Bilateral Exchange Research Articles

Multitasking and Network-building: China’s Party Diplomacy in Latin America

This paper examines China’s Party diplomacy and its practice in Latin America. As part of China’s overall diplomatic strategy, the CPC’s diplomacy in the region aims to fulfill multiple tasks. Using publicly available documentation, this paper creates a dataset covering exchanges between the Communist Party of China (CPC) and Latin America to analyze the CPC’s network-building in the region since 2013. The results show that to achieve China’s strategic goals, the CPC’s contacts in Latin America are characterized by diversification and openness. Daily interactions and knowledge exchanges are the main content of the CPC’s interactions with its contacts. Additionally, global, regional, and bilateral exchange mechanisms, especially the cooperation mechanism between the CPC and Latin American leftists, have been established. Although the party-based approach to Sino-Latin American relations faces challenges from political volatility, ideological differences, regional fragmentation, and external intervention, China’s party diplomacy in the region still has great opportunities for development. Inter-party exchanges not only help us understand the development of Sino-Latin American relations but also provide an important perspective for studying cooperation among Third World countries.

Global uncertainty and exchange rate conditions: Assessing the impact of uncertainty shocks in emerging markets and advanced economies

Economic and financial conditions respond significantly to increased measures of uncertainty, particularly in economic policy, monetary policy, and financial markets. This research employs the global vector autoregression (global VAR) model to assess the response of bilateral exchange rates, exchange rate volatility, exchange market pressure, and nominal and real effective exchange rates to shocks in global economic and financial uncertainty, along with U.S. monetary policy uncertainty, U.S. equity market volatility, and U.S. financial stress indicators. Spikes in uncertainty correspond to immediate increases in exchange rate volatility, buildup of exchange market pressure, and depreciation for emerging markets. The results are compared to advanced economies, China, and Russia separately, identifying key differences across markets.

Heterogeneity in exchange rate pass-through to import prices in Thailand: Evidence from micro data

We use transaction-level customs data and show that there is significant the Thai border. Our findings uncover several structural determinants of ERPT, where we document lower ERPT for (i) prices of differentiated goods, (ii) firms with a higher degree of market power, (iii) prices of goods controlled by the government and (iv) goods invoiced in the local currency. We also find that for the large majority of Thai imports that are invoiced in the US dollar under the dominant currency pricing (DCP) paradigm, price responses to the US dollar are much stronger than those associated with the bilateral exchange rate vis-à-vis the exporters' currency, but only in the short run. Finally, by investigating state-dependent properties of ERPT, we find that small exchange rate changes are associated with higher ERPT, while the degree of pass-through is stronger during episodes of depreciations rather than appreciations, particularly for goods that practice DCP.

Long-Run Trade Relationship between the U.S. and Canada: The Case of the Canadian Dollar with the U.S. Dollar

This study investigates the long-run relationship between the U.S. dollar and the Canadian dollar by analyzing the bilateral exchange rate induced by nominal and real shocks. The methodology centers on a structural vector autoregressive (SVAR) model, including the analysis of impulse response and variance decomposition to account for the impact of nominal and real shocks on exchange rate movements. This study also decomposes real shocks into demand and supply factors from both Canada and the U.S. and compares their impacts on the nominal and real exchange rates. The results are compared to shocks driven by country-specific nominal factors. This study uses quarterly data from December 1972 to December 2023. The findings suggest that real shocks have a permanent impact on both the nominal and real exchange rates, compared to nominal shocks, which have a temporary impact. Country-specific real supply-side factors have a more significant impact than country-specific real demand-side factors. Country-specific nominal factors barely impacted the nominal and real exchange rates between the U.S. and Canada.

Can Africa–China cooperation influence African green growth to truly alleviate undernourishment? Evidence of the quadruple mediating effect

AbstractClimate change has significantly threatened the global economy and increased the risk of food insecurity. Despite humanitarian efforts, African countries continue to face huge challenges related to global warming and deep undernourishment to reach a sustainable future. In this respect, China and Africa engage in bilateral exchanges to overcome these difficulties. However, exploring sustainable partnerships between China and Africa is a complicated and multifaceted topic, notably in the green economy and treating undernourishment, which needs more pertinence scientific research. Accordingly, this paper aims to explore the combined effect of eco‐innovation, Chinese investment, and trade on green growth while simultaneously addressing the issues of undernourishment in the context of Africa–China cooperation. This study applies the generalized method of moments (GMM) to analyze a sample of 26 African countries over 11 years. This paper finds that eco‐innovations and FDI positively impact green growth, with p‐values below .046. The study reveals that Chinese exports have a detrimental effect on green growth, with p‐values below .033. This paper shows that green growth has a positive impact on undernourishment. This research finds a quadruple mediating effect of green growth between its driving factors and undernourishment. Therefore, our findings demonstrated that China's growing involvement in Africa, mainly through exporting natural resources, is likely to impede the attainment of sustainable development goals. However, countries can still gain from FDI and import sustainable products from China. Lastly, policymakers must consider the importance of the increasing interaction between China and Africa to achieve sustainable growth and reduce undernourishment.

The performance of emerging markets during the Fed’s easing and tightening cycles: A cross-country resilience analysis

We investigate the determinants of emerging markets performance during five U.S. Federal Reserve monetary tightening and easing cycles during 2004–2023. We study how macroeconomic and institutional conditions of an Emerging Market (EM) at the beginning of a cycle explain EM resilience during each cycle. More specifically, our baseline cross-sectional regressions examine how those conditions affect three measures of resilience, namely bilateral exchange rate against the USD, exchange rate market pressure, and country-specific Morgan Stanley Capital International index (MSCI). We then stack the five cross-sections to build a panel database to investigate potential asymmetry between tightening versus easing cycles. Our evidence indicates that macroeconomic and institutional variables are associated with EM performance, determinants of resilience differ during tightening versus easing cycles, and institutions matter more during difficult times. Our specific findings are largely consistent with economic intuition. For instance, we find that current account balance, international reserves, and inflation are all important determinants of EM resilience.

한중 우호관계 발전을 위한 인문교류의 방향성

South Korea should continue its friendly relations with China for economic, geopolitical and security reasons. As China continues to compete with the United States for global hegemony, it is in its interest to maintain friendly relations with South Korea. In line with these interests, under the Park Geun-hye administration, China and South Korea issued a joint statement on the future vision of Korea and China, formalizing active bilateral exchanges centered on humanities. However, there is a subtle difference between the two countries in terms of the humanities exchange agreed upon in the statement. While Korea views the concept of humanities as a broad approach to human exchanges that encompasses traditional and popular culture, China focuses on traditional culture and is opposed to popular culture exchanges. The two countries have not been able to come to a mutual agreement on this issue. For friendly relations with China, Korea should continue humanities exchanges through a public diplomatic approach rather than a hard power competition. If so, it would be easiest to approach humanities exchanges based on traditional culture in the same flow as China's internal and external policies. Of course, there is a risk of cultural appropriation. However, humanities exchanges are an inevitable part of China-ROK diplomacy. In that case, we should start with traditional cultural exchanges that China can easily accept and gradually expand the scope. And it would be better to allow Korean pop culture-based content to penetrate China naturally, not through a policy approach.

Modeling Asymmetric Effects of Exchange Rate Fluctuations on Agricultural Trade Balance: Evidence from Iran and Iraq

The exchange rate plays a crucial role in foreign trade and has asymmetric effects. This study examines the asymmetric effects of exchange rate volatility on the trade balance in the agricultural sector between Iran and Iraq, using the non-linear ARDL model from 1998 to 2020. The results show that Iraq's GDP and oil price fluctuations positively affect the trade balance. In contrast, Iran's GDP and the U.S. economic sanctions against Iran have negative and significant effects on the trade balance of Iran with Iraq in the agriculture sector. The results do not confirm the existence of the J-curve effect in the trade relations between Iran and Iraq, because an increase in the bilateral exchange rate, in both the long-run and short-run, improves the trade balance of Iran with Iraq in the agriculture sector. Furthermore, the positive and negative fluctuations of the bilateral exchange rate have different effects on the trade balance. While the devaluation of the national currency does not cause a downward trend in the short run, the exchange rate policy can improve the trade balance from the beginning.

Losing sleep at the international market: Daylight Saving Time and exchange rates

This article examines the impact of the move into and out of Daylight Saving Time (DST) on bilateral exchange rates. When a country starts DST, the value of its currency depreciates, which is reversed when the country exits DST.

Coupling and decoupling of ancestral linkages and current cross-border economic activities: Genetics and policy

This paper studies the potential link between the biological evolution of populations and present-day economic interactions by estimating the correlation of shared ancestry among populations with cross-border capital and human flows. To this end, we employ the new concept of genetic distance, based on (dis)similarity of neutral gene alleles, to quantify shared ancestry. We then incorporate the genetic distance measure into an augmented gravity model, traditionally used to analyze the effect of geographical distance on bilateral exchange. Our analysis focuses on bilateral foreign direct investment (FDI) and migration across 135 countries and we use both linear regression techniques as well as the Poisson Pseudo-Maximum Likelihood Estimator to account for any non-linearities in the model. Our results show that a 1% increase in genetic distance reduces FDI flows by 0.08% while controlling for other distance constructs and factors associated with global capital and human movement. Genetic distance also has a negative effect on migration, where a 1% increase in genetic distance reduces migration flows by 0.22%, with all other things remaining constant. Our study, therefore, links shared ancestry with economic behavior, showing how historical connections are associated with current economic exchanges among nations. Additionally, recognizing that ancestral ties are outside human control, we examine policy measures that help nations overcome such distance barriers. Our findings show that strengthening a nation’s institutional quality and adherence to the rule of law can effectively mitigate any negative correlation of distance constructs with economic exchanges. These insights suggest that prudent policies to foster a stable business environment are essential for any nation to attract FDI and human capital, even from geographically or genetically distant nations.

An Assessment of Purchasing Power Parity in the Long-Run: Evidence from India and its four Major Trading Partners

The present study focuses on evaluating the validity of the Relative Purchasing Power Parity (RPPP) theory for India and its four major trading partner nations namely the United States, China, the United Arab Emirates, and Saudi Arabia using monthly time series spanning January 2001 to March 2021. For the purpose of empirical analysis, standard Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) unit root tests, as well as the Johansen-Juselius cointegration technique, have been applied. Firstly, the stationarity of the real exchange rate has been investigated using standard unit root tests. The findings indicate that each country’s real exchange rate is nonstationary signifying the absence of strong PPP. Thereafter, the weak form of PPP was tested in the second stage using the Johansen cointegration test. The findings of the cointegration test confirm the presence of a long-run relationship among bilateral exchange rates, domestic price levels, and foreign price levels for all countries undertaken except for the UAE. Since three economies from among the total four trading partners’ country-pair support the existence of PPP, it can be said that PPP holds for the Indian rupee exchange rate for the economies so considered. The study further signals that India’s trade with the UAE could lead to arbitrage opportunities.

Is the exchange rate exposure puzzle really a puzzle? International evidence

PurposeGiven the difficulties in finding significant exchange rate exposure in the extant literature, this paper attempts to resolve the so-called “exposure puzzle” by investigating whether currency movements have any significant impact on international industry returns.Design/methodology/approachThis paper utilizes the multivariate Generalized AutoRegressive Conditional Heteroskedasticity (MGARCH) methodology to estimate both symmetric and asymmetric exchange rate exposures for each industry common across 12 countries simultaneously.FindingsThe empirical results show that exchange rate exposure is not only statistically significant but also economically important based on the estimation of an asymmetric three-factor exposure model using MGARCH methodology. This is an extremely important finding as it suggests that the “exposure puzzle” may not be a puzzle at all once a better methodology is utilized in the estimation.Research limitations/implicationsBecause this study tries to resolve the exchange rate exposure puzzle by focusing on whether exchange rate movements affect ex-post returns as opposed to ex ante expected returns and given the significant exposures with respect to different risk factors found in the study, it is interesting to see if any of these risk factors commands a risk premium. In other words, a natural extension of this study is to test whether any of these risk factors is priced in international industry returns.Practical implicationsThe findings of the study have interesting implications for international investors who would like to diversify their portfolios across different industries and are concerned about whether the unexpected movements in the bilateral exchange rates will affect their portfolio returns in addition to its interest rate and world market risk exposures.Originality/valueThe study utilizes the MGARCH methodology, which has not been fully exploited in the exchange rate exposure literature.

Sensitivity of bilateral trade between Korea and China to exchange rate fluctuations: Insights from the semiconductor industry

AbstractThis study delves into the impact of exchange rate fluctuations on the bilateral semiconductor trade between Korea and China. We present compelling evidence emphasising the significant role of exchange rate changes in Korea's semiconductor trade with China, affecting both short‐term and long‐term dynamics. Our analysis also reveals an asymmetrical effect of bilateral exchange rates on Korea's semiconductor trade with China. Specifically, we find that exchange rate asymmetries primarily manifest as a long‐term phenomenon in Korea's semiconductor exports to China. At the same time, they influence both short‐ and long‐term dynamics in Korea's semiconductor imports from China.

From dominant to producer currency pricing: Dynamics of Chilean exports

We revisit a central question for international macroeconomics: the response of export prices and quantities to movements in the exchange rate (ER). We use granular export data for Chile and study how the effects of ER movements vary over time with the currency of invoicing and the destination of exports. For prices, we find that the short-run effects of bilateral ER movements vanish when controlling for U.S. dollar ER, which supports dominant currency pricing. However, over longer horizons a more significant role is played by bilateral ER movements, in line with the predictions of producer currency pricing. These dynamics do not depend on the invoicing currency. The results we find for quantities support the view that bilateral exchange rate movements contribute to macroeconomic adjustment through export volumes over the medium term.

The Impact of a Common Currency on the European Union

This study examines the ramifications of adopting a common currency within the European Union (EU), focusing on introducing the euro. Initially prompted by optimistic expectations of economic stimulation and balanced budgets, the research critically assesses the economic, trade, and policy dimensions associated with a unified currency. Utilizing Mundell's optimal currency regions concept, the methodology establishes prerequisites for a successful monetary union, emphasizing vulnerability to macroeconomic shocks, labor market flexibility, and intra-regional commerce. Findings reveal that while a common currency eliminates foreign exchange expenses, reduces uncertainty in bilateral exchange rates, and facilitates investments, member states must sacrifice autonomy in monetary and exchange rate policies. The advantages include streamlined cross-border payments, enhanced trade, and improved movement of labor and products, while the drawbacks involve rigid monetary policies and limitations on policy tailoring to specific economic conditions.
 To maximize benefits, the research proposes measures such as deepening economic integration, ensuring macroeconomic stability, and promoting political unity. The study emphasizes the importance of sound economic policies to complement the adoption of a common currency and mitigate potential challenges. In conclusion, the research offers a comprehensive understanding of the advantages and disadvantages associated with a common currency in the EU, providing a roadmap for effective navigation and suggesting interventions to ensure successful implementation.

Do China's policy measures for RMB internationalization foster currency co-movements?

This paper examines the factors driving the co-movement between the renminbi (RMB) and other currencies, with a particular focus on the impact of China's institutional arrangements on RMB co-movements. Using panel data covering 32 countries from 2005 to 2020, the study finds that, among the institutional arrangements, clearing banks and direct trading strengthen the RMB's influence on bilateral exchange rates, while currency swaps weaken it. These institutional arrangements play a role in amplifying the impact of economic linkages on RMB weights. Currency swaps can enhance the RMB's weight through trade linkages, while clearing banks and direct trading create amplifying effects through financial linkages. Overall, China's institutional arrangements contribute significantly to greater RMB co-movements through both a direct effect and an amplifying effect.

Unveiling the Relationship Between Oil Price and Exchange Rate: New Insight from Time-varying Versus Fixed Coefficient Cointegration

This study provides a brief analysis of time-varying cointegration between the INR–USD bilateral exchange rate and Brent crude oil prices in the post–subprime crisis period. Prior studies established this relationship using the assumption that the long-run relation is intertemporally constant. However, there is much recent evidence demonstrating that this assumption may not be feasible. To address this issue and to go beyond the restrictive time-invariant environment, we employed the time-varying cointegration framework of Bierens and Martins (2010) , which was assessed through orthogonal Chebyshev time polynomials. The result shows that the Rupee was decoupled from oil price shocks in the first two samples. However, the oil price pass-through effect will become stronger in the third and fourth samples. The endogenous structural break test suggests the presence of serious parameter instabilities due to fluctuations in oil prices and the exchange rate over the period under study. This indicates the ability of international crude oil prices to influence domestic economic activities through the exchange rate. Policymakers should consider this factor while making monetary and foreign exchange policies. JEL Codes: E44, G14, G15

Algerian Archives in 1962: Legacy and Plunder

What part do archives take in the management of a country? In the manufacturing of its history? What to do then when these are located in the former colonizing country and we keep on claiming their restitution? What could their status be but how could this dispossession happen? What did these fifty years of debate and bilateral exchanges bring? The sharing of the context is essential to understanding that in 1963 the country’s leaders busy with immediate concerns did not bring interest to the archival dimension of sovereignty. So, what about this file today opened in 1963, how to comprehend the attitudes of both sides?

The COVID-19 pandemics and import demand elasticities: evidence from China’s customs data

We study China’s import demand elasticities using HS 8-digit customs data on China’s provincial imports during January 2019 to March 2021. It is found that both direct bilateral exchange rate elasticity and third-country exchange rate elasticity are affected by (1) policies that these Asian economies adopted to alleviate the adverse impacts of the COVID-19 pandemic and (2) the degree of concentration of exporters exporting a certain product to a certain Chinese provincial market. It is found that economic support policies will lower the bilateral exchange rate elasticity of trade flows, or even alter the sign of the bilateral exchange rate elasticity of China’s imports. Besides, the economic support policies can alleviate the pressure of foreign competition on exporters and make the exporters more resilient to the impacts of foreign competitors’ exchange rate depreciation. In contrast, the degree of market concentration of exporters in a certain provincial market affects the exchange rate and the third-country exchange rate elasticity differently. A higher market concentration lowers the bilateral exchange rate elasticity of trade flows but magnifies the impact of foreign competitors’ currency depreciation on exporters. These results are robust to alternative modes of trade, regional heterogeneity, product heterogeneity, various measures of policy responses to the pandemic, and alternative database.

Bilateral Exchange: Enteral Nutrition Clinical Decision Making in Pediatric Surgery Patients

IntroductionEvidence-based medicine guides clinical decision-making; however, promoting enteral nutrition has historically followed a dogmatic approach in which patients graduate from clear liquids to full liquids to a regular diet after return of bowel function. Enhanced recovery after surgery has demonstrated that early enteral nutrition initiation is associated with shorter hospital stays. We aimed to understand postoperative pediatric nutrition practices in Kenya and the United States. MethodsWe completed a prospective observational study of pediatric surgery fellows during clinical rounds in a pediatric referral center in Kenya (S4A) and one in the United States (Riley). Fellow-patient interactions were observed from postoperative day one to discharge or postoperative day 30, whichever happened first. Patient demographic, operative information, and daily observations including nutritional status were collected via REDCap. ResultsWe included 75 patients with 41 (54.7%) from Kenya; patients in Kenya were younger with 40% of patients in Kenya presenting as neonates. Median time to initiation and full enteral nutrition was shorter for the patients at Riley when compared to their counterparts at S4A. In the neonatal subgroup, patients at S4A initiated enteral nutrition sooner, but their hospital length of stays were not significantly different. ConclusionsStudying current nutrition practices may guide early enteral nutrition protocols. Implementing these protocols, particularly in a setting where enteral nutrition alternatives are minimal, may provide evidence of success and overrule dogmatic nutrition advancement. Studying implementation of these protocols in resource-constrained areas, where patient length of stay is often related to socioeconomic factors, may identify additional benefits to patients.