Effects Of Exchange Rate Changes Research Articles

The Asymmetric Effects of Exchange Rate Changes on Output: Evidence from Asian Countries

ABSTRACT This article examines the asymmetric effects of real exchange rate changes on the domestic output of selected Asian countries. To account for asymmetries, we separate currency appreciation from depreciation and utilize the nonlinear autoregressive distributed lag (NARDL) model. Employing annual data (1973 to 2018), we find evidence of short-run and long-run asymmetries in the effects of real exchange changes on the domestic output of all the countries. This means that currency appreciations have different effects from currency depreciations on the output of the countries. Overall, the results suggest that both currency appreciations and depreciations are contractionary in most cases.

Effect of Exchange Rate Change on Macroeconomic Variables Through Banking System: Approach of Macro-Econometric Model

Effect of Exchange Rate Change on Macroeconomic Variables Through Banking System: Approach of Macro-Econometric Model

"환율 변화가 기업 규모별 우리나라 수출기업에 미치는 영향"

"환율 변화가 기업 규모별 우리나라 수출기업에 미치는 영향"

U.S.-German commodity trade and the J-curve: New evidence from asymmetry analysis

Since the introduction of the nonlinear ARDL approach and asymmetric cointegration and error-correction modeling, old relations are receiving renewed attention, and the link between the trade balance and the exchange rate is no exception. We add to this new literature by using industry-level data from 59 2-digit industries that trade between the U.S. and Germany. We find that when the old approach of the linear model was used, the real dollar-euro rate had short-run effects in 17 industries that lasted into the long run in 26 industries. However, when the nonlinear model was estimated, we found short-run asymmetric effects of exchange rate changes in 49 industries, which lasted into long-run asymmetric effects in 28 industries. The J-curve effect was supported in a total of 18 industries.

Trade Restriction and Economic Growth: A Study of Developed and Developing Countries

According to the World Bank, most research suggests that unilateral reduction in trade barriers can result in the greatest and the quickest gains in welfare. However, recently United States imposed tariffs on good imported from China and Chinese government retaliated by introducing trade barriers on imports from the United States. Generally, developed counties attempt to improve their trade deficits by allowing the exchange rate to depreciate, whereas developing countries rely more on trade restrictions.
 In this paper, five developed countries and five developing countries that experienced persistent trade deficits were selected. A VAR statistical technique was used to examine the effects of exchange rate changes of the net trade of two selected groups of countries. It is shown that in case of developed counties, the exchange rate and net trade moved in the same direction. However, the same results were not confirmed for the developing countries.

On the Asymmetric Effects of Exchange Rate Changes on Trade Flows: Evidence from the U.S.-Canada Trade in Forest Products

On the Asymmetric Effects of Exchange Rate Changes on Trade Flows: Evidence from the U.S.-Canada Trade in Forest Products

Exchange Rates as Trade Frictions: Estimates and Implications for Policy

This paper improves on current treatment of exchange rate variation in quantitative trade models. Exchange rate changes with heterogeneous passthrough to buyers are embedded in the structural gravity model. Quantification on two digit annual bilateral trade data reveals real effects of exchange rate changes on producers that are substantial for some country-sector-time period observations. Real national income effects are small but not always negligible. Effective exchange Rates with Gravitas (ERGs) are introduced as theory-consistent indexes to guide potential policy remedies.

Dominant Currencies and the Export Supply Channel

Dominant currency pricing (DCP) weakens the demand-side effects of exchange rate changes on exports (Gopinath et al., 2020). However, adjustment in the export sector can still occur through other supply-side channels. With bilateral trade data at the HS2-product level, panel fixed-effects regressions and an instrumental variables (IV) approach, this paper presents several novel findings: (1), a depreciation of an exporter’s currency against the US-dollar increases total export volumes between non-US countries, whereas bilateral exchange rates matter very little. (2), there is no statistically significant increase in average exports per firm (the intensive margin), while the aggregate export response is mainly driven by an increase in the number of exporting firms (the extensive margin). (3), there is substantial heterogeneity in the export response to exchange rates against dominant currencies. Market concentration, approximated by the Herfindahl-Hirschman Index (HHI), reduces the response of both the extensive and intensive margins to the US-dollar exchange rate. These results highlight an “export supply channel” of exchange rates in a world with dominant currencies, deepen our understanding of aggregate export adjustment and further underline the heterogeneous export response in different sectors to exchange rate changes. JEL Classification: F14, F31, F41

Linkage Between Exchange Rate and Stock Prices: Evidence from Vietnam

The study investigates the asymmetric effect of exchange rate changes on stock prices in Vietnam. We use the nonlinear autoregressive-distributed lag (ARDL) analysis for monthly data from 2001:01 to 2018:05, based on VN-Index stock price collected from Ho Chi Minh Stock Exchange (HOSE); the nominal exchange rate is separated into currency depreciation and appreciation through a partial sum decomposition process. Asymmetry is estimated both in the long-run relationship and the short-run error correction mechanism. The research results show that the effect of exchange rate changes on stock prices is asymmetrical, both in the short run and in long run. Accordingly, the stock prices react to different levels to depreciation and appreciation. However, the currency appreciation affects a stronger transmission of stock prices when compared to the long-run currency depreciation. In the absence of asymmetry, the exchange rate only has a short-run impact on stock prices. This implies a symmetrical assumption that underestimates the impact of exchange rate changes on stock prices in Vietnam. This study points to an important implication for regulators in Vietnam. They should consider the relationship between exchange rate changes and stock prices in both the long run and the short run to manage the stock and foreign exchange market.

The effects of exchange rate fluctuations on the stock market and the affecting mechanisms: Evidence from BRICS countries

Using data from BRICS countries, we apply the TVP-VAR model to analyze the effects of exchange rate fluctuations on their stock markets and the mechanisms leading to those effects. We find that for BRICS countries, there are similarities as well as differences in the extent, direction, and duration of the effects of exchange rate changes on the stock market. As for the affecting mechanisms, Brazil is almost entirely driven by the financial account, while the current account is dominant for Russia, whereas India, China, and South Africa depend on both mechanisms.

The Turkey-US commodity trade and the asymmetric J-curve

Unlike past studies, recent studies try to separate currency appreciations from depreciations and show that indeed, the effects of exchange rate changes on the trade balance are asymmetric. We add to this literature by considering the response of the trade balance of 45 industries that trade between Turkey and the USA We find that the real lira-dollar rate has short-run asymmetric effects in 28 out of 45 industries. Short-run asymmetric effects translate into the long-run asymmetric effects in only 13 industries. While our findings are industry specific, additional analysis revealed that in some industries while depreciations had significant effects, appreciations did not, in some other industries the opposite was true. Such findings were hidden by the estimates of past traditional linear models.

On the asymmetric effects of the real exchange rate on domestic investment in G7 countries

AbstractTwo studies have assessed the symmetric and asymmetric effects of exchange rate changes on domestic investment. One included six emerging countries and the other one, 18 African nations. Both revealed that using nonlinear models to assess the asymmetric effects yield a more significant outcome compared to symmetric and linear models. We add to this small literature by showing the same using quarterly data from each of the G7 countries. Indeed, nonlinear models produced relatively more short‐run and long‐run effects of changes in the real effective exchange rate on domestic investment, though in an asymmetric manner.

Asymmetry cointegration and the J-curve: new evidence from Africa

PurposeThe purpose is to assess the asymmetric effects of exchange rate changes on the trade balance using data from African nations.Design/methodology/approachThe methodology is based on the most recent development in asymmetry cointegration and error-correction modeling.FindingsWhile the authors find short-run asymmetric effects in many of the countries in their sample, asymmetry cointegration yields support for the new definition of the J-curve in Algeria, Cameroon, Ethiopia, Morocco, Tanzania and Zambia.Originality/valueThis is the first study that applies nonlinear ARDL approach of Shin et al. (2014) using data from each of the 13 countries in Africa.

Asymmetric effect of exchange rate changes on cross-border trade in Nigeria

This paper investigates the asymmetric effect of exchange rate changes on cross-border trade in Nigeria. The investigation becomes necessary because several studies have reported insignificant results in attempting to establish a link between these two variables using symmetric specification. Whereas, there are strong evidence of nonlinear mean-reverting association because some exchange rate changes of the same magnitude exhibit different effects on other variables of interest. Having separated the real effective exchange rate into both depreciation and appreciation regimes using the partial sum processes based on logistic smooth-transition and exponential smooth-transition, results from the nonlinear autoregressive distributed lags show that exchange rate appreciation had a statistically significant negative relationship with cross-border trade in Nigeria. The study concludes that the relationship between real effective exchange rate and cross-border trade is asymmetric. (Depreciation and appreciation of equal magnitude do not have the same effect on cross-border trade in Nigeria.) The study recommends that policy makers should consider models that allow a nonlinear adjustment of exchange rates which may produce outcomes supporting an effective devaluation or appreciation policy, at least against some trading partners.

Estimating the effect of exchange rate changes on total exports

This paper shows that real effective exchange rate (REER) regressions, the standard approach for estimating the response of aggregate exports to exchange rate changes, imply biased estimates of the underlying elasticities. We provide a new aggregate regression specification that is consistent with bilateral trade flows micro-founded by the gravity equation. This theory-consistent aggregation leads to unbiased estimates when prices are set in an international currency as postulated by the dominant currency paradigm. We use Monte-Carlo simulations to compare elasticity estimates based on this new “ideal-REER” regression against typical regression specifications found in the REER literature. The results show that the biases are small (around 1 percent) for the exchange rate and large (around 10 percent) for the demand elasticity. We find empirical support for this prediction from annual trade flow data. The difference between elasticities estimated on the bilateral and the aggregate levels reduce significantly when applying an ideal-REER regression rather than a standard REER approach.

Exchange Rate Pass-Through Investigation for Turkish Economy

Turkish economy continued to rapidly opening up to the outside for the last 40 years. It has long been in the top 20 largest economies in the world. Exchange rate is an important variable affecting micro and macro variables in the economy. This study aims to investigate the effect of exchange rate changes on the producer and consumer prices in Turkey by using the VAR model. Results show that the degree of transition with effect-response functions and how the prices were affected by variance decomposition by using the 2005-2019 monthly data. CPI's response to the change in nominal exchange rate was found to be greater than PPI. The end of the impact is shorter than CPI’s impact.

환율과 경상수지의 구조적 변화와 정책방향 (Structural Factors Behind Foreign Exchange Rate and Current Account Balances and Policy Directions)

환율과 경상수지의 구조적 변화와 정책방향 (Structural Factors Behind Foreign Exchange Rate and Current Account Balances and Policy Directions)

Osetljivost izvoza diferenciranih proizvoda CESEE zemalja na promene deviznih kurseva

The research aims to examine the effects of exchange rate changes on the value of bilateral export of differentiated products in the selected CESEE countries, while controlling the impact of traditional gravity variables. Identifying the determinants that affect the export of high value-added products is of particular importance for this group of countries, while analyzing the effects of exchange rate changes is a contribution to the previous researches. In order to comprehensively understand the relationship between the observed variables, a quantile panel regeression was used to estimate the gravity equation. Examining the heterogeneity of the impact of exchange rate changes and other selected trade factors along the export distribution is another contribution of the paper, given that bilateral trade researches are usually based on assessing the average impact. The results indicate that the CESEE countries' export of differentiated products is significantly influenced by exchange rate changes. Exchange rate volatility has a negative impact, which grows at higher levels of export. The heterogeneity of the impact depending on export level was also confirmed for other determinants discussed in the paper.

The South Africa‐U.S. Trade and the Real Exchange Rate: Asymmetric Evidence from 25 Industries

AbstractPrevious studies that assessed the effects of exchange rate changes on the trade balance of South Africa assumed that the effects are symmetric. In this paper we violate that assumption and assess the asymmetric effects of the real rand‐dollar rate on the trade balance of 25 2‐digit industries that trade between South Africa and the U.S. We find short‐run asymmetric effects in a total of 19 industries but short‐run cumulative or impact asymmetric effects only on five industries. Short‐run asymmetric effects lasted into long‐run asymmetric effects on 14 industries. Further analysis revealed industries that will benefit from rand depreciation and those that will be hurt from rand appreciation.

Asymmetric effects of exchange rate changes on the demand for divisia money in Malaysia

Asymmetric effects of exchange rate changes on the demand for divisia money in Malaysia