Exchange Rate Fluctuations Research Articles

The Impact of Economic Factors on Saudi Arabia’s Foreign Trade with BRICS Countries: A Gravity Model Approach

Our investigation, bolstered by the robust gravity trade model and panel data econometric technique, underscores the pivotal factors that influence trade interactions between Saudi Arabia and the BRICS nations—Brazil, Russia, India, China, and South Africa. The study, spanning from 1998 to 2023, delves into key economic metrics such as the gross domestic product, exchange rate fluctuations, inflationary trends, political conditions, and trade deals. We employ a range of econometric strategies, including pooled Ordinary Least Squares (OLS) and fixed effects models, to reveal that the GDP of BRICS states consistently and significantly impacts trade volumes. Specifically, a 1% increase in the GDP of partner countries correlates with a 0.37% rise in trade volume within the pooled OLS model. This effect amplifies to 1.43% when adjusting for temporal and country-specific factors in the fixed effects, underscoring the importance of accommodating unobserved heterogeneity, which refers to the unmeasured factors that can influence the relationship between GDP and trade volume. The political stability of BRICS nations mitigates transactional risks and promotes more stable trade relationships, thereby enhancing trade flows. Fluctuations in exchange rates exert positive and significant effects. This indicates that a more robust Saudi Riyal, an essential policy instrument, can enhance trade by increasing the competitiveness of Saudi exports. This study demonstrates that economic magnitude, political stability, and exchange rates affect Saudi Arabia’s trade with BRICS nations. These results bolster the Kingdom’s Vision 2030 objectives for economic diversification. This research advocates for stable political climates and strategic trade agreements to enhance trade relations. This study asserts that this approach will guarantee sustainable growth and diminish the Kingdom’s reliance on oil exports, instilling optimism in the Saudi economy.

Influential Factors of Indonesian Cocoa Export: Evidence from FMOLS and DOLS Approaches

The study investigated the determinants of cocoa exports using both FMOLS and DOLS approaches. The time series data were obtained from FAOSTAT and ICCO websites from the year 1990 to 2022. ADF and PP stationary unit roots were conducted to examine the stationarity of the variables while Johansen cointegration was used to verify the cointegrating among the variables. The outcome of the Johansen cointegration analysis suggests the existence of a cointegration relationship among the eight variables, indicating the presence of long-run relationships among the variables. The estimated results revealed that cocoa productivity, domestic cocoa production, domestic cocoa supply, exchange rates, and world cocoa prices affect Indonesian cocoa exports. Based on the estimated results and discussion, the study draws a conclusion that cocoa productivity, domestic cocoa production, exchange rates, and world cocoa prices positively and statistically significantly influenced cocoa exports while domestic cocoa supply negatively affected Indonesian cocoa exports. The study recommends that the government of Indonesia should stabilize the fluctuating exchange rates and encourage cocoa production via higher productivity by practicing farm rehabilitation practices to increase productivity and cocoa beans for exports. Moreover, the supply of cocoa beans should also be increased by increasing domestic producer prices. These key determinants are crucial for policymakers and industry stakeholders to understand and address to enhance the competitiveness and growth of the cocoa export industry in Indonesia.

Exchange Rate Dynamics and Monetary Fundamentals: Evidence from South Asian Countries

This paper examined the role of monetary fundamentals in determining nominal exchange rate changes in South Asian countries. The Vector Autoregressive (VAR) technique and Autoregressive Distribution Lag (ARDL) were used. Results from the VAR indicate that the exchange rate responds to shock originating from differences in money supply, inflation differential, interest rate, and real income differential and are consistent with the short-run predictions of the monetary model of the exchange rate. The results show that inflation and interest rate differentials are responsible for the majority of changes in exchange rates in the short run. The conclusion from the result is that, particularly in the short run, monetary fundamentals are the primary causes of exchange rate fluctuations in South Asian countries.

The impact of dollar price fluctuations on the GDP of developing countries: Iraq as a model

The exchange rate is a tool of monetary policy, which is a matter of monetary policy, determined by the Central Bank of Iraq, as well as the subject of the exchange rate of complex topics, and the importance of this research lies in understanding the impact of dollar price fluctuations on the Iraqi economy, which contributes to enhancing knowledge about how external factors interact with local economic conditions, providing valuable recommendations for decision-makers to design effective strategies to deal with these fluctuations and achieve greater economic stability. The descriptive approach was used to collect and analyze economic data related to dollar price fluctuations and its impact on GDP, which helps to understand the relationships between these variables in Iraq during the period (2003-2024), the most important conclusions reached by the research that the general trend indicates sustainable growth in GDP, but economic challenges, such as exchange rate fluctuations and inflation, need to be effectively addressed. The government and central bank should promote economic stability through effective monetary policies that support growth and maintain exchange rate stability.

The Impact of Exchange Rate Fluctuations on Nigeria Capital Market Performance

The Impact of Exchange Rate Fluctuations on Nigeria Capital Market Performance

Effects of Interest Rate Change on Private Sector Investment, Evidence From Pakistan

This study examines the effects of lending rates, inflation, and exchange rate fluctuations on private sector credits (PSC) in Pakistan from 1961 to 2017. The analysis shows that lending rates have a minimal impact on PSC, with an insignificant relationship. However, inflation and exchange rates show significant negative effects, indicating that rising prices and currency depreciation reduce private sector borrowing by increasing costs and uncertainty. These findings suggest that while interest rate management remains important, policymakers should prioritize strategies for stabilizing inflation and exchange rates to support private sector investment. Consequently, fostering macroeconomic stability may mitigate the indirect effects of the crowding-out phenomenon, promoting a favorable investment environment conducive to private sector growth.

Analisis Pengaruh Pembiayaan LPEI Konvesional dan Syariah, Variabel Ekonomi Makro Terhadap Pertumbuhan Ekspor Indonesia

The purpose of this study is to evaluate the relationship between funding provided by LPEI in conventional and sharia forms to export growth, using two separate models to compare the two types of funding. This study also examines the relationship between inflation and the rupiah exchange rate on Indonesia's export growth. The analysis uses monthly data from 2015 to 2022 and ARDL approach in data analysis, with the help of EViews 12 to estimate the long-run and short-run impact of these variables on export growth. The results of this study show that in the short run, neither conventional nor sharia LPEI financing has a significant impact on export growth. The value of exports in the previous period and the previous two periods has a negative effect on current export growth. In contrast, export growth is positively affected by the value of exports in the previous three and four periods. Changes in the rupiah exchange rate in the previous period have a positive effect on export growth in the Islamic LPEI financing model, while changes in the inflation rate have no significant effect on export growth. In the long run, both conventional and Islamic LPEI financing do not have a major impact on export growth. The positive impact on export growth in the Islamic LPEI financing model is caused by fluctuations in the rupiah exchange rate in the long run. Changes in inflation do not have a significant impact on export growth based on other macroeconomic variables.

Renewable Energy Consumption in Somalia: Assessing Its Impact on Currency Exchange Rates

This study utilizes an Autoregressive Distributed Lag (ARDL) model to examine the effects of renewable energy, economic growth, and inflation rate on exchange rate fluctuations in Somalia from 1990 to 2019. The analysis shows that economic growth and RE positively influence the exchange rate in both the short and long run. In contrast, inflation negatively impacts the exchange rate in the short run, suggesting short-term currency appreciation, but leads to depreciation in the long term. Moreover, the study finds that a 1% increase in RE results in an 80% increase in the exchange rate, indicating significant currency depreciation. To mitigate currency depreciation, the research advocates for policies promoting local renewable energy use to reduce import dependency and stabilize the currency. This approach includes investments in renewable infrastructure, community education, and economic diversification. This study highlights the need for further research into renewable energy’s impact on exchange rates in Somalia, particularly in different economic contexts, to gain a more holistic understanding of these dynamics.

The Dynamics of Tourism, Economic Growth, and CO2 Emissions in Uzbekistan: An ARDL Approach

In this study, we examined the impact of key macroeconomic variables on the sustainability of tourism in Uzbekistan using open data from the World Bank from 2000 to 2023. The selected variables for the study include the number of international tourists, GDP, CO2 emissions, and exchange rates. Considering the importance of climate issues in ensuring sustainable tourism, the study combines these factors using the autoregressive distributed lag (ARDL) model to assess their long-term relationships. We chose this model due to its flexibility in dealing with variables of different integration orders. The results of the bounds testing procedure confirm the existence of a long-term cointegration relationship between the dependent variable (international tourist arrivals) and the selected macroeconomic indicators. Specifically, the study results indicate that GDP growth, exchange rate fluctuations, and CO2 emissions positively affect tourist arrivals to Uzbekistan. The findings of this study underscore the importance of infrastructure development and macroeconomic stability in attracting international tourists while emphasizing the need for sustainable international practices to mitigate environmental impacts. This study contributes to understanding the complex interrelationship between tourism development and macroeconomic variables in the context of developing countries and aids decision-making in this area.

Parameter instabilities and monetary policy in a small open economy: Evidence from an estimated model for the UK

This paper reconsiders whether monetary policy in small open economies responds to exchange rates by studying possible parameter instabilities in a Dynamic Stochastic General Equilibrium model. The main focus of the paper is to revisit preceding evidence on the response to exchange rate movements by the Bank of England and determine if its reaction function has remained constant throughout the sample. To this end, I estimate a small open economy general equilibrium model using Bayesian econometric techniques over rolling windows. I find overwhelming evidence of shifts in several parameters, including those related to the policy rule. Furthermore, posterior odds tests reveal a time-varying response to exchange-rate fluctuations by the monetary authorities. The results favor the model with the nominal exchange rate embedded in the policy rule for the initial subsamples. However, the evidence steadily evolves across windows and ultimately changes to prefer the model specification with no exchange rate. The paper also documents evident variations in the model dynamics derived from the instability of parameters via rolling-window impulse response functions and variance decomposition analysis.

A causality investigation into stock prices and macroeconomic indicators in the Indian stock market

Background of the study The systematic impact of macroeconomic variables on stock market returns makes it crucial to comprehend the link between macroeconomic variables and the stock market. Stock prices are closely linked to macroeconomic indicators, a crucial aspect for investors, policymakers, and researchers in emerging markets like India, influencing investment decisions and policy formulation. Methods The autoregressive distributed lag (ARDL) model was used in this study to examine the causal links between specific macroeconomic factors and Indian stock prices from April 2009 to March 2023. Results The outcomes of the research suggest that macroeconomic variables exert influence on the Indian stock market, across the short and long term. Moreover, the results of the paired Granger causality test suggest that the domestic macroeconomic variables possess predictive significance for stock prices in the Indian stock market. Conclusion The study reveals that macroeconomic variables significantly impact the Indian stock market, highlighting the need for investors and portfolio managers to monitor these conditions to optimize returns and mitigate risks. The Reserve Bank of India should maintain an optimal money supply to prevent inflation and exchange rate fluctuations, while bolstering the export sector and facilitating imports through initiatives like Atma-nirbhar Bharat Abhiyan and Make in India. Policies focusing on productivity, infrastructure, and a favourable business environment are also crucial. Therefore, it is crucial for investors and portfolio managers to consistently analyse the current macroeconomic conditions in order to maximize their profits and minimize risks. This research has extensive significance for comprehending the intricate connections between the stock market and macroeconomic issues.

Analyzing the Dynamics of Inflation, Exchange Rates and Economic Growth through the Gini Index: Modeling VAR in Morocco

In this study, we analyze the cross-impact of inflation, exchange rates and economic growth on income inequality in Morocco between 2000 and 2022, based on the GINI index as a measure of inequality. Its main objective is to understand how these macroeconomic variables influence income disparities. Our methodology is based on a VAR model to capture dynamic interactions between variables. To validate the robustness of the model, Granger causality tests and specification tests, including tests of homoscedasticity and autocorrelation of residuals, were used. The result is that inflation has a significant positive impact on income inequality, and exchange rate fluctuations directly influence inequality. Furthermore, economic growth helps to reduce inequality, although this effect depends on the distribution of the benefits of this growth. This study contributes to the existing literature by providing empirical evidence of the importance of macroeconomic stability and educational and fiscal policies in reducing income inequality.

Interaction of Climate Change and Green Stocks on Economic Growth in ASEAN-5

Research Originality: This study presents a new interaction of climate change in moderating the effect of green stocks, exchange rates, and net exports on economic growth in ASEAN-5 countries. Research Objectives: This study aims to analyze the interaction of climate change on green stocks, exchange rates, and net exports on economic growth in ASEAN-5 countries. Research Methods: This study used quarterly panel data from ASEAN-5 countries, 2016-2022, and selected a fixed effects model as the best model. The moderated regression analysis (MRA) approach supports this research.Empirical Results: The results showed that green stocks, exchange rates, and net exports positively affect economic growth in ASEAN-5 countries. The interaction of climate change on green stocks and exchange rates has a negative effect on economic growth. However, the interaction of climate change on net exports positively affects economic growth in ASEAN-5 countries. It represents that climate change can weaken the effect of green stocks and exchange rates on economic growth. Meanwhile, climate change can strengthen the effect of net exports on economic growth in ASEAN-5 countries. Implications: This study implies that the government needs to increase investment in green stocks to support financing that can mitigate climate change and develop net exports to increase economic growth toward a green economy. Similarly, the ASEAN-5 central banks, as monetary authorities, can maintain exchange rate fluctuations to achieve stable economic growth.JEL Classification: F31, F43, G11, Q54, Q56

State‐Dependent Exchange Rate Pass‐Through

ABSTRACTWe estimate how the rate of pass‐through from the exchange rate to domestic prices varies across states of the economy and depending on the shocks that drive fluctuations in the exchange rate. We confirm several results from the literature and uncover new facts. Drawing on the experience of a large sample of advanced and emerging market economies over the past 30 years, we document that exchange rate pass‐through is significantly larger during periods of elevated uncertainty and when inflation is high. Using a novel identification strategy, we also show that pass‐through is higher when exchange rate fluctuations are driven by U.S. monetary policy.

Dynamic interactions among exchange rate, natural gas demand, production in manufacturing and battery industry export – evidence from Hungary

In the context of the current global economic transformation, the rapid rise of the electric vehicle industry has made the battery industry a new focus of competition among countries. Despite its relatively small economic and demographic size, Hungary has garnered significant academic interest by emerging as the world’s third-largest battery producer in 2021. The study employed a dynamic vector autoregressive (VAR) model to determine that fluctuations in the Hungarian exchange rate have a notable immediate influ-ence on exports in the battery business，which suggests that changes in exc-hange rates directly affect international competitiveness. The battery sector is experiencing a progressive increase in the influence of fluctuations in na-tural gas demand, particularly in terms of their impact on production costs and supply chains. The battery industry has had substantial advancements in technological innovation and production efficiency as a direct result of the expansion in manufacturing production. And Hungary’s total industrial deve-lopment is significantly influenced by the long-term effects of export expan-sion in the battery industry. JEL Codes: L62, E44, O14, C22

Construction Cost-Influencing Factors: Insights from a Survey of Engineers in Saudi Arabia

Cost overruns represent a continuous challenge within the construction industry, frequently affecting the success of projects. This study explores the factors influencing cost during the construction phase in Saudi Arabia, utilizing data from a survey of 1076 engineers working in the Saudi construction industry. The results identify a number of cost-related factors, including inadequate project management, poor cost estimation, and design errors. Interestingly, some factors, such as currency exchange rate fluctuations and social and cultural influences, were found to have a limited impact on construction costs. Furthermore, the study highlights the role of experience and education level in shaping engineers’ perceptions of these cost factors. The study employs statistical analysis, including Pearson’s chi-squared test, to demonstrate associations between demographics, project characteristics, and cost-influencing factors. The findings suggest the need for refined project management practices, enhanced technical training, and the implementation of digital technologies such as Construction 4.0 to mitigate cost-related risks. This research provides significant insights for construction professionals and policymakers seeking to enhance cost management within the Saudi construction sector, thereby contributing to the ongoing development initiatives aligned with Saudi Arabia’s Vision 2030.

Understanding Deflationary Trends in China: Internal and External Factors Analysis

This paper investigates the recent deflationary trend observed in China, exploring its underlying causes from both internal and external perspectives. Since the 1970s, China has undergone significant economic reforms, embraced market principles and experienced a substantial expansion in its money supply. Despite expectations of inflation due to the substantial money supply relative to GDP, China has experienced a period of low or negative inflation rates since April 2023. This study examines potential factors contributing to this deflationary period, including exchange rate fluctuations, monetary policy dynamics, economic structural shifts, and external shocks. Furthermore, the paper evaluates the development of transmission routes of monetary policy and possible impacts on the responsiveness of price level to money supply, particularly within the context of China's evolving financial system. Additionally, it analyses shifts in the key drivers of the Chinese economyinvestment, net exports, and consumptionand their role in exacerbating deflationary pressures. The study extends its analysis to February 2024, observing potential signs of a transition away from deflation. It emphasizes the risks associated with deflation and the Chinese government's efforts to balance inflation targets with economic stability and employment objectives, particularly in light of challenges in the real estate sector.

Exchange rate fluctuations and industrial production in Malaysia: evidence from dynamic simulated ARDL analysis

Contemporary literature argues that the exchange rate serves as an important instrument of industrial policy to boost economic growth. However, it is difficult to design effective exchange rate policies owing to the uncertainty shrouding the outcomes of the exchange rate movement for industrial growth. Therefore, this study uses a dynamic simulated autoregressive distributive lags approach to study the impact of positive and negative changes in the real effective exchange rate on industrial production of Malaysia for the period 1970–2022. We employ an extended production function to study this relationship by incorporating capital, labour and globalisation as additional explanatory variables. The findings suggest that positive (negative) changes in real effective exchange rate are followed by positive (negative) changes in economic growth in the long run. Furthermore, positive changes in capital affect economic growth positively and significantly in both the short and long run. Finally, positive (negative) movement in labour and globalization positively (negatively) and significantly affect industrial production in the long run respectively. Policymakers should depreciate currency to expand industrial production in Malaysia. Moreover, to boost industrial production, short-term loans should be introduced for capital accumulation.

Investigating The Validity of The Marshall-Lerner Principle and J-Curve Theory in Relation to Real Exchange Rates and Trade Imbalances: An Empirical Study of China's Economic Dynamics

According to traditional macroeconomic theory, meeting the Marshall-Lerner condition suggests that currency devaluation could positively impact the long-term trade balance. This implies that despite initial import cost increases, enhanced export competitiveness from a weaker currency eventually leads to trade balance improvements. However, short-term negative effects, known as the J-curve effect, may occur due to trade volume adjustments lagging currency devaluations. This study aims to assess the validity of the Marshall-Lerner condition in China's economy from 1995: Q1 to 2023: Q4 and evaluate the short-term J-curve effect's magnitude. Analyzing economic indicators and exchange rate fluctuations, the research confirms the validity of the Marshall-Lerner condition and supports the existence of the J-curve effect. These findings highlight the importance of nuanced currency policymaking for sustainable economic growth and stability, considering both short-term adjustments and long-term objectives. Key Words: Marshall-Lerner Condition, J Hypothesis, Foreign Trade.

New insights into Korea's trade relations: A comprehensive FNARDL analysis with 18 global partners

This study applied the Fourier nonlinear autoregressive distributed lag (FNARDL) model to investigate the bilateral J-curve effect between Korea and 18 trading partners. As a result, negative asymmetric effects of changes in the real exchange rate were detected in some cases in the short run. However, in other cases, these effects were positive or exhibited both positive and negative trends. This variation stemmed from the heterogeneity of import and export products and the diverse reactions of exporters to exchange rate fluctuations. By contrast, positive asymmetric effects were evident in most cases in the long run. Through the Fourier function, the FNARDL model better captured the J-curve effect compared to the standard NARDL model. Furthermore, by using bilateral trade data, this study mitigated the problem of aggregate misalignment, compared to using a country's gross trade data with the rest of the world. Therefore, the hidden effects of the real exchange rate were unveiled. This study's findings will enhance policymakers' awareness of formulating exchange rate management strategies.