Bank Currency Research Articles

The Impact of Bilateral Currency Swaps on Outward Foreign Direct Investment

The outbreak of the 2008 international financial crisis caused many countries around the world to face exchange rate fluctuations and currency crises. At the same time, China's central bank creatively began to sign central bank currency swap agreements with other countries to stabilize exchange rates and avoid the risk of fluctuations in the US dollar. This article is based on panel data from 90 countries from 2000 to 2021, and uses empirical analysis methods to explore the impact of currency swap agreements on China's outward foreign direct investment. On this basis, the intermediary effect is applied to analyze the financial market mechanism of currency swap policy. Research has found that currency swap agreements have a significant positive impact on the scale of China's outward foreign direct investment (OFDI). Financing constraints are an important influencing mechanism for currency swap agreements to promote China's OFDI. In the context of economic globalization and complex international situations, this study has important reference value for China to further promote deepening cooperation in the financial field between countries and promote the internationalization of the renminbi to facilitate the domestic and international dual circulation.

Classification & Detection of Banknotes Using Machine Learning

Abstract: The only valuable resource in our country is bank currency, which is why money launderers inject fake notes that mimic genuine notes into the financial system to create imbalances. When the market is demonetized, there is a discernible quantity of counterfeit money floating about. In most cases, a human cannot easily tell the difference between a genuine note and a counterfeit one, even when many of the features of a counterfeit note are the same. Automated systems must beaccessible at banks or ATMs in order to identify bank currency authenticity. Since counterfeit banknotes are meticulously crafted, an effective algorithm that can determine whether a note is real or false must be createdin order to create such an automated system. In this study,we use a dataset from the UCI machine learning repository to apply the CNN algorithm. In order to put this into practice, we used machine learning algorithms and evaluated how well they performed using a range of quantitative analytical metrics.

De-dollarization? Not so fast

De-dollarization refers to the reduction of the reliance of foreign countries on the US dollar. This phenomenon generates concern about the U.S. dollar as a global currency. We construct new data on the currency denomination of central bank currency reserves, foreign exchange transaction volume, denomination of global debt securities, and the invoicing of trade. This paper presents empirical evidence suggesting that these concerns are misplaced, finding US dollar dominance remains unchanged up through late 2023, nearly two years after the 2022 Russian invasion of Ukraine and several years after the 2020 COVID-19 pandemic. Meanwhile euro and renminbi influence have since declined. These findings have implications for reserve currency resilience, U.S. dollar dominance, U.S. sanctions policy, international spillovers of U.S. monetary policy, and U.S. government borrowing costs.

Wo liegen die Vor- und Nachteile einer digitalen Zentralbankwährung?

Abstract The introduction of a digital euro has been in discussion in the eurozone for some time. The European Central Bank’s investigation phase started in October 2021 and entered a preparatory phase in October 2023. Digital central bank money is already being used in other countries. The introduction of a digital euro raises many questions that affect households and companies, commercial banks and the central bank. Among other things, the following questions arise: Why do we need a digital central bank currency today? What requirements must an additional form of money issued by a central bank fulfil? What are the risks and opportunities associated with the digital euro?

Der digitale Euro aus einer historischen Perspektive

Abstract The introduction of a digital currency is part of the continuous evolution of the financial system, which has always been driven by technological innovations. For the first time in many years, Western central banks are exposed to potential currency competition. But a digital euro also has the potential to affect the two-tier structure of the grown financial system. The ECB should not engage in an interest rate competition with commercial banks and the digital currency should remain non-interest-bearing. Instead of imposing holding limits, notice periods could also be used to reduce the risk of bank runs. The ECB should limit itself and implement a hybrid digital central bank currency.

Blockchain in banking: a study on central bank digital currency

The banking sector has been greatly impacted by the technological outburst of the twenty-first century. Bitcoin, the first crypto asset created on block chain technology, has firmly established itself in the financial sector since its introduction in 2009. The market capitalization of uncontrolled crypto assets has grown at an unprecedented rate, posing a threat to the banking industry and the economy. Illegal activities such as terrorist funding and money laundering find refuge in the unregulated world of crypto assets. To keep up with the demands of the computer-savvy Generation Next, banks worldwide have adopted various technologies and improved their service standards. However, central banks continue to follow the traditional system of issuing hard currency bank notes, which do not match the aspirations of most end users. As a result, Central Banks worldwide are currently brainstorming the introduction of a Central Bank Digital Currency (CBDC). This study aims to explore the theoretical aspect, feasibility, and status of CBDC. Four Central Banks have already issued CBDC, while others are in the process of doing so. Block chain under Distributed Ledger Technology is the most suitable and widely accepted platform for issuing CBDC. Robust computer security measures must be established to prevent hacking and ensure monetary stability for CBDC. During the initial stages of CBDC implementation, hard currency banknotes and CBDC will run parallelly until any possible initial hiccups are resolved. CBDC has the potential to boost banking and finance, trade finance, and cross-border international settlements.

Private bank money vs central bank money: A historical lesson for CBDC introduction

How does the arrival of a new central-bank issued currency affect commercial banks creating private money? In this paper, we study the opening of Bank of Canada in 1935 and the effects of banknote issuance monopoly on chartered banks. We use bank-level data to provide evidence that banks mostly affected by the currency competition experienced lower profitability but did not decrease their lending compared to unaffected peers. This analysis of the arrival of a new central bank currency can offer lessons for debates on central bank digital currencies (CBDCs).

Markov-switching analysis of exchange rate pass-through: Sugar Price in Iran

Due to its inherent role in ensuring food security and as one of the productive sectors of the economy, the agricultural sector has a priority in receiving preferential currency. Having a preferred currency has caused the price of this commodity in the market to be multi-valued. On the other hand, the allocation of billions of dollars at a price lower than the free market price of foreign exchange to imports makes the percentage of the effect of the preferred currency on the price of commodities more important. In such circumstances, it must be determined whether the allocation of preferential or bank currency (42000Rials) to sugar has been able to be transferred to the final price of this commodity. To answer this question, time series data with monthly frequency of domestic sugar prices, official exchange rates and world prices during the years 2011: 03-2019:11 and the nonlinear pattern of Markov MSIAH regime change have been used. The results showed that during the period 2011:03-2019:11, the average monthly growth rate of the price of this product was equal to 1.5 percent. Meanwhile, during the period of implementation of the preferential exchange rate policy, the average monthly price growth rate was equal to 2.7 percent. The results also show that in the short run, the exchange rate pass-through to sugar price in the second regime was significant and equal to 5%. In the long run, the exchange rate pass-through in this regime was equal to six percent.

THE EFFECTS OF DIGITAL CURRENCY (ENAIRA) ADOPTION ON NIGERIA ECONOMY

This study examined the determinants of eNaira adoption in Nigeria, also examined the effects of eNaira adoption on economy in Nigeria. The utilized data were randomly collected from banks staff, economists, and Nigerians through questionnaires. These were rigorously analyzed through MANOVA, correlation, chi-square and Crombach’s Alpha statistics reliability. It is concluded that eNaira will have positive significant effect on economy in Nigeria in terms of employment generation, economic stability, easy facilitation of transaction, security of money, direct welfare disbursements enablement, Revenue and tax collection Increment, cost of processing cash reduction, resilient payment system supports, Central Bank currency usability improvement, and economic activities enhancement. It will also serve as medium of exchange, secured store of value, and stable unit of account. It is recommended that CBDC should establish validation scheme (centralized or decentralized) to prevent double spending or identity theft of eNaira code. Also, there is need to educate people about the eNaira by the government on the importance of this new development. Citizens must enlightened to understand the difference between cash deposits’ digital representation in bank accounts and eNaira in digital wallets. There must also be a programme which should be organized by CBN to deepen the enlightenment of eNaira in the country.

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Abstract. Introduction. The activity of banks in foreign exchange markets, which consists in the management of assets and liabilities in foreign currency and in bank metals, is associated with currency risks (one of the elements of market risk), which arise in connection with the use of various currencies and bank metals during conducting banking operations. Risk means the uncertainty associated with the occurrence of any event or its consequences. The continuous functioning of the foreign exchange market is its main feature, which leads to the fact that a bank that has an open position in foreign currency is exposed to currency risk even when it is not working. Under such circumstances, the analysis and assessment of currency risks in the bank becomes very relevant, the results of which will ensure the creation of conditions for its stable and efficient functioning. Purpose. The purpose of the work is the analysis and assessment of the bank's currency risk. Results. The article examines the nature and types of currency risk, analyzes the structure and dynamics of currency assets and liabilities on various grounds. Also, the work identifies the risk of currency operations of JSC "Ukrsibbank" and draws relevant conclusions. Conclusions. The work draws the following conclusions: in the composition of foreign currency assets, a significant share of loans to legal entities is almost 33% and other currency assets - almost 62%, the lowest share is loans to individuals and funds in other banks; the dynamics of all currency assets is not uniform, there is a clear growth trend only in other currency assets, and only through them the bank increases currency assets in general; the largest share in the bank's monetary assets and liabilities is made up of US dollars and Euros; in terms of the number of currencies that the bank uses in foreign exchange operations, the currency portfolio is not diversified, which causes additional risk. Therefore, the bank's foreign exchange risk management policy can be assessed as positive, since banks, in contrast to risks, create reserves for assets from conversion into the reporting currency, in recent years have followed the norms of the foreign exchange position and used favorable trends in exchange rate changes in the formation of foreign currency assets and liabilities.

Currency basis term structure, cross-border investment flow, and central bank currency swap agreement

In this study, we analyze the impact of term structure changes of currency basis on cross-border sovereign bond investment flows and that of major central banks' USD funds-supplying operations. We find that changes in short-term USD/JPY basis with less than six-month terms led to a shift in the demand between Japanese government bonds and US Treasury bonds. Results also show that the funds-supplying operations reduced currency basis with less than three-month durations. The banks’ enhanced measures in March 2020 also further reduced the currency basis.

Detecting counterfeit banknotes with machine learning


 
 
 The one important asset of our country is Bank currency and to create discrepancies of money miscreants introduce the fake notes which resembles to original note in thefinancial market. During demonetization time it is seen that so much of fake currency is floating in market. In general, by a human being, it is very difficult to identify forged note from the genuine not instead of various parameters designed for identification as many features of forged note are similar to original one. To discriminate between fake bank currency and original note is a challenging task. So, there must be an automated system that will be available in banks or in ATM machines. To design such an automated system there is need to design an efficient algorithm which is able to predict weather the banknote is genuine or forged bank currency as fake notes are designed with high precision. In this project six supervised machine learning algorithms are applied on dataset available on UCI machine learning repository for detection of Bank currency authentication
 
 

The economic law of (central bank) digital currency

ABSTRACT The digital transformation of money has raised concerns about how it affects sovereignty. The rise of cryptocurrencies and the possibility of global payment systems based on stablecoins and digital currencies issued by central banks require a re-evaluation of the effects of these changes on the concept of money as a public good and legal tender. The analysis will start focusing on this experience and its implications to shift to the case where a cryptocurrency is used as a central bank currency. Then an attempt will be made to frame the distinctive features of a digital currency issued by a central bank.

Legal characteristics of the bank deposit (deposit) agreement

Holding on the deposit of funds are their transfer in cash or non-cash in foreign, or national currency, banknote or bank currency and at the expense of the owner for compliance under certain conditions in accordance with the contract.
 The agreement of the bank deposit is concluded in writing. If the bank's deposit agreement or certificates and other documents that meet the requirements of the bank's legislation, regulations or other provisions which corresponds to the written form of the bank deposit agreement (bank rules) and the customs of business.
 The agreed condition that the bank has the right to change the rate of interest on the deposit in a one-way order is invalid. Interest on bank deposits is accrued from the date of receipt of the deposit by the bank and ends on the day before the depositor accepts the deposit or debiting the funds from the account of the account.
 In judicial practice, there is no unanimity on the question of whether the heir has the right to receive interest on the relevant contract of the bank deposit (deposit) and the right of way of life after the death of the depositor of funds until the actual return of the deposit.
 We consider it expedient to make changes to paragraph 3 of Chapter 71 of the Civil Code of Ukraine on further improvement of legislative provisions on deposit obligations, in particular by limiting and regulating the range of entities with the right to provide this type of financial services complying with their compliance with the established legislation with the requirements for professional students of this market focusing on the economic base of the main types of their activities, clarification of the legal regime of those involved in the depository fund of financial institutions and active assets defining the permissible limits between the establishment of legal succession and harmonization of approaches to the mechanism of accrual of interest in the investigated obligations

Detection of Fake Currency Using KNN Algorithm

Abstract: Bank currency is our country's most valuable asset, and to cause inconsistencies in money, criminals use phony notes that seem identical to the real one on the stock exchange. During demonetization time it is seen that so much fake currency is floating in the market. In general, for a human being, it is very difficult to identify forged notes from the genuine not instead of various parameters designed for identification as many features of forged notes are similar to the original one. To discriminate between fake bank currency and original note is a challenging task. So, there must be an automated system that will be available in banks or ATMs. To design such an automated system there is a need to design an efficient algorithm that can predict whether the banknote is genuine or forged bank currency as fake notes are designed with high precision. In this paper, six supervised machine learning algorithms are applied to the dataset available on the UCI machine learning repository for the detection of Bank currency authentication. To implement this we have applied Support Vector Machine, Random Forest, Logistic Regression, Naïve Bayes, Decision Tree, K- Nearest Neighbor by considering three train test ratios 80:20, 70:30, and 60:40 and measured their performance based on various quantitative analysis parameters like Precision, Accuracy, Recall, MCC, F1-Score and others. And some SML algorithms are giving 100 % accuracy for a particular train test ratio. Keywords: Support Vector Machine, Bank currency, Supervised Machine Learning

A Pilot study screening bank currency in community circulation for potential carriage of SARS-CoV-2: how safe handling the currency is?

Purpose: Currency seems to represent an important vehicle for transmission of pathogenic microorganisms, thus a potential in affecting the public health. Digital transactions are more common in developed countries; however, handling cash currency is still very common in many countries including Bahrain. A recent study from Australia reported that SARS-CoV-2 may survive for 28 days on smooth surfaces (including banknotes), however the study was purely experimental and done in controlled laboratory environment. There were worldwide speculations suggesting the possible transmission of SARS-CoV-2 infection through currency notes. A recent study from Bangladesh reported presence of SARS-CoV-2 in approximately 7% of currency samples collected from the community. No such study has been performed on Bahraini currency, so the present study was proposed to screen the cash currency in circulation in Bahrain for the possible presence of SARS-CoV-2. Method: We collected notes and coins of Bahraini currency and a few of Saudi riyals from different public sources of currency exchange. Two time points were selected for collection when percentage of tested positive cases was on its peak. All the samples were tested for the presence of SARS-CoV-2 antigen with rapid antigen detection kit and qRT-PCR method. For initial validation, 5 samples each of potential SARS-CoV-2 RNAs extracted from known positive cases and 5 samples of extracted RNA from known negative persons were tested by rapid antigen detection kit and qRT-PCR. The results of qRT-PCR were interpreted as per the interpretation chart provided by the supplier. Results: During the study period, a total of 250 currency samples were collected including different denominations of currency notes and coins. Majority of the currency samples were collected from grocery stores followed by food outlets. Following validation, the currency samples were tested, and all turned negative for SARS-CoV-2 by rapid antigen detection test as well as by RT-PCR. Conclusion: This study predicts on Bahraini currency posing no threat of SARS-CoV-2 transmission via currency exchange.

A Pilot study screening bank currency in community circulation for potential carriage of SARS-CoV-2: how safe handling the currency is?

Purpose: Currency seems to represent an important vehicle for transmission of pathogenic microorganisms, thus a potential in affecting the public health. Digital transactions are more common in developed countries; however, handling cash currency is still very common in many countries including Bahrain. A recent study from Australia reported that SARS-CoV-2 may survive for 28 days on smooth surfaces (including banknotes), however the study was purely experimental and done in controlled laboratory environment. There were worldwide speculations suggesting the possible transmission of SARS-CoV-2 infection through currency notes. A recent study from Bangladesh reported presence of SARS-CoV-2 in approximately 7% of currency samples collected from the community. No such study has been performed on Bahraini currency, so the present study was proposed to screen the cash currency in circulation in Bahrain for the possible presence of SARS-CoV-2. Method: We collected notes and coins of Bahraini currency and a few of Saudi riyals from different public sources of currency exchange. Two time points were selected for collection when percentage of tested positive cases was on its peak. All the samples were tested for the presence of SARS-CoV-2 antigen with rapid antigen detection kit and qRT-PCR method. For initial validation, 5 samples each of potential SARS-CoV-2 RNAs extracted from known positive cases and 5 samples of extracted RNA from known negative persons were tested by rapid antigen detection kit and qRT-PCR. The results of qRT-PCR were interpreted as per the interpretation chart provided by the supplier. Results: During the study period, a total of 250 currency samples were collected including different denominations of currency notes and coins. Majority of the currency samples were collected from grocery stores followed by food outlets. Following validation, the currency samples were tested, and all turned negative for SARS-CoV-2 by rapid antigen detection test as well as by RT-PCR. Conclusion: This study predicts on Bahraini currency posing no threat of SARS-CoV-2 transmission via currency exchange.

General equilibrium cryptocurrency pricing in an OLG model

We study the valorization of cryptocurrency in an overlapping generations model where agents have the choice between crypto- and central bank currency. We pay attention to three features of cryptocurrency: it is a risky asset (because of frauds and hacks), which one acquires by bearing transaction costs, and its supply reaches its upper limit in a finite time (e.g., Bitcoin). We consider both the standard case with linear–quadratic utility functions and the more general case where utility functions are not specified. We find that the effect of an increase in cryptocurrency on the currency prices depends on the transaction costs that individuals bear to get cryptocurrency. In particular, when these costs are convex non-increasing in the quantity of cryptocurrency, the cryptocurrency price may increase with this quantity. Otherwise, when the transaction costs are either increasing or concave non-increasing, the cryptocurrency price decreases with the quantity of cryptocurrency. We also show that the cryptocurrency and the central bank currency prices always move in opposite directions.

Second Thoughts About Central Bank Digital Currencies

Sustained decline in central banks’ monetary liabilities (reserves and currency in circulation), which the emergency of cryptocurrencies may have hastened, has been enabled by technological innovations that over time have allowed financial institutions and their customers to execute transactions and settle their debts without resorting to central bank currency. Policymakers are concerned about their ability to guarantee public’s access to government-backed currency. This has implications for central banks’ balance sheet and income position, which central bank digital currency might reconstitute. But the introduction of central bank digital currency (CBDC) comes with its own risks and could be disruptive for financial markets. We believe that retaining the option to have access to government-guaranteed currency is of utmost importance, despite the sporadic demand for physical currency in the modern society, but it could be addressed within existing institutional structures without the introduction of CBDC. However, policy authorities are right in seeking oversight and regulation for cryptocurrencies to address the destabilizing potential of cryptocurrencies for financial markets, and they should continue modernizing payment infrastructures to bring retail settlement systems at par with cryptocurrencies in terms of settlement speed but without associated liquidity and credit risks. These steps would preserve the status quo and allow private sector to continue innovating while limiting central banks’ footprint in the financial markets.

BRI and the Internationalization of China’s Renminbi

Ever since the proposition of Belt and Road Initiative, known as BRI, by President Xi of China in 2013, it has accelerated the internationalization of RMB in many different ways, involving financing, investment and so forth. This study affirms the feasibility of using BRI to encourage RMB’s internationalization around the globe. The situations of related regions and Chinese corresponding endeavor have been discussed separately, for example, 17+1 cooperation achievement in transport sector in Europe, investments to Africa in large infrastructure, industrial, and communications projects, and taking advantage of Egypt’s “zero tariff” in the Middle East. Afterwards, the analysis of central bank currency swaps and points out the benefits offered by RMB’s internationalization for closing the infrastructure gap of BRI, and the BRI’s providing better opportunity to further the internationalization of RMB. Finally, both opportunities and challenges for RMB’s internationalization in related to BRI are discussed. This paper reveals that the internationalization of RMB via BRI is promising. Despite all kinds of challenges which are confronted by China, the country is given giant hope to handle well and convert those into opportunities, to encourage the use of RMB around the globe and make its contribution to world’s economy.