Foreign Exchange Research Articles

Effects of Non-Tariff Barriers on Promotion of East African Community Integration: A Case of Magasins Généraux du Rwanda

Regional integration in East Africa has proven to strengthen investments within member nations. However, differing non-tariff barrier policies among East African Community (EAC) partner states have posed significant challenges to progress. This study assessed the effects of non-tariff barriers on the promotion of EAC integration, using Magasins Généraux du Rwanda (MAGERWA) as a case study. Specifically, the study evaluated the effects of technical barriers to trade, analysed the impact of import quotas, and scrutinised the effects of foreign exchange restrictions on EAC integration. The study was anchored in three theories: Liberal Intergovernmentalism Theory, Economic Integration Theories, and the Heckscher-Ohlin Theory. It used a descriptive research design with both quantitative and qualitative approaches. The target population consisted of 2,045 individuals. A sample size of 335 was determined using the Yamane formula and selected through both simple random and purposive sampling techniques. Data were collected using a questionnaire survey and analysed using SPSS version 26. Bivariate analysis, including P-values, was used to evaluate the relationship between independent and dependent categorical variables. Descriptive statistics such as mean and standard deviation, as well as single and multiple logistic regression models, were used to assess the strength of the relationships. A p-value < 0.05 and a 95% confidence interval were used for inference. Results were presented in frequency and cross-tabulation tables. The study found that technical barriers to trade had a statistically significant relationship with the promotion of EAC integration (r = 0.953, p<0.05). Similarly, import quotas showed a significant relationship with EAC integration (r = 0.954). Foreign exchange limitations also demonstrated a significant correlation with EAC integration, with a correlation coefficient of.966. The regression analysis showed a mean square of 199.267 and a residual mean square of 0.107, with an F-value of 1864.147 and a p-value of.000b. The researcher suggested that EAC member states should implement the planned goals of the community to promote free trade in the region, thereby enhancing economic integration.

Aversion to the use of foreign exchange hedging in state-owned enterprises: Evidence from China

Using a sample of state-owned enterprises (SOEs) listed in China from 2006 to 2017, we examine the impact of state ownership on foreign exchange (forex) hedging. We find that SOEs engage in forex hedging both less frequently and to a lesser extent than non-SOEs. These results are robust to a series of additional tests, such as difference-in-differences analyses, instrumental variable tests, and alternative explanation tests. The effect is particularly pronounced for SOEs with weaker internal controls, fewer professional auditors, and less marketization. We further find that the use of currency derivatives by SOEs hinders the promotion of managers. Furthermore, the prevalence of subjective performance evaluation in SOEs, as opposed to objective performance measures, affects managers' decisions regarding hedging, as evidenced by negative promotion–performance sensitivity when using financial derivatives. Overall, our study sheds light on the aversion of SOEs to forex hedging, providing insight into the conservative decision-making tendencies of SOE managers under political governance.

Exchange rate flexibilization and macroeconomic determinants: Evidence from MENA region

Many emerging economies have significantly changed their economic policies by adopting floating exchange rate regimes. This article aims to investigate the relationship between exchange rate variations and key macroeconomic indicators in the MENA region, focusing specifically on Egypt, Tunisia, and Turkey. The study employs regression analysis to explore how macroeconomic factors such as inflation, interest rates, trade balances, foreign exchange reserves, etc. influence exchange rate movements in these economies. By conducting a comprehensive regression model, we aim to provide insights into the complex dynamics of exchange rate fluctuations and their implications for economic stability and policymaking in the MENA region.

The Real Equilibrium Exchange Rate of the Czech Koruna – the BEER Approach

The aim of this paper is to develop a model of the real equilibrium CZK/EUR exchange rate with all relevant explanatory variables. Emphasis will be placed on examining the longest possible time horizon, with a period of real convergence, but also economic stagnation. The model is based on the theoretical BEER approach using a cointegration or error correction model that distinguishes between short-term and long-term relationships. The results show that the Czech koruna strengthens when the productivity differential, terms of trade differential or gross fixed capital formation increase, while the koruna weakens when the VIX index representing global risk aversion increases. For the real interest rate differential, the hypothesis that the koruna strengthens in the short run during the improvement but weakens in the long run probably due to the country's risk premium, was confirmed. Moreover, it turned out that the start of the European Central Bank's quantitative easing led to strengthening of the Czech koruna, while the start of the CNB's foreign exchange interventions in 2013 led to weakening of the Czech koruna.

The Forecasting of TheNumber Tourists Arriving in Turkey with Intuitionistic Fuzzy Regression Functions Approach

The impacts of the tourism sector on countries are felt in various areas such as economy, cultural heritage and social development. Tourism contributes significantly to a country's foreign exchange earnings and positively affects the trade network. Tourists' spending boosts local economies and increases employment. These effects are particularly important for Turkey. Tourist visits can be used as a tool for regional promotion. Therefore, tourism demand forecasting is necessary to make the best use of these positive effects on Turkey's economic development and to plan tourism activities. Artificial neural network methods and fuzzy systems for time series forecasting problem are frequently used analysis methods in recent years. In this study, the time series of the total number of tourists visiting Turkey on a monthly basis is analyzed with the intuitionistic fuzzy regression functions approach, which is a generalization of the fuzzy regression functions approach. The analysis performance of the intuitionistic fuzzy regression functions approach is evaluated using fuzzy regression functions approach, multilayer perceptron artificial neural network and multiplicative neuron model artificial neural networks. As a result of the analysis, it is concluded that the intuitionistic fuzzy regression approach produces better forecasting results than both some artificial neural network models and the fuzzy regression functions approach. Since this is the first time that the intuitionistic fuzzy regression functions approach has been used in forecasting the number of tourists, the study aims to contribute to the literature and to help tourism industry employees to be more efficient and successful by providing them with the opportunity to make better future planning.

Indirect Evidence of the Effect of Informal Economy in the Behavior of the Foreign Currency’s Prices: A Case Study

The effect of informal economy on the behavior of exchange rate is complex and difficult to evaluate in common economic conditions. But if informal sector is sizeable and a certain foreign currency is used for transactions therein without being converted, the supply and the demand for this currency, the velocity of the money circulation, and several other variables would be impacted, implicating a measurable response in the corresponding FX rates’ behavior, while the other currencies’ prices will be less affected. Consequently, distinguishable dissimilarities regarding dynamics and statistical features are expected for the exchange rates of the currencies traded in the country. By evidencing and analyzing them, we can proceed with a backward analysis to identify the hidden relationships between informal economy and exchange rates. As a case study we analyzed the FX rates of main currencies traded in Albania, considering that specifically the Euro is used at a non-neglected volume as national currency substitute in the informal sector. Recognizing the complexity of the relationship under investigation, we have employed an interdisciplinary approach by incorporating econometrics and econophysics approaches. After examining the multifractal features of each FX series, the non-stationarity measure for distributions of the corresponding rate of returns, and the significance of self-organizing regimes on FX time series, we noticed that the price of the EU currency behaves distinguishably different. We described the specific features observed for the Euro-ALL exchange rates as an indication of their response to the informal economy and partial usage of the Euro in the role of national currency in this sector. Those findings are used also for opinionizing regarding formalization issues and scenarios of replacement of national currency by the Euro. Acknowledging that informality is undoubtedly harmful for the economy, this work is limited to providing an alternative explanation of specific FX rates comportment observed in the country, and to offer a descriptive analysis for similar systems.

Vietnam's exports to Korea and the real exchange rate: Post-crisis evidence from the multiple threshold nonlinear autoregressive distributed lag model

In this study, the asymmetric effects of the real exchange rate on Vietnam's exports to Korea were investigated using the multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model. As a result, the MTNARDL model exhibited enhanced estimation accuracy compared to the single-threshold nonlinear autoregressive distributed lag (NARDL) model. Furthermore, the aggregate bias problem was solved using individual export data for 16 major industries instead of relying on the overall export value data. The results revealed the substantial asymmetric impact of real exchange rate fluctuations in the short and long run. Fluctuations in the real exchange rate boosted Vietnam's exports to the Republic of Korea in the long run, with minimal negative influence. This indicates that the depreciation of the Vietnamese dong against the United States (US) dollar encouraged exports in some industries but limited exports in others. However, the short-term effect of the real exchange rate remains uncertain, as it could be either negative or positive depending on the industry and threshold level. The diverse impacts of the real exchange rate fluctuations on exports across industries were attributed to factors such as the capacity to absorb foreign exchange risks, product heterogeneity, and the ease of adjusting inputs and production for each sector. Therefore, these findings may help policymakers develop Vietnam-specific policies to address long- and short-term changes in the threshold levels of real exchange rate fluctuations.

Explainable machine learning for financial risk management: two practical use cases

We explore the potential of machine learning (ML) models applied in two financial risk management areas, i.e., credit risk management and financial risk hedging, through two practical use cases. This comparative study starts with the issue of explainability in complex ML models used in peer-to-peer lending for credit risk management. The first use case examines the limitations of using Kernel-SHAP with dependent features and evaluates different methods for estimating these dependencies using the Lending Club dataset. Our results suggest that accounting for feature dependence improves the understanding and robustness of prediction explanations. The second use case investigates a dynamic method for hedging foreign exchange risk in international equity portfolios, emphasizing the importance of accurate forecasts of currency returns. The analysis demonstrates that predictions yielded by ML models can significantly enhance the hedging of portfolios against currency risk. These findings highlight the transformative potential of advanced ML models in financial risk management, showcasing their capability to improve financial risk measurement and management. Further, our study outlines future research directions to advance this field.

Socio-economic contributions of tourism in the development of hospitality industry

This study examines socio-economic contributions of tourism in the development of hospitality industry in Cross River State, Nigeria. The economic impact analysis (EIA) was adopted as the underpinning theory for the study. It helps in analysing the contributions of an industry to the economy of a region. The researcher used cross sectional survey method, non-probability purposive method and quantitative method (multiple regression) to analyse 232 staff of hotels, restaurants, eateries and dining in Calabar metropolis, Cross River, Nigeria. Findings from the study show that the socio economic contributions of tourism (income generation, foreign exchange earnings and employment opportunities) increases revenue, improve the quality of services and facilities of hospitality industry and relieves government of the responsibility of been the sole employer of labour. The research results provide an insight on the importance of developing nations investing in tourism as the gate way to development of hospitality industry. Research results have identify socio economic contributions of tourism as the key to sustainability of hospitality industry in the area of revenue generation, improvement in services and facilities to state of art and reducing pressure on government in the area of employment.

The Dynamic Relationship Between Exchange Rate Volatility and Stock Prices in the Egyptian Real Estate Market and the Moderating Effect of Interest Rates

Among different channels of the financial market, the exchange rates and stock markets play a vital role in the domestic and international markets. This study aims to explore the dynamic relationship between the exchange rate (USD/EGP) and the real estate sector listed companies of the Egyptian Stock Exchange (EGX) from 2013 to 2023. Additionally, the study examines the moderating effect of interest rates on the relationship. To achieve this, the study employs several econometric methods such as Augmented Dicky Fuller (ADF) test, Granger Causality test to determine the direction of the relationship, Vector Autoregressive (VAR) model, and more. The results demonstrate that a long-run relationship exists between the variables. Furthermore, there is a significant unidirectional causality that runs from the exchange rate to real estate stock prices; thus, fluctuations in the exchange rate can significantly affect the profitability of investments in real estate stocks. Therefore, investors should closely monitor the movements in the exchange rate level to predict changes in real estate stock prices. When including the interest rate as a moderator, the outcome changes to bidirectional causality, meaning that the exchange rate and real estate stock price movements affect each other at a 1% significance level. Hence, interest rate could be used as an instrument to control demand in both the stock market and foreign exchange market. Finally, it is recommended that policymakers use the monetary policy while considering this bidirectional relationship in the presence of interest rate as a moderating variable.

A Time Series Study of Financial Sector Development and Original Sin in Nigeria

This study examined financial sector development and original sin in Nigeria financial market. Time series data was sourced from Central Bank of Nigeria Statistical Bulletin from 1990-2023. Original sin measured by Nigeria external debt per exchange rate, Capital market development as market capitalization to gross domestic product, Foreign exchange market as variation in naira exchange rate per US Dollar, banking sector development as percentage total bank assets to gross domestic product, money market development as insurance total assets to gross domestic product, Money market development as value of money market instrument to gross domestic product. The study employed descriptive statistics and multiple regression models to estimate the relationship that exists between the dependent and independent variables. The null Hypotheses (H0) were tested at 0.05 level of significance, Ordinary Least Square (OLS), Augmented Dickey Fuller Test, Johansen Co-integration test, normalized co-integrating equations and parsimonious vector error correction model were used to conduct the investigations and analysis. The study found that 57.0% variation on original sin can be traced and explained by variation on the independent variables as formulated in the regression model. However, the F-Statistics and the F-probability justifies that the model is significant and adequate in explaining variation on the dependent variable. The β coefficient shows that capital market development have negative effect on original sin, foreign exchange market have positive effect on original sin, banking sector development have negative effect on original sin, insurance sector development and money market development have positive effect on original sin. From the findings, the study concludes that the independent variables determine positively and negatively original sin in Nigeria. We recommend that the need for policies to deepen the capital market as this can cushion the effect of the negative effect of external borrowing and domiciled in Nigeria currency rather than international currency. There should be institutionalized policies to enhance the value of the naira against other international currencies as this can reduce the pressure of exchange rate variation in international debt and international monetary environment. Public expenditure should be directed to the productive sector of the economy as this can enhance the productive capacity of the economy and reduce the negative effect on balance of payment and other macroeconomic variables. Policies should be advanced to reduce external borrowings; this can reduce the debt burden and reduce the incidence of original sin in the financial market.

The Influencing Factors of RMB Exchange Rate in the Background of Anti-globalizationAn Empirical Evidence Based on VAR Model

Affected by the epidemic and geopolitics, global economic growth has slowed down, trade protectionism has begun to emerge, and anti-globalization sentiment has begun to sprout. With the pace of the Federal Reserve's interest rate hike, the global exchange rate, especially the RMB exchange rate, is gradually under pressure, which has a great impact on the economy and financial sector of the whole country. The research topic of this paper is the influencing factors of the RMB exchange rate in the background of anti-globalization, and the empirical analysis of the VAR model based on Stata software. The study found that rising domestic interest rates, a rising balance between import and export trade and rising uncertainty about US economic policy will lead to the appreciation of the RMB, while the growth of money supply will lead to the depreciation of RMB. It is worth noting that the RMB exchange rate is less affected by the uncertain economic policy factors in the United States, which shows that under the current anti-globalization and international game background, China still has a relatively independent control of the foreign exchange market.

A Research of Fine-Tuning CNN-LSTM Model for Gold Price Prediction

Gold price and foreign exchange price prediction are usually regarded as serialized data with strong time correlation. It is precisely because of this feature that the performance of traditional convolutional neural networks is often not as good as that of recurrent neural networks. This paper fine-tunes the CNN-LSTM model in two ways. The first is to simplify the input data, convert the time series into binary data, and change the model task from predicting prices to predicting price fluctuations. The second is to add a dropout layer and use the dropout layer to improve the model's overfitting problem. The results demonstrate that the improved model outperforms the first model, with prediction accuracy rising from 54% to 57%. Furthermore, the refined model is not limited to processing the gold price series; it can also be applied to other time series, and when paired with other models, it could yield even better outcomes.

Problems and Solutions of Chinas Foreign Exchange Market

This paper explores the current state, significance, and issues of China's foreign exchange market, emphasizing its crucial role in the global financial system. The market has seen substantial growth, with daily trading volumes exceeding $6.6 trillion by 2023, supporting international trade and investment through a stable RMB exchange rate and ample liquidity. Despite these advancements, several key challenges persist, including information asymmetry, excessive government intervention, and high policy sensitivity. These issues contribute to market volatility and inefficiency. The paper provides a deep analysis of these problems by data on trading volumes and market activities from 2015 to 2023. To address these challenges, the study proposes solutions like enhancing investor education, managing government intervention more appropriately, and improving information transparency. Implementing these strategies can enhance market stability and efficiency, supporting sustainable economic growth and strengthening China's position in the global financial system. Future research is suggested to evaluate the long-term impacts of these strategies and to explore further measures to mitigate ongoing risks and problems in FX market.

Correction to “Early inventory management practices in the foreign exchange market: Insights from sixteenth‐century Lyon”

Correction to “Early inventory management practices in the foreign exchange market: Insights from sixteenth‐century Lyon”

The Relationship between the Return of Energy Companies Listed on the Kazakhstan Stock Exchange and the Exchange Rate, KASE Index, and Gold Return: ARDL Bounds Value Approach

In a free market economy, stock market indices are influenced not only by national economic developments, but also by economic indicators such as gold, exchange rates, and oil. It is important to consider these indicators when analyzing the returns of companies traded on the stock exchange. Internal factors that impact stock market returns include the company's estimated earnings and changes in the company's financial structure. External factors include macroeconomic variables such as exchange rates, interest rates, gold prices, and Gross Domestic Product (GDP). A study analyzed the relationship between the returns of energy companies traded on KASE and the KASE index, exchange rate, and gold return during the period of 01.01.2023-01.04.2024 (328 trading days) using the ARDL Bounds Value Approach. The research findings indicate that the stock market composite index, foreign exchange, and gold returns have a long-term effect on the returns of energy companies. Particularly, the long-term effect of the stock market composite index return is found to be significant and positive for all three assets. Additionally, the effect of companies' past values has been observed as negative. According to the error correction model analysis, a key finding is that shocks to company returns will reach equilibrium in a short time, approximately one trading day. These results can provide decision support, especially for investors, when investing in energy companies.

Impact of Foreign Direct Investment on Renewable Energy Consumption: Findings from Bootstrap ARDL with a Fourier Function

Renewable energy consumption (REC) is viewed to be a core component for delivering sustainable economic growth. It is broadly acknowledged that REC can significantly contribute to lessening the burden of carbon emissions on the environment and fostering economic progress. Although foreign direct investments (FDI) are perceived as a key catalyst of REC growth, in some cases they can cause negative effects on REC. While there are many studies in the literature exploring the effects of FDI on variables such as economic growth, employment and foreign exchange deficits, the amount of studies examining the effect of the said variable on REC is very limited. The existing study attempts to fill this knowledge gap concerning the relationship between FDI and REC in Türkiye. This research investigates the long-run impact of FDI on RECs in Türkiye for the period 1973-2022 using the bootstrap Fourier ARDL technique. Empirical analysis reveals that FDI affects REC negatively, while GDP has no effect. The study's conclusions confirm the Pollution Haven Hypothesis (PHVH) in Türkiye, suggesting that the country has emerged as a desirable destination for businesses seeking to relocate their operations and evade the strict environmental regulations in their home countries.

Does Privatization improve Corporate Governance and Profitability? Evidence from Cement Company of Northern Nigeria

The paper study how Privatization improves Corporate Governance and Profitability of Cement Company of Northern Nigeria. Data was collected from secondary sources, and the statistical tools employed in the Methodology were descriptive statistics and OLS regressions. The study aimed at bridging literature gap on studies that relate corporate governance and privatization policy in Nigeria. The results suggest that, The result suggest that, the company has lower market capitalization, private sector and foreign investors have concentrated ownership, bigger board size, lower percentage of executive directors and higher percentage of non-executive directors, Board chairmen were not the chief executives and chairmen audit committees were non-executive directors, lower workforce, higher percentage of management staff small percentage of non-management staff, lower profitability, products demand depended on government capital projects, The Company purchased 5MW power plant in 1991, macro-economic challenges such as devaluation of naira, energy sector crisis, foreign exchange rate, inflation, trade liberalization, inconsistent stabilization policies, political instability and banks’ strikes and weak private sector. Inferential result reveals that, has state ownership, percentage of management staff, percentage of non-management staff and privatization have positive and significant relationship with profitability. However, minority ownership has a negative and significant relationship with profitability. Based on these findings, the researcher arrived at the conclusion that, Corporate governance has significant impacts on profitability of Cement Company of Northern Nigerian. Even though, unfavourable macroeconomic environment militated against its efficiency. The study recommends that, government needs to introduce macroeconomic stabilization measures that will improve effective demand of cement products particularly with the problem of withdrawal of fuel subsidy in the economy. The company should, as a matter of necessity, design strategies that will; create international market opportunities, enhance security measures, cheap inputs, efficient financial and inventories management that will improve profitability post privatization.

Globalization, Migration, and Economic Growth in Nigeria

The study aimed to empirically examine the effect of globalization and migration on Nigeria's economic growth. The study covered the period 33 years (1990 – 2022). The variables used in the study are foreign direct investment, trade openness, foreign exchange rate, remittances, and gross domestic product. The ARDL (autoregressive distributed lag) model was employed for the study and a long-run relationship was established. Findings revealed that remittance had a significantly positive effect on Nigeria's economic growth in the long run. The finding of the error correction mechanism revealed a speed of adjustment to equilibrium of 31.1%. The study suggested that the government, as a key player, should take immediate action to formulate policies that bolster and optimize the advantages of remittance inflows. This is crucial as remittances have been found to positively and significantly affect economic growth in the short and long run. These measures may encompass reducing transaction expenses, improving financial literacy among recipients, and encouraging investments to amplify the developmental effects of remittances.

Development and benefit of FDI in India

Foreign direct investment (FDI) is a key source of funds for India's economic development. Totake advantage of India's evolving economic climate and lower labour, foreign firms engage directly in fastgrowingprivate Indian enterprises. There are so many advantages of Foreign Direct Investments in Indialike Promotion of investment in key areas, New technologies, Increase in Capital inflow, Increase inExports, Promotion of Employment opportunities, Promotion of financial services, Exchange ratestability and development of backward areas. Foreign Direct Investment (FDI) is critical to a country'seconomic development. The entry of foreign cash has allowed India to improve its infrastructure,increase productivity, and increase employment. FDI also serves as a vehicle for acquiring sophisticatedtechnology and mobilizing foreign exchange reserves. This Article is an attempt to explore new benefitsof FDI for the economic growth of the nation.