Exchange Rate Formation Research Articles

Export of agricultural products as a determinant of currency security of Ukrainian economy

Purpose. The purpose of this study is the development of the methodological approach for estimation the impact of agri-food exports on the monetary sphere of Ukraine in order to substantiate the prospective directions of the export potential of agricultural products as the factor in ensuring the currency security of Ukraine. Methodology / approach. The following methods were used: literature review in determining the main trends in the export of agricultural products based on the analysis of publications; economic and statistical analysis to assess the impact of key factors on the formation of the export potential of agricultural products and its impact on exchange rate formation; ARDL modelling, Dickey-Fuller, and Engle-Granger tests to estimate the impact of different factors on exchange rate changes. Results. The paper highlights the immediate and delayed influence of selected factors on the dynamics of the exchange rate in Ukraine, showing that the export of food products and raw materials for their production can significantly strengthen the national currency in the long-run. The continuous growth in food exports contributes to a slower appreciation of the exchange rate, which ultimately leads to a stronger national currency. Therefore, the strategy of focusing on increasing food exports can play a vital role in bolstering the Ukrainian currency in the long-run by exerting a positive influence on the exchange rate dynamics and contributing to the overall economic stability. Originality / scientific novelty. The study contributes to the understanding of the complex interplay between war, food security, and economic stability. The novelty implies the ARDL model of the influence of agricultural exports on the currency and exchange rate sphere of the Ukrainian economy. Additionally, the analysis adds new dimension to the discussion on the strategic importance of the agricultural sector for foreign exchange reserves and currency accumulation. Practical value / implications. The practical value is that understanding the relationship between export volumes, global prices, and exchange rate movements can help in predicting and managing currency fluctuations more effectively. By identifying the time frames for the return of exchange rate shocks to their long-term equilibrium and the impact of various factors on currency valuation, the study aims policy-making processes at ensuring currency security for the state.

Currency Exchange Rate Formation in Ukraine: Problems and Ways of Optimization

The conducted analysis proved the presence of quite diverse trends in the foreign exchange market of Ukraine: the national currency is undervalued, the exchange rate is unstable, a significant burden on the financial system as a whole due to the growth of public debt, a high level of dollarization of the economy. That is, on the one hand, there are destructive processes, including those of a chronic nature. On the other hand, the national currency market quickly and easily picks up new opportunities that come to all spheres of economic life, related to digitization and electronic means of trade.
 It was revealed that of the key macroeconomic variables that determine the exchange rate: gross domestic product, government debt, gold and foreign exchange reserves, balance of payments, inflation, it is inflation that has the greatest influence on the exchange rate.
 Key macroeconomic parameters determining the state of the foreign exchange market can have a destabilizing effect on the foreign exchange market both at a fixed and at a floating exchange rate. It has been proven that the use of any of these regimes in their "pure" form is particularly risky for the economy. An algorithm for making a decision on softening/increasing course flexibility was proposed.

Formation of the Relationship between the Exchange Rate and the Investment Yield of Pension Assets in Kazakhstan: Causes and Consequences

The efficiency of pension asset management, reflected in their performance, determines the stability of the funded pension system of Kazakhstan, and also has the potential to significantly affect the budget process, since the state guarantees recipients a positive real return on their pension savings and compensates from the budget for losses incurred during periods when inflation exceeds the nominal rate of return. The need to ensure a positive real return on pension assets managed by the National Bank of Kazakhstan determines not only the high relevance of the issue of investment management itself, but also other aspects that affect the return, including changes in the exchange rate of the Kazakhstani tenge. The subject of the article is the impact of the tenge exchange rate on the profitability of pension assets, which can be very significant, since it forms one of the main components of investment income — income from foreign currency revaluation. This influence can also act as a factor in the formation of the tenge exchange rate during periods when the real return of pension assets decreases due to the negative situation in the financial markets and high inflation, and this thesis reflects the scientific novelty of the article. The assessment of the hypothesis about the formation of the relationship between the exchange rate of the Kazakhstani currency and the investment yield of pension assets is the aim of this work, and the identification of the main causes and consequences of this phenomenon is its task. Comparative and correlation analysis of indicators of investment return of pension assets, changes in the exchange rate of the Kazakhstani currency, parameters of the external sector and others were used as research methods. The results of the analysis confirm the existence of a relationship between the indicators of profitability of pension assets and the tenge exchange rate, and allow us draw the conclusion that this profitability has an indirect impact on the formation of the Kazakhstani currency exchange rate over the past few years, which has been characterized by non-standard dynamics in the context of a significant improvement in the external economic environment.

Overview of the foreign exchange market of Ukraine in the conditions of martial law

The paper examines the peculiarities of the functioning of the currency market of Ukraine in the conditions of martial law and takes into account the aspect of economic and political components. The data of the study of the currency market of Ukraine during the war period are presented and their content is analyzed. The causes and factors influencing the formation and activity of the foreign exchange market are identified, and proposals are given for carrying out stabilization measures and minimizing currency risks in conditions of stress and uncertainty caused by the war. The main elements of the NBU's regulatory easing policy on the currency market of Ukraine in wartime conditions are outlined. One of the first steps taken by the National Bank of Ukraine in times of macroeconomic and military-political instability were the measures of strict currency regulation aimed at minimizing currency risks. In order to maintain financial stability, the NBU had to introduce strict currency restrictions and fix the exchange rate of the hryvnia to the US dollar. Such administrative intervention helped to balance the foreign exchange market in conditions where it would have been impossible to do so by market methods. The temporary fixation of the exchange rate, strict restrictions on currency transactions, restrictions on withdrawals from currency accounts and other measures became a reliable basis for stabilizing both the currency market and the financial system of Ukraine. Of course, administrative restrictions smooth out temporary distortions in the foreign exchange market, but over time they can lead to the accumulation of imbalances, since the market mechanism of balancing the demand and supply of currency in search of exchange rate equilibrium ceases to operate, which sooner or later can lead to or to sudden major crises, or to endless stagnation. Therefore, long-term regulation of the foreign exchange market by strict administrative measures can have negative consequences. This prompted the NBU, in accordance with the new strategy of gradually abandoning the fixed exchange rate of the hryvnia, to switch to the strategy of easing currency restrictions and returning to flexible exchange rate formation and targeting. This strategy is one of the structural beacons of the memorandum with the IMF, which will determine the sequence of steps to liberalize currency restrictions and return to a more flexible exchange rate regime. If such mitigations are not made even in the conditions of a brutal war, the consequences for the country's financial system and the functioning of business can be negative.

Agricultural business in independent Ukraine: thirty-year dynamics of the reorganization process

Purpose. The purpose of the article is to identify stages in development and to analyze the content of transformation processes in Ukrainian agriculture for the period of 1991–2022 years.
 Methodology / approach. This research uses content analysis of legislative field to present basis for organization of agriculture business activity for the 30-years of restoration of Ukraine independence. Official statistical data are studied to reveal repercussion in productivity as an effect of Laws, Acts and Agreements implementation. Methods of regression and correlation analysis are used to unveil peculiarities in agriculture tendency. Hodrick-Prescott method is applied to extract structural components, exclude random impacts on economical processes and to find out significant changes or turnings in the sector development. Quantitative analysis results were obtained by the GNU Octave software tool.
 Results. Legislative evolution has influenced on the way of agriculture business organization and branch productivity. Analysis revealed two stages in its development. The first one (1991–1999) is the period of business transformation with changes of ownership forms on the land. This period is notable by its descending dynamics. Transformation has required to build relationships in business environment after collapse of Soviet Union, to supply with material and technical resources, to support its activity with financial funds. The essence of the first stage is in findings of an effective form of farming management. The second stage is the exit from the lowest point at which agrarian business was in 1999 and the gradual growth of its activity and profitability. This is the period of strengthening of relationships in the business environment, development of crop and livestock production, implementing of new technologies of land cultivation, plant, and animal care. It is the period of economic recovery on the base of private land ownership, motivation of producers’ activity, agreements on free trade and cooperation with the EU and other countries. Simultaneously, it is the years of overcoming of such shocking consequences as economic collapse of the end of 1990s, the instability of foreign currency and the banking crisis of 2008–2009, the beginning of the hybrid occupation of Ukraine by Russia in 2014, the rapid fluctuation of the value of its own currency in 2014–2015 because of war. The alteration of the principles of currency exchange rate formation with the transition from a fixed value to that is formed under the influence of market conditions was a mean to overcome this instability. Russia’s full-scale armed aggression against Ukraine since 2022 caused the latest devastating events in the economy.
 Originality / scientific novelty. The novelty of the obtained research results is in presentation, argumentation, and interpretation of productivity waves in agriculture development for the 30-years of Ukraine independency with the use of extract method of structural components and correlation analysis of smoothed data sets. The continuity of legislative stages of agriculture reorganization was built to reveal ground for agriculture growth and to understand factors of branch sustainability. It is the first time when research shows how to detect latent changes in the development in the context of legislative changes, external threats, and internal peculiarities of branch.
 Practical value / implications. Results of analysis can be implemented in the historical reconstruction of causes and consequences of falls and rises in the Ukrainian economy for the period of 1991–2022. Used smoothing method is suggested to be applied in econometric research when the dynamics of indicators behavior cannot be approximated with certain function unmistakably because of ambiguous form of data scattering or its latent character.

Analysis of the Real Exchange Rate of Vietnamese Dong from the Perspective of Demographic Dividend

With the advantage of demographic dividend and extensive investment value, Vietnam's foreign trade has developed rapidly and made great contribution to its economic development. By studying the mechanism of the indirect effect of the population age structure on the promoting effect of economic development on the real exchange rate of the Vietnamese dong, it is of great significance to understand the long-term change law of the exchange rate of Vietnam and even other developing countries. In this paper, the influence of population age structure on the real exchange rate of VND(Vietnamese dong) against USD(US dollar) was studied. In accordance with the idea of "relevant theoretical analysis - empirical analysis - conclusions and suggestions", the unit root test, analysis of variance and other econometric methods were used for empirical test. It is found that there is a long-term equilibrium relationship between the population age structure and the real exchange rate of VND. It mainly affects the real exchange rate of Vietnam through the mechanism of economic demand, while the influence of "Balassa-Samuelson" on the supply side is weak. In the process of boosting economic growth, the age structure of the population leads to the depreciation tendency of the dong exchange rate. Based on the conclusions of this paper, relevant suggestions are put forward for Vietnam and other countries enjoying demographic dividend to improve the exchange rate formation mechanism, tap the second demographic dividend and develop demographic quality dividend.

ДИНАМІКА КУРСОВОЇ ПОЛІТИКИ НАЦІОНАЛЬНОГО БАНКУ УКРАЇНИ В УМОВАХ ВІЙНИ ТА АКТУАЛЬНА СТРАТЕГІЯ КУРСОУТВОРЕННЯ

The article is devoted to the analysis of the measures of the exchange rate policy of the National Bank of Ukraine regarding the optimal order of formation of the exchange rate, which have been taken since the beginning of the full-scale war and the justification of the reasons and feasibility of the transition to the regime of managed flexibility of the exchange rate as an actual and most optimal concept of exchange rate formation. The relevance of the research is beyond doubt, because the choice of a successful strategy for the formation of currency rates using effective traditional and innovative tools will allow balancing the currency market, ensuring financial security and general economic development. The research methods used in the work are: analytical method, graphical method, methods of comparison and detailing. Basic theoretical aspects of the essence of foreign exchange policy have been highlighted, its object, subjects and key tasks have been defined. Operational actions of the National Bank of Ukraine to prevent the rapid depreciation of the national currency due to the impact of the war have been determined, the first of which was the immediate transition to a fixed exchange rate regime, with the aim of adapting to difficult conditions, avoiding panic, ensuring the stable operation of the financial system, curbing inflation and maintaining macroeconomic stability In addition to the fixed exchange rate, directive currency restrictions have been established, including: restrictions on the operation of the foreign exchange market, restrictions on the issuance of cash in the national currency, a ban on the issuance of cash in foreign currency, and others. The advantages of the fixed exchange rate policy, as a temporary stabilization tool, as well as the disadvantages of its long-term use, which put pressure on the economy and are a threat to the state’s financial system, have been analyzed. The advantages, rationality, and prerequisites for introducing the system of managed exchange rate flexibility by the National Bank of Ukraine as a transitional stage before returning to the regime of currency exchange rate formation that operated before the start of a full-scale war, namely: a floating exchange rate and inflation targeting, have been argued.

ТЕОРЕТИЧНІ ПІДХОДИ АНАЛІЗУ ВПЛИВУ ПАРИТЕТІВ НА ФОРМУВАННЯ ВАЛЮТНОГО КУРСУ ТА ВАЛЮТНОГО РИЗИКУ

Effective currency risk management is one of the most critical challenges for developing countries and emerging markets nowadays. Thus, it requires a comprehensive analysis of its causes, nature, factors, and possible consequences. Since the definition of a currency risk relates to unpredictable changes in exchange rates, its analysis means examining exchange rate volatility and formation. International parity conditions are one of the most straightforward and widespread approaches to explaining exchange rate formation. It includes purchasing power parity and interest parity. The first one is based on the law of one price and means the same purchasing power of currencies involved in buying a homogeneous product or a basket of goods in two countries under some conditions. Interest Rate Parity measures expected changes in nominal exchange rate by the difference in nominal interest rates at home and abroad. Nevertheless, clear theoretical foundations and empirical testing of theoretical assumptions have revealed contradictory results. It has led to several anomalies: Purchasing-Power-Parity Puzzle, Forward Premium Puzzle, and Forward Bias Puzzle. Despite all trials to solve the puzzles using new economic and econometric approaches to explain exchange rate volatility, there are constant and significant rebounds from theoretical models. Thus, we emphasize the need for a multidisciplinary approach to currency risk management that considers economic, political, and social factors. One possible method relates to improving existing models economically (adding new elements) or econometrically (applying the updated mathematical models). An alternative way is to analyze a currency risk as a systematic one depending on global factors. Consequently, the focus on exchange rate modeling and forecasting shifts to calculating and analyzing its premium. This approach might be the most prominent for the Ukrainian economy under postwar instability and fragility. Overall, this article provides valuable insights into the complex world of currency risks and offers practical recommendations for managing these risks in an uncertain global economy.

Трансформация валютно-финансовых инструментов рынка в условиях регионализации мировой экономики

The problems of transforming the elements of the global monetary and financial system in the direction of regionalization are discussed. The issues of prospects for de-dollarization and possible scenarios for switching to alternative means of payment in regional trade are discussed, five main scenarios for the development of the de-dollarization course are identified. The vulnerabilities of the Jamaican system in the context of global risks are identified. The analysis of the actual conditions for the formation of exchange rates is carried out. The main factors of the US dollar exchange rate formation are considered. A comparative analysis of the euro as a tool for replacing the world reserve currency is carried out, the weak position of the euro as a promising ‘donor’ of the US dollar has been revealed. The main threats to the economies of developing countries with weak national monetary institutions are formulated. An assessment of the structure of the distribution of investment gold among the national banks of the largest holders of reserves in precious metals is given, the dynamics of gold production and the dynamics of increment of reserves by national banks of the largest countries are considered, the prospects of gold mining and its distribution in the system of international finance are assessed. The applicability of futures of the main commodity markets as investment reserves is considered, the volatility of oil futures in terms of gold has been assessed. The prospects of the cryptocurrency market instruments as instruments for replacing the world reserve currency are assessed, the strengths and weaknesses of the processes of formation of crypto-tools markets are revealed

РЕГУЛЮВАННЯ ВАЛЮТНОГО РИНКУ УКРАЇНИ В УМОВАХ ФІНАНСОВОЇ НЕСТАБІЛЬНОСТІ ВОЄННОГО ЧАСУ

The article examines the peculiarities of the functioning of the currency market of Ukraine since the beginning of the full-scale invasion. The exchange rate dynamics in the pre-war period are shown and the factors of its formation in 2022-2023 are determined. It is noted that a significant inflow of capital into the country in the form of foreign aid from allied countries makes it possible to compensate for the foreign currency deficit. The NBU's measures to maintain exchange rate stability and their consequences for the monetary sphere in general and the foreign exchange market, in particular, are analyzed. Based on the study of risks and threats to the stability of the foreign exchange market, appropriate measures of the NBU to neutralize them in the conditions of martial law have been determined. The expediency of fixing the exchange rate at the current stage and the conditions for restoring the regime of flexible exchange rate formation are substantiated. It is established that during the period of martial law, financial markets remained stable due to the significant inflow of non-market capital into the country, the application of a fixed exchange rate and currency restrictions. Such positive consequences of maintaining a fixed exchange rate of the hryvnia as curbing the volatility of the foreign exchange market, reducing the cost of risk insurance, reducing the vulnerability of the economy to changes in capital flows, and stabilizing Ukraine's debt position have been identified.The directions for improving the regulation of the foreign exchange market in the short and long term are outlined. The NBU's strategic direction regarding the regulation of the foreign exchange sphere is the movement towards the gradual weakening of currency control and the removal of currency restrictions introduced at the beginning of the war, the transition to flexible exchange rate formation and the return to the monetary policy of inflation targeting. The restoration of production and the adjustment of transport logistics (opening of ports and/or setting up of alternative transportation routes), the revival of exports and the growth of foreign exchange earnings from other sources will ensure an increase in the supply of foreign currency on the market. After the cessation of hostilities, the NBU should conduct an exchange rate policy taking into account the tasks of post-war reconstruction, balancing between the stimulation of imports and the attraction of foreign investments

Assessment of an Exchange Rate’s Fluctuations Impact on the Foreign Exchange Market

The article analyzes the foreign exchange market functioning under the influence of exchange rate fluctuations. The main factors determining the exchange rate in the existing conditions have been determined. All course-forming factors are divided into fundamental ones, which include the main economic indicators; technical conjunctural; extraordinary (unexpected) and non-economical. The formation of the forward currency operations market trends, in particular forward contracts, currency swaps, options and other financial instruments, was also investigated. The income trends of the current currency market from quotes of the most used currency pairs are briefly described.It was concluded that the most predictable indicator in the current currency operations market is the standardized exchange rate, determined on the basis of currency quotes of at least 6 commercial banks. When calculating the average arithmetic rate, the highest and lowest quotation rates are not taken into account.The future foreign exchange market trends depend on the choice of the monetary policy vector, which is based on a qualitative and quantitative assessment. Since the processes in the currency market have a fractal structure and cannot be predicted using classical methods, the provisions of the fractal statistics theory are used for this purpose.In particular, on the basis of existing quotations of the currency pair US dollar/Ukrainian hryvnia, the Hurst indicator, which reflects the level of anti-persistence of the national currency exchange rate dynamics, was calculated, and accordingly, its ability to change trends to the opposite in periods of high volatility and in the presence of factors that cause it. The volatility of the national currency rate and the level of anti-persistence of currency fluctuations depends on a number of measures in the field of currency regulation and currency and monetary policy. At the same time, any intervention of the state government in the exchange rate formation process causes a change in the trend. The results of the calculations can be used for operational and strategic planning of the business entities behavior on currency markets and measures aimed at countering the negative impact of exchange rate changes.

MODELING THE EXCHANGE RATE OF THE KAZAKHSTANI TENGE

The article discusses the role of key factors in the exchange rate formation of the Kazakhstani tenge. The study analyzes which factors are key for short-term and long-term forecasting. A linear regression model is built, with the STEP function on quarterly data from 01/01/2005 to 06/01/2021 using free statistical software with open source access and the R programming language. The STEP function allows you to choose the best model from one dependent and 14 independent variables. An analysis of domestic and foreign studies is carried out to identify the degree of relationship (positive or negative) between the key factors affecting the nominal exchange rate of the national currency of Kazakhstan. The relationship between the nominal exchange rate and direct or indirect state intervention is investigated. Access to data is a key issue for qualitative forecasting of the nominal exchange rate of the Kazakhstani tenge and affects the predictive power of the model. As recommendations, it is proposed to provide economic agents with KASE data. In conclusion, conclusions are drawn about the presence of objective prerequisites that impede the transition to a free-floating exchange rate in Kazakhstan.

Global imbalances: Causes and consequences of manifestations in the modern economy

Subject. The article addresses imbalances as a characteristic feature of today's global economy. Imbalances restrain the development of national economic systems and impact negatively upon the global economy. Nowadays, there is a tendency towards sustainability of global imbalances. Objectives. The aim is to conduct a comprehensive study of reasons and consequences of global imbalances, elaborate methodological framework for increasing the effectiveness of global imbalances regulation to ensure the sustainability of the global economy. Methods. The study employs methods of scientific abstraction, induction, deduction, synthesis, and comparative analysis. Results. Imbalances in today’s world economy are a result of uneven economic development of certain countries and regions. The countries that lead the new technological mode are able to increase significantly their exports. They have large trade surpluses. On the contrary, importing countries face problems to reduce a trade deficit. Such a situation leads to sharpening the problem of international regulation of balance of trade deficits and surpluses. Conclusions. Uneven economic development is the main reason for imbalances. Its acceleration depends on creation of new technologies and new types of products. This process leads to structural shifts in national economies. Under these conditions, a group of countries exporting new products and technologies is formed. Balance of trade and balance of payments of these countries show a surplus. But imbalances have a negative impact on exchange rate formation mechanism, stability of international trade and capital movement. Such a situation implies policies to correct imbalances.

ЕТАПИ ТА ПЕРСПЕКТИВИ РОЗВИТКУ ВАЛЮТНОГО РИНКУ В УМОВАХ ВІДКРИТОСТІ НАЦІОНАЛЬНОЇ ЕКОНОМІКИ

The article discusses the stages of development of the national currency market. The features and characteristics of each of the stages are analyzed. It was found out that its evolution was accompanied by negative trends in the national economy: high rates of inflation, a sharp decline in production, a deficit in the balance of payments, etc. The development took place in the context of the processes of integration into the international currency market and was characterized by gradual liberalization, up to the introduction of flexible exchange rate formation and independent monetary policy. The flexibility of the exchange rate and the relatively independent monetary policy of the NBU enable the economy to better adapt to both external and internal shocks. The test of such a policy was the COVID-19 pandemic and the unfolding of crisis phenomena as a result of Russia’s full-scale armed aggression against Ukraine. It has been established that the currency market needs reforms by the regulator that will allow the current crisis to pass with the least upheavals, ensure Ukraine’s competitiveness by building effective mechanisms for its development. These mechanisms should take into account the prospects of potential membership in the EU and the creation of programs and funds for post-war reconstruction, which will allow the restoration of the economic and financial systems. It was determined that the financial market of Ukraine has significant potential for the use of modern digital technologies. Liberalization of the process of using cryptocurrencies can be a breakthrough in the system of currency market development. The first steps towards this have already been taken with the adoption of the Law of Ukraine «On Virtual Assets», which established their legal status, and users can legally exchange, buy and sell cryptocurrency. A retrospective analysis of the recovery of currency markets in different historical periods was carried out. It was established that the strategy for the development of the foreign exchange market of Ukraine should take into account the use of regulatory mechanisms that would ensure both its liberalization and the ability to maintain financial stability in the post-war period. The recovery strategy should be built taking into account European aspirations and the effective use of funds for the reconstruction of Ukraine, based on the introduction of modern digital technologies in the financial system.

ЕКОНОМІКО-МАТЕМАТИЧНИЙ ІНСТРУМЕНТАРІЙ ПРОГНОЗУВАННЯ ОБМІННОГО КУРСУ ВАЛЮТ

The article deals with the analysis of existing approaches to exchange rate forecasting. It also includes the review of Ukrainian and foreign scientists on this topic. The authors of this article have considered the main disadvantages and benefits of existing forecasting dimensions, as well as individual methods and models. They indicated ways to facilitate the implementation of currency exchange rate forecasting using neural networks with software libraries for various programming languages and individual software applications, as well. As a result, the authors have systematized knowledge about existing approaches used in the process of currency exchange rate forecasting. There are two dimensions of currency exchange rate forecasting, in particular, intuitive and formalized ones. The intuitive dimension is peculiar to short-term forecasting and is often used in trading. Its main advantages include the ability to consider structural changes in the economy that can significantly affect the exchange rate formation itself and the speed of forecasting. However, the disadvantage of intuitive methods is the inability to prove formally the quality of the obtained forecasts. The advantages of the formalized dimension of forecasting include the ability to prove the quality. Businesses and government agencies use it the most often. Extrapolation methods and machine learning methods are mainly used to predict the exchange rate using formalized methods. Moreover, the reviewed studies indicate that among the well-known extrapolation methods for predicting the exchange rate, autoregressive models (VAR, AR, ARMA, ARIMA, SARIMA, ARCH, GARCH, ARDL) and smoothing methods (floating averages, adaptive methods and models) are used the most frequently. Machine learning methods include neural networks. Trend models have proved to be ineffective for currency exchange rate forecasting. The reason for this appeared to be using large amounts of data for currency exchange rate forecasting, and each fluctuation there directly affects the whole phenomenon.

Economic Uncertainty and Exchange Market Pressure: Evidence From China

This paper evaluates the impact of local and external economic uncertainty shocks on China’s exchange market pressure from a time-varying perspective. We first construct a simple behavioral model to provide some economic background for our empirical analysis. The model identifies two channels, namely market sentiment and market demand, through which economic uncertainty has a time-varying impact on exchange market pressure. Notably, we calculate a new exchange market pressure index for China by considering China’s practice. Using the economic policy uncertainty index as a proxy for economic uncertainty and our new estimates of China’s exchange market pressure, we employ a novel TVP-VAR model controlling for over-parameterization to a monthly dataset from January 2001 to October 2020 to analyze the impact of China’s and U.S. economic policy uncertainties on China’s exchange market pressure. Our empirical findings robustly show that an upsurge in U.S. EPU is followed by appreciation pressure of the RMB against the dollar, while a hike in China’s EPU triggers devaluation pressure on the RMB. In addition, the impact of economic policy uncertainty has considerable time variation in magnitude, especially after mid-2011, showing a trade-off mechanism between the effects of domestic and foreign economic uncertainties on China’s exchange market pressure. Moreover, we attribute the time-varying features to the changes in China’s dependence on the U.S. and in the exchange rate flexibility. Finally, China should further improve the exchange rate flexibility, reduce its dependence on the U.S. and develop a more diversified currency basket in the exchange rate formation mechanism. JEL: F31 C50 E70

Modern exchange rate formation in a resource-oriented economy: the institutional dimension

There is an increasing need for in-depth theoretical and applied studies of the essence, structure and features of the formation of the exchange rate, the development of the mechanism of currency regulation in the Russian Federation, determining the degree of state regulation of currency relations, including due to the introduction of currency restrictions, clarifying the main criteria for the effectiveness of their application, as well as developing directions for improving the mechanism of currency regulation in the conditions of post-crisis economic development. The main purpose of this article was to consider the peculiarities of the formation of the exchange rate in a resource-oriented economy, which includes the Russian economy. The article uses general scientific methods, in particular, analysis, synthesis, comparison, as well as a systematic approach to the study of information. The value of the exchange rate for the economy is indicated. The main indicators of exchange rates and the main groups of factors affecting the exchange rate of the national currency are described.

Вплив чинників на управління безпекою валютного ринку в Україні

The article analyzes the principles of development and security management of the foreign exchange market of Ukraine. Substantiates the influence of factors on the functioning of the foreign exchange market such as: improvement of the regulatory framework; monetary policy on the stabilization of the floating exchange rate regime; lending to the National Bank of Ukraine within the current 18-month stand-by program from the International Monetary Fund; replenishment of the market currency through the purchase and sale of government bonds; the influence of international and domestic factors on the liberalization of the foreign exchange market in Ukraine; receipt of a share of currency more than 10% of the population working abroad; restoring the confidence of individuals and entrepreneurs in the national currency. The structure and analysis of the process and dynamics of the foreign exchange market of Ukraine are characterized. The author evaluates the security management of currency regulation of the floating exchange rate regime, which directly affects the state of the foreign exchange market (Fig. 1). The state of exchange rate regulation and its impact on the foreign exchange market on the basis of personal observation during 2015-2021 are studied. The main advantage of this article is the clarification of the elements of the mechanism of currency regulation, which is due to the negative impact of a wide range of external and internal factors on the tools (Fig. 2). This mechanism is a powerful lever of state management of economic security and regulation of foreign exchange market liberalization in the context of a significant deterioration of the crisis situation in Ukraine in recent years. The main areas of security management of the mechanism of functioning of the foreign exchange market of Ukraine are the following. The first is optimization of the procedure of foreign exchange interventions of the NBU – schedule, parameters of interventions. This will increase the transparency and predictability of NBU operations in the foreign exchange market. NBU managers should abandon discriminatory approach to ensure all banks have equal access to interventions. The second is increasing of the digitization and disclosure of communication policies with actors. Its deterioration is due to negative comments addressed to banks regarding speculative actions on exchange rate formation, non-compliance with the requirements of the NBU in lending, security management and customer distrust. The third is strengthening of the reserve requirements for bank security management in order to reduce the excessive liquidity of the banking system.

Changes in the ruble exchange rate during the economic crisis: Consequences and effectiveness of the efforts undertaken

Subject. We consider the main trends and factors of changes in the Ruble exchange rate. Objectives. The purpose of the study is to identify the consequences and effectiveness of measures taken to stabilize the Ruble exchange rate during the economic crisis, and reveal factors of Ruble appreciation. Methods. The study rests on methods of systems analysis and synthesis, estimation techniques, the content analysis of literature and analytical data on the topic, statistical data analysis, graphical and regulatory methods. Results. We considered the specifics of the exchange rate in Russia, its advantages and benefits for the economy. The paper considers the behavior of the Ruble to Dollar and Ruble to Euro exchange rates over the past ten years, and identifies the factors of changes. We analyze the dynamics of currency interventions by the Central Bank of Russia as a tool to support the Ruble exchange rate. We also review important factors of exchange rate formation in Russia, which can contribute to the strengthening of the Ruble exchange rate. Conclusions. To stabilize the Ruble exchange rate, it is important to determine the main factors of exchange rate formation and the mechanism of their influence. In particular, we highlight such factors as the development of the country's export potential, attraction of investors to the purchase of Federal bonded loans, control over capital outflow abroad, liberalization of currency control, and greater public confidence in the national currency.

COMPETITIVE DEVALUATION AS AN ELEMENT OF RUSSIA'S MODERN MONETARY POLICY

The purpose of this article is to analyze the current system of exchange rate formation in Russia, to identify its main features. The dynamics of the exchange rate is of particular importance for Russian economy, which is among the so-called export-and resource-oriented. In such economies, the exchange rate is significantly dependent on the conditions of foreign markets, since the receipt of foreign exchange earnings from exports is the most important fundamental factor in the supply of foreign currency on the domestic market. On the other hand, the exchange rate itself is a factor in the external price competitiveness of Russian exports. The statistical databases of the Federal State Statistics Service and the Bank of Russia, as well as the statistical data of the International Monetary Fund group, the World Bank and the Organization for Economic Cooperation and Development, served as the information base for this study. The paper used critical and comparative analysis, a systematic approach to the study of information, retrospective, statistical and graphical methods, on the basis of which the prerequisites were investigated and the features of the current monetary policy and some of its individual elements were identified.