Effective Exchange Rate Research Articles

Sanctions and the exchange rate in time

SUMMARY We test the predictions of recent theoretical studies of the impact of sanctions on the exchange rate. We build a database of exchange rates and sanctions spanning 1914–45 – an era when both large and small economies were targeted by multilateral sanction packages, facilitating comparisons with today’s Russian war episode. We estimate the dynamic response of the exchange rate in a panel of sanction episodes at weekly frequency using local projections, conditioning on the type of sanctions taken. We tease out mechanisms through which sanctions affect the exchange rate by estimating their effects on macroeconomic variables plausibly acting as transmission channels. Our estimates suggest that import restrictions, export restrictions, asset freezes and trade embargoes lead to exchange rate effects consistent with theory, though the precision of the measured effects varies across sanction type. These findings suggest that recent models of the effects of sanctions on the exchange rate do not just match developments in today’s specific Russia episode but have broader applicability. It follows that the direction of exchange rate movements is not an adequate metric of the success or failure of sanctions but a reflection of the type and scale of the measures taken.

Analysis of Symmetric and Asymmetric Effects of Exchange Rate Pass-Through in Inflation-Targeting Countries

The main purpose of this study is to analyze the effects of symmetry and asymmetry of the exchange rate pass-through in Middle-Income and High-Income countries that implement inflation-targeting policies. This study uses a sample of Middle-Income Countries (South Africa, Brazil, India, Indonesia, and Mexico) and High-Income Countries (Australia, Japan, Canada, Norway, and Sweden) in the form of time-series 2000:Q1- 2021:Q4 with the method of Autoregressive Distribution Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL). The results showed that five countries have a significant positive effect on the real exchange rate on inflation in the short-run in the ARDL method. In addition, in the NARDL method, five countries significantly positively affect the depreciation of the real exchange rate on inflation in the short-run. Then, only one country has a significant negative effect between the appreciation of the real exchange rate on inflation in the short-run and eight countries in the long-run. Based on the estimation results, it can be concluded that the average quantity of real exchange rate effect on inflation (exchange rate pass-through) in Middle-Income Countries is greater than in High-Income Countries. Therefore, inflation-targeting policies are more flexible to be applied in high-income countries. In addition to the exchange rate, other variables such as oil prices, money supply, and real GDP also greatly affect inflation and have different effects in each country.

Causal Relationships between Oil Prices and Key Macroeconomic Variables in India

India is among the largest and fastest-growing economies in the world. To continue its growth, energy is and will continue to be one of its most important considerations. With a population of over one billion, India is the third largest consumer of petroleum on the globe. To maintain this ranking, India imports a large percentage of its total oil consumption. Given India’s current position as a large importer of oil, how does oil price volatility affect the Indian economy? This paper examines the effect of oil price volatility on inflation, economic growth, and the stock market in India. Statistical tests suggest that the overall price level, the real effective exchange rate, and oil prices are negatively related to aggregate output in the long run. Granger causality test results derived from a vector error correction model support bidirectional causality between oil prices and aggregate output, indicating that a change in oil prices also affects aggregate output in the short run.

Analisis Pengaruh Inflasi, Kurs, dan Investasi Terhadap Ekspor Indonesia Tahun 2009 – 2018

This study was conducted to determine the effects of inflation, exchange rates, and investment on Indonesian exports in 2009–2018. Among the data used in this study are Indonesian inflation, US inflation, the middle rate of the US dollar, and investment, which includes domestic investment (PMDN) and foreign investment (PMA) on the value of Indonesia's exports. This study uses secondary data and data analysis techniques with multiple linear regression analysis. Based on the research that has been done, the results show that inflation, exchange rates, and investment have simultaneously had a significant effect on Indonesian exports from 2009–2018. Partially, the results show that both Indonesian and United States inflation and the United States dollar exchange rate had no significant effect on Indonesian exports in 2009–2018, and investment substantially impacted Indonesian exports in 2009–2018.

Faktor-Faktor Yang Mempengaruhi Cadangan Devisa Indonesia

This study aims to analyze in the short and long term the effect of exports,exchange rate and froreign direct investment (FDI) on foreign exchangereserves in Indonesia. This type of research is quantitative research usingsecondary data. The data analysis method used is the Auto RegressiveDistributed Lag (ARDL). The variables used are Foreign Reserves (Y), Exports(X1), Exchange Rate (X2) and Foreign Direct Investment (X3). The data used isthe time series period 1989-2020 obtained from relevant institutions andagencie. The results of this study indicate that all independent variablestogether have a significant effect on foreign exchange reserves as the dependentvariable. In the short-term test, the export variable has a positive andsignificant effect on foreign exchange reserves. Exchange rate has a negativeand insignificant effect on foreign exchange reserves, while FDI has a negativeand significant effect on foreign exchange reserves. In the long term, the exportvariable has a negative and significant effect on foreign exchange reserves. Theexchange rate has a positive and significant effect on foreign exchange reserves,while FDI has a positive and significant effect on foreign exchange reserves.

FAKTOR-FAKTOR YANG MEMPENGARUHI PERTUMBUHAN INVESTOR SAHAM SYARIAH DI INDONESIA TAHUN 2015-2021

Factors Influencing Economic Growth on the Growth of Sharia Stock Investors in Indonesia in 2015-2021
 Stocks have recently been increasingly in demand by the majority of people in Indonesia, many phenomena have occurred including economic problems, crises, politics, and others, but these fluctuations do not affect people's interest in buying Islamic stocks. This study aims to determine the effect of the dollar exchange rate, inflation, and economic growth on the growth of stock investors in Indonesia.
 This type of research is descriptive research which is analyzed using quantitative analysis. The data used are the financial reports of Islamic banks in Jambi through the Financial Services Authority (OJK), in the period from March 2015 to December 2021. The prerequisite analysis test was carried out using the normality test, muticolinierity, heteroscedasticity, and linearity tests. Furthermore, the data were analyzed using multiple linear regression analysis.
 Based on the results of the study, it can be concluded that during the period from 2015 to December 2021, the dollar exchange rate has no significant effect on the growth of Islamic stock investors and inflation has a significant negative effect on the growth of Islamic stock investors in Indonesia, GRDP has a significant effect on the growth of stock investors in Indonesia. and simultaneously the Dollar Exchange Rate, Inflation, and Economic Growth are significant for the Growth of Stock Investors in Indonesia.

Analisis Faktor-Faktor Yang Mempengaruhi Impor Gandum Indonesia

Indonesia must provide for its residents' food demands because of its expanding population. Due to limitations in producing it, Indonesia imports a lot of wheat to meet the consumption need. This research attempts to: 1) examine some factors that affecting indonesia wheat import 2) to analyze the effect of dollar exchange rate, global wheat price, and indonesian wheat consumption on Indonesian wheat imports. This study used secondary data in the form of dollar exchange rate, global wheat price, and indonesian wheat consumption for the last 23 years (2000-2022). Eviews 12.0 was used to process the data, and multiple linear regression models with the Ordinary Least Square (OLS) technique were used. The multiple linear regression findings demonstrate that only Indonesian wheat consumption has a positive impact on imports of Indonesian wheat; the impact of the dollar exchange rate and the world wheat price is negligible.

Asymmetric Effects of Exchange Rate on the Value Added of Industrial Sector in Iran: Evidence of Non-linear Co-accumulation of NARDL

Asymmetric Effects of Exchange Rate on the Value Added of Industrial Sector in Iran: Evidence of Non-linear Co-accumulation of NARDL

THE EFFECT OF EXCHANGE RATES, INFLATION AND BI RATES ON PROFITABILITY IN ISLAMIC COMMERCIAL BANKS DURING THE 2016-2022 PERIOD

A bank is a place to raise distribute and funds public funds. In addition, banks also provide payment services to the public. The main goal of a bank is to obtain profitability. This trial purpose to examine the effect of inflation, exchange rate, and BI rate on profitability (ROA) in Islamic commercial banks for the 2016-2022 period. The residents of this study incoporate all Islamic trade banks for the 2016-2022 period. The type of investigation used in this analysis is quantitative analysis. The data used is secondly data with a causal associative approach. The consequence of this study argue that the independent variables of Exchange Rate, Inflation, and the BI Rate have a significant effect on the dependent variable of Islamic Banking profitability (ROA). And partially, inflation and the BI Rate have a positive effect on ROA at the level α = 10%, while the exchange rate has a negative effect on ROA.

Impact of Oil Price and Exchange Rate on Economic Growth of Pakistan

The primary goal of this study was to investigate how oil price and exchange rate effect the economic growth of Pakistan from 1992 to 2021. The rising oil prices are the major concern for all the developing economies and Pakistan is suffering from it. The unit root test, correlation test, bound test was used to examine the economic trend. The result from multiple linear regression model describe that there is short run and long run relationship between the variables. It indicates that there is a positive impact of oil price on economic growth. The countries like Pakistan who are oil importers should purchase crude oil on less prices.

Pengaruh Pendapatan Domestik Bruto, Nilai Kurs, Dan Penanaman Modal Asing Terhadap Utang Luar Negeri Indonesia Periode 1990-2022

The purpose of this study was to analyze the effect of Gross Domestic Income, Exchange Rate, and Foreign Investment on foreign debt in Indonesia for the period 1990-2022. This study uses quantitative data. This study uses multiple linear regression statistical tests with the Ordinary Least Square (OLS) approach. From the results of the determination test, it can be seen that the R-squared value of 0.914054 indicates that the X1, X2 and X3 variables (GDP, KURS and FDI) simultaneously influence the Foreign Debt (Y) variable by 91.40%, and the remaining 8.60% is influenced by other variables not included in this study.

Effect of Ukraine’s public debt management on its macroeconomic development: VAR modeling

One of the tools of economic policy of any country is efficient public debt management, which influences and determines the dynamics of key macroeconomic indicators. The study aims to assess how public debt management affects Ukraine’s macroeconomic development. The analyzed period includes data of 2015–2021. Econometric modeling is used to establish the existence of causal relationships between the dynamics of public debt and changes in key macroeconomic indicators using the Granger causality test and VAR (Vector Autoregression) model. The obtained results demonstrate that during the study period, the strongest links existed between the public debt and GDP, debt servicing and Ukraine’s total state budget expenditures, public debt and consumer price index, real effective exchange rate index of the hryvnia to the US dollar, and political stability index. At the same time, the calculations proved that public debt does not have a significant impact on foreign direct investment and the level of imports of goods and services. The proposed model allows for forecasts for future periods and can be used in developing public debt management policy.

Threshold Impact of Remittances on Real Exchange Rates for WAEMU: A Panel Smooth Transition Regression Approach

This paper explores the nonlinear relationship between workers’ remittances and real effective exchange rates for West African Economic and Monetary Union (WAEMU) member countries using the panel smooth transition regression (PSTR). The PSTR was estimated with one transition function and one location parameter as dictated by the diagnostic tests. The diagnostic tests reveal that the relationship between workers’ remittances and real effective rates is nonlinear. The estimated threshold value is 3.07%. The results reveal that increases in workers’ remittances have a depreciating effect on real effective exchange rates in regime one, associated with threshold value of less than 3.07%. However, in the second regime when the threshold value is greater than or equal to 3.07%, increases in workers remittances have an appreciating impact on real effective exchange rates. These results substantiate that the relationship between workers’ remittances and real effective exchange rates is asymmetric and as such should be modeled accordingly. Above all, the results confirm the presence of Dutch disease effect in the second regime where the estimated coefficient on workers’ remittances is negative and statistically significant. However, there is no evidence of Dutch disease effect in the first regime where the regression coefficient on workers remittances is positive and also statistically significant. Policy implications are discussed.

Do flexible exchange rates matter for monetary autonomy?

This paper studies the impact of exchange rate regimes on monetary autonomy, by applying a propensity score matching (PSM) model for 174 countries over the period 1970–2017. The PSM technique, that we used here to account for self-selection bias and endogeneity, reveals that the average treatment effect of flexible exchange rates on monetary autonomy is statistically significant, providing support for the impossible trinity. We also find that the effect of flexible exchange rates on monetary autonomy is more prominent in advanced economies than in emerging and developing ones. Furthermore, we show that the global financial recession (GFC) affects the monetary autonomy responses to flexible exchange rates. In particular, the GFC causes an increase in the level of monetary autonomy in countries adopting flexible exchange rates during the post-crisis period.

Energy price shocks and current account balances: Evidence from emerging market and developing economies

This paper investigates the effects of real energy price shocks on current account balances of 45 emerging market and developing economies. The investigation is based on country-specific structural vector autoregression models, where alternative specifications and identification schemes are considered for robustness purposes. The empirical results suggest that 1 % of a positive real oil price shock results in up to 0.11 (0.08) percentage points of a cumulative improvement (deterioration) in current account balances of oil exporters (importers) after five years, whereas 1 % of a positive real natural gas price shock results in up to 0.06 (0.04) percentage points of a cumulative improvement (deterioration) in current account balances of natural gas exporters (importers) after five years. Real coal price shocks result in higher current account balances of oil exporters and natural gas exporters, suggesting substitution of coal with oil and natural gas in such cases. When contributions of alternative real energy prices to the variance of current account balances are compared, real oil price shocks dominate those of real natural gas and real coal prices. The empirical results investigating the effects of oil demand versus oil supply shocks on current account balances suggest that oil demand shocks (rather than oil supply shocks) result in similar reactions of current account balances to real oil price shocks, supporting the view that the effects of oil demand shocks are different from those of oil supply shocks. The results are robust to the consideration of country-specific changes in real GDP and real effective exchange rates.

Fossil Fuel-Based versus Electric Vehicles: A Volatility Spillover Perspective Regarding the Environment

Due to environmental concerns, electric vehicles (EVs) are gaining traction over fossil fuel-based vehicles. For electronic devices, including vehicles, copper is the key material used for building. This situation draws attention to the impact of copper prices, crude oil prices, and exchange rates on the economic viability of using EVs over fossil fuels. We use the volatility spillover effect (VSE) to determine the financial viability of these two types of vehicles in the context of environmental issues. Daily data on copper prices, crude oil, exchange rate, and the BSE100 ESG (“Bombay Stock Exchange 100 Environmental, Social and Governance”) index are taken from 1 November 2017 to 20 September 2022. Two popular multivariate GARCH (“Multivariate Generalized Autoregressive Conditional Heteroscedasticity”) family models, i.e., the BEKK (“Baba–Engle–Kraft–Kroner”)-GARCH (BG) and DCC (“Dynamic Conditional Correlation”)-GARCH (DG) models, are utilized to find volatility connections between these variables. These are appropriate GARCH models to observe the volatility dependence of one market on another market. It is found that there exist volatility effects of copper and exchange rate on the S&P BSE100 ESG Equity Index Price, which we will refer to here as ESG. However, crude oil is found to be insignificant for ESG. The novelty of this study is in the use of volatility spillover to determine economic viability. The volatility effects of copper prices are positive for ESG in the short run and negative for long-term volatility. The exchange rate has a positive volatility effect on ESG in the long run. Surprisingly, we find that EVs are technologically better than fossil fuel-based vehicles as a possible sustainable energy source. We observe studies that have raised similar concerns about EVs’ lack of business sense compared to fossil fuels. However, using VSE to explore financial viability offers a fresh perspective. Based on the findings of the current study, it is recommended that policymakers and researchers revisit their support for EVs as an alternate and sustainable source of energy.

Handling asymmetries in the trade balance

The existing literature in the US-Mexico trade balance reports mixed evidence on the effects of exchange rate shocks. In this paper we propose a new approach of studying exchange rate effects that allows for asymmetries in the balance of trade. Our results show that using either linear modelling or non-linear modelling and zero threshold, there is no evidence of co-integration for the US-Mexico trade. However, using a quantile analysis and median threshold, for the first time in the literature on trade balance, we obtain evidence of co-integration. Indeed, our findings show the existence of a long-run relation between the trade balance and its determinants except for periods of significant deficits, where the trade balance is detached from underlying fundamentals and follows a random walk. A USD depreciation, especially a small one, is effective in the short run in improving the trade balance, while in the long run, any depreciation worsens the trade balance. These findings hold due to the complementarity of the US and Mexican economies and the change in the structure of the Mexican economy towards higher value-added products that have led to income effects outweighing in the long run, any intending short-run effects, of exchange rate depreciation.

Impact of geopolitical risk on tourism demand: evidence from asymmetric NARDL approach

PurposeMany tourism academics have investigated the linkages between tourism, power and space; few have specifically addressed the profound links between tourism and geopolitics. In view of the restrictive assumptions of the linear framework used in the earlier studies, and hidden asymmetries present in the time series data. Against this backdrop, the study tries to find out how tourists may respond differently to favourable and unfavourable shocks in geopolitical risk (GPR).Design/methodology/approachIn order to capture this asymmetric nature of the problem, the study employs the non-linear autoregressive distributed lag (NARDL) model to evaluate data from 2001Q1 to 2019Q4.FindingsThe results show that both positive and negative shock to GPR does not produce results of equal magnitude. A positive shock to GPR has a more detrimental effect on foreign tourist arrivals (FTA) than a beneficial effect a negative shock produces. Besides this, the present study also looks at the effect of other macro-economic variables on FTA. An ascend in the real effective exchange rate (REER) i.e. appreciation of the domestic currency has an unfavourable impact on foreign visitor arrivals, while an increase in world gross domestic product amplify it. The results of the study are robust to alternative measures of the control variable.Practical implicationsThe study is significant for policymakers in understanding the short and long-run implications of GPR on FTA in India. The present study can assist policymakers, and destination managers to manage the external and internal risks and minimise the consequences of geopolitical threats on the Indian tourism industry. Consequently, destination managers can utilise the study's findings in calibrating their operations and designing crisis marketing strategies within the geopolitical dynamics of the Indian state.Originality/valueThe study tries to find out how tourists may exhibit distinct reactions to positive and negative disturbances in GPR. The study provides first-hand evidence of how GPR impacts tourism demand. The paper also includes the existing body of literature related to GPR factors and their effect on tourist influx, specifically in the framework of the Indian tourism sector.

PENGARUH INFLASI, SUKU BUNGA DAN NILAI TUKAR TERHADAP HARGA SAHAM DENGAN PERTUMBUHAN EKONOMI SEBAGAI VARIABEL INTERVENING

Purpose – This study aims to determine the effect of Inflation, Interes Rates and Exchange Rates on Stock Prices with Economic Growth as an intervening variable in healthcare sector companies on the indonesian stock exchange. Design/methodology – This research is a quantitative approach, there is data calculation in the form of numbers. The research population used 25 healthcare companies listed on the IDX for the 2014-2021 period. Using purposive sampling techniques, 11 sample companies were obtained during the 2014-2021 period. Technique data analysis used is Structural Modeling Equation (SEM) with Program IBM SPSS AMOS 24. Findings - The result show that Inflation affected Economic Growt, Interest Rate did not affect Economic Growth, Exchange affected Economic Growth, Inflation affected The Stock Price, Interest Rates did not affect The Stock Price, Exchange Rates affected The Stock Price, Economic Growth did not affect The Stock Price, Economic Growth strengthens the influence of Inflation on The Stock Price, Economic Growth strengthens the influence of Interest Rate on The Stock Price, Economic Growth strengthens the influence of Exchange Rate on The Stock Price.

Sources of real exchange rate fluctuations in Egypt

PurposeThis paper aims to empirically investigate the sources of real exchange rate fluctuations in Egypt using structural vector autoregression (SVAR). The data covers the period between 1980 and 2016, where exchange regime has been changed more than once.Design/methodology/approachThis paper investigates the source of real exchange rate fluctuations for the period between 1980 and 2016 using the SVAR method. The SVAR method will incorporate real gross domestic product (GDP), real effective exchange rate (REER) and price level in a multidimensional equations system. However, impulse response function (IRF) and error variance decompositions (EVDC) will be generated by the system to have a behavioral insight of real exchange rate in response to economic shocks.FindingsThe IRF and EVDC results indicate a significant impact of demand shocks over the real exchange rate relative to supply shocks and monetary shocks in the period between 1980 and 2016. On the other hand, monetary shocks will have a negligible effect on the real exchange rate in the short run and converging to its previous level in the covering period of the study.Originality/valueIn the best of the authors' knowledge, the topic of the source of the real exchange rate fluctuations in Egypt has not been discussed in a wide range due to the lack of time series data. However, this study provides constructed data for REER for Egypt with the published method in the International Monetary Fund (IMF). Furthermore, the study involves theoretical and econometric modeling to ensure the reliability of the economic results.