Abstract
We study how to design experiments for the objective of choosing optimal polices. An experimenter wants to choose a policy to maximize welfare subject to budget or other policy constraints. The effects of counterfactual policies are described by a structural econometric model governed by an unknown parameter. The experimenter has access to some pilot data, and has the opportunity to collect additional data through an experiment. The joint experimental design and policy choice problem is a dynamic optimization problem with a very high-dimensional state space, since the chosen policy depends on the realized data. We propose a low-dimensional approximation to the solution and show it is asymptotically optimal under Bayes expected welfare. The method applies to policies allocating discrete as well as continuous treatments, such as cash transfers, prices, or tax credits, which may be targeted on the basis of covariates. We demonstrate the method using the conditional cash transfer program Progresa, showing how to design an experiment to help choose a policy aimed at increasing graduation rates and reducing gender disparities in education. Compared to the original Progresa experiment, the optimal experiment requires only one quarter as many observations to obtain equally effective policies.

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Abstract
A simple dividend-based currency strategy, which shorts a currency on the date its country’s recent aggregate dividend payment by listed companies is large, exhibits a significant Sharpe ratio and alpha not explained by standard FX factors. To understand this anomaly, I empirically identify the significant price impact of predetermined dividend payments on exchange rates around payment dates. I propose the dividend repatriation channel where benchmark investors (ETFs & mutual funds) predictably repatriate a certain proportion of dividends received in local currency due to the cash dividend treatment in the equity index methodology. I build a model in which heterogeneous financial intermediaries with limited risk-bearing capacity accommodate benchmark investors’ currency demands stemming from dividend repatriation flows. In line with the model’s implications, I find that the price impact of dividend flows on FX around the payment date is large when the intermediary capital ratio is low, the CIP deviation is large, and the FX implied volatility is high. I conclude by discussing the implications of my findings on currency market elasticity, capital regulations, and FX regimes.

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