Japan's Imbalance of Payments

During the past three decades, Japan’s current account experienced five large swings. The yen appreciated considerably in periods when the current account boomed, and it depreciated whenever Japan’s external performance weakened. However, there has always been a certain lag in the adjustment of the exchange rate. This paper tries to explain these empirical regularities. It argues that as a result of the large movements of the current account, the flows of cash between Japan and ist trading partners fluctuated considerably, which in turn influenced the demand for yen relative to other currencies. To the extent that these cash flows were lagging the current account—primarily because of the Japanese lending abroad—the exchange rate’s response to external imbalances occurred with a delay. Based on the estimated maturity structure of Japan’s foreign lending, the paper constructs a measure of payment flows across Japanese borders, which is shown to follow the movements of the exchange rate very closely. The empirical findings raise doubts regarding the feasibility of proposals to depreciate the yen in order to help Japan out of its current economic crisis.yen exchange rate, cash flow, current account, foreign lending maturity structure

Long swings in Japan’s current account and in the yen

The yen has experienced several big swings over recent decades. This paper argues that the fluctuations of the Japanese exchange rate resulted mainly from corresponding movements in the current account, which affected the demand for yen relative to other currencies. The paper builds a vector error correction model for the exchange rate and the current account, based on the idea that the exchange rate and its economic fundamental do not move too far apart over time. In addition, the model allows for a Markov-switching stochastic trend in the current account. Regime changes occur at uncertain dates, possibly in response to exchange rate changes. Bayesian estimation proceeds using an innovative Gibbs-sampling procedure. The empirical results suggest that recurrent structural breaks in the yen’s fundamentals account for the large fluctuations of the Japanese exchange rat

Balance of payments flows and exchange rate prediction in Japan

Monetary models of exchange rates tend to focus on inflation differentials to explain exchange rate movements. This paper assesses the ability of currency flows to predict exchange rate changes. The focus is on Japan. Currency flows are assumed to depend on the level of the current account and on the international investment position, where the latter is used as a proxy for international debt repayments. A state space model is used to predict simultaneously the exchange rate and its determinants. Using rolling regressions and out-of-sample predictions, it is shown that a model featuring currency flows can predict the direction of exchange rate movements better than a random walk (with or without drift). However, as happens with standard macroeconomic models, the model is not able to outperform a random walk in terms of the mean square prediction error criterio

The purchasing power parity fallacy: time to reconsider the PPP hypothesis

This is a post-peer-review, pre-copyedit version of an article published in Open Economic Reviews. The final authenticated version is available online at: http://dx.doi.org/10.1007/s11079-017-9473-9Traded good prices affect the real exchange rate first through their effect on the overall price level and second through their effect on the nominal exchange rate. Whereas the price level effect, which is positive in sign, is universally recognized, the nominal exchange rate effect, which is negative in sign, is routinely ignored. We calculate to which extent real exchange rate changes are accounted for by traded good prices and other components of the real exchange rate. We find that the nominal exchange rate effect neutralizes the price level effect entirely, suggesting that, contrary to popular belief, good market arbitrage is not conducive to purchasing power parity (the purchasing power parity fallacy). Rather than traded or non-traded good prices, the main driving force behind the real exchange rate is currency market pressure, a variable that, as we argue, is largely determined by the cumulative trade and capital flows of a countr

Japan's Imbalance of Payments

During the past three decades, Japan's current account experienced five large swings. The yen appreciated considerably in periods when the current account boomed, and it depreciated whenever Japan's external performance weakened. However, there has always been a certain lag in the adjustment of the exchange rate. This paper tries to explain these empirical regularities. It argues that as a result of the large movements of the current account, the flows of cash between Japan and ist trading partners fluctuated considerably, which in turn influenced the demand for yen relative to other currencies. To the extent that these cash flows were lagging the current account primarily because of the Japanese lending abroad the exchange rate's response to external imbalances occurred with a delay. Based on the estimated maturity structure of Japan's foreign lending, the paper constructs a measure of payment flows across Japanese borders, which is shown to follow the movements of the exchange rate very closely. The empirical findings raise doubts regarding the feasibility of proposals to depreciate the yen in order to help Japan out of its current economic crisis

Current account reversals triggered by large exchange rate movements

Japan's long-lasting current account surplus as well as Germany's temporary surplus during the 1980s are the two largest current account surpluses the world has witnessed. Remarkably, net exports were rising in both countries despite the large overall appreciation of the Japanese yen and the considerable strength of the German mark. This paper shows that the real exchange rate still mattered for the export performance of these economies. It applies a Markov-switching time series model to the current accounts of both countries, in which the transition probabilities depend on the level of the real exchange rate. It finds that both countries¿ current accounts, while overall rising, experienced several setbacks and subsequent recoveries, with clear turning-points. It further demonstrates that current account reversals were triggered by the real exchange rate appreciating, or depreciating, too strongly

Quantum phase estimation algorithm in presence of static imperfections

We study numerically the effects of static imperfections and residual couplings between qubits for the quantum phase estimation algorithm with two qubits. We show that the success probability of the algorithm is affected significantly more by static imperfections than by random noise errors in quantum gates. An improvement of the algorithm accuracy can be reached by application of the Pauli-random-error-correction method (PAREC).Comment: 5 pages, 5 figures. Research avilable at http://www.quantware.ups-tlse.fr

Controlled-NOT logic gate for phase qubits based on conditional spectroscopy

A controlled-NOT logic gate based on conditional spectroscopy has been demonstrated recently for a pair of superconducting flux qubits [Plantenberg et al., Nature 447, 836 (2007)]. Here we study the fidelity of this type of gate applied to a phase qubit coupled to a resonator (or a pair of capacitively coupled phase qubits). Our results show that an intrinsic fidelity of more than 99% is achievable in 45ns.Comment: 5 pages, 5 figures, To appear in Quantum Inf. Pro

Owning the Body: Bodily Autonomy and Consent in the Works of Octavia Butler

During the 1980’s the Second Wave feminist movement provided more interest in interdisciplinary movements towards equity in the case of gender. One movement that slowly grew was Womanism, which included the intersection between race and gender. Specifically, the experiences of black women in the United States. Inspired by this movement authors such as Octavia Butler was a black science fiction author who wrote literature focused on black women. Alongside her preoccupation, with race in science fiction, Butler explores the nature of consent and bodily autonomy in utopian and dystopian futures. Within her novels, she uses Womanism to engage with futuristic visions of anxiety with bodily autonomy. Utilizing theories such as Womanism and the Cyborg theory coined by Donna Haraway, there is ample opportunity to analyze Butler\u27s literature as a commentary on gender, race, and intersectionality

Decoherence in rf SQUID Qubits

We report measurements of coherence times of an rf SQUID qubit using pulsed microwaves and rapid flux pulses. The modified rf SQUID, described by an double-well potential, has independent, in situ, controls for the tilt and barrier height of the potential. The decay of coherent oscillations is dominated by the lifetime of the excited state and low frequency flux noise and is consistent with independent measurement of these quantities obtained by microwave spectroscopy, resonant tunneling between fluxoid wells and decay of the excited state. The oscillation's waveform is compared to analytical results obtained for finite decay rates and detuning and averaged over low frequency flux noise.Comment: 24 pages, 13 figures, submitted to the journal Quantum Information Processin