqwhuqdwlrqdo Prqh| dqg Ilqdqfh/ Qr1 45/ ss1448046;1

Ehuwrod/ J1 dqg U1 Fdedoohur +4<<5, Wdujhw ]rqhv dqg Uhdoljqphqwv/ Dphulfdq Hfrqrplf Uhylhz/ Qr1 ;5/ ss1 85308691

Ehuwrod/ J1 dqg O1 Vyhqvvrq +4<<6, Vwrfkdvwlf Ghydoxdwlrq Ulvn dqg wkh Hpslulfdo Ilw ri Wdujhw0]rqh Prghov/ Uhylhz ri hfrqrplf Vwxglhv/ Qr1 93/ ss1 9;<0:451

Eroohq/ Qlfrodv S1/ Vwhskhq I1 Jud|/ dqg Urehuw H1 Zkdoh| +5333, Uhjlph0 Vzlwfklqj lq Iruhljq H{fkdqjh Udwhv= Hylghqfh iurp Fxuuhqf| Rswlrqv/ Mrxuqdo ri Hfrqrphwulfv/ Qr1 <7/ 56<05:91

Erqvhu0Qhdo/ F1 dqg J1 Wdqqhu +4<<9, Fhqwudo Edqn Lqwhuyhqwlrq dqg wkh Yrodwlolw| ri Iruhljq H{fkdqjh Udwhv= Hylghqfh iurp wkh Rswlrqv Pdu0 nhw/ Mrxuqdo ri Lqwhuqdwlrqdo Prqh| dqg Ilqdqfh/ Qr1 48+9,/ ss1 ;860;:;1

Eudjd gh Pdfhgr/ M1 +5334d, FulvhvB Zkdw FulvhvB Hvfxgr iurp HFX wr HPX/ lq Vkruw0Whup Fdslwdo Iorzv dqg Hfrqrplfv Fulvhv/ hglwhg e|

(17)

Vwhskdq| Jul!wk0Mrqhv/ Pdqxho Prqwhv dqg Dqvzdu Qdvxwlrq/ vwxg| suh0 sduhg iru XQX2ZLGHU/ R{irug Xqlyhuvlw| Suhvv/ ss15860593 +dq hduolhu yhuvlrq dsshduhg dv Qryd Hfrqrplfv Zrunlqj Sdshu/ Qr1 646/ Ghfhpehu 4<<:,1

Eudjd gh Pdfhgr/ M1 +5334e, Wkh Hxur lq Lqwhuqdwlrqdo Ilqdqfldo Du0 fklwhfwxuh/ Dfwd Rhfrqrplfd/ Yro1 84 +6,/ ss1 5;:0647 5333253341

Eudjd gh Pdfhgr/ M1/ Fdwhod Qxqhv/ O1 dqg I1 Frydv +5336, Prylqj wkh Hvfxgr lqwr wkh Hxur lq fkdswhu ; ri Vkdslqj wkh Qhz Hxursh= Hfrqrplf Srolf| Fkdoohqjhv ri HX Hqodujhphqw/ hglwhg e| Plfkdho Odqghuvpdqq dqg Gdulxv Urvdwl/ Sdojudyh/ iruwkfrplqj +dq hduolhu yhuvlrq dsshduhg dv FHSU Glvfxvvlrq Sdshu/ Qr1 557;/ Rfwrehu 4<<<,1

Eudqgqhu1 S1/ Juhfk K1/ dqg K1 Vwl{ +5334, Wkh Hhfwlyhqhvv ri Fhqwudo Edqn Lqwhuyhqwlrq lq wkh HPV= Wkh Srvw 4<<6 H{shulhqfh/ ZLIR Zrunlqj Sdshuv/ Qr1 49;/ Qryhpehu1

Eulwhv0Shuhlud/ O1 +5336, Lqwhuyhqwlrq dqg H{fkdqjh Udwh Srolf| Fuhgl0 elolw|= Wkh Sruwxjxhvh H{shulhqfh/ Grfwrudo Uhvhdufk Sursrvdo vxeplwwhg wr wkh Idfxogdgh gh Hfrqrpld/ Xqlyhuvlgdgh Qryd gh Olverd/ Mxo|1

Fdpsehoo/ V1G1 +5334, Vshflfdwlrq Whvwlqj dqg Vhpl0Sdudphwulf Hvwl0 pdwlrq ri Uhjlph0Vzlwfklqj Prghov= Dq H{dplqdwlrq ri wkh XV Vkruw0Whup Lqwhuhvw Udwh/ Pdqxvfulsw1

Grplqjxh}/ N1 P1 dqg M1 D1 Iudqnho +4<<6d, Grhv Iruhljq H{fkdqjh Lqwhuyhqwlrq ZrunB/ Lqvwlwxwh iru Lqwhuqdwlrqdo Hfrqrplfv/ Zdvklqjwrq/ GF1 Grplqjxh}/ N1 P1 dqg M1 D1 Iudqnho +4<<6e, Grhv Iruhljq H{fkdqjh Lqwhuyhqwlrq PdwwhuB Wkh Sruwirolr Hhfw/ Dphulfdq Hfrqrplf Uhylhz/ Qr1 ;6+8,/ ss146890469<1

Grplqjxh}/ N1 P1 +4<<;, Fhqwudo Edqn Lqwhuyhqwlrq dqg H{fkdqjh Udwh Yrodwlolw|/ Mrxuqdo ri Lqwhuqdwlrqdo Prqh| dqg Ilqdqfh/ Qr1 4:+4,/ ss14940 4<31

Hglvrq/ K1 M1 +4<<6, Wkh Hhfwlyhqhvv ri Fhqwudo Edqn Lqwhuyhqwlrq= D Vxuyh| ri wkh Olwhudwxuh diwhu 4<;5/ Qr1 4; lq Vshfldo Sdshuv lq Lqwhuqd0 wlrqdo Hfrqrplfv/ Sulqfhwrq Xqlyhuvlw|/ Ghsduwphqw ri Hfrqrplfv Lqwhuqd0

(18)

Hqjho/ F1 dqg M1 G1 Kdplowrq +4<<3, Orqj Vzlqjv lq wkh Groodu=Duh Wkh| lq wkh Gdwd dqg Gr Pdunhwv Nqrz LwB/ Dphulfdq Hfrqrplf Uhylhz/ Qr1 ;3+7,/ ss19;<0:461

Hqjho/ F1 dqg F1 V1 Kdnnlr +4<<9, Wkh Glvwulexwlrq ri H{fkdqjh Udwhv lq wkh HPV/ Lqwhuqdwlrqdo Mrxuqdo ri Ilqdqfh dqg Hfrqrplfv/ Qr1 48/ ss18809:1

Iurrw/ N1 dqg O1 Revwihog +4<<4, H{fkdqjh Udwh G|qdplfv xqghu Vwrfkdv0 wlf Uhjlph Vkliwv= D Xqlhg Dssurdfk/ Mrxuqdo ri Lqwhuqdwlrqdo Hfrqrplfv/ Qr1 64+607,/ ss1536055<1

Jud|/ V1 +4<<9, Prgholqj wkh Frqglwlrqdo Glvwulexwlrq ri Lqwhuhvw Udwhv dv d Uhjlph0Vzlwfklqj Surfhvv/ Mrxuqdo ri Ilqdqfldo Hfrqrplfv/ Qr175/ ss15:0951

Kdplowrq/ M1 G1 +4<<7, Wlph Vhulhv Dqdo|vlv/ Sulqfhwrq Xqlyhuvlw| Suhvv/ Sulqfhwrq/ QM1

Kdplowrq/ M1 G1 dqg U1 Vxvpho +4<<7, Dxwruhjuhvvlyh Frqglwlrqdo Khw0 hurvnhgdvwlflw| dqg Fkdqjhv lq Uhjlph/ Mrxuqdo ri Hfrqrphwulfv/ Qr197/ ss163:06661

Kdqvhq/ E1H1 +4<<5, Wkh Olnholkrrg Udwlr Whvw xqghu Qrq0vwdqgdug Frqglwlrqv= Whvwlqj wkh Pdunry Wuhqg Prgho ri JQS/ Mrxuqdo ri Dssolhg Hfrqrphwulfv/ Qr1 :/ ss1 V940V;51

Kdqvhq/ E1H1 +4<<7, Huudwxp= Wkh Olnholkrrg Udwlr Whvw xqghu Qrq0 vwdqgdug Frqglwlrqv= Whvwlqj wkh Pdunry Wuhqg Prgho ri JQS/ Zrunlqj Sdshu/ Ervwrq Froohjh1

Kxqj/ M1K1 +4<<:, Lqwhuyhqwlrq Vwudwhjlhv dqg H{fkdqjh Udwh Yrodwlolw|= D Qrlvh Wudglqj Shuvshfwlyh/ Mrxuqdo ri Lqwhuqdwlrqdo Prqh| dqg Ilqdqfh/ Qr1 49 +8,/ ss1 ::<0:<61

Nuxjpdq/ S1U1 +4<<4, Wdujhw ]rqhv dqg H{fkdqjh Udwh G|qdplfv/ Txduwhuo| Mrxuqdo ri Hfrqrplfv/ Qr1 439 +6,/ ss1 99<09;51

Odprxuhx{/ F1J1 dqg Z1 G1 Odvwudshv +4<<3, Shuvlvwhqfh lq Yduldqfh/ Vwuxfwxudo Fkdqjh dqg wkh JDUFK Prgho/ Mrxuqdo ri Exvlqhvv dqg Hfr0 qrplf Vwdwlvwlfv/ Qr18/ ss1 454045<1

(19)

Olqgehuj/ K1 dqg S1 Vùghuolqg +4<<7, Lqwhuyhqwlrq Srolf| dqg Phdq Uh0 yhuvlrq lq H{fkdqjh Udwh Wdujhw ]rqhv= Wkh Vzhglvk Fdvh/ Vfdqglqdyldq Mrxuqdo ri Hfrqrplfv/ Qr1 <9 +7,/ ss1 7<<08461

Pxvvd/ P1 +4<;4, Wkh Uroh ri R!fldo Lqwhuyhqwlrq/ Jurxs ri Wkluw| Rffdvlrqdo Sdshuv/ Qr1 9/ Qhz \run= Jurxs ri Wkluw|1

Svdudgdnlv/ ]1 dqg Q1 Vsdjqror +5336, Rq wkh Ghwhuplqdwlrq ri wkh Qxpehu ri Uhjlphv lq Pdunry0Vzlwfklqj Dxwruhjuhvvlyh Prghov/ Mrxuqdo ri Wlph Vhulhv Dqdo|vlv/ Yr1 57/ Qr1 5/ ss1 56:05851

Urjhuv/ M1P dqg S1O1 Vlnorv +5334,/ Iruhljq H{fkdqjh Pdunhw Lqwhuyhq0 wlrq lq Wzr Vpdoo Rshq Hfrqrplhv= Wkh Fdqdgldq dqg Dxvwudoldq H{shul0 hqfh/ Iruwkfrplqj lq Mrxuqdo Ri Lqwhuqdwlrqdo Prqh| dqg Ilqdqfh1

Vduqr/ O1 dqg P1 S1 Wd|oru +5334, R!fldo Lqwhuyhqwlrq lq wkh Iruhljq H{fkdqjh Pdunhw= Lv Lw Hhfwlyh dqg/ Li Vr/ Krz Grhv Lw ZrunB/ Mrxuqdo ri Hfrqrplf Olwhudwxuh/ Yro1 [[[L[ +Vhsw1,/ ss1;6<0;9;1

Vfkzduw}/ D1 M1 +5333, Wkh Ulvh dqg Idoo ri Iruhljq H{fkdqjh Pdunhw Lqwhuyhqwlrq/ QEHUZrunlqj Sdshu/ Qr1 ::841

Vyhqvvrq/ O1 H1 +4<<4, Wkh Whup Vwuxfwxuh ri Lqwhuhvw Udwh Glhuhqwldov= Wkhru| dqg Vzhglvk Gdwd/ Mrxuqdo ri Prqhwdu| Hfrqrplfv/ Qr1 5;/ ss1 ;:04491

Vyhqvvrq/ O1 H1 +4<<5, Dq Lqwhusuhwdwlrq ri Uhfhqw Uhvhdufk rq H{0 fkdqjh Udwh Wdujhw ]rqhv/ Mrxuqdo ri Hfrqrplf Shuvshfwlyhv/ Qr1 9 +7,/ ss1 44<04771

Vyhqvvrq/ O1 H1 +4<<7, Zk| H{fkdqjh Udwh EdqgvB Prqhwdu| Lqghshq0 ghqfh lq Vslwh ri Il{hg H{fkdqjh Udwhv/ Mrxuqdo ri Prqhwdu| Hfrqrplfv/ Qr1 66/ ss148:04<<1

Wd|oru/ P1 S1+4<<8, Wkh Hfrqrplfv ri H{fkdqjh Udwhv/ Mrxuqdo ri Hfrqrplf Olwhudwxuh/ Qr1 ;6/ ss14607:1

(20)

Table 1: MSEGARCH Estimation Results

ERM S ERM 6 ERM 15

Parameter Estimate Std. Error Estimate Std. Error Estimate Std. Error

Mean 10 α -0.0440 0.0188** 0.0206 0.0171 -0.0083 0.0042** 20 α 0.0210 0.0147* 1.3694 0.2212** 0.0048 0.0064 11 α -0.3480 0.0798**   -0.4052 0.0407** 21 α -0.1727 0.0570**   -0.1589 0.0364** 12 α     -0.1027 0.0358** 22 α     -0.0701 0.0281** I 1 α 0.5672 0.1656** 0.2905 0.1022**   I 2 α       D 1 α -0.0307 0.0129**   -0.0533 0.0080** D 2 α   -0.5325 0.0772** _ _ Variance 1 0 β -1.7865 0.8673** -2.1055 0.3182** -2.2358 0.3925** 2 0 β -1.0468 0.2913** -1.7153 0.3972** -2.2631 0.4180** | | 1 e β _ _ 0.4158 0.2090** 0.4958 0.1304** | | 2 e β 0.4953 0.1241** 0.9561 0.3209** 0.5988 0.1222** v 1 β 0.5220 0.2660**   0.5107 0.0918** v 2 β 0.7057 0.1062**   0.3216 0.1406** | | 1 D β _ _ -0.1270 0.0745**   | | 2 D β _ _ _ _ _ _ TVTP 10 γ 2.3742 0.7286** 2.3259 0.2335** 2.9530 0.3943** 20 γ 2.8603 0.7856** 1.3861 0.4145** 2.8992 0.1963** | | 1 I γ -1.1028 0.5678** -0.0389 0.0249* _ _ | | 2 I γ -1.1384 0.5098**     1 d _{5.0783 1.7604**} _{2.8172 0.3066**} 2 d 5.1138 0.8600** _∞ _{3.1712 0.4141**} N. Obs. 633 438 1358

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Table 1 (continued): MSEGARCH Estimation Results

ERM S ERM 6 ERM 15

Log-Likelihood -20.3 -142.6 484.5. AIC -36.3 -155.4 467.5 SBC -71.9 -180.4 423.2 Diagnostics LB1 0.1609 (0.6883) 0.0309 (0.8606) 1.6842 (0.1944) LB2 1.6936 (0.4288) 0.4600 (0.7945) 2.5075 (0.2854) LB3 1.8364 (0.6070) 1.3105 (0.7266) 3.6172 (0.3059) LB5 6.5247 (0.2585) 1.5975 (0.9016) 7.3356 (0.1969) LB10 15.5343 (0.1138) 6.6423 (0.7587) 10.0977 (0.4320) LB15 18.9789 (0.2147) 13.6070 (0.5555) 20.0782 (0.1690) LM1 0.0398 (0.8418) 0.0262 (0.8713) 0.0947 (0.7583) LM2 0.3407 (0.8434) 0.0365 (0.9819) 0.1758 (0.9159) LM3 1.0791 (0.7821) 0.0370 (0.9981) 0.2965 (0.9607) LM5 1.7351 (0.8844) 0.1049 (0.9998) 0.2988 (0.9977) LM10 2.9764 (0.9820) 0.2412 (1.0000) 0.5173 (1.0000) LM15 4.6686 (0.9946) 0.4484 (1.0000) 3.9165 (0.9980)

Notes: The variables are defined as in the text. A double (single) asterisk means that the estimated parameter is significantly different from zero at a 5% (10%) level. A degree of freedom di = +∞

denotes a Normal distribution in the i-th regime. LBt denotes the Ljung-Box statistic for serial correlation in the standardised residuals up to lag t. LMt denotes the ARCH-LM statistic for the squared standardised residuals up to lag t. The p-values corresponding to these statistics are in given parenthesis.

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Figure 1: Daily Percentage Deviation of PTE/DEM from Central Parity -6 -5 -3 -2 0 2 3 5 6 8 21/09/1989 21/03/1990 21/09/1990 21/03/1991 21/09/1991 21/03/1992 21/09/1992 21/03/1993 21/09/1993 21/03/1994 21/09/1994 21/03/1995 21/09/1995 21/03/1996 21/09/1996 21/03/1997 21/09/1997 21/03/1998 21/09/1998

ERM S ERM 6 ERM 15

Note: The Portuguese Escudo was realigned on the following dates: November 23, 1992;

May 14, 1993; and March 6, 1995. The first realignment occurred in the wake of the 1992 ERM crisis whilst the others were the result of the PTE following the realignments of the Spanish Peseta.

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Figure 2: Smoothed Probabilities of the High-Volatility Regime ERM S 0.0 0.2 0.4 0.6 0.8 1.0 9/21/89 6/28/90 4/04/91 1/09/92

Figure 3: Smoothed Probabilities of the High-Volatility Regime ERM 6 0.0 0.2 0.4 0.6 0.8 1.0 4/06/92 8/24/92 1/11/93 5/31/93

Figure 4: Smoothed Probabilities of the High-Volatility Regime ERM 15 0.2 0.4 0.6 0.8 1.0

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(30)

Table A.2.1:

Whole Sample Period: January, 7 1987 – December, 31 1998

Model 1 without Intervention or Central Parity k log-lik MSE MAE AIC SBC

Single Regime ARCH – constant variance 3 -1682.94 1432.41 15.99 -1685.94 -1692.59 Single Regime ARCH – arch terms 5 -1601.87 2037.89 18.06 -1606.87 -1617.95 SWARCH (2,2) 8 -1527.11 1599.19 15.96 -1535.11 -1552.84 SWARCH (3,2) 11 -1502.12 1458.20 14.56 -1513.12 -1537.51 SWARCH (4,2) 15 -1491.46 1423.61 14.66 -1506.46 -1539.71 SWARCH (5,1) 18 -1488.53 1298.66 14.08 -1506.53 -1546.42

Model 2 with Intervention and Central Parity k log-lik MSE MAE AIC SBC

Single Regime ARCH – constant variance 9 -1655.49 1284.93 15.01 -1687.20 -1702.71 Single Regime ARCH – 2 arch terms 11 -1579.74 1878.86 17.50 -1590.74 -1675.44 SWARCH (2,2) 14 -1511.74 1361.98 14.55 -1525.74 -1556.77 SWARCH (3,2) 17 -1492.84 1334.20 14.17 -1509.84 -1547.52 SWARCH (4,2) 22 -1487.42 1385.37 14.19 -1509.42 -1558.18 SWARCH (5,1) – no convergence - - - -

Model 3 with Intervention and Central Parity k log-lik MSE MAE AIC SBC

Single Regime ARCH – constant variance 7 -1647.01 1282.93 15.01 -1654.01 -1669.52 Single Regime ARCH – 2 arch terms 9 -1579.75 1879.11 17.50 -1588.75 -1608.70 SWARCH (2,2) 12 -1511.78 1362.25 14.55 -1523.78 -1550.36 SWARCH (3,2) 15 -1494.78 1333.85 14.22 -1509.78 -1543.02 SWARCH (4,2) 20 -1487.46 1391.80 14.20 -1507.46 -1551.77 SWARCH (5,1) – no convergence - - - -

Note: k denotes the number of estimated parameters and log-lik the value of the log-likelihood function. All other

designations have the usual interpretations.

Are the Estimated Parameters Significant?

Model 2 with Intervention and Central Parity Mean Variance

Purchases Sales C. Parity Purchases Sales C. Parity

Single Regime ARCH - constant variance Yes** No Yes** No No Yes** Single Regime ARCH – 2 arch terms No No Yes** No No Yes** SWARCH (2,2) Yes* No No No No Yes** SWARCH (3,2) Yes** No Yes** No No No SWARCH (4,2) No No Yes* No No No SWARCH (5,1) - no convergence - - - -

Model 3 with Intervention and Central Parity Mean Variance

Purchases Sales C. Parity C. Parity

Single Regime ARCH - constant variance Yes** No Yes** Yes** Single Regime ARCH – 2 arch terms No No Yes** Yes** SWARCH (2,2) Yes* No No Yes**

SWARCH (3,2) No Yes** Yes** No SWARCH (4,2) No No Yes* Yes*

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Table A.2.2:

Truncated Sample: September 21, 1989 - December 31, 1998

Model 1 without Intervention or Central Parity k log-lik MSE MAE AIC SBC SWARCH (2,2) 8 -1188.01 2091.81 18.91 -1196.01 -1212.70 SWARCH (3,2) 11 -1167.54 1783.63 16.76 -1178.54 -1201.50 SWARCH (4,2) 16 -1158.17 1789.16 16.14 -1174.17 -1207.56

Model 2 with Intervention and Central Parity k log-lik MSE MAE AIC SBC SWARCH (2,2) 14 -1180.65 1869.10 17.96 -1194.65 -1223.86 SWARCH (3,2) 17 -1166.04 1723.88 16.22 -1183.04 -1218.52 SWARCH (4,2) 22 -1156.46 1743.09 16.17 -1178.46 -1224.37

Model 3 with Intervention and Central Parity k log-lik MSE MAE AIC SBC SWARCH (2,2) 12 -1182.06 1665.75 16.90 -1194.06 -1219.11 SWARCH (3,2) 15 -1166.65 1720.96 16.20 -1181.65 -1212.96 SWARCH (4,2) 20 -1156.56 1743.54 16.19 -1176.56 -1218.30 Note: k denotes the number of estimated parameters and log-lik the value of the log-likelihood function. All other

Model 2 with Intervention and Central Parity Mean Variance Purchases Sales C. Parity Purchases Sales C. Parity

SWARCH (2,2) No Yes* No No No Yes**

SWARCH (3,2) No No Yes** No No No

SWARCH (4,2) No No Yes** No No No

Model 3 with Intervention and Central Parity Mean Variance Purchases Sales C. Parity C. Parity

SWARCH (2,2) Yes* No No Yes**

SWARCH (3,2) No No Yes** No

SWARCH (4,2) No No Yes** No

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Table A.2.3:

Inconvertible Escudo: September 21, 1989 – December, 9 1992

Model 1 without Intervention or Central Parity k log-lik MSE MAE AIC SBC

SWARCH (2,2) 8 -464.41 1235.12 21.55 -472.41 -484.84

SWARCH (3,1) 10 -459.95 1059.04 20.63 -469.95 -485.48

Model 2 with Intervention and Central Parity k log-lik MSE MAE AIC SBC

SWARCH (2,2) 14 -461.58 1015.89 19.21 -475.58 -497.32

SWARCH (3,1) 16 -457.28 953.60 19.28 -473.28 -498.12

SWARCH (2,2) 12 -461.56 1014.00 19.23 -473.56 -492.19

SWARCH (3,1) 14 -458.27 985.34 19.80 -472.27 -494.01

SWARCH (2,2) No No No No No No

SWARCH (3,1) No No Yes** No No Yes*

SWARCH (2,2) No No Yes* No

SWARCH (3,1) No No Yes* No

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Table A.2.4:

Convertible Escudo: December, 16 1992 – December, 31 1998

Model 1 without Intervention or Central Parity k log-lik MSE MAE AIC SBC

SWARCH (2,2) 8 -702.83 3048.91 17.65 -710.83 -725.80

SWARCH (3,2) 12 -690.38 2377.05 15.34 -702.38 -724.84

SWARCH (2,2) 14 -683.94 2469.30 17.05 -697.94 -724.14

SWARCH (3,2) 18 -681.84 2408.57 15.69 -699.84 -733.52

SWARCH (2,2) 12 -684.67 2409.46 16.96 -696.67 -719.12

SWARCH (3,2) 16 -681.90 2385.10 15.60 -697.90 -727.85

SWARCH (2,2) No Yes** No No No Yes**

SWARCH (3,2) No No Yes* No No Yes*

SWARCH (2,2) No Yes** No Yes*

SWARCH (3,2) No No Yes** Yes*

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Figure A.2.1: Inconvertible Escudo– SWARCH (2,2) model Smoothed Probability of the High Volatility State

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 20/09/1989 20/12/1989 20/03/1990 20/06/1990 20/09/1990 20/12/1990 20/03/1991 20/06/1991 20/09/1991 20/12/1991 20/03/1992 20/06/1992 20/09/1992

Note: The SWARCH (2,2) model is chosen using the SBC criterion when considering the top three panels of Table A.2.3.

Figure A.2.2: Convertible Escudo – SWARCH (2,2) model Smoothed Probability of the High Volatility State

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 16/12/1992 16/06/1993 16/12/1993 16/06/1994 16/12/1994 16/06/1995 16/12/1995 16/06/1996 16/12/1996 16/06/1997 16/12/1997 16/06/1998 16/12/1998

Note: The SWARCH (2,2) model is chosen using the SBC criterion when considering the top three panels of Table A.2.4.

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(36)

Table A.3.1: Descriptive Statistics for the Daily Exchange Rate Returns ERM S

(1989/09/21 – 1992/04/03)

ERM 6

(1992/04/04 – 1993/08/02)

Variable Statistic Value Null Hypothesis p-value

Minimum -1.517 Maximum 1.840 Median 0.005 Mean 0.005 H0: Mean=0 0.652 Std Deviation 0.295 Skewness 0.709 H0: Sk=0 0.000 Kurtosis 8.998 H0: K=0 0.000 Jarque-Bera 1003.691 H0: Normality 0.000 (1) -0.179 Q(20) 41.875 H0: No Autocorrelation 0.003 LM(20) 37.733 H0: No ARCH 0.000

log St ADF -3.145 H0: Unit Root -2.867*

Phillips-Perron -3.438 H0: Unit Root -2.867*

Minimum -2.881 Maximum 4.696 Median 0.012 Mean 0.044 H0: Mean=0 0.182 Std Deviation 0.626 Skewness 1.388 H0: Sk=0 0.000 Kurtosis 24.017 H0: K=0 0.000 Jarque-Bera _{6797.496 H0:}_Normality _0.000 (1) -0.282 Q(20) 40.358 H0: No Autocorrelation 0.003 LM(20) 56.658 H0: No ARCH 0.000

log St ADF 0.559 H0: Unit Root -2.870*

Phillips-Perron 0.402 H0: Unit Root -2.867*

t s ∆ t s ∆

(37)

Table A.3.1 (continued): ERM 15

(1993/08/03 – 1998/12/31)

Note: St is the PTE/DEM exchange rate while st denotes 100 times the log difference of the

exchange rate. (1)denotes the value of the autocorrelation function at the first lag and Q(20) is

the Ljung-Box Q-statistic with a lag-length of 20 periods. LM(20) denotes the ARCH-LM statistic for the squared standardised residuals with a lag-length of 20 periods. The fourth column gives the null hypotheses of the tests that were conducted. For example, the Jarque-Bera statistic tests for Normality while the ADF/Phillips-Perron procedures test for the presence of unit roots. The last column contains the corresponding p-values, except for the case of the unit root tests where an asterisk denotes the test’s 5% critical value.

Minimum -1.313 Maximum 1.478 Median 0.0008 Mean -0.001 H0: Mean=0 0.849 Std Deviation 0.207 Skewness -0.152 H0: Sk=0 0.027 Kurtosis 10.507 H0: K=0 0.000 Jarque-Bera 2982.689 H0: Normality 0.000 (1) -0.237 Q(20) 106.83 H0: No Autocorrelation 0.000 LM(20) 83.732 H0: No ARCH 0.000

log St ADF -1.871 H0: Unit Root -2.865*

Phillips-Perron -2.489 H0: Unit Root -2.864*

t

s ∆

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Figure A.3.1: Daily Percentage Change in PTE/DEM -4 -3 -2 -1 0 1 2 3 4 21/09/1989 21/03/1990 21/09/1990 21/03/1991 21/09/1991 21/03/1992 21/09/1992 21/03/1993 21/09/1993 21/03/1994 21/09/1994 21/03/1995 21/09/1995 21/03/1996 21/09/1996 21/03/1997 21/09/1997 21/03/1998 21/09/1998