The profitability of forward currency speculation by central banks: A comment
Abstract The article by Beenstock and Dadashi (1986), which tries to examine the profitability of the forward currency operations of the Canadian Exchange Fund Account, is misleading in two ways. First, its longer sample period mixes forward contracts entered into during a fixed exchange rate period (contracts which proved unprofitable) with contracts from the flexible exchange rate period. Second, it assumes that the net forward position reflects entirely forward contracts and not ‘overnight’ spot transactions. Official reports and econometric evidence show that the latter transactions predominated.
Re-Examining the Behavior of Real Exchange Rates
This study shows that the real exchange rate is related to the real interest rate differential and risk premium for all but one of the exchange rates investigated, when these two explanatory factors are proxied by forward premia. In general, our results are consistent with the literature that rejects the notion that real exchange rates follow a martingal and suggest that monetary factors may be important determinants of real exchange rates.
Deliberative Democracy and the Resource Curse: A Nationwide Experiment in Tanzania
Oil and gas discoveries in developing countries are often associated with short-sighted economic policies and, in response, calls to insulate resource management from populist impulses. We report on a randomized experiment testing methods to overcome this apparent tension between sound resource governance and democratic politics. Soon after Tanzania’s discovery of major natural gas reserves, we invited a nationally representative sample of voters to an intensive public deliberation of policy options featuring nationally recognized experts and small-group discussions. Democratic deliberation reinforced the public’s strong preference for rapid spending of gas revenues, but also increased support for various prudential and economically orthodox measures, including independent oversight of gas revenues, limits on government borrowing, and selling gas abroad rather than subsidizing fuel at home. These effects were driven by deliberation per se, rather than a pure information treatment, and show no evidence of contamination by facilitatoror peer-effects in group deliberations. www.cgdev.org Justin Sandefur, Nancy Birdsall, James Fishkin, and Mujobu Moyo