Exchange Rate Changes Research Articles

Effects of Exchange Rate Changes on Real Estate Prices in Russia During the Russian-Ukrainian War

Effects of Exchange Rate Changes on Real Estate Prices in Russia During the Russian-Ukrainian War

Relationship Between Exchange Rate and Inflation in Afghanistan

Afghanistan is an import dependent country and has been facing perpetual trade balance deficit for decades. In case of imperfect competition in the market or existence of market monopoly, there is a higher chance of reflecting the exchange rate changes on the prices of the goods. In Addition, countries with low level of domestic production and higher amounts of imports usually experience higher degree of the exchange rate pass-through effect on inflation. Countries with high import volumes and low export levels often face a deficit in foreign currency inflows and an excess in outflows. These countries need substantial foreign currency to purchase and import goods from both neighboring and international markets, increasing domestic demand for foreign currencies and consequently leading to domestic currency depreciation. This study investigated the relationship between exchange rates and inflation in Afghanistan, examining how exchange rates impact inflation and the benefits associated with exchange rate mechanisms. The primary research questions include: What is the relationship between exchange rates and inflation in Afghanistan? How does the exchange rate influence inflation in the country? What are the benefits of exchange rate systems? The hypothesis posits that higher inflation typically depresses a country's currency value and that exchange rates directly affect inflation. Additionally, exchange rates determine the value of currency exchanges between different nations. This research aims to elucidate the relationship between exchange rates and inflation in Afghanistan, assess the impact of exchange rates on inflation, and explore the benefits of exchange rate systems. The methodology involves a binary system and utilizes secondary data collected from books, websites, and research papers. Findings indicate that Afghanistan's reliance on imports results in a persistent trade balance deficit, with a significant portion of goods, especially non-food items, being imported due to insufficient domestic production. To import goods, Afghanistan requires foreign currencies, which are typically earned through exports of goods and services as of a result, Afghanistan will experience stability in the exchange rate and in the domestic prices.

THE IMPACT OF THE RECIPROCAL RELATIONSHIP BETWEEN EXCHANGE RATES AND INTEREST RATES ON THE BOND MARKET USING THE SVAR MODEL FOR CHINA FOR THE PERIOD FROM (2000-2020)

This study aims to illustrate the effect of the reciprocal relationship between the exchange rates and interest rates on the bond market by using the SVAR model for China during (2000 -2020), this is to analyze and measure the relationship between exchange rates and interest rates and showing their impact through changes in the bond index and monitoring the changes that occur in their traded prices in the financial markets. This study is based on three standard model estimations. The first model includes the effect of interest rates and inflation on the exchange rates. The second model shows the effect of the exchange rates and money supply on the interest rate. The third model includes the effect of exchange and interest rates on the bond index. The Structural Vector Auto Regression Model (SVAR) was used to test the long-term relationship between the variables of the study, in addition to the variance Decomposition analysis and the analysis of the Impulse response functions (IRF). The results showed that the reciprocal relationship between the exchange rates and interest rates is a positive inverse relationship, and the effect is in both directions. In other words, when the prevailing interest rate rises in the country, it leads to an appreciation in the value of the currency due to the increase in demand for the currency of that country, resulting in a depreciation in its exchange rate and conversely. In addition, the results indicated that the bond index is sensitive to any shock or any unexpected change in exchange rate and interest rate and that these shocks manifest in the short term and stabilize in the long term.

The asymmetric effects of exchange rate volatility on UK–Pakistan trade flows: New evidence from nonlinear ARDL approach

Using the nonlinear autoregressive distributed lag (NARDL) method, the current study explores the effects of exchange rate variations on commodities trade between Pakistan and the United Kingdom. The current study contends that the limiting assumption of symmetry between the exchange rate and the trade flows may have hampered the empirical results, despite the fact that earlier studies primarily used the symmetric cointegration approach. From 1980 to 2020, the study examines the symmetric and asymmetries effects of exchange rate variations on 35 sectors in Pakistan that import from the UK and 35 industries that export to the UK. The findings suggest that there is evidence of a considerable influence of asymmetric exchange rate variations on trade flows in both the short and long term in over half of the importing and exporting industries that participate in trade with the UK. By highlighting the significance of taking into account asymmetry in the analysis and exposing the sector-specific effects of exchange rate changes on trade flows, the study adds to the body of current work.

The nexus between economic growth and conditional exchange rate volatility: evidence from emerging economies

PurposeThe purpose of this paper was to examine the nexus between conditional exchange rate volatility and economic growth in BRICS countries. Further, the dynamic causation between economic growth and exchange rate volatility is also examined.Design/methodology/approachWe employed three techniques, namely, dynamic panel models, static panel models and Dumitrescu and Hurlin (DH) panel causality test to examine the economic growth–conditional exchange rate volatility nexus in BRICS countries.FindingsThe overall results showed that conditional exchange rate volatility has a negative and significant effect on economic growth. Interestingly, the results showed that whenever the exchange rate volatility exceeds the 0–1.54 range, the economic growth of BRICS is reduced, on average, by 5%. Further, the results of the causality test reconciled with that of ARDL wherein unidirectional causality from exchange rate volatility, exports, labour force and gross capital formation to economic growth was found.Research limitations/implicationsThe urgent recommendation is to develop and align fiscal, monetary, trade and exchange rate policies, either through creating a common currency region or through coordinated measures to offset volatility and trade risks in the long run. Further, to offset the impact of excessive exchange rate changes, BRICS economies can set up currency hedging systems, implement temporary capital controls during periods of extreme volatility or create currency swap agreements with other nations or regions. Last, but not least, investment and labour policies that are coherent and well-coordinated can support market stabilisation, promote investment and increase worker productivity and job prospects.Originality/valueResearchers hold contrasting views regarding the effect of exchange rate volatility on economic growth. Some researchers claim that exchange rate volatility reduces growth, and several shreds of empirical evidence claim that lower exchange rate volatility is linked with an increase in economic growth, at least in the short run. However, the challenge lies in establishing the optimal range beyond which exchange rate volatility becomes detrimental to economic growth. The present study contributes to this aspect by seeking to identify the optimal spectrum beyond which excessive shifts in exchange rate volatility negatively affect economic growth, or endeavors to define the acceptable spectrum within which these fluctuations actually boost growth. To the best of our knowledge, this study is the first to analyse the given research area. The present study used a dummy variable technique to capture the impact of permissible exchange rate band on the economic growth.

Decomposition of food price inflation in Sri Lanka

The recent upsurge in food prices in Sri Lanka has raised significant concerns, posing a threat to the food and nutritional security of the population. However, the causal factors driving this inflation still need to be better understood. Our study, utilizing Cointegration and Vector Error Correction Models (VECM), investigates the role of supply and demand-side determinants of food inflation. The study identified changes in exchange rate, agricultural wages, fuel prices, money supply, and fertilizer prices as key drivers of food inflation in Sri Lanka. Expansion of the money supply exerted the most substantial influence on food inflation in the long run. At the same time, changes in world market prices were found to be the most influential determinants of food inflation in the short run. Findings underscore the need for a comprehensive strategy that combines supply-side enhancements and demand-side management to control food inflation in Sri Lanka.

Exchange Rate and Gold Price: Evidence from Malaysia

This study examines the relationship of exchange rate and gold price in Malaysia. The autoregressive distributed lag (ARDL) approach shows that there is long-run relationship between exchange rate and its determinants, includes gold price. An increase in gold price will lead to a depreciation of the US dollar. There is a negative relationship between exchange rate and gold price. Gold price is found to have a significant impact on exchange rate in the short run. The generalized forecast error variance decompositions demonstrate that changes of gold price influence the forecast error variance of changes of exchange rate. There is a link between the gold market and the exchange rate market.

Controlling the money supply from macroeconomics perspective: Saving interest and exchange rate

<p>The M2 money supply over the last five years has tended to increase by 10-12%, which is allegedly due to macro factors, namely, low savings interest and increasing exchange rate requirements, causing rising inflation rates. This research aims to determine the influence of savings interest and the exchange rate on the money supply in Indonesia for the 2004-2023 period. The analysis technique used in this research is linear regression with annual time series data of 20 observation units. This simultaneous model has never been studied by previous researchers. The results of this research analysis provide information that every change in savings interest negatively affects the M2 Money supply by 78.60% and a significant, positive effect between the Exchange Rate and Money in circulation by 78.40%. Meanwhile, simultaneous changes in savings interest and exchange rates have a significant effect on changes in money supply in Indonesia and the influence is substantial at 91.20%. Therefore, the conclusion of this research is, that partially and simultaneously the proposed model exhibits a significant influence between savings interest and the exchange rate on the amount of money circulating in Indonesia. Therefore, it is crucial to pay attention to the current macroeconomic conditions concerning these two factors, especially the stability of the exchange rate, to ensure that it does not increase the money supply and inflation which may reduce people’s purchasing power in Indonesia.</p>

An Empirical Analysis of Money Demand and Its Stability in Zambia 1984-2021

The paper was an empirical analysis of the stability of money demand in Zambia between 1984 and 2021. The money demand function tries to explain the factors that influence people’s demand for money in an economy. The determinants included real income, exchange rate, inflation rate and interest rate. Using E-views 9.0, an appropriate model was estimated for statistical analysis. In the analysis of data, unit root tests were done to check the order of integration of the variables. Furthermore, to test for long term equilibrium relationships among variables the Augmented-Dickey Fuller (ADF) was used to test procedure on the residuals. Out of the many ways of testing for normality, this paper chose the Jarque-Bera test to conduct the normality test on the variables. From this study’s results, the bound test showed that there is a long run cointegration relationship among demand for real money balances, real GDP, interest rates, exchange rate and inflation in case of broad money aggregates. In the long run, all the independent variables are significant determinants of money demand which will be positively affected by percentage changes in exchange rates and negatively by percentage changes in gross domestic product, inflation, and interest rate. The study found that for the implementation of monetary policy in any economy to be successful, it relies heavily on the instruments of monetary policy used as well as the structure of the economy. However, for emerging economies such as Zambia, there are special hurdles that may make the implementation of monetary policy less effective in the achievement of the monetary policy goals. From the findings, it is recommended that as the process of modernizing monetary policy frameworks are implemented in addressing emerging economic challenges, there is need to continue with monetary aggregates in monetary policy conduct.

Multi-factor forecasting of statistical trends for data science problems

The article deals with the processes of multi-factor forecasting of statistical trends for Data Science problems. Most of the classic approaches to data processing consist of studying the consequences of phenomena rather than the factors of their appearance. At the same time, the factors affecting the behavior of the investigated process are assumed to be random and are not investigated. The article discusses the approach to forecasting the parameters of the trend of statistical time series, which consists of the study of factors that lead to changes in the dynamics of the studied process. This approach potentially has better indicators of adequacy, accuracy, and efficiency in obtaining final solutions than classical approaches. The implementation of this approach is shown using an example of the analysis of exchange rate changes. The obtained results show the practicality of considering multi-factoriality in forecasting tasks.

PECULIARITIES OF CREDIT BEHAVIOUR OF THE POPULATION DURING THE WAR

This article focuses on the peculiarities of the credit behaviour of the population during the war. In times of instability, financial issues are particularly acute among the population, which in turn attracts the attention of researchers and the public to address this issue. In the article, the author focuses on the consequences of the impact of the military conflict on the life of the population, the level of optimism and stability of the economic situation, which generally affects the credit behaviour of the population. The features of the credit behaviour of the population in wartime are determined. In particular, credit behaviour is considered as one of the types of financial behaviour of the population aimed at temporary borrowing of external funds to meet personal needs. Credit behaviour in wartime depends on the financial stability of the population. The article shows the relationship between labour employment and credit behaviour of the population, as the number of jobs decreases and the number of job seekers increases. The author notes that declining incomes, unemployment and inflation lead to problems with loan repayment. Late repayment of loans has negative consequences for both credit service providers and borrowers. Indeed, in times of instability, the issue of compliance with previously assumed obligations becomes particularly acute. Economic instability, changes in exchange rates, socio-economic conditions, government policies and personal capabilities of each citizen, and asset impairment can pose a risk to borrowers and lenders. The article presents an analysis of credit behaviour during the war, which allows us to outline the prospects for economic modernisation of Ukraine and improve our understanding of this topic, since the development of practical approaches to understanding credit behaviour will contribute to the development of an effective policy of modernisation of Ukraine, generating new insights into the directions and pace of the dynamics of modernity in general.

THE ROLE OF RISK MANAGEMENT IN ENSURING THE FINANCIAL STABILITY OF ENTERPRISES UNDER FORCE MAJEURE CIRCUMSTANCES IN FOREIGN ECONOMIC ACTIVITIES

The article examines the influence of the modern globalized economic environment on the activities of enterprises operating in the field of foreign economic activity and facing a large number of risks in the course of their operation, in particular due to the influence of force majeure circumstances. The importance of risk management for ensuring the financial stability of enterprises in the conditions of increasing risks and threats to economic activity is determined. The impact of risk management on the financial stability of enterprises in foreign economic activity, especially in cases of force majeure, is studied. It has been proven that risk management in the context of foreign trade involves the identification, assessment, management and monitoring of risks that may arise. It has been determined that effective risk management allows business entities to properly adapt to changes in the economic environment and reduces the likelihood of financial losses in the event of force majeure events, such as the cessation of trade, sudden changes in exchange rates, or military or political crises. Strategies for including risk management in the management processes of enterprises based on analytical assessments and practical experience of ensuring financial stability are considered. Methods of risk identification, development of risk minimization strategies and mechanisms of risk control during foreign economic operations were studied. The objective necessity of forming an effective risk management system in the management mechanism of economic entities to ensure the financial stability of enterprises in foreign economic activity, especially in connection with force majeure circumstances, has been proven. The issue of implementing risk management at the level of strategic and operational management of enterprises is considered. Methods of risk forecasting, analysis of their impact on financial indicators and development of effective action plans to reduce possible negative consequences of exposure to risks and threats were analyzed. The necessity of introducing international risk management standards into the activities of Ukrainian enterprises, which contribute to increasing their level of competitiveness and compliance with international requirements, has been proven. The need for constant improvement of the risk management system and the introduction of corrections in enterprise management strategies, taking into account changes in the external environment, was identified. It is proposed to introduce approaches to the management of enterprises focused on effective management of financial risks in force majeure situations in order to ensure their financial sustainability and stability.

Causality Analysis Between Exchange Rate, Current Balance Sheet, Inflation, and Gross Domestic Product in ASEAN-5 1980-2022

This research investigates the causality between exchange rate, current balance sheet, inflation, and gross domestic product in ASEAN 5 from 1980 to 2022. The method employs the Granger causality test. This research finds weak evidence of a J-curve effect on the current account balance in Indonesia because empirical results with several tests and models reject the J-curve hypothesis and do not find evidence of an influence of the rupiah exchange rate on Indonesia's current account balance in the long term so that it can the conclusion is drawn that: (1) There is no causal relationship between the current account balance and the exchange rate in Indonesia from 1996-2022; (2) Changes in exchange rates affect changes in the current account balance in the short and long term; (3) The mechanism for changes in the current account deficit does not affect changes in the exchange rate

Особливості використання документарних форм міжнародних розрахунків в Україні

The peculiarities of the use of documentary forms of international settlements by economic entities of Ukraine are analyzed, in particular, advantages and disadvantages, requirements for the use of documentary forms of international settlements, as well as the main directions of innovative approaches to improving their application. The prospects for the development of documentary forms of international settlements in Ukraine are outlined. The stages of decision-making regarding the use of a documentary letter of credit in the implementation of an export operation have been developed. This article analyzed the use of documentary forms of international settlements in Ukraine, which is an important and necessary factor in ensuring the effective and safe implementation of foreign economic activity, especially in conditions of increased volatility of the international environment. The advantage of documentary forms of international settlements is that they provide a high level of protection of the interests of the parties to the agreement. They allow you to avoid risks associated with non-payment of goods delivery, unreliable information about the condition and quality of goods, possible changes in prices or exchange rates and other potential problems. The use of documentary forms of international settlements also ensures trust between the parties by monitoring compliance with the terms of the agreement. However, using a documentary form of settlement can also be a complex and sometimes inconvenient process, as it requires some interaction with paper and compliance with certain procedures. In addition, this form of payment can be expensive due to commissions and other costs associated with banking transactions. Ukraine, as a state with a high level of involvement in international economic relations, actively uses documentary forms for international settlements. This is confirmed by the large number of banks offering this service and the growth of foreign trade volumes. Thus, the use of documentary forms of international settlements in Ukraine is beneficial and necessary to ensure the safety and efficiency of foreign economic transactions. However, it requires some discipline and additional costs. In general, the issue of the use of documentary forms of international settlements in Ukraine requires attention and resolution by improving the legal framework, passing certification courses, improving the qualifications of specialists, and increasing the number of banks that provide services for the use of documentary forms of international settlements. This will help ensure the safety and efficiency of foreign economic activity of Ukrainian companies.

ANALISIS PENGARUH NON-TARIFF MEASURES (SANITARY AND PHYTOSANITARY) TERHADAP VOLUME EKSPOR IKAN TUNA KE NEGARA TUJUAN EKSPOR

This study aims to analyze the effect of Gross Domestic Product (GDP) per capita, economic distance, real exchange rate, and dummy SPS simultaneously and partially on volume of tuna exports to export destination countries. The analysis technique used in this study was panel data regression. The results of this study found that simultaneously GDP per capita, economic distance, real exchange rate, and dummy SPS affect the volume of tuna exports to export destination countries. GDP per capita and real exchange rate partially have a positive and significant effect, dummy SPS partially affects the volume of tuna exports to export destination countries. Meanwhile, economic distance has a negative and insignificant effect on the volume of tuna exports to export destination countries. The implication of this study is that the existence of GDP per capita and changes in the real exchange rate will increase the export volume of Indonesian tuna, the SPS action will reduce the export volume of Indonesian tuna, and the long economic distance will reduce the export volume of Indonesian tuna although not significantly.

The Nexus Between Energy Demand and Currency Valuation: Evidence from Selected OECD Countries

This study focuses on the unequal relationship between energy consumption and its determinants. Past studies have not examined how minor and substantial currency value changes affect energy consumption in the organization for economic cooperation and development (OECD) countries. This study compares the effects of modest and significant exchange rate (ER) changes on energy demand (ED) in OECD countries, which include Greece, Belgium, Ireland, Denmark, Portugal, Norway and Italy. Our work adds to the literature by distinguishing the effect of small to significant changes in currency fluctuations. We do this with a sophisticated model, an updated multiple threshold nonlinear autoregressive distributed lag (MTNARDL). Next, we compare the model’s outcomes to conventional nonlinear autoregressive distributed lag (NARDL) and autoregressive distributed lag (ARDL) models. According to NARDL and ARDL estimates, co-integration is present in the context of Belgium. However, the MTNARDL model division of series suggests cointegration in all sample countries. It implies that this model is superior to previous ones. We conclude with policy recommendations based on the results of our inquiry.

EXCHANGE RATE VOLATILITY OF UKRAINE’S MAIN TRADING PARTNERS

Ukraine, as an open economy under conditions of Russian aggression, is highly vulnerable to the import of exogenous shocks. This is embodied in exchange rate volatility and the emergence of corresponding risks. Most studies are aimed at direct, explicit, or transactional risks. They reflect the negative impact of exchange rate fluctuations on economic entities' cash flows in foreign economic activities. However, changes in currency prices can also affect the subjects oriented to the local market and not carry out operations in foreign currencies by changing competitiveness. One speaks about the indirect, implicit, or economic currency risk in this case. The latter generally arises in the event of volatility in the exchange rates of currencies of importing countries or competitors. The study is devoted to the analysis of indirect currency risks, which reflect potential adaptations of competitiveness due to changes in exchange rates. For this purpose, the currencies of the countries that account for about 80% of Ukraine's trade turnover over the last 10 years, namely the euro, Japanese yen, British pound, Swiss franc, yuan, Indian rupee, Czech krona, Polish zloty, Hungarian forint, and Turkish lira were chosen. The article aims to assess the volatility of exchange rates of Ukraine's main trading partners as a stage of analyzing economic currency risks. The paper uses statistical methods for volatility estimation and distribution characteristics, namely standard deviation, skewness, and kurtosis. The obtained results show that some currencies have a high level of asymmetry and excess, indicating possible unpredictable rate changes. The calculated indicators' generalization allows identifying currencies with relatively high and low risk. The article complements the results of previous studies, as it covers both major reserve currencies and currencies of leading countries whose markets are developing globally and in Europe. Estimates of asymmetry and excess exchange rate distributions are essential for effective currency risk management.

Asymmetric Exchange Rate Effects on Trade Flows in India

This paper examines the role of exchange rate changes on India’s trade. The drivers of exports and imports (income, exchange rate including sectoral differences, and exchange rate variability) are estimated for the short and long run including a structural break. Using annual data from 1994 to 2022, the results of dynamic fixed effects estimation show that both exports and imports are income-elastic in the short and long run, but income elasticity is far stronger for exports. Moreover, exports are responsive to the real effective exchange rate in the short run but not in the long run, and the reverse is true for imports. Furthermore, exchange rates have asymmetric effects for high-volume and primary sectors for exports and imports. The combined impacts show the ineffectiveness of using currency depreciation to address trade imbalances.

Terms of trade or market power? Further evidence from dynamic spillovers in return and volatility between Malaysian crude palm oil and foreign exchange markets

This study examines whether the Malaysian ringgit (MYR) provides terms of trade or market power for crude palm oil (CPO). We consider MYR exchange rates against three currencies of major CPO-importing countries, including the Indian rupee (INR), euro (EUR) and Chinese yuan (CNY). Using daily data on Malaysian CPO prices (spot and futures) and foreign exchange rates (INRMYR, EURMYR and CNYMYR) from 2000 to 2018, our results provide three notable findings. First, volatility spillovers from EURMYR to CPO spot and futures are more significant during the global financial crisis of 2008–2009. Second, the return spillovers from CPO spot and futures to INRMYR and EURMYR exchange rates experience significant bursts after the crisis. Third, the volatility of CPO spot price changes shows the predictive ability of the volatility of INRMYR exchange rate changes at the end of 2018. Overall, our findings support that the terms of trade are a driver of the CPO market after the crisis.

Evaluating the Impact of Inflation and Exchange Rates on the Net Active Value (NAV) of Conventional Mutual Funds in Indonesia

The growing development in the financial industry and the current high inflation rate are a great worry for investment prospects, especially mutual funds. Conventional mutual funds in Indonesia have experienced significant growth in the capital market. In the last 10 years, the number of domestic mutual funds has continued to increase. One measure of investment performance in mutual funds is proxied by the Net Asset Value (NAV) of mutual funds. Therefore, the objective of this study is to evaluate the influence of macroeconomics variables on the NAV of conventional mutual funds in Indonesia. In this study, using commercial bank data in Indonesia, we estimate an empirical model of the effect of inflation and exchange rates on the NAV of conventional mutual funds in Indonesia during the period 2012–2022. We employ a time series model using the Ordinary Least Square (OLS). The main findings show that while inflation has no effect on the NAV of conventional mutual funds, the exchange rate has a significant effect on it because there are many instruments in conventional mutual funds that have invested abroad due to changes in exchange rates that appear with dominant results that do not affect the growth of the NAV of conventional mutual funds. Keywords: macroeconomics, net active value (NAV), mutual funds