Exchange Rate Management Policies Research Articles

Modeling the impact of exchange rate fluctuations on agricultural performance: Evidence from Morocco during the period 2000-2023

The agricultural sector is a cornerstone of Morocco's economic development, contributing significantly to food security, employment, raw materials for agro-industries, and national GDP. This study investigates the impact of Real Effective Exchange Rate (REER) fluctuations on agricultural performance in Morocco from 2000 to 2023. Using an econometric framework, three models were developed: the first examines the direct effects of REER on agriculture, the second explores the implications of REER misalignments (calculated via the Behavioral Equilibrium Exchange Rate (BEER) approach), and the third analyzes the distinct impacts of REER overvaluation and undervaluation. The ARDL method was employed to estimate these models, incorporating control variables such as GDP Growth Rate, inflation, and foreign direct investment. The findings reveal that REER fluctuations significantly influence agricultural performance, with undervaluation enhancing export competitiveness and overvaluation diminishing profitability and production. REER misalignments, particularly overvaluation, have adverse long-term effects on the sector’s competitiveness. Conversely, undervaluation fosters growth through export stimulation and increased investments. The study underscores the need for a strategic exchange rate management policy aimed at stabilizing the REER and mitigating misalignments to support sustainable agricultural growth and competitiveness in Morocco. These insights provide a foundation for policymakers to devise macroeconomic strategies that enhance the agricultural sector’s resilience and contribution to national economic development.

Foreign Exchange Management and Selected Macroeconomic Performance Nexus Evidence From Nigeria

The objective of economic stability is fundamental to relative wellbeing of any country. Therefore, exchange rate management is key to fueling growth potentials and relative macroeconomic stability. The study empirically examined the exchange rate management and selected macroeconomic nexus in Nigeria from 1981Q1 to 2021Q4. The technique of generalized auto regressive conditional heteroscedasticity GARCH (1,1) was employed to model the dependent variable of quarterly nominal effective exchange rate( QNEER) on the explanatory variables : quarterly external reserves(QEXRES);quarterly gross domestic product (QGDP) ,and Dummy of effective exchange rate policy (DUMEXPO). The research output showed exchange rate depreciation in Nigeria exhibited a statistically significant inverse relationship with external reserves and gross domestic product during the review period. Whereas, test of exchange rate management policy effectiveness showed a relatively weak policy thrust are implemented to stabilized exchange disequilibrium. The study however, recommended for a consistently well recalibration of exchange policy as well as monetary policy intervention strategies so as to restore convergence, attract capital inflow and macroeconomic equilibrium position. Keywords: Exchange rate management, Sterilization, Pass-through, Nominal exchange rate.

Determinants of Exchange Rate in African Sub-Sahara Countries

The study examines empirically exchange rate determinants in African sub-Sahara countries specifically Anglophone West African countries like The Gambia, Ghana, Liberia, Nigeria, and Sierra Leone between 1981 and 2019. In order to achieve this objective, both descriptive statistics and the Panel Least Square (PLS) estimation methods were employed to analyze the data. The result of the analysis reveals that INFL has a negative relationship with EXCR but it does impact significantly on it at 5 percent level; INTR has negative and an insignificant impact on EXCR at 5 percent level; CABL has negative relationship with EXCR and it also impacts significantly on it at 5 percent level; TMTR has negative relationship with EXCR and it also impact significantly on it at 5 percent level. The study therefore concludes that inflation rate (INFL), interest rate (INTR), current account balance (CABL) and terms of trade (TMTR) depreciates exchange rate (EXCR) in African sub-Sahara countries specifically Anglophone West African countries. Based on the findings of the research work, the following are recommended: The government should encourage export diversification especially the non-oil sector exports. This can be achieved through value addition to both the agriculture and manufacturing sub-sectors output. There should be stable exchange rate management policy that avoids over-valuation or excessive depreciation of their currencies and ensures international competitiveness of tradable goods, relative price stability as well as avoiding inconsistent fiscal policies.

Asymmetric Exchange Rate Pass‐Through to Consumer Prices in Ghana: Evidence from EMD‐NARDL Approach

This paper analyses the US dollar exchange rate pass‐through to consumer prices in Ghana from January 1990 to January 2020 using the empirical mode decomposition‐based nonlinear autoregressive distributed lags model (EMD‐NARDL). This model eliminates the noise component of the underlying data and captures the short‐ and long‐run nonlinearities. We find evidence of cointegration between denoised series of consumer prices and exchange rate and asymmetric pass‐through in both the short‐ and long‐run. Specifically, exchange rate pass‐through was found to be in the long‐run incomplete in the period of depreciation and statistically zero pass‐through in the period of appreciation. In the short‐run, the exchange rate pass‐through in periods of depreciation is near complete; that is, 81% against 74% in periods of appreciation. We recommend that monetary authorities consistently monitor exchange rate behaviour and maintain efficient exchange rate management policies to ensure stable consumer prices. This could be achieved through proper and timely policy interventions using the available monetary policy tools such as foreign exchange reserves.

JAPAN’S STOCK MARKET PERFORMANCE: EVIDENCE FROM TODA-YAMAMOTO AND DOLADO-LUTKEPOHL TESTS FOR MULTIVARIATE GRANGER CAUSALITY

This paper empirically examines the causal linkages of Japan's stock market (proxied by Nikkei 225 index) performance with selected key macroeconomic fundamentals. Relatively recent Toda-Yamamoto and Dolado-Lutkepohl, multivariate Granger causality tests are implemented. Monthly time series data from September 1974 to February 2017 with a large sample size of 510 monthly observations covering the floating exchange rate regime were utilized. The study documents some interesting and some unexpected results. Bi-directional causality is evidenced only between the stock market and the industrial production. Somewhat counterintuitively, unidirectional causality runs from stock market to money supply. Furthermore, unidirectional causality flows from interest rate (bond yield) to stock market. Not so surprisingly, no causality is detected between the stock market and the general price level. This is also true for stock market and exchange rate. The above findings may aid Japanese policy makers to formulate appropriate financial, monetary and exchange rate management policies. Japan should give second thought on the efficacy of its over reliance on monetary policy with interest-rates targeting and should prepare itself for launching a pragmatic fiscal stimulus program.Keywords: Stock Market; Macroeconomics Fundamentals; Granger CausalityJEL Classifications: E44, F41, G15DOI: https://doi.org/10.32479/ijefi.11262

Differences in Tourism Demand: A Comparison between Developed and Developing Economies

Tourism is important in bringing a positive socioeconomic change in the form of creating jobs, increasing income and welfare. The study at hand employs the generalized method of moments approach in the course of investigating the dynamic relationship of tourism expenditures, GDP, globalization, CO2 emissions, and exchange rate with tourism demand during 1995-2014. A total of 50 countries are included in this research study, which is divided into two categories, i.e. 25 developed economies and 25 developing countries. Based on the Panel GMM estimates, for both economies and overall sample, the findings reveal a positive and a significant association between tourism expenditures, world income, globalization and GDP per capita, while there are mixed results for the real exchange rate, environment quality and government effectiveness. It can be suggested that the governance, growth, environment protection and exchange rate management policies can be tapped to boost the tourism receipts.

International Trade Costs and Trade Flows: Evidence from the West African Monetary Zone (WAMZ)

Purpose: The study examines the effect of international trade costs on trade flows in the West African Monetary Zone (WAMZ), a sub-regional economic bloc within the Economic Community of West African States (ECOWAS).
 Method: Six member countries of the WAMZ, based on data availability, are examined using panel data estimation technique and the Fully Modified Ordinary Least squares (FMOLS), which is employed to test for the robustness of results, for the sample period of 2006-2018.
 Results: The study finds a negative and significant effect of international trade costs on trade flows in the WAMZ sub-region. Time to trade is also found to be negatively and significantly related to trade. Exchange rate, financial development (measured by commercial banks' credit to the private sector), and real GDP growth rate (a measure of growth in annual national income/economic size) have a positive and significant impact on trade in the sub-region. The study further finds evidence that the ease of doing business is positively related to trade in the sub-region, but the impact is weak. 
 Implications: In the light of the empirical findings, the study recommends that policy measures and strategies to reduce international trade costs and time to trade through simplified and harmonized trade procedures be implemented in the sub-region. Policies to encourage domestic investment (i.e increase capital stock) and rapid development of the financial sector should also be implemented. These should be supported with sound and stable macroeconomic exchange rate management policies, in order to enhance trade and integration in the sub-region.

Exchange Rate Management and Economic Growth: A Brewing Crisis in Pakistan

In this article it is argued that Pakistan has had a consistently overvalued exchange rate and the policy with regards to management of the exchange rate has undergone a significant change in recent years. We show that prior to March 2013, the policy target of the exchange management was stability of the real effective exchange rate. However, during the tenure of the current government, the policy target for exchange rate management seems to have been stability of the nominal exchange rate against the US dollar. As the currencies of Pakistan’s major trading partners (UK, Europe and China) have depreciated against the dollar during this period, the real effective exchange rate has appreciated by over 20 percent since the time that the current policy makers took office. Overvaluation in general and the recent reversal in the exchange rate management policy in particular have had an adverse impact on exports and the manufacturing sector. This not only has serious negative consequences for the long term, growth of the economy, but has greatly increased the short-term risk of a balance of payments crisis.

PELEMAHAN RUPIAH: MANAJEMEN NILAI TUKAR INDONESIA DAN PELAJARAN DARI MASA LALU

World ecomonic trend in 2008 has decreased significantly after growing rapidly for a decade (world economic growth up to 2007 was 5.2%). Global contraction happened because of United States and Europe performance decreasing. In 2008, this impact had spread to all around the world including Asia and especially Indonesia. This paper aims to consider Indonesia Experience in Exchange Rate Management policy. This paper con-cerned on pre-1990 period which was highlighted by the exchange value rezime and with all of the variations.

Contract farming risks: A quantitative assessment

The objective of this study is to identify the key risks facing each of the stakeholders in the export-focused paprika value chain in Zambia. Although a deterministic cost-benefit analysis indicated that this outgrower scheme would have a very satisfactory net present value (NPV), a Monte Carlo analysis using an integrated financial–economic–stakeholder model identifies a number of risk variables that could make this system unsustainable. The major risks include the variability of the real exchange rate in Zambia; the international price of paprika; and the farm yield rates. This analysis points out that irrigation systems are very important for both stabilising and increasing yields. The analysis also shows the limitations of loan financing for such outgrower arrangements when at the sector level it is difficult or even impossible to mitigate the risks from real exchange rate movements and changes in international commodity prices. This micro-level analysis shows how critical real exchange rate management policies are in achieving sustainability of such export-oriented value chains.

Currency Wars: Who Gains from the Battle?

textabstractWe study the growth effects of currency undervaluation when countries employ active exchange rate management policies or impose capital controls, using a panel dataset of 185 countries. Applying two-stage regressions, we find that changes in undervaluation driven by exchange rate management and capital control policies have no significant impact on economic growth. Undervaluation that leads to higher growth mainly stems from policies that lower government consumption, reduce inflation and increase domestic savings. However, these policies are good for growth by themselves, with only limited additional growth effects through increased currency undervaluation. In sum, we find no evidence that battling in the currency depreciation war significantly increases a country’s growth rate.

Contract farming risks: A quantitative assessment

The objective of this study is to identify the key risks facing each of the stakeholders in the export-focused paprika value chain in Zambia. Although a deterministic cost-benefit analysis indicated that this outgrower scheme would have a very satisfactory net present value (NPV), a Monte Carlo analysis using an integrated financial–economic–stakeholder model identifies a number of risk variables that could make this system unsustainable. The major risks include the variability of the real exchange rate in Zambia; the international price of paprika; and the farm yield rates. This analysis points out that irrigation systems are very important for both stabilising and increasing yields. The analysis also shows the limitations of loan financing for such outgrower arrangements when at the sector level it is difficult or even impossible to mitigate the risks from real exchange rate movements and changes in international commodity prices. This micro-level analysis shows how critical real exchange rate management policies are in achieving sustainability of such export-oriented value chains.

A comparison of two methods of predicting, ANN and times series for Iran’s non-oil exports

The importance of increasing independence from oil revenues whatever the reason is, fluctuations in oil prices and global demand, government revenues severely affected and have led to the Euphrates secret tool exports to earn foreign currency to be raised. Hats why many experts and scholars of the current situation of the economy towards exports has shifted. Possible to examine the prospects for exports and provides more precise planning for the economy of Iran. This study evaluated the predictive power of Iran’s non-oil exports methods of Artificial Neural Network (ANN) and mass Autoregressive Moving Average (ARIMA) which was used. Required data for the years 1959 to 2010 were obtained from central bank of Iran. Therefore to compare the accuracy of prediction methods measure the average absolute deviation, root mean square error and coefficient of determination is used. The results showed that the artificial neural network techniques can also develop new methods of predicting and be a policy maker especially the non-oil export sector in decision-making in the future. The result seems to dollar exchange rate management policy in our country is a function of politics. Even if this rate is not always constant in long run.

Monetary Regimes and Share Price Volatility in East Asia

This paper applies counter-factual simulation experiments based on a calibrated DSGE model of a small open-economy. We compare the alternative monetary regimes of East Asia: the monetary targeting framework of the Central Bank of the Republic of China, the fixed-rate system practiced in Hong Kong, the Taylor rule used in Korea, and the exchange-rate management policy used in Singapore. The welfare differences are minimal, but the monetary rule of Taiwan delivers significantly lower share market volatility for a variety of shocks.

Exchange Rate Management and the Manufacturing Sector Performance in the Nigerian Economy

Since Nigeria is heavily factor-input import dependent, the inability to locally source the required inputs in the manufacturing sector in the country is a chronic problem. Consequently, the exchange rate plays an important role in the ability of the economy to attain a realistic growth in the manufacturing sector. This study examined the impact of exchange rate management on the growth of the manufacturing sector in Nigeria. Ordinary Least Square (OLS) multiple regression analysis, using E-view was employed. The study covered the periods of 1986-2010 with the use of time-series data. The empirical result of this study shows that depreciation which forms part of the structural adjustment policy (SAP) 1986, and which dominated the period under review has no significant relationship with the manufacturing's sector productivity. It was found that in Nigeria, exchange rate appreciation has a significant relationship with domestic output. And that exchange rate appreciation will promote growth in the manufacturing sector. It was also ascertained from the estimated regression line that there is a positive relationship between the manufacturing gross domestic product and inflation. It is recommended that government should direct its exchange rate management policy towards exchange rate appreciation in order to reduce the cost of production in the manufacturing sector that depends heavily on foreign inputs while there should be total ban of importation on consumer and intermediate goods that can be produced locally. Since manufacturing sector depends much on foreign inputs, and for the importation of these foreign inputs not be continuous, efforts should be geared towards improving the level of technology, increasing agricultural production, and developing local raw materials in the country. In addition, the government should ensure stable electricity, good roads, water, telecommunication etc. And more importantly as regards this study, the exchange rate appreciation is what the Government should intensify efforts to achieve in Nigeria.

Changes in services trade barriers in banking and their impact: the case of the ASEAN+3

Although there has been extensive research on the ASEAN+3 countries, which reveals a synchronisation of economic policies, including exchange rate management policies, research on the regional pattern of trade policies in the banking sector is limited. We evaluate the trade barriers in banking and their evolution, using data from three sequential surveys conducted by the World Bank and surveys by other international organisations. We find that the country dispersions in trade-restricting policies are stable over time. Moreover, we find no evidence of moves in the direction of liberalisation in the sector. The economic modelling undertaken provides an indication of the real income gains and the cost increases of the policies adopted.

Monetary Policy Transparency in the Inflation Targeting Countries: The Czech Republic, Hungary and Poland

This paper quantifies transparency of monetary policy in the three EU New Member States that have adopted direct inflation targeting strategy. Two measures of transparency are applied. The institutional measure reflects the extent to which a central bank discloses information that is related to the policymaking process. The behavioural measure reflects the clarity among the financial market participants about the true course of monetary policy. The paper shows an ambiguous association between the two measures of transparency, which may be attributed to the active exchange rate management policy that undermines the actual transparency proxied by the behavioural measure.

Exchange Rate Management Strategies in the Accession Countries: The Case of Hungary

Several leading candidate countries will eventually enter the European Monetary Union (EMU). A key question is what exchange rate management policy should be pursued after joining the European Union (EU). This paper focuses on the impact of Euro-area monetary policy on Hungary. We find that Euro-area monetary policy shocks may be destabilising for Hungary as the impact of these shocks appears to be much greater on Hungarian industrial production than on Euro-area industrial production. Thus, Hungary has much to gain by retaining some monetary policy independence during the interim period between admission to the EU and adoption of the euro in order to isolate itself from Euro-area monetary policy shocks.

Monetary Policy Transparency in Inflation Targeting Countries: The Czech Republic, Hungary and Poland

This paper quantifies transparency of monetary policy in the three EU New Member States that have adopted direct inflation targeting strategy. Two measures of transparency are applied. The institutional measure reflects the extent to which a central bank discloses information that is related to the policymaking process. The behavioural measure reflects the clarity among the financial market participants about the true course of monetary policy. The paper shows an ambiguous association between the two measures of transparency, which may be attributed to the active exchange rate management policy that undermines the actual transparency proxied by the behavioural measure.

Methods of assessing the long-run equilibrium value of an exchange rate

The many industrial countries which have in recent years opted for a managed floating exchange rate regime are now in need of methods for assessing the appropriateness of their exchange rates and for guiding their exchange rate management policies. Three methods are considered here: the purchasing power parity (PPP) method, the underlying payments disequilibria (UPD) approach, and the asset-market disturbances (AMD) method. All three methods are found to have serious weaknesses, but, if used with care, provide rough yardsticks that would help the authorities in preventing their exchange rates from becoming widely undervalued or overvalued.