Yuhn, Ky-Hyang

This study investigates the existence of long run Purchasing Power Parity (PPP) for the G7 countries (the United States, Canada, Germany, United Kingdom, France, Italy and Japan). Using the unit root test as well as cointegration techniques we have tested the PPP doctrine. The empirical results indicate that both effective exchange rate and consumer price index time series are nonstationary. Furthermore, the relationship between the effective exchange rate and the price level is shown to be in long run equilibrium in the United States, Canada, Japan and Italy but no evidence for PPP can be found for Germany, the United Kingdom and France. Thus, it can be claimed that the United States, Canada and Japan's markets allow the exchange rate to fluctuate freely as opposed to the European markets, since European economies are prone to disturbances (real shocks) that lead to permanent deviations from the PPP.

This thesis examines the significance of the real interest rate and stock prices as explanatory variables in the aggregate consumption function. This study applies the methodologies of OLS regression analysis and tests of cointegration to examine the relationship between stock prices and consumption. The empirical results suggest that stock prices are a significant factor in the modified aggregate consumption function. Consumers, perceiving stock prices to be an indicator of their wealth, are making more expenditures on durable goods as they perceive increases in stock values to be permanent. Finally, the results of the tests for cointegration suggest that there is no long-run equilibrium relationship between stock prices and consumption.

The Solow growth model examines the effects of saving, population and technological advances on the growth of an economy. Long-run economic growth is explained by the exogenous variable, technology. In this model lower income countries will experience higher rates of economic growth, which will lead to convergence in the standards of living between low-income and high-income countries. Additional theories including the augmented Solow model, which tests for conditional convergence and endogenous growth theories have been developed recently. An empirical inquiry of the convergence hypothesis has been conducted using a variety samples based on income classifications and geographical locations.

There are conflicting theories on the effects of devaluation on economy. This thesis sets out to investigate the impact of devaluation on the standard of living of developing countries, specifically Tunisia. The results obtained from the regressions contradicted the contractionary view of devaluation. It concluded that with proper structural reforms, devaluation improves the growth rate and therefore, the standard of living of a country. Surprisingly, this negative sign of government expenditure elasticity opened up the question for further research on the impact of the role and size of a government on the growth rate.

The purpose of this study is to determine what factors could influence an economic agents' decision to travel or vacation in Florida. This study measures this decision by analyzing the state Division of Tourism estimates for visitors in light of changes in; national gross domestic product, non-aviation gasoline prices, average airfares, and exchange rates. This data was compiled on a quarterly basis form 1980 to 1993 and analyzed by employing Translog and Cobb-Douglas demand functional forms for use in regression analysis. Based upon the regression results, the Cobb-Douglas functional form best represents what has historically occurred in the real economic world and follows generally accepted micro-economic demand theory. The Cobb-Douglas techniques reveal that an economic agents' future income expectations, measured by GDP levels, has a significant influence on Florida visitor estimates and has a role in the decision to vacation in Florida.

The purpose of this thesis is to examine the efficient market hypothesis (EMH) employing an ARCH model proposed by Engle (1982). The relations of the US stock market and other five major stock markets, i.e., the Canadian, French, German, Japanese, and UK markets are investigated. The time series used in this study are monthly stock price and dividend indices for the above six stock markets. The data cover the period from January 1970 to March 1991. In this study I utilize the ARCH model which appears to be very powerful in modeling conditional heteroscedasticity of stock prices. My test results provide unambiguous evidence of significant ARCH effects existing between the six national stock markets. Therefore, this study demonstrates the existence of market inefficiency for these national markets.

This study subjects the world's major stock markets to cointegration tests in an effort to respond to the common investigation that the major equity markets tend to move together with the U.S. market. The relationships between the United States and Canada, France, Germany, Japan, and the United Kingdom will be investigated. Not only will the entire period of 1970-1991.3 be examined, but the pre-1987 crash and the post-1987 crash periods as well. In addition, the Chow test will be employed to probe for any structural change occurrence relating to the worldwide stock market crash of October 1987. Evidence of cointegration is found to exist vis-a-vis the U.S. with the U.K. and Germany for the entire period; however, since the crash, only the U.K. and Japan have exhibited equilibrium relations. Absolutely no cointegration was detected for Canada nor France with the U.S. market.

The main contribution of this thesis is the determination of how long it takes for an adjustment in the short-term interest rate to effect inflation. In order to ascertain this, a good amount of economic theory is covered, including a rudimentary explanation of inflation and interest rates, a brief history of monetary policy in the United States, an analysis of the relationship between long- and short-term interest rates, the importance of credibility and inertia, and a detailed review of interest rate policy since 1979. This, in conjunction with empirical analysis, does in fact offer an answer to this question.

Lookback options are path dependent contingent claims whose payoff depend on the extrema of a given security's price over a given period. Some of these options are already traded on specialized markets (such as foreign exchange) and mostly in over-the-counter market alongside with other path dependent options (knock-ins, knock-outs, etc.). This thesis examines the existing pricing models of conventional options as well as standard European lookback options and provides some results about early exercise of their American counterparts with the use of notions from the theory of optimal stopping.

The purpose of this study is determine what factors could influence an
economic agents' decision to travel or vacation in Florida. This study
measures this decision by analyzing the state Division of Tourism estimates
for visitors in light of changes in; national gross domestic product, non-aviation
gasoline prices, average airfares, and exchange rates. This data
was compiled on a quarterly basis form 1980 to 1993 and analyzed by
employing Translog and Cobb-Douglas demand functional forms for use in
regression analysis. Based upon the regression results, the Cobb-Douglas
functional form best represents what has historically occurred in the real
economic world and follows generally accepted micro-economic demand
theory. The Cobb-Douglas techniques reveal that an economic agents'
future income expectations, measured by GOP levels, has a significant
influence on Florida visitor estimates and has a role in the decision to
vacation in Florida.