Parity Exchange Rates Research Articles

Central Bank Operations Under Foreign Exchange Accumulation: The Case of the Macedonian Central Bank (2005–2022)

ABSTRACT The present article analyses the balance sheet composition and the evolution of the operational framework of the Macedonian central bank. It shows that the compensating movements on its balance sheet could not be attributed exclusively to domestic liquidity management operations, as in the absence of substantial foreign currency inflows, the central bank has increased foreign reserves through the proceeds arising from the issuance of government bonds denominated in foreign currency on international financial markets. Despite retaining some of the characteristics of a currency board, the absence of a strict commitment to such a regime has allowed the central bank to employ a range of instruments of domestic liquidity management and to maintain relatively tight control over its policy rate. The level of the policy rate under a rigidly fixed exchange rate parity meant to be sustained over time, would however continue to depend on the ability of the authorities to ensure a sufficient level of foreign exchange reserves.

A Study on the Exchange Rate Linkage between Korea and China following the Reform of the Yuan Exchange Rate System

Purpose - This study aims to conduct an empirical analysis of exchange rate volatility and dynamic correlation between Korea and China based on the “8.11” central exchange rate reform in China. Unlike other developed countries’ foreign exchange markets, the Chinese Yuan has not yet achieved complete free circulation, and China has an onshore Yuan exchange rate (CNY) and an offshore Yuan exchange rate (CNH). In this study, we investigated the dynamic correlation between Korea’s won exchange rate and China’s onshore yuan exchange rate and offshore yuan exchange rate around the “8.11” central exchange rate reform in China. Design/Methodology – In this study, we attempted to analyze the average and the volatility spillover effect of the won exchange rate from China’s onshore and offshore yuan exchange rate before and after the 8.11 central parity exchange rate reform. In addition, the relation between the won exchange rate and on- and off-shore yuan exchange rate at various stages were analyzed through the VAR model and the VAR-BEKK-GARCH model. Findings – The results of analyzing the volatility spillovers between the KRW exchange rate and the offshore RMB exchange rate show that there are two-way volatility spillovers between the two markets, both before and after the “8.11” central parity rate reform. The dynamic correlation between the two exchange rates (CNY and KRW, CNH and KRW) is increasing over time. In addition, the two exchange rates are positively correlated with each other, implying that the volatility of the two exchange rate markets is moving in the same direction. The dynamic dependence relations between CNY and KRW become significantly higher after the “8.11” central parity rate reform. Originality/value - As a non-international currency, the won must engage in export trade and capital market transactions with other international reserve currency countries. Therefore, it is important for Korean export-import companies and investors to explore changes in the dynamic correlation between the won and the Chinese yuan through exploration.

Exchange rate instabilities during the Russia-Ukraine war: Evidence from V4 countries

PurposeThis study investigates the impact of the Russian Ruble on the Czech crown, Polish zloty, and Hungarian forint during the Russia-Ukraine war. The euro is used as a comparative base unit in the four exchange rate parities. The Euro was used since the Czech Republic, Hungary, Poland, and Russia maintain intensive economic relations with the Eurozone. At the same time, the Visegrad (V4) countries are geographically located in the European continent and are bordered by the Eurozone member states. MethodsThe series stands in daily frequency and indicate the period from February 1, 2022, to February 1, 2023. To generate the results, the VAR impulse response function, variance decomposition, vector error correction model, and granger causality test were performed. ResultsEven though Russia demanded that gas payments be made in Rubles, this fact did not affect the Czech crown, Polish zloty, and Hungarian forint. Due to the fact that gas payments for the V4 countries were agreed in Euros through German contractors. During this period, the strong influence of the Czech crown on the Polish zloty and the Hungarian forint is observed. ImplicationsFrom a policy perspective, the results provide indications for the national governments and regulatory bodies on the implications of the Russian ruble during this conflict. In short, our findings document that the instability of currency pairs is not only economic but also geopolitical. Energy dependence on autocratic states not only endangers national security but can set exchange rates in cardiac arrest. Moreover, the geographical proximity to the conflict zone tends to be decisive in the collapse of national currencies.

TVP-VAR Frequency Connectedness Between the Foreign Exchange Rates of Non-Euro Area Member Countries

Abstract Research background The main purpose of monetary integration between EU countries is to eliminate excessive fluctuations in exchange rates. High volatility in exchange rates can cause various negative economic and financial effects, especially during periods of economic shocks. In addition, estimating the volatility between currencies and their interactions is of great importance for effective portfolio management. Purpose The objective of this research is to scrutinize the transmission of volatility between the currencies of those European Union nations that do not participate in the EURO area, focusing on the exchange rate parity of the US Dollar with seven non-EURO zone currencies. Research methodology Daily volatility in exchange rates was calculated using the Garman-Klass-Yang-Zhang (GK-YZ) method. To investigate the connectedness between these volatilities, we used the Time-Varying Parameter Vector Autoregression (TVP-VAR) frequency connectedness approach. Results The Average Total Connectedness Index exhibits a significant degree of connectedness of approximately 71.84%. The Net Total Directional Connectedness Index indicates that the CZK, DKK and RON exchange rates are net beneficiaries in aggregate and in a longer term perspective, whereas the DKK, HUF and PLN exchange rates are net beneficiaries in a shorter term horizon. In the context of major global events such as the onset of the COVID-19 outbreak in March 2020 and the start of the Russia-Ukraine conflict in February 2022, it could be observed that the dynamic Total Connectedness Index exhibited a substantial increase, both overall and from a long-term perspective, corroborating theoretical expectations. According to the Net Pairwise Directional Connectedness index, the highest bilateral connectedness overall and in the short run was between DKK and RON, while in the long run between BGN and DKK. Novelty Examining the connectedness of currencies is of great importance for investors doing business with foreign currency, international cooperation and policies, risk management and portfolio management. Determining the connectedness in different frequency (short and long-term) ranges provides important information for hedging risk. In addition, the bilateral connectedness between currencies is a guide for effective portfolio diversification.

Response to comment on "Fairness considerations in global mitigation investments".

We welcome the analysis of Semieniuk et al. (1) as an additional sensitivity to illustrate a more extreme distribution of regional contributions to climate mitigation investments that supports our main conclusion regarding the North-South divide in mitigation investment capabilities. In response to Semieniuk et al. we would like to first point out that, in defining the required global mitigation investments for the 2020 to 2030 period, our study relies on the estimates in the sixth assessment report (AR6) of the Intergovernmental Panel on Climate Change (IPCC) WGIII (2). These are based on diverse sources and underlying models that to varying degrees reflect regional differences in technology costs and consider both purchasing power parity (PPP) and market exchange rates (MERs). We use these IPCC estimates as a starting point and focus entirely on the question of how much of the needed regional investments, given different fairness considerations, should be financed from sources within a region.

Technical comment on "Fairness considerations in global mitigation investments".

In an otherwise excellent analysis of fair regional shares of global mitigation investments, Pachauri et al. (Policy Forum, 9 December 2022, p. 1057) dramatically overestimate developing countries' 'capability' to invest by estimating GDP using purchasing power parity exchange rates. Since internationally sourced investment goods must be paid for at market exchange rates, capability-based interregional finance flows should be vastly larger.

Willingness to Pay for Down Syndrome Screening: A systematics Review.

Background:Financial ability to pay has a unique role in the accessibility of health care services, which indicates the necessity of raising enough funds by governments. However, how much households are willing to pay (WTP) for receiving a particular service? And what factors influence their WTP? The current systematic review aimed to, firstly, review studies on the WTP for Down syndrome (DS) screening, and, secondly, to identify factors that affect WTP for DS screening. Methods:We systematically searched the Scopus, PubMed, Web of Sciences (ISI), and Embase databases to identify relevant studies from their inception to June 2020; the search strategy was updated on December 2021. Initially, 157 articles were identified, and 5 were found eligible for full-text review. In event of any disagreement, a third reviewer was used. Extracted WTPs were converted to US dollars in 2018 using exchange rate parity and the present value formula to make a comparison. The quality assessment of the selected studies was done using the "Lancsar and Louvier" and Smith checklist; also, vote counting was used to assess the influence of factors. Results:Five eligible studies, published from 2005 to 2020, were fully reviewed. All final studies were scored as good quality. The extracted WTPs varied from $169 to $1118 in UK and Canada, respectively. Income and information/knowledge about screening tests were the most frequently investigated factors. Education level, detection rate, women's age, cost, and family history were significantly associated with higher levels of WTP for DS screening. Conclusion:This study demonstrated a significant gap in WTP for DS screening in various countries. Women are WTP higher costs for tests with higher screenings. Also, a unique role was identified for income, occupation, information, and family history of DS in WTP for DS screening. In addition, a positive association was found for the variable of age.

The Nexus between Usd Parity and Trade Balance of BRICS-T Countries

Unlike many previous studies that focused on the link between trade balance and exchange rate parities through time series models, panel data models were applied mainly to BRICS-T countries. Comparative variances of trade balances against USD/local currency parity were revealed, and the most sensitive countries were Brazil, Turkey, and Russia. According to the panel EGLS analysis, the same parity had a non-significant negative impact on the trade balance in the short run. A significant long-term effect was found in the FMOLS analysis. Panel VAR and VECM generalized impulse response analysis revealed the negative impact of the USD/domestic currency parity on the trade balance of BRICS-T. The J-curve was observed briefly in the analyses.

Economic costs of the Russia‐Ukraine war

AbstractThe unprovoked and brutal invasion of Ukraine by Russia on 24 February 2022 is imposing a terrible human cost. In this paper, we use the National Institute Global Econometric Model (NiGEM) to quantify the impact of the war on the global economy. The war represents a massive cost, equivalent to 1% of global GDP in 2022, or about $1.5 trillion valued at purchasing power parity exchange rates (PPP), compared with our GDP forecast made at the beginning of 2022. Europe is the region affected most, given trade links its proximity to Ukraine and Russia and its reliance on energy and food supplies from those countries. GDP in Europe is expected to shrink by more than 1% in 2022 compared with our forecast at the beginning of 2022. In Western Europe, Germany will be worst affected, followed by France and Italy. GDP in ‘Developing Europe’, where Ukraine is the largest representative, is expected to shrink by 30%. The war will also add about 2% to global inflation in 2022 and 1% in 2023, compared with NIESR's inflation projection at the beginning of 2022.

The economic and social costs of visual impairment and blindness in India.

To provide a current estimate of the economic and social costs (or welfare costs) of visual impairment and blindness in India. Using evidence from the recently conducted Blindness and Visual Impairment Survey across India, the Lancet Global Health Commission on Global Eye Health and other sources, we developed an economic model that estimates the costs of reduced employment, elevated mortality risk, education loss for children, productivity loss in employment, welfare loss for the unemployed, and caregiver costs associated with moderate and severe visual impairment (MSVI) and blindness. Probabilistic sensitivity analyses were also conducted by varying key parameters simultaneously. The costs of MSVI and blindness in India in 2019 are estimated at INR 1,158 billion (range: INR 947-1,427 billion) or $54.4 billion at purchasing power parity exchange rates (range: $44.5-67.0 billion), accounting for all six cost streams. The largest cost was for the loss of employment, whereas the the second largest cost was for caregiver time. A more conservative estimate focusing only on employment loss and elevated mortality risk yielded a cost of INR 504 billion (range: INR 348-621 billion) or $23.7 billion (range: $16.3-29.2 billion). Poor eye health imposes a non-trivial recurring cost to the Indian economy equivalent to 0.47% to 0.70% of GDP in the primary scenario, a substantial constraint on the country's growth aspirations. Furthermore, the absolute costs of poor eye health will increase over time as India ages and becomes wealthier unless further progress is made in reducing the prevalence of MSVI and blindness.

Economic evaluation of pan-genotypic generic direct-acting antiviral regimens for treatment of chronic hepatitis C in Iran: a cost-effectiveness study

IntroductionLow-cost generic direct-acting antiviral (DAA) regimens for treatment of hepatitis C virus (HCV) are available in several low-income/middle-income countries, important for treatment scale-up. This study evaluated the cost-effectiveness of genotype-dependent...

What determines mergers and acquisitions in BRICS countries: Liquidity, exchange rate or innovation?

This study examines the impact of liquidity, international competitiveness, and innovation on 44,756 domestic and 20,917 cross-border mergers and acquisition (M&A) transactions over 25 years in BRICS nations. The results from negative binomial fixed effects panel regression are in alignment with economic prosperity theory, namely, there is synchronised alignment between macroeconomic determinants and business cycles, which, in turn, leads to M&A activities. Domestic M&A is driven primarily by high liquidity followed by innovation. Inbound M&A volume is impacted by exchange rate parity, followed by liquidity. The order of factors influencing the outbound M&A volume is liquidity, exchange rate parity, and, lastly, innovation.

Exchange rate parities and Taylor rule deviations

This paper investigates the PPP and UIP conditions by taking into account possible nonlinearities as well as the role of Taylor rule deviations under alternative monetary policy frameworks. The analysis is conducted using monthly data from January 1993 to December 2020 for five inflation-targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeting ones (the USA, the Euro Area and Switzerland). Both a benchmark linear VECM and a nonlinear Threshold VECM are estimated; the latter includes Taylor rule deviations as the threshold variable. The results can be summarized as follows. First, the nonlinear specification provides much stronger evidence for the PPP and UIP conditions, the estimated adjustment speed towards equilibrium being twice as fast. Second, Taylor rule deviations play an important role: the adjustment speed is twice as fast when deviations are small and the credibility of the central bank is higher. Third, inflation targeting tends to generate a higher degree of credibility for the monetary authorities, thereby reducing deviations of the exchange rate from the PPP- and UIP-implied equilibrium.

Estimating the Financial Incentive for Caribbean Teachers to Migrate: An Analysis of Salary Differentials using Purchasing Power Parity (PPP)

The teaching stock within the Caribbean region has been eroded by migration to developed countries. Higher potential earnings are one of the motivating factors to move abroad, but little is known about the extent of the income disparity between countries in the Caribbean and popular destination countries. Teacher salary comparisons are undertaken between selected countries in the Caribbean; Suriname, Trinidad and Tobago, St. Lucia, and Jamaica and popular destination countries, namely; United Kingdom, United States, and Canada using a purchasing power parity (PPP) exchange rate. Results show that newly qualified teachers can earn substantially more abroad, with Canada paying over twice the PPP adjusted salary compared to that offered in Jamaica (133.1%) and Suriname (110.6%). The United States offers the highest earning increases for mid- and late career teachers at over three times that offered in Jamaica (214.5%) and Suriname (223.4%). Canada is a close second across all Caribbean countries, whilst the United Kingdom offers the smallest salary differentials at 153.6% for Jamaica and 64.8% for St. Lucia. The study further reveals that there are salary disparities within the Caribbean, which may be a motivating factor for intra-regional migration.

Immediately loaded single-implant mandibular overdentures compared to conventional complete dentures: A cost-effectiveness analysis

BackgroundIn recent years, the single-implant mandibular overdenture (SIMO) has been proposed as an alternative to more complex overdenture designs as a simplified implant intervention for edentulous patients. ObjectiveThe aim of this study was to run a cost-effectiveness analysis alongside a randomized clinical trial comparing the SIMO and the conventional complete denture (CCD) treatment. Imediately loaded external hexagon implant and ball attachment were used for the overdenture goup. Direct costs related to therapies were identified and valuated throughout a 1-year period after delivery, in Brazilian currency (R$) and converted into international dollars (I$) using purchase power parity exchange rates. Treatment effectiveness was measured using the OHIP-Edent and satisfaction scores for calculation of incremental cost-effectiveness ratios (ICER). ResultsOutcomes were assessed at the 1-year follow-up for 65 patients (CCD=34; SIMO=31). Overall OHIP-Edent and satisfaction scores improved significantly in the SIMO group, while remained unchanged in the CCD group. The mean overall costs were R$1,179.04 (I$590.99) for the CCD group and R$2,127.91 (I$1,068.20) for the SIMO group – 80.7% incremental cost for SIMO. The ICER calculation for SIMO treatment showed a mean cost of I$48.20 for 1-point reduction in OHIP-Edent scores, and I$12.56 for 1-point increase in satisfaction score. ConclusionsFindings support the effectiveness of this simplified and low-cost implant intervention for edentulous patients. SIMO also seems a cost-effective alternative to the CCD and the relatively low incremental cost may potentially increase the utilization of dental implants among older subjects, especially those with limited financial resources. Clinical significanceThe immediately loaded single-implant mandibular overdenture was superior to the conventional complete denture in terms of patient-reported outcome measures at a low incremental cost.

The Real Military Balance: International Comparisons of Defense Spending

International comparisons of military spending are necessary for monitoring security risks, assessing defense capabilities, and planning defense budgets. Nevertheless, conventional comparisons do not allow for differences in defense sector input prices across countries. I use defense sector budget data to construct a database of military purchasing power parity (PPP) exchange rates for 59 countries. Real military spending in many countries, including Russia and China, is found to significantly exceed conventional estimates based on market exchange rates and GDP‐PPP exchange rates. Similarly, the US share of world military spending is substantially diminished.

A Systematic Review of Demand-Side Methods of Estimating the Societal Monetary Value of Health Gain

ObjectivesAlthough many reviews of the literature on cost-effectiveness thresholds (CETs) exist, the availability of new studies and the absence of a fully comprehensive analysis warrant a new review. This study systematically reviews demand-side methods for estimating the societal monetary value of health gain. MethodsSeveral electronic databases were searched from inception to October 2019. To be included, a study had to be an original article in any language, with a clearly described method for estimating the societal monetary values of health gain and with all estimated values reported. Estimates were converted to US dollars ($), using purchasing power parity (PPP) exchange rates and the gross domestic product (GDP) per capita (2019). ResultsWe included 53 studies; 45 used direct approach and 8 used indirect approach. Median estimates from the direct approach were PPP$ 24 942 (range 554-1 301 912) per quality-adjusted life-year (QALY), which were typically 0.53 (range 0.02-24.08) GDP per capita. Median estimates using the indirect approach were PPP$ 310 051 (range 36 402-7 574 870) per QALY, which accounted for 7.87 (range 0.68-116.95) GDP per capita. ConclusionsOur review found that the societal values of health gain or CETs were less than GDP per capita. The great variety in methods and estimates suggests that a more standardized and internationally agreed methodology for estimating CET is warranted. Multiple CETs may have a role when QALYs are not equally valued from a societal perspective (eg, QALYs accruing to people near death compared with equivalent QALYs to others).

Purchasing power parities and the Dollar-A-Day approach: An unstable relationship

We show that the Dollar-A-Day methodology in global poverty measurement provides inconsistent International Poverty Line (iPL) solutions when a complete set of consistency criteria in the iPL definition is used. This article illustrates that minor fluctuations in purchasing power parity exchange rates can yield inconsistent iPLs. We find a rate of inconsistency of 46.1% and we conclude that this is a worrisome attribute of the method.

Global poverty: A first estimation of its uncertainty

The dollar-a-day method, applied in monitoring the UN’s development goals against poverty, provides no confidence interval for the official figures of global poverty reduction, a practice that does not allow statistical testing. Using Monte Carlo micro-simulations we construct confidence intervals that reflect the error introduced by the process of determining the International Poverty Line, as well as the uncertainty of the involved Purchasing Power Parity exchange rates. These estimates identify a reduction of 5.19% between 1990 and 2015 at 95% confidence level, in stark contrast with the remarkable 73% reduction of global poverty reported in the World Bank official statistics published on September 18, 2018. At the same time, MDG1 obtains with a 80% confidence level. The cost-of-basic-needs method paints a more promising picture identifying a 35.71% reduction at 95% confidence level, while the confidence level at which poverty in 2015 was half of 1990 stands at 46%. We conclude that the derivation method of the international poverty line introduces high levels of uncertainty in the estimates.

Exchange Rate Parities and Taylor Rule Deviations

Exchange Rate Parities and Taylor Rule Deviations