DOCSLIB.ORG

Currency Investment Insights Alternative Risk Premia Benchmarks July 6 2020 Bloomberg Systematic Strategies a Bloomberg Professional Service Offering

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Currency Investment Insights Alternative Risk Premia Benchmarks July 6 2020 Bloomberg Systematic Strategies a Bloomberg Professional Service Offering Bloomberg Systematic Strategies A Bloomberg Professional Service offering Currency investment insights Alternative risk premia benchmarks July 6 2020 Bloomberg Systematic Strategies A Bloomberg Professional Service offering Currency investment insights Alternative risk premia benchmarks For decades, the currency markets have been the first port of call for discretionary Kartik Ghia, PhD investors looking to express macroeconomic views. In more recent years, this has +1 212 617 5649 been accompanied by a plethora of quantitative investment strategies aimed at [email protected] providing access to alternative risk premia factors in the currency markets. Despite increasingly widespread use within systematic investment portfolios, the lack of Michael K. Donat, CFA established benchmarks even for the most popular investment styles—carry, value +1 212 617 5509 and trend—has made performance comparisons difficult. This has often led to a wide [email protected] range of conclusions about long run performance. Zarvan Khambatta, CFA, CAIA In this publication, we establish tradable benchmarks for three alternative factors— +1 212 617 5418 carry, value, and trend. We highlight the properties of the individual styles, the [email protected] implications for portfolio construction and propose rules-based, transparent implementations. The resulting benchmarks can either be used to replicate factor returns in the currency markets or as a tool to measure the performance of existing portfolios. The intention is to provide a common frame of reference around which asset owners and managers can base performance expectations. Our discussion includes: Examining the performance characteristics of the carry trade Investigating the value factor and propose a transparent, rules-based strategy using a measure of purchasing power parity (PPP) Assessing the role of signals and portfolio construction in developing a transparent trend following benchmark Performance attribution and case studies for three investment styles Proposing a multi-factor currency benchmark using a risk-based approach Figure 1: Diversified profiles: carry, value and trend Source: Bloomberg Bloomberg Systematic Strategies A Bloomberg Professional Service offering Introduction Systematic investment strategies have long been a staple of currency investors. Viewed as a relatively inexpensive way to express macroeconomic views, the most popular styles are carry, value, and trend following. Each provides exposure to an identifiable risk factor in exchange for a long-run positive expected return. Differences in the drivers of returns translate to distinct returns profiles—which can potentially be combined to develop robust return-seeking portfolios. Alternative beta strategies have four important elements: (1) universe selection and the choice of instrument, (2) signal and ranking methodology, (3) constituent weighting and (4) rebalancing frequency. As we see in later sections, currency strategies have one additional feature—exposure to the US dollar. Despite the existence of multiple parameters that promote a plethora of implementations, the relative similarity in signals across each implementation within a style, permits the identification of broad benchmarks for carry, value, and trend following in currencies. There is a significant amount of academic and practitioner literature discussing these styles—both the drivers of returns and the various considerations surrounding implementation. Our prior publications on the subject are listed in the bibliography. In later sections, we simply refer to these findings where appropriate. In the initial sections, we describe an example of a transparent, robust implementation for each investment style. The implementations discussed are intended to be accessible to a wide audience. To promote the flexible use of the benchmarks the construction process is modular and facilitates customization to specific requirements. The four main considerations are: 1. Transparency of methodology and data 2. Understanding whether a common consensus exists (using published literature and invested funds) 3. Implementation feasibility 4. Ability to isolate exposure to the style (‘purity’) After the individual index style construction and design has been laid out, the latter sections of this publication will discuss a multi-style benchmark. There are two main use cases for these style benchmarks; the first in a primary role as a return generator and the second in an ancillary capacity as a return enhancer/risk reducer. These can be summarized as (1) a source of investment return which is typically part of a macro portfolio and (2) an excess return overlay in conjunction with an international asset portfolio/cash flows. This is typically used by asset managers and/or the treasury department of a corporation to enhance risk-adjusted returns by systematically managing underlying currency exposures. The style benchmarks discussed here are intended to highlight longer term performance characteristics and illustrates portfolio use-cases. The aim is to construct an investible factor-based framework to provide investors with the ability to customize these benchmarks and address individual requirements. Data The currency universe for the style benchmarks is comprised of 24 indices within the Bloomberg FX Forward Index Family. The indices span developed and emerging markets Bloomberg Systematic Strategies A Bloomberg Professional Service offering and represent the excess return of holding and rolling a 1-month currency forward contract against the U.S. dollar. The pricing source for the spot and forward rates used to construct these indices is Bloomberg FX Fixing (BFIX). For liquidity purposes, trades are via the US dollar pairs—even for (non-US dollar) crosses. By region, the currency indices cover: Asia Pacific: AUD*, IDR, INR, JPY*, KRW, NZD*, PHP, SGD, and TWD EMEA: CHF*, CZK, EUR*, GBP*, HUF, ILS, NOK*, PLN, RUB, SEK*, TRY, and ZAR Americas: BRL, CAD*, and MXN The asterisk (*) denotes a currency classified as a developed market (or G10) currency. For more information about this family of indices please refer to the Bloomberg FX Forward Index Family, July 2019. The inception date is January 1999 with the exception of selected emerging market (EM) currencies which start at later dates depending on data availability. For the carry strategy, we need a measure for the US funding rate. In-line with general industry practice, we use the US 1-month LIBOR. OIS rates can be used instead of LIBOR with minimal change in stated results. Given the transparency in methodology and public availability, we use PPP data from the Organization for Economic Cooperation and Development (OECD) to calculate the signal for the value strategy. The data is published with periodic revisions. Due to circumstances, our data collected prior to 2018 includes revisions. The data following this date are point-in-time. We address the impact of this in the value investing section. The carry trade The currency carry trade is defined as investing in a high yielding currency and funding in a (relatively) lower yielding currency. The profile of the risk premium is steady, incremental gains during periods of low-to-medium market volatility interspersed with sudden, large drawdowns when investor sentiment turns bearish. The compensation for this ‘crash risk’—manifested by a strong negative skewness in returns—is a positive long run expected return. The returns profile can be compared to an insurance underwriter who earns a steady income through premium but must pay-out sporadically when specified events occur. For an extended discussion on the drivers of returns and the different variations in the strategy, refer to The G10 FX carry premium, November 2010, Bloomberg LP and Deconstructing currency carry, January 2019, Bloomberg LP. The G10-EM currency classification is both a manifestation of structural differences between economic regimes and an artifact of tradition. The broad economic classification is based on aspects such as whether the currency is actively managed, the existence of capital controls, the state of economic development, and the independence of fiscal and monetary institutions. (See The EM FX Carry Premium, September 2010, Bloomberg LP). At the same time, the steady institutional developments within emerging markets has muddied the traditional distinctions between the two groups—leaving some room for discretion. For the purposes of our carry benchmark, we maintain the distinction between the two groups since many institutions still segment portfolios by traditional definitions. The currency carry benchmark comprises of a weighted average of the G10 and EM carry benchmarks. The standalone G10 and EM-only carry portfolios are combined to create Bloomberg Systematic Strategies A Bloomberg Professional Service offering the final (composite) portfolio; which contains an equal number of offsetting G10 and EM currencies in the funding and investment legs. Over extended periods, relative to this carry portfolio (which enforces separation between G10 and EM currencies), a portfolio using a combined universe will tend to overweight the number of G10 and EM currencies in the funding and investment legs respectively.1 In turn, this translates into higher sensitivity (for the combined universe portfolio) to global ‘risk-on/off’ sentiment. Signal Currency carry strategies have signals with varying degrees of complexity. These range from the magnitude of pairwise interest rate differentials
Load more

Recommended publications
  • The Socialization of Investment, from Keynes to Minsky and Beyond
    Working Paper No. 822 The Socialization of Investment, from Keynes to Minsky and Beyond by Riccardo Bellofiore* University of Bergamo December 2014 * [email protected] This paper was prepared for the project “Financing Innovation: An Application of a Keynes-Schumpeter- Minsky Synthesis,” funded in part by the Institute for New Economic Thinking, INET grant no. IN012-00036, administered through the Levy Economics Institute of Bard College. Co-principal investigators: Mariana Mazzucato (Science Policy Research Unit, University of Sussex) and L. Randall Wray (Levy Institute). The author thanks INET and the Levy Institute for support of this research. The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. Levy Economics Institute P.O. Box 5000 Annandale-on-Hudson, NY 12504-5000 http://www.levyinstitute.org Copyright © Levy Economics Institute 2014 All rights reserved ISSN 1547-366X Abstract An understanding of, and an intervention into, the present capitalist reality requires that we put together the insights of Karl Marx on labor, as well as those of Hyman Minsky on finance. The best way to do this is within a longer-term perspective, looking at the different stages through which capitalism evolves.
    [Show full text]
  • Investment Interests Safe Harbor (42 C.F.R
    Investment Interests Safe Harbor (42 C.F.R. § 1001.952(a)) (a) As used in section 1128B of the Act, “remuneration” does not include any payment that is a return on an investment interest, such as a dividend or interest income, made to an investor as long as all of the applicable standards are met within one of the following three categories of entities: (1) If, within the previous fiscal year or previous 12 month period, the entity possesses more than $50,000,000 in undepreciated net tangible assets (based on the net acquisition cost of purchasing such assets from an unrelated entity) related to the furnishing of health care items and services, all of the following five standards must be met— (i) With respect to an investment interest that is an equity security, the equity security must be registered with the Securities and Exchange Commission under 15 U.S.C. 781 (b) or (g). (ii) The investment interest of an investor in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must be obtained on terms (including any direct or indirect transferability restrictions) and at a price equally available to the public when trading on a registered securities exchange, such as the New York Stock Exchange or the American Stock Exchange, or in accordance with the National Association of Securities Dealers Automated Quotation System. (iii) The entity or any investor must not market or furnish the entity's items or services (or those of another entity as part of a cross referral agreement) to passive investors differently than to non-investors.
    [Show full text]
  • 15 Theories of Investment Expenditures
    Economics 314 Coursebook, 2010 Jeffrey Parker 15 THEORIES OF INVESTMENT EXPENDITURES Chapter 15 Contents A. Topics and Tools ..............................................................................2 B. How Firms Invest ............................................................................2 What investment is and what it is not ............................................................................ 2 Financing of investment ................................................................................................ 3 The Modigliani-Miller theorem ..................................................................................... 5 Sources of finance and credit availability effects ............................................................... 6 C. Investment and the Business Cycle ...................................................... 8 Keynes and the business cycle ........................................................................................ 8 The accelerator theory of investment ............................................................................... 9 The multiplier-accelerator model .................................................................................. 10 D. Understanding Romer’s Chapter 8 ..................................................... 12 The firm’s profit function ............................................................................................ 13 User cost of capital .....................................................................................................
    [Show full text]
  • The Flexible Accelerator Model of Investment: an Application to Ugandan Tea-Processing Firms
    African Journal of Agricultural and Resource Economics Volume 10 Number 1 pages 1-15 The flexible accelerator model of investment: An application to Ugandan tea-processing firms *Edgar E. Twine International Livestock Research Institute, c/o IITA East Africa Hub, Dar es Salaam, Tanzania. E-mail: [email protected] Barnabas Kiiza Makerere University, Kampala, Uganda. E-mail: [email protected] Bernard Bashaasha Makerere University, Kampala, Uganda. E-mail: [email protected] Abstract The study uses the flexible accelerator model to examine determinants of the level and growth of investment in machinery and equipment for a sample of tea-processing firms in Uganda. Using a dynamic panel data model, we find that, in the long run, the level of investment in machinery and equipment is positively influenced by the accelerator, firm-level liquidity, and a favourable investment climate in the country. Depreciation of the exchange rate negatively affects investment. We conclude that firm-level strategies that increase output and profitability, and a favourable investment policy climate, are imperative to the growth of the tea industry. Key words: accelerator model; fixed asset investments; Ugandan tea-processing firms 1. Introduction Investment or capital accumulation is widely regarded as important in raising output and income at both the firm and national level. The private sector in Uganda has responded to macroeconomic policy reforms with private investment increasing by 13% per year on average from 1986/1987 to 1997/1998 (Collier & Reinikka 2001). The sectors that have attracted most investment in recent years are manufacturing, agriculture, forestry, fishing, construction and services.
    [Show full text]
  • How Do Central Banks Invest? Embracing Risk in Official Reserves
    How do Central Banks Invest? Embracing Risk in Official Reserves Elliot Hentov, PhD, Head of Policy and Research, Official Institutions Group, State Street Global Advisors Alexander Petrov, Senior Strategist, Official Institutions Group, State Street Global Advisors Danae Kyriakopoulou, Chief Economist and Director of Research, OMFIF Pierre Ortlieb, Economist, OMFIF How do Central Banks Invest? Embracing Risk in Official Reserves This is an update to the 2017 SSGA study of central bank asset allocation.1 In contrast to the last study which focused on the allocation of excess reserves (i.e. the investment tranche) exclusively, this study reviews the entire reserve portfolio. Two years on, the main findings are: • Overall, there is greater diversity of asset • Central banks hold around $800bn (6% of classes and a broader use of risk assets, portfolio) in equities and over one trillion with roughly 15% ($2tn out of total $13tn) (9% of portfolio) in return-enhancing2 bonds in unconventional reserve instruments. (mainly investment-grade corporates and • Based on official reserves, central banks asset-backed securities) compared with are significant, frequently dominant, close to zero at the beginning of the century. capital markets participants: they hold about a third of all supranational debt and nearly a fifth of high-grade sovereign debt (or nearly half if domestic QE holdings are added). Central Banks as Asset Owners In December 2017, total global central bank reserves5 stood at around $13.3tn, recovering from their end- After a decade of unconventional monetary policy, one 2015 trough but below the mid-2014 peak of over could be forgiven for confusion around central bank $13.6tn (see Figure 1).
    [Show full text]
  • Saving, Investment, and the Financial System
    LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College [email protected] http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution is permitted for educational and research purposes, so long as no changes are made. All copies must be provided free of charge and must include this copyright notice. Ch 26 Saving, Investment, and the Introduction When Financial a country saves System a large fraction of its income, more resources are available for investment in capital, and higher capital raises the economy’s productivity, raising living standards still further. But within that country, at any given point in time, some people will want to save some of their income for the future, while others will want to borrow to finance investments in physical capital. How are savers and investors coordinated? The financial system consists of those institutions in my the econo that help to match ’s one person savings with another person’s investment. This chapter: 1. Describes the variety of ns institutio that make up the financial system in the US today. 2. Describes the relationship between the financial system and these key macroeconomic variables: saving and investment. 3. Develops a model that describes how the interest rate adjusts mand so as to equate the de for and supply of funds in the financial system and uses this model to show how various government policies affect the interest rate, saving, and investment. Outline 1. Financial Institutions in the US Economy A. Financial Markets i. Bond Market ii. Stock Market B.
    [Show full text]
  • The Investment Currency Market There Are Two
    The investment currency market There are two recognised foreigncurrency markets in the United Kingdom: the official market, through which most payments between residents and non-residents pass; and the investment currency market, in which the 'dollar premium' arises. The investment currency market is available for certain specified capital transactions, and only residents of the Scheduled Territories[l] have access to it. The purpose of this article is to explain what is meant by 'investment currency' and the 'dollar premium', and to show how the investment currency market works. It should be mentioned at the outset that payments through the investment currency market are subject to the provisions of the Exchange Control Act 1947, just as much as are payments through the official market. In particular, residents need permission to purchase any foreign currency and are required to sell any foreign currency in their possession on the official market unless they have been given permission to sell it on the investment currency market or to retain it for some particular purpose. Moreover, any permissions given may be conditional. It is these and other powers in the Act which provide the legislativebasis of the investment currency market and enable it to be controlled. What is investment currency? Investment currency is foreign currency which has originated in the main from the sale abroad of foreign currency securitiesowned by UK residents, and which may be used by residents of the Scheduled Territories to acquire foreignassets, for which currency from the official marketis not made available. The investment currency market is primarily a mechanism to enable portfolio investments in foreign currency securities to be transferred among UK residents; other permitted uses include the purchase of properties abroad for private use and, to a very small extent, the financing of direct investments abroad.
    [Show full text]
  • Which Equity Sectors Can Combat Higher Inflation? Some Investors Are Worried That Inflation Is Set to Rise
    SECOND QUARTER 2021 Insight Which Equity Sectors Can Combat Higher Inflation? Some investors are worried that inflation is set to rise. We look at which equity sectors could prove to be the most resilient. Insight from sub-adviser THE SHARP RISE IN BOND YIELDS OVER RECENT WEEKS HAS RATTLED Schroders Investment Management EQUITY MARKETS AMID FEARS THAT FISCAL STIMULUS AND A POST- PANDEMIC SPENDING SPLURGE COULD STOKE HIGHER INFLATION. Sean Markowicz, CFA Five-year inflation expectations, as measured by the yield difference Strategist, Research and Analytics between nominal and inflation-protected US Treasury bonds, have rebounded sharply from their pandemic lows and are now at 2.5%— their highest level since 2008. Moderate inflation is generally good for equities because it tends to be associated with positive economic growth, rising profits, and stock price gains. However, things can quickly turn ugly for stock-market investors if the economy overheats and inflation rises too high. Our research has found that equities outperformed inflation 90% of the time when inflation has been low (below 3% on average) and rising—this is where we are today. But when inflation was high (above 3% on average) and rising, equities fared no better than a coin toss, as shown in the chart below. FIGURE 1 % of Rolling 12-Month Periods When US Equity Returns Exceeded Inflation Rate, 1973-2020 100% Key Points 90% 90% Five-year inflation 81% expectations, as measured by 80% 76% the yield difference between 70% nominal and inflation- protected US Treasury bonds, 60% 48% have rebounded sharply from 50% their pandemic lows.
    [Show full text]
  • Investment Funds Description P Series of the Wespath Funds Trust
    ` AS OF JANUARY 1, 2021 Investment Funds Description P Series of the Wespath Funds Trust a general agency of The United Methodist Church INVESTMENT FUNDS DESCRIPTION P Series of the Wespath Funds Trust As of January 1, 2021 (Containing performance and other information as of December 31, 2020, unless otherwise noted) The information contained in this Investment Funds Description – P Series is intended for (1) organizations that are controlled by or associated with The United Methodist Church (the “Church”) that elect to or are required to sponsor retirement and/or health and welfare benefit plans and programs for clergy and lay employees of a church or a tax-exempt convention or association of churches consistent with Section 414(e) of the Internal Revenue Code (each a “Church Plan”) administered by the General Board of Pension and Health Benefits of The United Methodist Church, Incorporated in Illinois, a general agency of the Church doing business under the assumed name of Wespath Benefits and Investments (“WBI”) (such Church Plans hereafter referred to as the “Benefit Plans”) for the benefit of their employees (such organizations hereafter referred to as the “Plan Sponsors”); (2) the Benefit Plans; (3) individuals who are eligible to participate in the Benefit Plans, as a result of their employment (or former employment) with a Plan Sponsor, or beneficiaries of such individuals (“Participants”); and (4) other investors approved by the Fund Manager under exceptional circumstances. Plan Sponsors, Benefit Plans, Participants and other investors approved by the Fund Manager under exceptional circumstances are collectively referred to herein as “Eligible Investors.” All such Eligible Investors shall qualify as permissible investors in a fund excepted from the definition of “investment company” under Section 3(c)(14) of the Investment Company Act of 1940, as amended (the “1940 Act”).
    [Show full text]
  • Basic Investment Terms
    Because money doesn’t come with instructions.SM Robert C. Eddy, CFP® Margaret F. Eddy, CFP® Matthew B. Showley, CFP® Basic Investment Terms ANNUITY – A financial product sold by financial institutions pay out a stream of payments to the individual at a later point; primarily used as a means of providing guaranteed cash flow for an individual during their retirement years. ASSETS – Resources with economic value owned by a company, fund, or individual, especially those that can be converted to cash; i.e. real estate, automobiles, investments (stocks and bonds), materials, inventories, etc. ASSET CLASS – An investment category; i.e. equities (stocks), fixed income (bonds), or money market (cash). Asset classes can be divided into size (small, mid and large capitalization stocks), geographic location (international, emerging markets, etc.), and other (real estate, commodities, hedge funds, etc.). BEAR OR BULL MARKET – A bear market is a prolonged market period where investment prices fall, usually accompanied by widespread pessimism, as a result of economic recession, high unemployment, or rising inflation (the Depression and Tech Bust of 2000 are examples). A bull market is a prolonged period where investment prices rise faster than their historical average, as a result of economic recovery, boom, or investor psychology; these terms are most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies, and commodities, i.e. Tech Boom of the late 1990’s. BOND – A debt security issued for a period longer than one year by corporations, governments, or their agencies, with the intent of raising capital by borrowing; a bond is the promise to repay the principal along with interest on a specified date; some bonds do not pay interest, but all bonds require a repayment of principal.
    [Show full text]
  • Investment Efficiency and the Distribution of Wealth Iii Acknowledgments
    WORKING PAPER NO.53 Investment Effi ciency and the Distribution of Wealth Abhijit V. Banerjee Cover_WP053.indd 1 5/11/2010 11:01:03 PM WORKINGPAPERNO.53 = InvestmentEfficiencyand theDistributionofWealth AbhijitV.Banerjee = = = = = = = = = ©2009TheInternationalBankforReconstructionandDevelopment/TheWorldBank OnbehalfoftheCommissiononGrowthandDevelopment 1818HStreetNW= Washington,DC20433 Telephone:2024731000 Internet: www.worldbank.org = www.growthcommission.org Email: [email protected] = [email protected] = Allrightsreserved= = 1234511=100908 = ThisworkingpaperisaproductoftheCommissiononGrowthandDevelopment,whichissponsoredby thefollowing=organizations: = AustralianAgencyforInternationalDevelopment(AusAID)= DutchMinistryofForeignAffairs SwedishInternationalDevelopmentCooperationAgency(SIDA) U.K.DepartmentofInternationalDevelopment(DFID) TheWilliamandFloraHewlettFoundation TheWorldBankGroup= = Thefindings,interpretations,andconclusionsexpressedhereindo=notnecessarilyreflecttheviewsofthe sponsoringorganizationsorthegovernmentstheyrepresent. = Thesponsoringorganizationsdonotguaranteetheaccuracyofthedataincluded=inthiswork.The boundaries,colors,denominations,andotherinformationshownonanymapinthisworkdonotimply anyjudgmentonthepartofthesponsoringorganizationsconcerningthelegalstatusofanyterritoryor theendorsementoracceptanceofsuchboundaries. = Allqueriesonrightsandlicenses,includingsubsidiaryrights,should=beaddressedtothe OfficeofthePublisher,TheWorldBank,1818HStreetNW,Washington,DC20433,USA; fax:2025222422;email:[email protected].
    [Show full text]
  • Investment Choice and Inflation Uncertainty
    Investment Choice and Inflation Uncertainty Greg Fischer∗ June 2016 Abstract This paper investigates the relationship between inflation uncertainty and investment using a panel of loan-level data from small businesses. Micro-level data makes it possible to study phenomena that are obscured in country or industry aggregates. The data show that periods of increased inflation uncertainty are associated with substantial reductions in total investment. Moreover, there is a shift in the composition of investment away from fixed assets and towards working capital—the more flexible factor of production—and fixed asset investment exhibits periods of inaction consistent with real option models of investment under uncertainty. JEL: E22, E31, D92, G21 Keywords: inflation, investment, uncertainty ∗Contact information: London School of Economics, g.fi[email protected]. I would like to thank Esther Duflo, Abhijit Banerjee, Oriana Bandiera, Tim Besley, Robin Burgess, Francesco Caselli, Victor Chernozhukov, Raymond Guiteras, Rick Hornbeck, Konrad Menzel, Trang Nguyen, Torsten Persson, Silvana Tenreyro, Tom Wilkening, and seminar par- ticipants at Columbia University, LSE, and the World Bank for many useful comments. The borrower data for this project were developed as part of joint research with Antoinette Schoar and Alejandro Drexler, for which Héber Delgado Medrano provided excellent research assistance. The management of ADOPEM in Santo Domingo, Dominican Repub- lic, in particular Mercedes Canalda de Beras-Goico and Juan Francisco Terrero Silva, was incredibly helpful and patient in providing access to their data and an understanding of their business. I gratefully acknowledge the financial support of the National Science Foundation’s Graduate Research Fellowship. 1 Introduction There is a general presumption that inflation—and, in particular, uncertainty about future infla- tion—has negative consequences for economic growth.
    [Show full text]