Currency Demand Research Articles

Analisa Atas Besaran Underground Economy di Indonesia Pada Tahun 2016-2021 Dengan Pendekatan Moneter

This study aims to analyze and determine the magnitude of the value of underground economy activities in Indonesia in the first quarter of 2015 to the fourth quarter of 2021. The method in this study is quantitative analysis using multiple linear regression equations estimated by the least squares method (Ordinary Least Square). The regression equation model used is a monetary approach model, which is a measurement of the magnitude of the underground economy based on the sensitivity of demand for currency. The bound variables used are the amount of demand for currency while the free variables include tax burden, opportunity costs, inflation, nominal Gross Domestic Product (GDP) and financial innovation. The result of this study is that the value of underground economy activities in the research period shows fluctuating values, with a range of values ranging from 127,384 billion to Rp. 625,919 billion The average calculation in that period shows a value that reaches Rp. 325,127 billion or equivalent to 18.2% of Nominal GDP. The novelty of this study is to update the data until 2021 and make adjustments to the variables and models used by the previous study.

Exchange rate spillover, carry trades, and the COVID-19 pandemic

Although it is widely accepted that exchange rates are connected, what drives these connections remains an unsettled question. We examine the interconnections and spillovers of G10 currencies over the period from January 1, 2018 to June 17, 2021. We find that the Euro and Australian dollar serve as risk transmitters whereas the Japanese yen operates as a risk recipient. During the COVID-19 pandemic period, countries with higher infection cases experience currency depreciation and transmit more currency risk to others. In response to this crisis, the Fed adopted the large-scale asset purchase program that weakened the USD and increased the demand for high-yield currencies through the portfolio rebalancing channel. The appreciation of high-yield currencies further attracts carry trades and enhances their risk transmission to low-yield currencies. Furthermore, we provide evidence to show that the COVID-19 infection cases, the Fed's policy, and carry trades are crucial determinants of exchange rate spillovers.

Remittance flows and informal economies in post‐Soviet transition countries

AbstractThis paper studies the impact of remittance flows on the size of informal economies in post‐Soviet countries. We compile a unique data set from a cluster of transition economies and use panel data econometric models to estimate effect sizes. Identification comes from varying macroeconomic conditions in Russia, which are plausibly exogenous to currency demand in remittance–recipient countries. Our estimates indicate that, across our models, it seems plausible that around 25% of all remittances flow into the informal economies of the region. Since shadow economies facilitate numerous illegal activities (such as organised crime, informal money lenders and money laundering), stronger regulatory and institutional frameworks accompanied with provision of incentives for informal firms to be integrated in the formal economy are likely to curb undesirable economic behaviour.

Do Payment Technology Innovations Affect Currency Demand in Tunisia?

This study investigates the impact of non-cash payment technologies on demand for currency in Tunisia using the autoregressive distributed lag (ARDL) cointegration approach from 2010M12 to 2018M7. In this context, our findings indicate a negative influence of EFT-POS terminals on currency demand. We have also shown that the demand for currency is positively influenced by the increase in the number of ATMs and the volume of transactions made by bank cards in circulation, reflecting the frequent use of cards to receive cash in Tunisia. Whereas, the impact of increase in check payments on demand for currency is negative and not significant. The empirical evidence shows that there is preference for cash in payment habits by Tunisian consumers. So, it should be noted that despite the development of payment systems, cash still attractive and an easier substitute for non-cash payments in Tunisia.

Estimating the size of informal economy in a post-transition country – the case of Poland

ABSTRACT The size of the informal economy in Poland is estimated by means of the Currency Demand Approach (CDA). Using quarterly data for the period 1999–2019, we adopt two separate econometric approaches. First, we specify a single equation model to estimate it with the Fully-Modified OLS method. Second, the CDA coefficients are treated as a cointegrating vector in a cointegrated VAR. The size of the informal economy in Poland is found to have diminished from about 32% of GDP in 2000 to about 12% of GDP in 2019. We provide confidence intervals for our estimates which, to our best knowledge, are rarely presented in the literature; their width ranges from 3 to 7% of GDP.

Macroeconomic Variables Uncertainty and Health Outcomes in Nigeria

Abstract Macroeconomic variables uncertainty relationship with key sectors in nations’ economies for both emerged and emerging economies have been investigated. In Nigeria, an emerging country, there is dearth of studies that have related macroeconomic variable uncertainty to health system performance. This study thus, bridges the gap by examining the time series of macroeconomic uncertainty and health outcomes by employing the Autoregressive Distributive Lag methodology. The macroeconomic variables investigated in the study are the exchange rate, the inflation rate, per capita income and index of health outcomes. The annual data for these macroeconomic variables span from 1980 to 2019. Augmented Dickey Fuller is employed to ascertain the stationarity state of the engaged macroeconomic data, while cause and effect among the variables are determined using the Granger causality test. In all, the findings reveal that, among the macroeconomic variables, exchange rate uncertainty has substantial impact on health outcomes. Inflation though has significant p-value, its sign is contrary to expectations. While the causality between health outcomes and per capita income is bi-directional, it is one-directional with exchange rate and non-directional with inflation rate. Based on these findings, a key policy recommendation is that, an inward looking approach should be encouraged to seek healthcare inputs within the nation’s economy to substitute for the hitherto imported ones. By so doing, foreign currency demand will be greatly eased, and a gradual move towards economic diversification could begin.

Predicting the demand for central bank digital currency: A structural analysis with survey data

What would be the potential demand for central bank digital currency (CBDC)? Which design attributes would affect the demand for CBDC? By applying a structural model to a unique Canadian survey dataset, I find that the aggregate CBDC holdings as a percentage of the total household liquid assets could range from 4–52%, based on households’ demand perspective. Allowing banks to respond to CBDC would substantially constrain the take-up of CBDC, reducing the upper bound prediction to below 20%. Important design attributes of CBDC identified are budgeting usefulness, anonymity, bundling of bank services, and rate of return.

Dampak Sistem Pembayaran Non-Tunai Terhadap Permintaan Uang Kartal di Indonesia

The stability of the demand for money is important to maintain the value of therupiah. This stability is seen in terms of the amount of currency and the ability ofmoney to fulfill all transactions in a short time. The use of non-cash money canhelp speed up the processing of financial transactions, but on the one hand it canhave an impact on changes in the demand for currency, which in turn affects thestability of the money supply. For this reason, it is necessary to conduct researchon the impact of using non-cash money on the demand for currency in Indonesia.This study analyzes the impact of non-cash payments using cards (APMK) on thedemand for currency in Indonesia for the 2014-2017 period. The analytical toolsused in this study are Vector Autoregression (VAR) to determine causality,Impulse Response Function (IRF) and Variance Decomposition (VD). The resultsshowed that the increase in the use of card-based non-cash money had an impacton reducing the demand for money in Indonesia in the 2014-2017 period. Thenon-cash money shock has an impact on the shock of changes in the demand forcurrency.

Shadow economy in Palestinian territories using currency demand approach

PurposeThe study aims at estimating the shadow economy (SE) using the method of demand for currency in Palestine for the period 2008–2018 by studying the relationship between a group of variables that affect the ratio of money traded outside the banking system to the money supply in the broad sense.Design/methodology/approachThe study has adopted analytical and descriptive research methods to estimate SE in Palestinian territories. The data has been obtained from the inflation reports issued by the Palestinian Monetary Authority for ten years, from 2008 to 2018. A standard model was constructed using EViews version 8 for statistical data processing after converting the annual data to quarterly data.FindingsThe authors demonstrated that the size of the SE in Palestinian territories has varied over time, and the annual average of its size during the study period reached about $1764.893 (in millions). This amount constitutes about 15.5% of the gross domestic product. The study provides recommendations for reducing the size of the SE in Palestinian territories.Practical implicationsThe current study shows that shadow economics could significantly matter for economic policy design by policymakers.Originality/valueThis study deals directly with Tanzi’s “estimation of shadow economy in Palestinian territories” concept and its impact on economic policies.

ПОСИЛЕННЯ ВАЛЮТНОГО РЕГУЛЮВАННЯ В УКРАЇНІ В УМОВАХ ЕСКАЛАЦІЇ ВОЄННИХ ДІЙ

Обґрунтовано актуальність використання потенціалу валютно-курсового регулювання в Україні в умовах війни і повоєнної економічної відбудови. На прикладі заходів валютного регулювання НБУ в умовах війни підтверджено дієвість валютних обмежень у частині тамування панічних і спекулятивних настроїв, утримання національного капіталу від втечі й загальної стабілізації обмінного курсу національної валюти. Відзначено, що ефективність заходів із стабілізації валютного курсу могла б бути вищою, якби вони реалізовувалися в рамках дієвої системи валютного регулювання. На підставі даних платіжного балансу України показано джерела девальваційного тиску у вигляді торговельних кредитів за кордон, імпорту послуг, знятті готівкової валюти з гривневих карткових рахунків. Окреслено ознаки порушення структури платіжного балансу через зменшення доходів від експорту продукції та грошових переказів при їх заміщенні міжнародною фінансовою допомогою. Виявлені загрози підтверджують необхідність розбудови вітчизняної системи валютно-курсового регулювання і валютного нагляду для запобігання виведенню національного капіталу, обмеження спекулятивного і панічного попиту на іноземну валюту й збільшення пропозиції на валютному ринку. Зазначено, що посилення заходів із стабілізації національної валюти цілком відповідає актуальним поглядам науковців, рекомендаціям міжнародних фінансових інституцій і вимогам євроінтеграції, тим більше, зважаючи на обставини війни. Концептуалізовано першочергові напрями розбудови системи валютно-курсового регулювання, що включають офіційне визнання необхідності такої системи і розширення функціоналу системи валютного нагляду, акцент на обмеженні спекулятивного й панічного попиту, боротьбу з напівлегальними шляхами виведення капіталу за кордон. Ефективний інструментарій такого регулювання повинен включати широкий спектр заходів, у тому числі з використанням інструментів макропруденційної політики, контролю за потоками капіталу і валютних інтервенцій на довгостроковій основі, оперативного використання адміністративних вимог для закриття виявлених шляхів уникнення встановлених обмежень.

Shadow Economy Estimation Using Cash Demand Approach: The Case of Serbia

Informalities in the Serbian economy seem to be relatively persistent and widespread, as suggested by some empirical evidence and numerous anecdotal evidence provided by citizens and companies. Nevertheless, the shadow—or informal—economy is a rather complicated phenomenon with a complex set of causes and consequences, implying that there are no universally accepted definitions nor quantification methods for determining the relative size of its impact. This paper takes a pioneering approach using the “monetary method” or the “currency demand approach” for the Serbian economy, based on econometric estimates of the demand for money. In this context, we rely on the well-known currency demand approach, expanding and applying it to the case of Serbia. Against the backdrop of the key research question, we found that the shadow economy in Serbia has decreased to roughly 20% of GDP in late 2021 from roughly 30% in 2005.

Валютные эффекты применения налоговой политики

The article examines the Russian experience in the field of currency regulation and the instruments that affect the exchange rate of the Russian ruble in crisis conditions. It is justified that the dynamics of the Russian ruble exchange rate depends primarily on the influence of four factors: the state of the economy of the issuing country, state monetary and financial policies, price dynamics of international commodity markets, and instability of the global monetary and financial system. It was established that the Russian ruble exchange rate also depends on the volume of foreign currency purchases by the population; a tendency for an increase in demand for foreign currency on the part of the population during the expectations of the Russian Federation (RF) national currency devaluation with a decrease in world oil prices was revealed. Based on an analysis of the currency policy of the Russian Federation, the authors come to the conclusion that curbing the weakening of the Russian ruble in the face of a decrease in the supply of foreign currency in the domestic market is carried out mainly through foreign exchange interventions and offer additional measures aimed at reducing demand on foreign currency through the introduction of tax instruments. Such measures will reduce the dependence of the ruble exchange rate on the volume of foreign currency inflows into the country, which will increase the efficiency of the Russian monetary policy and, as a consequence, the stability of the Russian economy to external adverse factors. In addition, six additional effects were revealed from the implementation of the proposed tax measures, which will strengthen the financial system of Russia. The proposed tax instruments can be applied in other countries, and the resulting increased demand for precious metals affects the global financial system up to its substantial transformation.

The Influence of Western Culture on Ghanaian Traditional Costumes: A Study of Selected Traditional Areas in the Volta Region of Ghana

The study assessed the influence of Western culture on traditional costumes in the Volta Region. The descriptive design was employed using one hundred and fifty respondents, with thirty (30) selected from each of the five (5) selected traditional areas for data collection. Questionnaires were the primary data collection instrument administered to the respondents through purposive sampling. The results saw the respondents affirming education, tourism, trade, religion and politics as the main dimensions through which the Western Culture had influenced the traditional costumes in the Volta Region. Out of the religious groups, the respondents who belong to the Islamic religion came first as the most affected religion regarding their ways of dressing. It was recommended that efforts be made to re-engineer the expertise that existed in weaving traditional costumes in the Volta Region and Ghana at large, as this will go a long way to boost the Government efforts in job creation and create avenues for the citizens to be engaged in self-employment activity that will reduce the volume of unemployment and the high demand for hard currency to import foreign clothes.

The effects of political risk on foreign exchange demand: Evidence from Zimbabwe

The political climate of any country has become one of the pillars of decision-making for investment and any other financial business. Zimbabwe is one of the countries that have experienced political instability for the longest time. Many studies have looked at the impact of political risk on the stock market and other macroeconomics variables without considering the impact of political risk on the demand for foreign exchange in a country. Using secondary data from the World Bank - World Development Indicator (WDI), International Country Risk Guide (ICRG), and Reserve Bank of Zimbabwe (RBZ), this study examined the effects of political risk on the foreign currency demand in Zimbabwe. The regression results showed a negative and significant association between political risk and foreign exchange reserve both in the short run and long-run period, implying an increase in foreign currency demand as political risk increases. The study also applied an alternate indicator for foreign exchange demand to test whether the main findings are robust to different dependent variable measures. The results from the robustness test are consistent with the main findings of the study. The study makes recommendations for policymaking by the Zimbabwean government and other regulators.

Impact of Indias Current Account Deficit and National Debt on Its Foreign Exchange Rate (vs. Us$): A Study of India from 1990-2018

Abstract: The Current Account Deficit and National Debt of a country are two major factors that can impact the foreign exchange rates it has with the currencies of other nations. This study empirically analyses the impact of India’s Current Account Deficit (in million USD) and National Debt (in million USD) on the nation’s Foreign Exchange Rate (vs.US$). The Current Account is the balance of trade between a country and its trading partners, reflecting all payments between countries for goods, services, interest, and dividends. A deficit in the current account shows that the value of the goods and services it imports exceeds the value of the products it exports. In other words, the country requires more foreign currency than it receives through sales of exports, and it supplies more of its owncurrency than foreigners demand for its products. The excess demand for foreign currency lowers the country's exchange rate (exchange rate depreciation). Thus the model presents a negative or inverse relation between Current Account Deficitand its impact on the Foreign Exchange Rate. Government debt is public debt or national debt owned by the central government. A country with increasing government debt is less likely to acquire foreign capital, leadingto inflation. Foreign investors will sell their bonds in the open market if the market predicts government debt within a certain country. As a result, a decrease in the value ofits exchange rate will follow

A Study on Changing Role of Foreign Institutional Investors (FIIs) in Indian Capital Market

The commencement of financial sector reform initiated in early 1990’s changed India’s policy on development strategy absolutely. The preliminary approach of financing current account deficit mainly by way of debt flows and official development assistance has altered to harnessing non-debt creating capital flows. Under this approach since September 14, 1992; Foreign Institutional Investors (FIIs) were allowed to invest in financial instruments in India and consequently Indian financial markets have changed greatly in its volume, size, depth and nature. FIIs are important to emerging economies because they bring funds and capital to businesses in developing countries. Foreign institutional investors play a very important role in any economy, since these are the big companies such as investment banks, mutual funds etc, who invest considerable amount of money in the Indian markets. These investors typically include hedge funds, mutual funds, insurance companies and investment banks among others. FIIs generally hold equity positions in foreign financial markets. Due to this, the companies invested in by FIIs generally have improved capital structures due to healthy inflow of funds. Thus, FIIs facilitate financial innovation and growth in capital markets. The entry of an FII can cause a drastic swing in domestic financial markets. It increases demand for local currency and directs inflation. Therefore, there are restrictions put by the managing authority of a country on how much stake FIIs can hold in the domestic company. This ensures that the FII’s influence on the company is limited, so as to avoid exploitation. However, not every FII will make an FDI in the country it is investing in. FIIs directly impact the stock market of the country, its exchange rate and inflation. FIIs can invest in listed, unlisted, and to-be-listed companies on the stock markets, in both the primary and secondary markets. This paper tries to analyse the changing role of FIIs in Indian capital markets because of their increasing share in the market.

Impact of COVID-19 on Indian Currency

Abstract: In this article the author examines the impact of COVID -19 on Indian rupee. The data has been collected through secondary method such as RBI bulletin, newspapers and other research papers. The objectives of the study to investigate the impact of COVID -19 on Indian rupee, currency growth, FDI, export - import, economic stability in Indian economy and protection of Indian rupee against the U.S. dollar by making efficient economic policies. This paper cover the data of exchange rate from 2012 to 2022 to know the impact of corona. Further, this study observe the effect of Covid -19 on Indian currency by classifying the data into two categories like pre Covid -19 and post Covid -19. Pre Covid including the periods from 2012 -18 and post Covid including 2020 -22. The value of domestic currency declined in comparison to foreign currency, because the demand for foreign currency is more than domestic currency. Thus, the domestic rate of exchange increased and the value of domestic exports become cheaper than foreign imports. The study has used statistical measures such as: Arithmetic Mean (A.M.), Standard deviation {S.D.} and Coefficient of variance (C.V.).

DIGITAL MONEY: OPPORTUNITIES AND CHALLENGES

Many parallel currencies have always circulated alongside the official currency. Today, a new generation of money is emerging from new technologies: “crypto-currencies”, the best known example of which is bitcoin. Although they constitute a remarkable technological advance, they raise many ethical and economic challenges, which this article tries to shed light on. These assets could eventually become new means of payment, or even units of account, thus reducing the demand for fiat currencies or central bank money. However, crypto-assets are too unstable and risky to really threaten fiat currencies. In this context, a group of leading economists and central bankers wondered whether advances in computing would make central banks obsolete. The digital age means new challenges, but also new opportunities for central banks. The motives for issuing an MDBC would therefore be to provide the public with a dematerialized monetary instrument without liquidity or credit risk that is resilient and easy to access, to curb the growth of crypto-assets and preserve monetary sovereignty. Key words: Digital Currency, Crypto-Currency, Central Bank, Sovereignty, Monetary Policy.

Euro Dinar Trading Analysis Using WARIMA Hybrid Model

The rise in the general level of prices in Iraq makes the local commodity less able to compete with other commodities, which leads to an increase in the amount of imports and a decrease in the amount of exports, since it raises demand for foreign currencies while decreasing demand for the local currency, which leads to a decrease in the exchange rate of the local currency in exchange for an increase in the exchange rate of currencies. This is one of the most important factors affecting the determination of the exchange rate and its fluctuations. This research deals with the currency of the European Euro and its impact against the Iraqi dinar. To make an accurate prediction for any process, modern methods can be used through which the model is developed. One of the most important modern methods that smooth the time series and purify it from noise is the wavelet transformation and in order to predict time series data using a new technique that combines the classic ARIMA method and the technique of Wavelet transformation, and this is called Wavelet-ARIMA hybrid model, as it was applied to data for a weekly time series of the rate of change in prices, buying and selling the European euro currency against the Iraqi dinar on the classic ARIMA model and the hybrid Wavelet-ARIMA model. The comparison was made between ARIMA and Wavelet-ARIMA models using several functions, including Haar, Db4 and Db6 to forecast the model that achieves better results for 64 weeks. As the hybrid model with Db6 function achieves better results, as the euro currency continues to increase, this negatively affects the Iraqi citizen in terms of high prices and positively on the country's economy

Falling Use of Cash and Demand for Retail Central Bank Digital Currency

Falling Use of Cash and Demand for Retail Central Bank Digital Currency