Jarocinski M.,European Central Bank
Computational Statistics and Data Analysis | Year: 2015
The correct implementation of the Durbin and Koopman simulation smoother is explained. A possible misunderstanding is pointed out and clarified for both the basic state space model with a non-zero mean of the initial state and with time-varying intercepts (mean adjustments). © 2015 Elsevier B.V.All rights reserved. Source
News Article | September 12, 2016
The R&D Index: Market Watch for the week ending Sept. 9, 2016 closed at 1515.45 for the 25 companies in the R&D Index. The Index was down 1.98 percent (or 30.6 basis points) over the week ending Sept. 2, 2016. Only four companies gained value last week from 0.02 percent (Sanofi) to 1.81 percent (Eli Lilly). Twenty-one companies lost value from -0.78 percent (Merck) to -5.22 percent (General Motors). Most of the losses seen in the R&D Index (and the DJIA) were seen on Friday, Sept. 9, when the DJIA dropped 2.13 percent or 394.5 basis points in just one day, it's largest drop since late June, and the largest drop in the R&D Index since late April. Oil prices fell on Friday, gold prices fell, and U.S. bonds fell as well, pushing their yields higher. As CNNMoney stated, “the good news is there wasn't any really bad news.” No government reports revealing bad economic data, no weak industrial earnings reports, and nothing to imply fears of a looming recession. What set off the sell-off was the lack of any strong economic support from central banks, according to some analysts. The European Central Bank left bond buys and interest rates where they were in their latest meeting. The U.S. Federal Reserve stated it still might raise interest rates, following a week of relatively weak industrial economic data. And Japan's economy received less stimulus than expected over the summer and its central bank is running out of government debt to buy to spur growth. It also is concerned about North Korea's latest round of nuclear sabre rattling. China announced last week plans to construct a sci-tech innovation center in Beijing to take shape in 2017. The plan is to upgrade the center in stages with a second stage offering incubators and the third stage to build a professional, deeply integrated services and business incubator platform. The government also announced plans to set up a State-level innovation center by the end of the year to boost Chinese companies' production capabilities in key robot components. This move is part of China's broad plan to tackle technological bottlenecks in key industries. Their overall aim is to build about 40-State-level innovation centers by 2025 to create a smart, safer and more flexible manufacturing industry. China set up its first innovation center in June to advance R&D in batteries for electric vehicles. This center has attracted first-phase capital of nearly $200 million from Chinese automakers and local governments. This center's plan is to catch up with Japan and South Korea in battery technology by 2020. China also announced nine new overseas research centers during the first half of 2016 with Chinese telecom and pharmaceutical companies, among others, pledging more than $50 billion for overseas investments. R&D Index is a weekly stock market summary of the top international companies involved in research and development. The top 25 industrial spenders of R&D in 2014 were selected based on the latest listings from Schonfeld & Associates' June 2015 R&D Ratios & Budgets. These 25 companies include pharmaceutical (11 companies), automotive (5), ICT (7) and conglomerate (2) organizations who invested a cumulative total of more than $170 billion in R&D in 2014, or approximately 10.8% of all the R&D spent in the world by government, industries and academia combined, according to R&D Magazine's 2014 Global R&D Funding Forecast. The stock prices used in the R&D Index are tabulated from NASDAQ, NYSE, XETRA and OTC common stock prices (in U.S. dollars) for the companies selected at the close of stock trading business on the Friday preceding the publication of the R&D Index in R&D Magazine's R&D Daily eNewsletter. The companies used in the R&D Index include Microsoft, Intel, Roche Holdings, Novartis, Johnson & Johnson, Pfizer, Toyota Motor, General Motors, Merck & Co., Ford Motor, Cisco, Apple Computer, Sanofi SA, Qualcomm, IBM, Astra Zeneca plc, Honda Motor, Daimler, Oracle, GlaxoSmithKline, Siemens, Eli Lilly Co., Ericsson, Bristol-Myers Squibb and Bayer AG. Stock prices are based on those stocks traded on the U.S. exchanges. R&D Index trends (in the stock prices) are just one indicator of the amount of capital available to these high-technology companies to invest in R&D and should not be implied to indicate the absolute value of R&D investments made by these organizations. The companies chosen for the R&D Index have very large sophisticated internal and global R&D organizations with each company investing between $4.3 and $11.7 billion annually on their R&D efforts.
News Article | January 21, 2016
News Article | April 8, 2016
If you spend some time in Bitcoinland, you’ll notice that a vocal section of the community strongly dislikes central banking. In their view, the digital currency is the solution to central banking’s many problems, including a lack of transparency, a close relationship with the global power elite, and the central banks’ ability to conjure money from thin air. For these people, using bitcoin is a way to disempower central banks—and empower the individual. So what would happen to the world’s central banks if bitcoin replaced national currencies? Turns out it would look a lot like a return to the gold standard, which was abandoned a long time ago, according to a recent staff working paper from Warren Weber at the Bank of Canada, the country’s central bank. And most people wouldn’t necessarily be better off in a bitcoin world. In fact, they could be left more vulnerable to financial crises. In the paper, Weber “imagines a world in which countries are on the Bitcoin standard, a monetary system in which all media of exchange are Bitcoin or are backed by it,” and compares this imagined future to a real past (1880-1913) when gold performed the same function. The predictions? Central banks would generally have a lot less room for some key stabilizing activities: setting nationally independent interest rates, creating money, and targeting inflation. Currency exchange rates would be fixed. Financial crises would still occur, and in the end might actually cause enough of an uproar to prompt a return to government-backed money. Under a bitcoin standard, Weber points out that central banks’ key interest-rate setting power would vanish thanks to the “virtually costless arbitrage of Bitcoin across countries.” In other words, bitcoin-holders around the world could actually offset the actions of central banks, and affect the national money supply, just by chasing better returns for themselves. David Yermack, a finance professor at New York University, compares this scenario to Europe today, where national central banks have “ceded control over monetary policy to the [European Central Bank] and the Euro,” causing particular trouble for Greece, as he told me in an email. “A central bank loses a lot of its power if it cannot control the money supply.” Since bitcoins are created by the bitcoin network at a predetermined rate, a central bank under a bitcoin standard would be “limited in what it can do because it cannot act as the lender of last resort to itself” by printing unlimited amounts of its own currency, according to Weber. That’s because money backed by bitcoin would have to conform to the supply of bitcoins, which is hard coded to increase at a set rate until a 21-million cap. So under a bitcoin standard, not only would economic crises still happen, but authorities would have fewer tools at their disposal to fight them. The news isn’t all bad for bitcoin. The Bank of Canada paper predicted that economic growth likely wouldn’t change much if it became the primary world currency, despite its deflationary model. Weber also found that prices would be more predictable, and that dealing with currency exchange would naturally be much less of a headache. But not all economists agree that deflation isn’t a problem. Yermack points out that the gold standard’s deflation caused social upheaval “and many people felt this was a real brake on economic growth...The optimal rate of monetary growth should really equal economic growth, not some artificial limit imposed by software.” So will bitcoin take over? Not if governments or central banks have anything to do with it. Weber argues that they’ll “take actions to prevent it,” for two reasons. One is to protect the revenues they bring in from “the ability to almost costlessly create money,” he writes. The second, according to Weber, is to protect their ability to “implement interest policies to affect their domestic economies. Governments would lose the ability to do either or both of these under the Bitcoin standard,” he writes—not an acceptable outcome. However unlikely mass bitcoin adoption may be, according to this Bank of Canada report, it would seriously hurt central banking as we know it. But bankers might not have to worry. Eventually, a better technology will probably emerge anyway, replacing bitcoin altogether, Weber argues. Or bitcoin itself may evolve into something completely different.
News Article | March 13, 2016
What was expected to be a largely quiet week, given the lack of economic data and the step down in corporate earnings velocity, certainly started off that way, but Thursday’s news spinning out of the European Central Bank (ECB) made much more waves than expected. Those bigger waves led the S&P 500 to climb another 1 percent last week, adding to the index’s overall move of 8.4 percent over the last month and now stands at just over 1 percent shy of breaking even for 2016.