Exchange Rate Policy Research Articles

Perspective of an exchange rate policy for global financial systems: evidence between China and ASEAN countries

Perspective of an exchange rate policy for global financial systems: evidence between China and ASEAN countries

ПРОЦИКЛИЧЕСКАЯ ПОЛИТИКА ЦЕНТРАЛЬНОГО БАНКА АРМЕНИИ: ЦЕНА ВОПРОСА

This article is devoted to the analysis and evaluation of monetary regulation based on the pro-cyclical policy approach in terms of the impact on economic growth on the example of the Armenian economy. The result of the study was the conclusion that procyclical monetary policy has a negative effect on the economy, which in turn requires a revision of such a policy for countries with emerging markets, in particular in Armenia. An analysis of the monetary and foreign exchange policies of Armenia proves that, since the implementation of inflation targeting, the Central Bank of the Republic of Armenia has been pursuing a pro-cyclical policy, which has led to a slowdown in economic growth, especially in the long term.

Blockchain and NFTs for Trusted Ownership, Trading, and Access of AI Models

The demand for high-quality Artificial Intelligence (AI) models is ever-increasing in this digital era. However, most of the existing methods leveraged for managing the ownership, trading, and access of AI models fall short of providing traceability, transparency, audit, security, and trustful features. In this paper, we propose a solution based on blockchain and Non-fungible Tokens (NFTs) to manage ownership rights and exchange of AI models in a transparent, traceable, auditable, secure, and trustworthy manner. Smart contracts are employed to enforce ownership, ease of access, and exchange policies for the unique NFT linked to an AI model. We use decentralized storage of the InterPlanetary File System (IPFS) and proxy re-encryption oracles to securely fetch, store, and share data related to AI models. We present algorithms along with their implementation, testing, and validation details. The proposed solution is evaluated using cost and security analyses to show its affordability and resiliency against security threats and attacks. All smart contract codes are made publicly available on GitHub.

MANAGEMENT OF THE COMPANY'S INTERNATIONAL FOREIGN CURRENCY-FINANCIAL RELATIONS

This article deals with the set of issues related to economic - currency-financial relations with abroad. To this end, we first presented the general concepts of this process including foreign exchange policy, the foreign exchange market accompanied by the exchange rate. For the practical work of the financial manager of the enterprise of particular importance are the transfers of funds through correspondent banks. That is why we considered it opportune for the financial manager to know the movement of funds in the process of import-export of goods. In this case, it is necessary to understand such financial categories as: the ,,nostro" account, the ,,vostro" account, spot transactions (,,spot"), forward operations, documentary credit, documentary collection, etc. International currency-financial relations are presented as a complex process.

Analysis on the J-Curve Effect by Industry on Bilateral Trade with the US and Japan

Purpose The purpose of this study was to examine the effect of exchange rates on short- run and long-run trade balances using the industry data of trading partners (US, Japan) since the 2000s. Design/Methodology/Approach This study used the ARDL-ECM model of Pesaran, Shin and Smith (2001). Previous research allowed for adding the relative money supply variable to the empirical analysis model. Findings In the short-run, the trade balances of 5 industries in the US were affected by exchange rate changes, but this was true for only 3 industries in Japan. However, the short-run effects became favorable in the long-run for only 3 industries in the US and 2 industries in Japan. The effect of the relative money supply on the long-run trade balance was relatively larger in Japan than in the United States. However, in this study, the direct route was not analyzed, so further review is needed. Research Implications This study is different in that it analyzed the effect of exchange rates on long-run and short-run trade balances by industry in trading countries, and identified the existence of the J-curve effect. The empirical analysis results of this study provide implications that can prevent the setting of identical exchange rate policies in different industries.

Reel Efektif Döviz Kurunun Türkiye'nin AB-27 ile İkili Ticareti Üzerine Etkisi: FADL Eşbütünleşme

Exchange rate policies have become important after the change resulting from the Bretton Woods system. Until today, different exchange rate systems were implemented in Turkey. Drastic changes in the Turkish Lira's value before and after economic crises led to the questioning of the exchange rate system in Turkey. Fluctuations have increased due to the determination of exchange rates within market conditions. With several macro-economic variables, changes in exchange rates impacted exportation and importation as well, causing uncertainty for both.EU countries have a significant share in Turkey's foreign trade regarding exports and imports. In the EU, local currencies are in use along with the EU's common currency, the Euro. A significant impact of economic unions is the inbound deviation within the union regarding trade with non-members. Monetary union among member states increases the importance of exchange rate fluctuations in non-member states such as Turkey.This study investigates the long-term relation between bilateral trade and real effective exchange rate in terms of Turkey's trade with 27 EU countries. Data regarding the 1998-2020 period's GDP, real effective exchange rate, imports and exports was investigated by Fourier ADL cointegration test. For series' stationarity, ADF and FADF tests were used; all series were determined as I (I). According to the results of the FADL cointegration test, a cointegration relation was determined for both models, where exports and imports were dependent variables. This study has found that real effective exchange rate does not have a statistically significant impact on Turkey's import and export with 27 EU countries.

Monetary and exchange policy of Kazakhstan: current problems and ways of improvement

The National Bank of Kazakhstan continues to pursue monetary policy in accordance with the principles of inflation targeting. As part of the medium-term strategy, the National Bank has reduced the target inflation corridor by one percentage point in 2020. Due to the global crisis of recent years, the National Bank has set a task to keep the inflation rate in the 4-6% corridor to stabilize the economy. The inflation rate at the end of 2020 was 7.5%. The National Bank has set a task to reduce this indicator to the level of the target corridor of 4-6% in 2021. Also, in conducting monetary policy, the National Bank has made decisions that have an anti-inflationary effect for the medium term, that is, the target level will decrease by 4% in 2021 and beyond. The preservation of monetary conditions by the regulator at a neutral level was characterized by a decrease in short-term rates after slow inflation. In 2019, against the background of a further decrease in inflation, it was decided to raise the base rate. At the same time, market participants may regard monetary conditions as the beginning of tightening. In Kazakhstan, the financial regulator sets the rate depending on the size of real and expected inflation in the country, external factors that determine the state of the balance of payments, as well as taking into account the need to maintain economic development. The article discusses the methods of conducting the monetary and monetary policy of Kazakhstan, as well as issues and ways to improve it.

Critical Junctures and Merchandize Exports of Nigeria

This study examined critical junctures and merchandize exports of Nigeria. Nigeria has had critical moments that warranted policy changes to mitigate economic challenges of the country. The global economic disaster occasioned by the oil and debt crises, multiple economic depression and stagnation during the late 1970’s led to the introduction of SAP in Nigeria. The global financial crisis of 2008 had a great effect on the economy of Nigeria. The Nigerian economy slipped into recession in November 2020, as the GDP contracted for the second consecutive quarter. The Covid-19 lockdown also tremendously affected the Nigerian economy. These conditions created crises in the Nigerian economy and necessitated policy adjustments. In the international trade sector, a key policy thrust is the enhancement of its trade balance to raise productivity of commodities with export potential designed to boost export performance to mitigate economic challenges. This study examined various export promotion strategies and used descriptive statistics to analyze the growth of merchandize exports before and after SAP. The study reveals that merchandize export earnings did not perform differently for both periods until the dawn of democratic era in 1999. The findings show that SAP and other export promotion strategies could not achieve the intended purpose to increase merchandize exports to international markets. The study recommends the need to create an enabling environment through an effective monetary, fiscal and exchange rate policies and infrastructural development for investment and expansion to boost merchandize exports in international markets.

Internationalization of Renminbi as a Function of China’s Foreign Exchange Policy

This article discusses the prospects of the Chinese renminbi (RMB) to expand its sphere of influence and become a full-scale reserve world currency. The methods used in the article are retrospective analysis and graphic analysis. The work is divided into three sections. The first section provides a broad overview of modern reserve currencies. The second part characterizes RMBs shaping as a reserve currency, as well as inner and outer factors that influence its status. The third section includes information about RMBs current status and its perspectives for being a reserve currency in the future. The article argues that currently RMB has already become a regional reserve currency in Asia-Pacific. Chinese government continues to make steps towards international expansion of RMB, yet these steps cannot make RMB one of the leading world currencies together with USD and EUR in the nearest decade.

On Exports and Capital Formation in Nigeria


 One remarkable importance of exports is that it enables countries generate the required foreign capital needed to drive sustainable growth and development. This is to say that export earnings are capable of increasing capital formation through real investment. This study therefore focused on the impact of exports to capital formation in Nigeria for a 40-year time period spanning from 1981 to 2020. Related works on the subject matter were reviewed. The unit root test showed that all the variables attained stationarity after first difference. The Johansen cointegration test result showed that there exists a stable long run relationship between gross fixed capital formation, oil export, non-oil export and exchange rate in the model. Using the ordinary least square (OLS) estimation technique in analyzing the data sourced, the results showed that oil export had a negative and insignificant impact on capital formation in Nigeria. Similarly, non-oil export and exchange rate exerted insignificant negative influences on capital formation in Nigeria for the period covered by the study. Based on the findings from the study, the following recommendations were made. First is that the proceeds from crude oil export should be used to acquire capital assets for investment which will in turn drive growth in the economy. Also the government through the central bank of Nigeria (CBN) and relevant agencies should pay more attention to the non-oil sector in terms of the implementation of favourable policies, grants and loans, tax incentives, research and development, etc. to improve the export of the sector, making it compete favourably in the international market. This is because crude oil is an exhaustible asset that is liable to depletion. Finally, efficient exchange rate policies should be implemented by government through the relevant authorities to protect the value of the naira while ensuring that the products are not too dare in the international market.

Long Term Impact of Higher Education on Pak-China Relations: Focusing on Educational Exchange Policies

Long Term Impact of Higher Education on Pak-China Relations: Focusing on Educational Exchange Policies

The impact of exchange rate policy uncertainty shock on Chinese energy firms' risk-taking

This study investigates the causal effect of exchange rate policy uncertainty shock on energy firms' risk-taking, employing the panel data of Chinese listed energy firms during 2003–2019. The results show that a shock of exchange rate policy uncertainty will lead to a significant increase in Chinese energy firms' risk-taking through encouraging these firms to seek for more government subsidies and invest more in financial assets. Moreover, the government subsidy channel is the main channel through which the exchange rate policy uncertainty shock influences the risk-taking of state-owned energy firms, while the financial asset investment channel is the main channel of the shock driving up the risk-taking of non-state-owned energy firms. We also find that the impact of the exchange rate policy uncertainty shock is weaker in energy firms with better growth opportunity and governance structure. These findings suggest that reducing the uncertainty regarding exchange rate policies helps alleviate the adverse shocks to energy firms and is conducive to preventing the potential financial risks.

The real consequences of policy‐driven exchange rate cycles: A stylized comparison of East Asia and Latin America

AbstractI develop the implications for capital accumulation, the trade balance, and real exchange rate cycles of different policy preferences, focusing in particular on broad stylized features of major Latin American and East Asian economies. Recent development literature has renewed interest in real exchange rate policy and the desirability of avoiding overvaluations. Political science literature, on the other hand, has emphasized the role of factors such as the influence of the manufacturing sector and the nature of the work force in shaping exchange rate policy. I formalize and relate some of these insights in a simple, dynamic, developing country framework with policy makers who intertemporally optimize and voters/audiences that are myopic. Given the choice between assigning greater weight to: (1) raising immediate worker purchasing power or (2) generating wage increases and manufacturing employment over time, I show that developing countries where policy makers choose the former are more likely to experience cycles with overvaluation, trade deficits, and abrupt (postponed) devaluations. Moreover, these cyclical differences may help explain differences in structural evolution over longer periods of time.

Do macroeconomic variables impact stock market returns? Evidence from Kazakhstan.

Globalization has resulted in increasing connectivity in the worldwide financial market, as well as a plethora of profit potential for international investors through global diversification. The stock market, also known as the securities exchange, is one of the most active businesses, and it plays an important role in economic development, benefiting the whole industry and trade. The purpose of this study is to investigate the impact of macroeconomic factors on stock market returns: evidence from Kazakhstan. This analysis uses quarterly data from Kazakhstan's stock market indices, gross domestic product, interest rate, inflation rate, currency rate, and foreign direct investment from 2000Q1 to 2019Q4. From the findings, it is explained that regulators should keep interest rate relatively low to encourage economic business, improve external financing through rule-based exchange rate policy. The paper recommends that both macro factors and stock market returns should adequately compensate investments. Keywords: Kazakhstan, macroeconomic variables, stock markets return, World Bank Indicators

Real Effective Exchange Rate Misalignment of the Tunisian dinar

In the Tunisian context, the issue of the misalignment of the real exchange rate has arisen for some time for some reason, a question that has intensified after the adoption of the floating regime. In this article, we will look at the assessment of the effects, if any, of the misalignment of the real effective exchange rate (REER) to its equilibrium value over the period from 1986 to 2015. The results show that the equilibrium level of the long-run exchange rate depends on productivity, the terms of trade and government spending. Two sub-periods are noted, that of a positive mismatch (undervaluation) from 1986 to 2003 followed by another negative mismatch (overvaluation) from 2004 to 2015. Such a result can be explained by the orientation of Tunisia towards the flexibility of the real exchange rate which in turn is likely to reduce the degree of imbalance of the real exchange rate. Similarly, the Tunisian authorities must adopt gradual reforms in their decisions on liberalization and financial integration and they are called upon to strengthen their trade and exchange policies to meet the challenge of the new international financial architecture. Finally, concerning the misalignment, we found the difference between the observed exchange rate and the equilibrium exchange rate is very low, especially since the implementation of the structural adjustment plan.

A proposal for a cooperative cross-entropy method to tackle the unit commitment problem

The paper presents a proposal about the Cooperative Cross-Entropy to solve Combinatorial Optimization Problems. The cooperative scheme consists of the definition of several instances of the Cross-Entropy method and the establishment of an exchange policy of solutions between the different instances participating in the model. Each instance consists of the implementation of a cross-entropy algorithm with particular parameters that originates a different probability density function for the generation of new solutions. The exchange policy is implemented synchronously between the instances, and the solutions for the exchange process are chosen within the elite solutions of each instance of the cooperative model. For the experimentation, we use a simplified version of the Unit Commitment Problem (UCP). The computational results show that for large instances of the UCP, the cooperative model is effective. Furthermore, the proposed model shows a better balance between intensification and exploration for a certain combination of parameters, and therefore, it seems to be a good approach to tackle other optimization problems.

Unconventional central banking and the politics of liquidity

The 2008 financial crisis saw central banks introduce a variety of tools to shore up the financial system, including unconventional measures that made use of central bank balance sheets to directly shape markets. This paper argues that central banks increasingly rely on unconventional tools in noncrisis times to maintain confidence in an unstable financial system: in rich countries, outright asset purchase programs form the core of monetary policy, and in emerging capitalist economies, the sale and purchase of foreign exchange assets constitute the central mechanism of exchange rate policy. These interventions increasingly target ‘market dysfunction,’ as opposed to (a narrow interpretation of) monetary policy or the level of the exchange rate, suggesting a convergence in central bank operations around maintaining the plumbing of finance. Using two case studies – foreign exchange operations by the Reserve Bank of India and asset purchase programs by the U.S. Federal Reserve – the paper demonstrates a blurring of the boundaries between crisis and noncrisis interventions, and lends evidence to the concept of a de-risking state that guarantees liquidity. The paper concludes with a discussion of how a de-risking state exacerbates inequality, financial vulnerabilities and undermines meaningful action on pressing issues such as climate change.

Purpose of the monetary policy of the central banks of the EU participating countries

The scientific article is devoted to the study of the purpose of monetary policy of the central banks of the EU member states. The legislation of the European Union, the member states of the European Union (Germany, France, Poland, the Czech Republic, Spain), as well as the United Kingdom, which left the EU, modern approaches in the science of constitutional and administrative law to determine the monetary policy of central banks EU members. The concept of the purpose of the monetary policy of the Central Banks of the EU member states, the activities and instruments of monetary policy, the functions of the central bank of the EU member state are distinguished. Emphasis is placed on the following regulatory functions of central banks that exist in legal doctrine: 1) management of aggregate money turnover; 2) regulation of the monetary sphere; 3) regulation of supply and demand for credit. The focus is on the fact that the central banks of the EU member states support purchasing power, as well as on the well-known fact: inflation - the slope of financial policy is recognized in economic theory as the most effective. Ensuring the stability of the currency (conducting open market operations or establishing exchange rate policies or reserve requirements, etc.) is a function of the central bank of the state, not the purpose of its activities. The stability of the national unit is also a function of the central bank of the state. It is established that the main purpose of the monetary policy of the central banks of the EU member states is to ensure price stability. In addition, it is argued that this is the inflationary - inclination of financial policy is the most effective. Accounting policy, interest rate policy, regulation of reserve requirements, money supply, open market operations and credit operations, interest rates, reserve requirements of banks are the activities and instruments of monetary policy of central banks. members of the EU, not the purpose of monetary policy.

China’s Escape from the Peripheral Condition: A Success Story?

This article explores the strategy of active interventions through which Chinese policymakers have created the conditions for pulling their country out of its peripheral status within the world economy. We find that the strategic use of exchange rate policy and the maintenance of extensive ownership in industrial assets by the national government have played a key role in cumulatively promoting the upgrading of technological capabilities of the national workforce since the mid-1990 onward. Economic data show support for the hypotheses of an increasing capacity of Chinese producers to gain access to oligopolistic technology markets. To the extent that this offers the opportunity to capture a slice of the technological rent hitherto reserved to the capitalist center, our study suggests that the growth of real wages in China will be consistent with the maintenance of the country’s external balance in the long run. JEL classification: L16, O47, J21, F13, B51

The impact of economic uncertainty and financial stress on consumer confidence: the case of Japan

PurposeThis study explores the response of consumer confidence in policy uncertainty in the Japanese context. The study also considers the dynamism of stock market behavior and financial stress and its impact on consumer confidence, which has remained unaddressed in the literature. The role of these control variables has important implications for policy discussions, particularly when other countries can learn from Japanese experiences.Design/methodology/approachThe nonlinear autoregressive distributed lag model postulated by Shin et al. (2014) was used for studying the asymmetric response of consumer confidence to policy uncertainty. This method has improved estimates compared to traditional linear cointegration methods.FindingsThe findings confirm the asymmetric impact of policy uncertainty on the consumer confidence index in Japan. The impact of the rise in policy uncertainty is greater than that of a fall in asymmetry on consumer confidence in Japan. Furthermore, the Wald test confirmed asymmetric behavior.Originality/valueThe contribution of this study is threefold. First, this study contributes to the extant literature by analyzing the asymmetric response of consumer confidence to policy uncertainty, controlling for both the financial stress and stock price indices. Second, to test the robustness of the exercise, the study utilized different frequencies of observations. Third, this study is the first to utilize the concept of Arbatli et al. (2017) to formulate a combined index of uncertainty based on economic policy uncertainty index, along with uncertainty indices such as fiscal, monetary, trade and exchange rate policies to study the overall impact of policy uncertainty.