Improving the prediction of currency movements

ForbesExchange rates—they don’t exactly make the world go round, but when they fluctuate, they can give it a bumpy ride. As MIT Sloan Professor Kristin Forbes wrote on the commerce website MarketWatch recently, movements in exchange rates can significantly affect a country’s competitiveness. On a macro level, they can have an impact on everything from export competitiveness to GDP growth and can make it harder to repay foreign debt and reduce earnings on foreign investments. On a micro level, exchange rates can push up or down the prices of key merchandise, from oil to oranges.

“Currency movements also have big implications for the outlook for inflation,” says Forbes, who is an external member of the Monetary Policy Committee for the Bank of England. “This relationship is known as ‘pass through’…it captures how changes in the exchange rate pass through to import prices and inflation…for those of us tasked with setting monetary policy, understanding how currency movements pass through into inflation is critical to our decision on when to adjust interest rates.”

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  Economics  Finance  

How successful is that social program? Check the data.

Smart data, and lots of it. Brian Beachkofski, SF’ 12, and John Grossman, SF ’12, are leveraging it to improve the human condition. Beachkofski (senior director) and Grossman (co-president and general counsel) work for Third Sector Capital Partners, Inc. The nonprofit consulting firm evaluates extensive sets of data to guide governments, social service agencies, and private funders in building social programs that successfully address critical challenges.

John Grossman
John Grossman

The innovative “pay-for-success (PFS)” social service model works this way: A government agency identifies a critical social need—chronic homelessness, for example. Then, funders like banks or charitable foundations provide upfront capital to a high-performing social service provider that can help meet that need. If the providers achieve predetermined outcome levels, as verified by an independent evaluator, the government repays the private funders’ initial investment. Third Sector, a leader in developing PFS initiatives, serves as a facilitator and advisor to all parties in the process, using data as the basis for modeling the project and projecting the benefit to the at-need population.

Brian Beachofski
Brian Beachofski

One example of the success of the PFS model is a Third Sector project in Cuyahoga County, Ohio. Beachkofski, Grossman, and their team partner with nonprofit and government agencies to reunite families with children who have been placed in foster care. The children originally were removed from their homes because their families were struggling with domestic violence, substance abuse, and homelessness. Data indicates that such children spend significantly longer lengths of time in foster care and suffer the loss of consistent caregivers.

Using a PFS model, the county government partners with a local nonprofit service provider to support these fragile families with access to housing, mental health, and other social services. As a result, they are reuniting families faster and improving lives while creating greater accountability for government spending.

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  Finance  Government