Narrow Results

Traditionally, central banks have used direct intervention in currency markets when the exchange rate has moved away from equilibrium or when the volatility has been excessive and the literature on the effects of indirect intervention is sparse. We examine whether indirect intervention has any impact on the exchange rate levels by examining the central bank verbal communications in Australia and Canada. We find evidence that the Bank of Canada’s (BOC’s) speeches reduce the mean exchange rate returns but not the Reserve Bank of Australia’s (RBA’s) speeches. Our results show that the socio-economic similarities between countries do not guarantee a similar impact of indirect intervention.

This chapter discusses Durbin, Wu, and Hausman (DWH) specification tests and provides examples of their application and interpretation. DWH tests compare alternative parameter estimates and can be useful in discerning endogeneity issues (omitted variables, measurement error/errors in variables, and simultaneity), incorrect functional form and contemporaneous correlation in the lagged dependent variable — serial correlation model, testing alternative estimators for a model, and testing alternative theoretical models. Empirical applications are provided illustrating the use of DWH tests in comparing LS, IV, FE, RE, and GMM estimators.

The scatter plot for apparent magnitude(m) and redshift (z) in the case of quasars as compiled in Véron-Cetty(V-C) Catalogues(2003 and 2006) clearly indicate that the data are truncated. We use non-parametric tests as developed by Efron and Petrosian to analyse these truncated data. Our analysis rejects the null hypothesis in case of both catalogues of quasar data. Further analysis shows linearity (in log z) of the Hubble law up to very small z(≤ 0.3) values but non-linearity for higher redshifts. The results raise new possibilities not only in the observational astronomy but for the entire cosmological debate.