Papers by marianna grimaldi
Journal of Money, Credit and Banking, Dec 13, 2021
Social Science Research Network, 2010
as well as participants at various seminars at the ECB for helpful comments. I would also like to... more as well as participants at various seminars at the ECB for helpful comments. I would also like to thank Agne Subelyte for help with data, Robert Wiklund for help with programming and Tracey Green for help with selecting financial press articles and news. The opinions expressed in the paper are those of the author and need not reflect those of the Riksbank. In particular, the word search performed in no way should be interpreted as an indicator of the ECB's communication.
World Scientific Studies in International Economics, Feb 3, 2014
We develop a model of the exchange rate that has two features. First, there are nonlinearities th... more We develop a model of the exchange rate that has two features. First, there are nonlinearities that arise from the existence of transaction costs in goods markets. Second, the model assumes heterogeneous agents who use simple forecasting rules, the 'fitness' of which is then controlled ex post by checking their profitability, and by switching to the more profitable rules. This model is capable of reproducing the empirical puzzles observed in exchange markets (disconnect puzzle, excess volatility, fat tails, volatility clustering). We analyse some policy implications of this type of modelling of the exchange rate.
Central Bank Communication and Financial Stress
The MIT Press eBooks, May 31, 2013
Exchange Rates in a Behavioural Finance Framework
We develop a simple model of the foreign exchange market in which agents optimize their portfolio... more We develop a simple model of the foreign exchange market in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one.This model produces two kinds of equilibria, a fundamental and a bubble one. In a stochastic environment the model generates a complex dynamics in which bubbles and crashes occur at unpredictable moments. We also analyse the empirical relevance of the model
Detecting and Interpreting Financial Stress in the Euro Area
SSRN Electronic Journal, 2010
Bubbling and Crashing Exchange Rates
SSRN Electronic Journal, 2003
The Exchange Rate and its Fundamentals. A Chaotic Perspective
SSRN Electronic Journal, 2002
Review of International Economics, 2005
Intervention in the Foreign Exchange Market in aM odel with Noise Traders
SSRN Electronic Journal, 2003
In this paper we analyze the effectiveness of sterilized interventions in the foreign exchange ma... more In this paper we analyze the effectiveness of sterilized interventions in the foreign exchange market. We use a model in which chartists and fundamentalists interact. This model produces speculative noise which leads to systematic deviations of the exchange rate from its fundamentals. In such an environment, interventions can be effective in reducing the noise. It does this by reducing the profitability of noise trading.
Journal of Economic Dynamics and Control, 2005
We develop a model of the exchange rate that has two features. First, there are nonlinearities th... more We develop a model of the exchange rate that has two features. First, there are nonlinearities that arise from the existence of transaction costs in goods markets. Second, the model assumes heterogeneous agents who use simple forecasting rules, the 'fitness' of which is then controlled ex post by checking their profitability, and by switching to the more profitable rules. This model is capable of reproducing the empirical puzzles observed in exchange markets (disconnect puzzle, excess volatility, fat tails, volatility clustering). We analyse some policy implications of this type of modelling of the exchange rate.
Journal of Banking & Finance, 2009
In this paper, we analyze the e¤ectiveness of the direct central bank interventions using a new e... more In this paper, we analyze the e¤ectiveness of the direct central bank interventions using a new e¤ectiveness criterion. To this aim, we investigate the e¤ects of central bank interventions (CBI) in a noise trading model with chartists and fundamentalists. We …rst estimate a model in which chartists extrapolate past returns and fundamentalists forecast a mean reverting dynamics of the exchange rate towards a fundamental value. Then, we investigate the role of central bank interventions for explaining the switching properties between the two types of agents. We …nd evidence that in the medium run, interventions increase the proportion of fundamentalists and therefore exert some stabilizing in ‡uence on the exchange rate.
European Economic Review, 2006
Bubbles and Crashes in a Behavioural Finance Model
SSRN Electronic Journal, 2004
SSRN Electronic Journal, 2002
In this paper we develop a model of the exchange rate. The existence of transactions costs introd... more In this paper we develop a model of the exchange rate. The existence of transactions costs introduces an important non-linearity. Agents have different beliefs about the future exchange rate. We show that this simple model creates great complexity in the market which is characterised by the fact that the exchange rate is disconnected from its fundamental most of the time. Periods of tranquility and turbulence alternate in unpredictable manner. Finally we show that this model mimicks most of the empirical puzzles uncovered in the literature.
SSRN Electronic Journal, 2005
We develop a simple model of the exchange rate in which agents optimize their portfolio and use d... more We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a stochastic environment the model generates a complex dynamics in which bubbles and crashes occur at unpredictable moments. We contrast these "behavioural" bubbles with "rational" bubbles.
SSRN Electronic Journal, 2019
The purpose of central bank minutes is to give an account of monetary policy meeting discussions ... more The purpose of central bank minutes is to give an account of monetary policy meeting discussions to outside observers, thereby enabling them to draw informed conclusions about future policy. However, minutes are by necessity a shortened and edited representation of a broader discussion. Consequently, they may omit information that is predictive of future policy decisions. To investigate this, we compare the information content of the FOMC's minutes and transcripts, focusing on three dimensions which are likely to be excluded from the minutes: 1) the committee's degree of hawkishness; 2) the chairperson's degree of hawkishness; and 3) the level of agreement between committee members. We measure committee and chairperson hawkishness with a novel dictionary that is constructed using the FOMC's minutes and transcripts. We measure agreement by performing deep transfer learning, a technique that involves training a deep learning model on one set of documents-U.S. congressional debates-and then making predictions on another: FOMC transcripts. Our findings suggest that transcripts are more informative than minutes and heightened committee agreement typically precedes policy rate increases.
OECD Journal: Financial Market Trends, 2017
This report provides estimates of the costs associated with bank resolution both in terms of the ... more This report provides estimates of the costs associated with bank resolution both in terms of the expected costs that might arise should a bank fail (i.e. as "ex-post" costs), as well as the cost associated with the likelihood that a solvent bank might fail (i.e. as "ex-ante" costs) over the next year. It finds that expected resolution costs (ex-post costs) have dropped recently due to higher average capital ratios and a lower level of bank liabilities as a percentage of GDP. The annualised value of these expected resolution costs (ex-ante costs), which increased sharply after 2008, has since subsided, but remains well above its 2008 level. Overall, the estimates produced in this report support the notion that recent financial sector reforms have had an impact on reducing the costs associated with bank failure, including the expected costs to taxpayers. However, estimates are in most cases yet to return to pre-crisis levels.
Heterogeneity of agents and the exchange rate: a nonlinear approach
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Papers by marianna grimaldi