Three essays on macroeconomic and international finance issues

This dissertation consists of three essays concerning macroeconomic and international finance issues that central banks should take into account to implement more successful monetary or exchange rate policy.; The first essay addresses a measurement issue regarding the official measurement of aggregate money stock (simple sum measure), as used by many central banks, and measures the United States capital stock of money implied by the Divisia money flow aggregates, in a manner consistent with the present-value model of economic capital stock. The economic stock of money derived by Barnett (1991) nests Rotemberg, Driscoll, and Poterba's (1995) currency equivalent index as a special case, under the assumption of martingale expectations. I permit non-martingale expectations and time varying discount rates. To compute the economic stock of money without imposing martingale expectations, I use forecasts based on the asymmetric vector autoregressive model and the Bayesian vector autoregressive model. The resulting capital-stock growth-rate index was surprisingly robust to the modeling of expectations whereas the official measure of money stock always overestimated the economic stock of money.; My second essay investigates the impact of Japanese central bank's intervention in foreign exchange market on the volatility of the Yen/U.S. dollar exchange rate using daily intervention data, covering period from April 1 1991 to December 31 2003. In contrast to the existing literatures, this study focuses on asymmetric effect of central bank's intervention on the conditional volatility conditional on the sign of the previous day's unexpected shock to exchange rate, in a framework of asymmetric GARCH models. My empirical results shows that the Japanese intervention in the 1990s increased exchange rate volatility only when there was unexpected negative shock (appreciation of yen) to exchange market on the previous day. Since 1999, the Japanese intervention had market calming effect especially when there was unexpected appreciation of yen on the previous day.; My third essay studies the relationship between risk neutral densities and option pricing models, and shows how option prices can be used to extract market participants' expectations of future interest rates, exchange rates, or stock prices. This paper theoretically examines the existing methods of estimating the risk neutral density function implied by options prices, and suggests the application possibilities of the information implicit in option prices to future economic studies.