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ABSTRACT: Several articles find no support for the LOP in commodity markets. A few articles find some support. Rejecting the LOP would strike at the heart of economic theory. Rejection would suggest that firms do not maximize wealth and households do not maximize utility. Our objective is to show how four common pitfalls can cause tests of the LOP to fail when in fact the LOP holds. All tests that fail to support the LOP fall in to at least two pitfalls. All of these pitfalls are the result of ignoring important practical implications of arbitrage.
Journal of International Money and Finance 01/2008; 27(6):915-925. · 1.02 Impact Factor
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ABSTRACT: The authors extend their earlier work on Canadian intervention in the foreign-exchange market in three ways: (1) use daily data from 1975 to 1986 to see if results for the 1950s hold during the current float; (2) extend their original model to include both stock and flow versions of the foreign-exchange market; and (3) compare estimates using published Canadian holdings of U.S. dollars to estimates using actual intervention, which is confidential. Canadian authorities continue to lean against the wind, but their lagged response is longer and more variable. Published data effectively reflect intervention.
Canadian Journal of Economics. 01/1993; 26(2):416-46.
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Journal of money credit and banking 02/1979; 11(2):151-64. · 1.09 Impact Factor
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Proceedings. 02/1976;
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Review. 02/1976;