The Predictability of the Chilean Yield Spread as an Economic Indicator
By Cong Ding
A country’s yield spread, defined as the difference between its long term and short term interest rates, has historically been used in developed countries as a proxy for projecting the economy’s future gross domestic product. Because interest rates are so liquid, data on rates are accessible and up to date. This means that the yield spread can be derived very quickly, and can therefore serve as an useful indicator for future economic growth. This paper empirically examines if interest rate data collected from the Chilean Central Bank construct yield spread indicators that can be used to predict GDP levels in subsequent periods. In addition, I assess whether the predictability is equally strong across different monetary policy regimes within the time period. I expected to find that the yield spread is positively correlated with GDP, but due to the volatile nature of an emerging market, I do not expect for the predictability to be consistent across the entire time period examined. I find that the Chilean yield spread does have predictive power on GDP, but that predictability is not clearly distinct across different monetary policy regime.
Advisor: Michelle Connolly | JEL Codes: N26,
A Superstar Dreaming: An economic analysis of the Aboriginal Desert Paintings Market
by Karen Francis
Abstract
Two artists each have total auction sales greater than AU$10 million in a single decade. In that same market and decade, over 20% of painters failed to sell a single painting offered at auction. There is no question that superstars dominate the Aboriginal Desert Paintings Market (ADPM) in Australia. But what contributes to the emergence of stars and superstars in this market? A gap has been left in the literature explaining superstardom; no mechanism for the emergence of stars in the visual arts has been offered. This study presents specific empirical characteristics and structural features of the ADPM which generate constraints and incentives for dealers and auction houses. The expected responsive behavior of these players is mostly confirmed by evidence presented in this study. The general picture that emerges is of a three-way tacit agreement by dealers (with government support), buyers and auction houses in promoting early success, reinforcing demonstrated market appeal by the few, and helping accelerate the shift of stars and the few real superstars from the primary to the auction market.
Professor Neil De Marchi, Faculty Advisor
JEL Codes: N27, P4, Z33
Measuring Capital Mobility in China: 1999 – 2005
by Huanjie Wang
Abstract
This paper examines the level of capital mobility in China during
Jan. 1999 to Apr. 2006 by estimating the covered interest rate differentials
during this time period. This study was made possible by data
from the fairly newly established offshore RMB Nondeliverable Forward
market. It concludes that China had not been enjoying perfect
capital mobility during the sample period of this study. Furthermore,
capital controls were mainly placed on capital outflow before 2003
and inflow afterward. Comparison with previous research confirms
the assertion.
Professor Stephanie Schmitt-Grohe, Faculty Advisor
JEL Codes: F32, N25, O53,
Analysis of Auction Price Risk: An Empirical Study of the Australian Aboriginal Art Market
by Ilya Voytov
Abstract
Auction theory economists have shown that auctions can be structured to maximize
the expected revenue to the seller. In this thesis, I show that they can also be
optimized to minimize the sellers’ risk through an understanding of the driving factors
behind seller’s auction price risk. I derive a general form equation for auction price
variance, and discuss how changes in the number of bidders and the type of bidders
affect the sellers’ auction risk. An empirical component of this paper takes data from
auction sales of Australian Aboriginal art and uses observed price variance to make
deductions about the underlying types of participating bidders.
Professor Neil De Marchi, Faculty Advisor
JEL Codes: C57, D44, D53, N27,
