Exchange Rate Policy Research Articles

The Political Economy of American Exchange Rate Bill Voting: From the Perspective of RMB Appreciation

Abstract Under the theoretical framework of international trade political economy, this paper examines whether interest groups can dominate the voting of the US Exchange Rate Manipulation Act in 2015 from the perspective of RMB appreciation. Taking 100 senators as samples, this paper makes model estimation by using Full Information Maximum Likelihood Method (FIML), and quantitatively investigates the deep-seated driving factors behind the voting results of the US Exchange Rate Manipulation Act. The empirical results show that the influence of political donations from different interest groups on the voting behavior of parliamentarians is different. The political donations from American labor organization significantly affect the voting behavior of parliamentarians, but business groups and ideological organizations do not play a significant role in the voting results. In addition, senators’ personal characteristics affect the political donation of the bill to a certain extent, but do not affect the voting results. In the future, China needs to continuously pay attention to the latest progress of US exchange rate policy, correctly evaluate its impact on China’s economy, and maintain communication and coordination with important US interest groups to reduce the negative impact on related industries in China. JEL classification numbers: F14, F50, F31. Keywords: RMB Appreciation, Trade Protection, Bills Voting, Political Donation, Interest Group.

Real Exchange Rate Misalignments in Tanzania

The study uses a real exchange rate equilibrium (REER) technique to examine real exchange rate misalignments in Tanzania, through the cointegration technique. The empirical findings reveal that the real exchange rate misalignment has decreased significantly over recent years, and the real effective exchange rate has been evolving close to the long-term equilibrium. The findings strongly suggest that the underlying monetary and exchange rate policies were crucial in bringing the real exchange rate back to equilibrium in line with medium-term fundamentals recently. As a result, it is suggested that the existing monetary and exchange rate policies be maintained. While the monetary policy will contribute to real exchange rate stability through low inflation, flexible exchange rate policy will contribute to real exchange rate stability through nominal exchange rate adjustment.

Exchange rate policy, structural breaks, and predictability of sugarcane prices

Sugarcane price uncertainty has been a contentious issue in Fiji’s sugar industry for the past few decades. We study the predictability of sugarcane prices by examining time-series properties of the historical prices data over the sample period 1975 to 2019 allowing for structural breaks. We employ the unit root test of Zivot-Andrews (1992) and the structural break test of Bai and Perron (1998) and find robust evidence that sugarcane prices are characterized as stationary (mean-reverting) processes with structural breaks occurring in 1986 and 2011. The estimated break dates coincide with exchange rate policy decisions such as the devaluation of the Fijian dollar by the Reserve Bank of Fiji. Our findings provide new insights that given concerns of price uncertainty in Fiji's sugar industry, historical data is useful for forecasting sugarcane prices, implying that sugarcane prices, in fact, are predictable. The results also reveal that shocks only have transitory effects on sugarcane prices, and devaluation is an important source of shock to sugarcane prices.

Financial development and real exchange rate misalignments effects on environmental pollution

The research examined the influence of the fundamental exchange rate misalignment and Least Developed Countries (LDCs) in Asia and Africa’s financial development on CO2 emissions in Asian countries using panel data from 1970 to 2021. The methodology consists of ARDL bound testing and PMG/ARDL estimators with dynamic OLS estimators. The results reveal that the long-run real exchange rates for least developed countries (LDCs) are expected to rise in CO2 emissions in Asian and African countries with improved trade and net foreign asset positions. The relative productivity and trade openness also increase the exchange rate, which also plays a vital role in the growth of CO2 emissions. Except for Egypt, all least developed countries (LDCs) currencies are overpriced throughout the research period at the same time; it would be harmed by increased openness, foreign direct investment inflows, and currency misalignment. Overvaluation harms Bahrain’s economic growth. In comparison, undervaluation helps Egypt that currency misalignment does not affect financial growth in any LDCs over the long run. In the short-run, more real investment, net foreign assets, and official assistance inflows would enhance financial growth in Qatar, Bahrain, Singapore, and South Korea. In contrast, trade openness would slow it down in Egypt and Kuwait. The study suggested that the poor economic performance is due to RER misalignment, which occurs when exchange rate policies are improper and causes a rise in CO2 emissions in many developing countries.

Managing Guyana’s Oil Wealth: Monetary and Exchange Rate Policy Considerations

Managing Guyana’s Oil Wealth: Monetary and Exchange Rate Policy Considerations

Changing anchor of the renminbi: A Bayesian learning approach to the decade-long transition

China’s exchange rate reform, initiated in 2005, had the goal of switching from a fixed U.S. dollar (USD) peg to a floating mechanism with reference to a trade-weighted currency basket. Over a decade of gradual transition, the renminbi (RMB) has gained importance in the international monetary system and has shown higher flexibility in its dollar value. However, previous studies have demonstrated the inertia of the RMB in maintaining a de facto dollar peg, with little evidence of the up-to-date effectiveness of the official currency basket. We present a Bayesian time-varying coefficient regression on the currency peg or basket weight suitable for studying transition process. We show that the exchange rate policy reform in 2015 triggered an eventual anchor switching, driving down the dollar weight from 1 to around 0.3. Since 2016, the weight of the official basket has been double that of the USD. SVAR and TVP-VAR analysis, controlling for endogeneity, provide consistent evidence of this regime change, which has important implications for China and the global economy. • China’s exchange rate regime had a strong inertia in keeping up a de facto dollar peg. • Little is known of the role of the official currency basket in RMB value formation. • We use Bayesian learning approach to evaluate the RMB’s changing anchor process. • The “8.11” reform in 2015 triggered an eventual departure from the dollar peg. • Since 2016, the weight of the official CFETS basket has been double that of the USD.

Iterative Knowledge Exchange Between Deep Learning and Space-Time Spectral Clustering for Unsupervised Segmentation in Videos.

We propose a dual system for unsupervised object segmentation in video, which brings together two modules with complementary properties: a space-time graph that discovers objects in videos and a deep network that learns powerful object features. The system uses an iterative knowledge exchange policy. A novel spectral space-time clustering process on the graph produces unsupervised segmentation masks passed to the network as pseudo-labels. The net learns to segment in single frames what the graph discovers in video and passes back to the graph strong image-level features that improve its node-level features in the next iteration. Knowledge is exchanged for several cycles until convergence. The graph has one node per each video pixel, but the object discovery is fast. It uses a novel power iteration algorithm computing the main space-time cluster as the principal eigenvector of a special Feature-Motion matrix without actually computing the matrix. The thorough experimental analysis validates our theoretical claims and proves the effectiveness of the cyclical knowledge exchange. We also perform experiments on the supervised scenario, incorporating features pretrained with human supervision. We achieve state-of-the-art level on unsupervised and supervised scenarios on four challenging datasets: DAVIS, SegTrack, YouTube-Objects, and DAVSOD. We will make our code publicly available.

Review: Enemies among Us: The Relocation, Internment, and Repatriation of German, Italian, and Japanese Americans during the Second World War, by John E. Schmitz

As we watch in horror the Russian invasion of Ukraine, we are again faced with the question of how much responsibility individual citizens should bear for the atrocities their political leaders inflict upon other nations. We also are forced to think what should be done with the expatriates supportive of their aggressive homeland, and how the people connected to the adversarial nations through ethnic ties should be treated when they may or may not be sympathetic to their ancestral nations.John E. Schmitz’s Enemies among Us illuminates the complications posed by these questions by presenting how the U.S. government treated enemy aliens and U.S. citizens with ethnic ties with the enemies during World War II. Schmitz uses historical sources as well as personal episodes, including those of his grandparents who were incarcerated in POW camps as naturalized German Americans, to show that warring nations tend to prioritize national security concerns at the expense of individual human rights.The forced removal and incarceration of Japanese Americans (which Schmitz calls “relocation and evacuation”) is a prime example of the governmental abuse of its war powers. To this tragic episode of human rights violation, Schmitz adds the “internment” of German, Italian, and Japanese aliens and a smaller number of German and Italian Americans, and he tells a larger story of involuntary—and mostly wrongful—confinement of individuals whose loyalty was rendered suspicious. Schmitz’s research on the executive records, the FBI records, and the War, State, and Justice Departments’ archives reveals the comprehensive scheme of the Roosevelt Administration aiming at protecting the nation from fifth-column activities not only within the United States but in the Western Hemisphere. The earlier chapters elucidate how J. Edgar Hoover took advantage of FDR’s fear of the fifth column to transform the FBI into a formidable secret police agency. The book also offers much information on the U.S. government’s intervention into Latin American policies regarding the arrests and deportation of alleged Axis sympathizers and alien enemies.By connecting the “internment” schemes on the East and the West Coasts, this book illuminates the “internment” of Japanese nationals (Issei) in detention centers—an understudied aspect of the wartime Japanese American experiences—as a part of the larger anti-espionage federal policy. The hostage exchange scheme explains the abduction and shipment of Japanese Latin Americans along with German Axis sympathizers to the United States. Schmitz describes how the federal enemy alien policies were confusing and often shifted clumsily. In the case of the hostage exchange policy, the government had to abandon the scheme because it turned out to be more dangerous to deport subversive internees to the enemy nations than to keep them in the United States. The book illustrates the overall injustice that befell those who were labeled potentially adversarial, and the primary sources show how the U.S. enemy alien policies were poorly managed.The major problem of this book lies in its handling of the story of 110,000 Japanese Americans incarcerated in the War Relocations Centers. The book would have worked better if it had focused on the treatment of Japanese, German, and Italian enemy aliens. Schmitz carefully distinguishes the terms “internment” (detention of enemy aliens) and “relocation/evacuation” (involuntary removal of American citizens), but often his arguments become muddled throughout the book. On the latter issue, scholars in Asian American studies—such as Eiichiro Azuma (2005, 2019), Brian Masaru Hayashi (2004), Masumi Izumi (2019), and Erik K. Yamamoto, Lorraine J. Bannai, and Margaret Chon (2020)—have produced many works that explain the complex and significant roles Japanese Americans played in West Coast agriculture and in the debates related to national security and civil liberties. The book’s bibliography and many of the simplistic and faulty descriptions of the state of Japanese America before and during World War II reveal that the author was ill-prepared to explain how issues of national security, loyalty, and race intersected with one another when Japanese Americans were locked up in the inland concentration camps.

The real exchange rate and services export diversification

PurposeThe relationship between real exchange rate and services export diversification is at the heart of this study.Design/methodology/approachThe analysis is performed using a sample of 113 countries over the period 1985–2014, and the 2-step system Generalized Method of Moments (GMM) approach. The analysis uses both the Theil index and Herfindahl–Hirschman index of services export concentration.FindingsThe analysis shows that over the full sample, the real effective exchange rate appreciation induces a greater services export diversification. This outcome applies to high-income countries and developing countries. However, the positive effect of the appreciation of the real exchange rate on services export concentration is lower in least developed countries than in other countries. Finally, the effect of the appreciation of the real exchange rate on services export concentration in tax haven countries depends on the indicator of services export concentration, as this is positive for the Theil index and negative for the Herfindahl–Hirschman index of services export concentration.Research limitations/implicationsThese findings highlight the strong influence of real exchange policies on countries' path of services export diversification.Originality/valueTo the best of the authors' knowledge, this topic is being addressed in the empirical literature for the first time.

Health information exchange policy and standards for digital health systems in africa: A systematic review.

Lack of interoperability and integration between heterogeneous health systems is a big challenge to realize the potential benefits of eHealth. To best move from siloed applications to interoperable eHealth solutions, health information exchange (HIE) policy and standards are necessary to be established. However, there is no comprehensive evidence on the current status of HIE policy and standards on the African continent. Therefore, this paper aimed to systematically review the status of HIE policy and standards which are currently in practice in Africa. A systematic search of the literature was conducted from Medical Literature Analysis and Retrieval System Online (MEDLINE), Scopus, Web of Science, and Excerpta Medica Database (EMBASE), and a total of 32 papers (21 strategic documents and 11 peer-reviewed papers) were selected based on predefined criteria for synthesis. Results revealed that African countries have paid attention to the development, improvement, adoption, and implementation of HIE architecture for interoperability and standards. Synthetic and semantic interoperability standards were identified for the implementation of HIE in Africa. Based on this comprehensive review, we recommend that comprehensive interoperable technical standards should be set at each national level and should be guided by appropriate governance and legal frameworks, data ownership and use agreements, and health data privacy and security guidelines. On top of the policy issues, there is a need to identify a set of standards (health system standards, communication, messaging standards, terminology/vocabulary standards, patient profile standards, privacy and security, and risk assessment) and implement them throughout all levels of the health system. On top of this, we recommend that the Africa Union (AU) and regional bodies provide the necessary human resource and high-level technical support to African countries to implement HIE policy and standards. To realize the full potential of eHealth in the continent, it is recommended that African countries need to have a common HIE policy, interoperable technical standards, and health data privacy and security guidelines. Currently, there is an ongoing effort by the Africa Centres for Disease Control and Prevention (Africa CDC) towards promoting HIE on the continent. A task force has been established from Africa CDC, Health Information Service Provider (HISP) partners, and African and global HIE subject matter experts to provide expertise and guidance in the development of AU policy and standards for HIE. Although the work is still ongoing, the African Union shall continue to support the implementation of HIE policy and standards in the continent. The authors of this review are currently working under the umbrella of the African Union to develop the HIE policy and standard to be endorsed by the head of states of the Africa Union. As a follow-up publication to this, the result will be published in mid-2022.

The Two‐Pillar Policy for the RMB

ABSTRACTThis paper studies China's recent exchange rate policy for the renminbi (RMB). We demonstrate empirically that a two‐pillar policy is in place, aiming to balance exchange rate flexibility and RMB index stability via market and basket pillars. We further extend and validate the formulation that incorporates the so‐called countercyclical factor. Theoretically, we develop a flexible‐price monetary model for the RMB in which the two‐pillar policy arises endogenously as an optimal response of the government. We estimate the model by generalized method of moments and quantitatively assess various policy trade‐offs.

Exchange Rate Policy and Firm Heterogeneity

Exchange Rate Policy and Firm Heterogeneity

Modelling oil price shocks and exchange rate behaviour in Nigeria – A regime‐switching approach

AbstractConsequent upon the intermittent variations in the global oil prices over the years and its attendant effects on exchange rate dynamics of oil‐rich economies, the study investigates the regime‐switching behaviour of oil price shocks and exchange rate behaviour in Nigeria. The period of investigation spans 1980q1 – 2020q4 and the technique of analysis is the Markov‐Switching Dynamic Regression. Predicated on an extended portfolio balancing theory, the unit‐root test with structural break confirms break points in the data. The Markov‐Switching Dynamic Regression shows the presence of two regimes of low and high global oil price shocks in the data. Additional results show that expectation plays a huge role in the oil price and exchange rate nexus in Nigeria and that the regime of low global oil price comes with more shock effects than that of high global price of oil. With short memory property, both the low and high global prices of oil exhibit high persistence level above 70 percent but the duration of persistence for the latter is half‐life the former. The study recommends that the monetary authority should introduce exchange rate policy surprise and further diversify the economy from oil dependence.

Do Lagged Terms Affect Exchange Rate Volatility in India? An Analysis Using ARIMA Model

Under a flexible exchange rate regime, a stable exchange rate is considered a prerequisite condition to attract capital inflows into any economy. Consistency in the exchange rate has become a key objective of the economic policy of developing nations. However, more integration of financial markets under flexible exchange rate policy led to an increase in capital mobility affecting exchange rate volatility. This paper addressed the issue of variation in the exchange rate of the Indian rupee against the US dollar under a flexible regime using monthly data spanning from January 2005 to December 2020. By employing an autoregressive integrated moving average model, the study found that volatility in the exchange rate had the potential to affect the exchange rate for a duration of almost three years, which is quite a long duration. The study’s findings suggested that apart from other factors, the sharp changes in the exchange rate should be controlled by the economy because their effect will be reflected in the next period and thus create a chain event to bring further instability to the exchange rate.

Ukraine

The Russian invasion of Ukraine that started over seven months ago has caused large loss of life, large population displacement, and significant infrastructure damage. The impact on economic activity has been enormous: real GDP has severely contracted, inflation has risen sharply, trade has been significantly disrupted, and the fiscal deficit has ballooned to unprecedented levels. In the immediate aftermath of the invasion, the authorities quickly adapted monetary and exchange rate policies to preserve financial and exchange rate stability. More recently, and to help reverse significant international reserves loss, the exchange rate was devalued, helping to stabilize FX reserves and maintain overall macroeconomic and financial stability. Fiscal policy has been geared to priority spending on defense, social benefits, humanitarian needs, and where possible some fixing of critical infrastructure. Uncertainty around the size of financing needs remains extremely elevated and highly dependent on the length of the war and its intensity, and economic risks loom large, including those related to potential additional damage to critical infrastructure or new disruptions to the agricultural and energy sectors.

An Evaluation Model of Urban-Rural Exchange Teachers in Elementary School Based on Optimal Control Neural Network

In this paper, an optimal control neural network algorithm is used to conduct an in-depth study and analysis of the evaluation of elementary school urban-rural exchange teachers, and an optimal control neural network evaluation model is designed and applied to the actual elementary school urban-rural exchange process. A tracking controller is designed to track the target trajectory for a typical second-order nonlinear system where the system model is partially unknown and the internal state of the system is unpredictable. The neural network observer is first designed using the input and output information of the system to approximate the drift dynamics of the system on the one hand and estimate the internal state information of the system on the other hand; then, based on the estimated system state, the sliding mode tracking controller is designed to achieve tracking of the established target trajectory. It is found that the policy implementation is not in place, teachers are not motivated to exchange and most of them aim at position promotion, their sense of responsibility is weak, and they cannot treat the matter of exchange seriously and correctly, thus cannot play their role in the exchange school. The ways to prevent and alleviate the conflict of interest among policy subjects are mainly divided into subjective and objective aspects: first, from the subjective level to arouse the value recognition of multiple interest subjects, including the government, should play the function of policy guidance and exhortation and clarify the value orientation of the policy; schools should cultivate the moral quality and professionalism of teachers and strengthen ideological mobilization; and teachers should improve their ideological awareness and consciously change their willingness to exchange. Establishing teachers’ status as civil servants, paying attention to teachers’ professional development and safeguarding the interests of rotating teachers to increase teachers’ motivation to exchange and rotate, creating a good social opinion environment, providing a good inflow school support environment for rotating teachers, and building a cloud platform for sharing high-quality educational resources create a good policy implementation environment to ensure that the teacher exchange and rotation policy is effectively implemented to achieve its goals of balancing teacher deployment. Although gradient-based methods can achieve high training accuracy, the performance of the backpropagation algorithm may be unsatisfactory when applied to test data, that is, if the size of the training data is not large enough.

The Implementation Dilemma and Solution of Teacher Exchange Rotation in Compulsory Education

The implementation of the policy of teacher exchange rotation in the compulsory education stage can provide an exchange platform and opportunity, promote the professional development of teachers, and balance urban and rural education resources. However, there are many difficulties in the implementation of the policy of teacher exchange and job rotation, such as unclear powers and responsibilities of various administrative departments, unscientific and fair selection procedures, and low willingness of teachers to exchange. This requires clarifying the scope of authority and responsibility of each department, building a department linkage mechanism, establishing a sound scientific and fair selection procedure and supervision mechanism, and increasing the incentive measures for mobile teachers in the exchange and job rotation policy, so as to effectively enhance the sense of belonging of teachers.

RESPONSES OF RICE OUTPUT TO MONETARY POLICY SHOCK IN NIGERIA FROM 1981-2020

The research looked at how monetary policy shocks affects rice output in Nigeria. The study made use of time series data spanning the year 1981 to 2020 obtained from the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS). The shocks were detected using the Vector Auto-Regressive model (VAR). The study revealed that unit shocks in interest rates, inflation, and exchange rates all harmed rice output with rice output responding more to a unit shock in interest rate. Monetary policy shocks have both positive and negative effects on rice output at different periods. This study concluded, however, that the timing of monetary policy instruments change has serious implications for rice output, and that rice output can bring about positive change in Nigeria's agricultural output if monetary policy instruments are well managed. The study recommended that the monetary authority should ensure that various policies are implemented to ensure that the interest rate to the agricultural sector is within a single digit, accessible, affordable, and sustainable to ensure greater productivity in the sector, as it accounted for the greatest shock in comparison to other monetary variables, the monetary authority should pursue an exchange rate policy that encourages investment in the Nigerian economy's real sector while maintaining market stability.

Economic Uncertainty and its Effects in Bolivia

The paper's primary finding reveals that there are three factors related to the level of Bolivian economic uncertainty. These were interpreted as: i) uncertainty of economic expectations; ii) uncertainty of monetary and exchange rate policy; iii) political and social uncertainty. The contribution of each factor was found to account for approximately one-third of the total uncertainty; however, due to the incidence of the searches, the uncertainty factor in the monetary exchange rate policy showed greater contemporaneous synchronization with the general level by using multivariate techniques monthly for the period from January 2004 to December 2020. The estimated index captured negative variations for uncertainty during times of economic boom and growth, and it reflected positive variations of uncertainty in times of economic slowdown, low commodity prices, persistent fiscal and external deficits, as well as drops in net international reserves. Finally, by estimating a structural VAR model (SVAR), a direct relationship was found between global (external) economic uncertainty and domestic (internal) economic uncertainty, which slows national economic activity by -0.65%, interpreted as a retarding factor for economic growth.

Orthodox Stabilization Programs Implemented in Turkey After 1980: Decisions of January 24 and April 5

İstikrar programları, daha çok ödemeler dengesi sorunlarını aşmak ve yüksek enflasyonun hüküm sürdüğü (hiperenflasyon ya da kronik yüksek enflasyon) ekonomiyi normalleştirmek amacıyla uygulamaya konulur. Ortodoks politikalar, ekonomide ortaya çıkan enflasyon, ödemeler dengesi açığı ve kamu açıklarının kaynağı olarak parasal genişlemeyi, aşırı değerlenmiş kur sistemini ve kamu kesimi kaynak harcama dengesizliğini görmektedir. Ortodoks politikalar, enflasyonu salt parasal bir olgu olarak ele alırken; heterodoks politikalar, enflasyonun kaynağında yapısal bozuklukların ve gelir çekişmesinin yattığına ilişkin inançtan hareketle uygulanmaktadır. Heterodoks istikrar politikalarının fiyat-ücret kontrolleri, bütçe disiplini ve sabit döviz kuru politikası olmak üzere üçayağı bulunmaktadır. Çalışmada, Ortodoks istikrar programı niteliğinde olan 24 Ocak ve 5 Nisan kararları, önceki ve sonraki ekonomik yapı analiz edilerek değerlendirilmiştir. Gerçekleşen sonuçları açısından 1980 uygulaması kamu maliyesi dengelerini bozmak, gelir dağılımını etkinsizleştirmek, ekonomiyi spekülatif yabancı sermaye dalgalanmalarına açık hale getirme pahasına ödemeler dengesi sorununu görece aşabilmiştir. 1994 Kararları ise, krizi bir sapma olarak nitelendirip, ekonominin tekrar faiz kur makası sarmalına döndürülmesi sağlanmıştır.