Exchange Rate Fluctuations Research Articles

Research on the Impact of Geopolitical Instability on Russian Trade

This study examines how global and country- specific geopolitical instability affects Russian trade using data from 1996 to 2021. A panel regression model analyzes trade between Russia and its 15 top trading partners, exploring both direct and indirect effects. The analysis focuses on how accumulated foreign direct investment (FDI) and exchange rate fluctuations mediate these relationships. The findings reveal that global geopolitical instability decrease Russian trade by 0.0558. Interestingly, this negative impact is partially mediated by a decrease in FDI (-0.0805). This aligns with the Structural Equation Modeling (SEM) results, which show a significant negative effect of global geopolitical instability on FDI (-1.209). This suggests that FDI acts as a key transmitter of the negative effects of global instability on Russian trade. The role of exchange rate fluctuations, however, is more complex. While the Sobel Test indicated a negative indirect effect, the SEM analysis shows a positive indirect effect through exchange rate fluctuations on trade. This suggests potentially countervailing effects of currency fluctuations, with depreciation potentially incentivizing exports while appreciation might make imports cheaper. The impact of country-specific geopolitical instability varies depending on the context. Industries like food products and textiles are significantly affected by geopolitical instability increase, while sectors such as fuels, metals and raw materials show resilience. Close trading partners are less affected by global instability but suffer from partner- specific instability. Geographically, Western Europe benefits from global instability but faces challenges from partner-specific instability, contrasting with Eastern Europe and Asia. Overall, this research contributes to the understanding of how geopolitical instability, mediated by FDI and exchange rates, shapes Russia's trade performance.

Financial Risk Identification and Control in the Openness Context: A System Dynamics Approach to Renminbi Internationalization

In an attempt to control a series of domestic and foreign financial risks amid the internationalization of Renminbi (RMB), China’s currency, this article categorizes these risks into five types: excessive volatility risk of exchange rate, balance of payments risks, policy risks, crisis contagion risks, and excessive volatility risk of financial asset prices. By employing system dynamics simulation models and sensitivity analysis, this paper examines strategies for financial risk control. Results indicate that the impacts of crisis contagion risk and balance of payments risk are the most significant, and that financial risks are extremely sensitive in such aspects as the degree of capital openness, exchange rate volatility, and foreign trade dependency. The paper suggests adopting strategies like gradually opening China’s capital accounts, maintaining its exchange rate fluctuations within a reasonable range, stabilizing its dependency on foreign trade, and ensuring that its growth rate of M2 matches that of the nominal GDP – a combined effort to control the complicated financial risks arising from various sources.

Does the Exchange Rate Have a Pass-Through Effect on Domestic Food Prices in Türkiye? An Empirical Study Using a Combined ANN Algorithm and VAR Method

Exchange rate fluctuations have far-reaching consequences for national economies, companies and, above all, consumers. It is therefore important to understand the mechanisms by which these fluctuations affect food prices in domestic markets. In this context, we examine the complex relationship between exchange rates and domestic food prices and attempt to calculate the pass-through effect of the exchange rate on domestic prices. To examine the pass-through effect of the exchange rate on food prices, we use monthly USD/TRY exchange rate data from January 2003 to July 2023 as well as the global food price index, the export-import rate for food and the producer price index for food in Türkiye. We employ the vector autoregression (VAR) method to determine the optimal lags of the variables included in the analysis and the artificial neural network (ANN) algorithm to calculate the overall pass-through effect of the USD/TRY exchange rate on domestic food prices. The results show that the pass-through effect of the variable on food prices persists for three months: the current month, the previous month and the two previous months. The total pass-through effect of the exchange rate on food prices reaches up to 27%. Half of this impact comes from the previous month's food prices. In addition, the ratio of food exports to imports accounts for about 12% of the increase in domestic food prices. The results also show that the variable with the highest pass-through effect is the producer price index and that 90% of the increase in food prices is due to domestic dynamics, while the effect of price increases in foreign markets is only about 10%.

Exchange rate in emerging markets: Shock absorber or source of shock?

This paper examines the stabilization role of flexible exchange rates for emerging economies within the Latin America and Asia regions. Based on a structural VAR model, we utilize zero, sign and exchange rate pass-through restrictions to identify structural macroeconomic shocks. Overall, we find that exogenous exchange rate shocks drive around half of total exchange rate fluctuations in emerging economies. Despite this predominant role, we find evidence that exchange rates do not act as a source of shocks to the real economy, but they instead absorb and reduce output growth and inflation volatilities. Based on counterfactual analyses, we further find that this shock-insulation property is highly shock-dependent, where the benefits of flexible exchange rates are sizable for demand and global monetary policy shocks, but are overall small in the face of supply shocks. Results also differ across time horizons, where the shock stabilization benefits are mainly limited to the short run for output, but also extend to the medium term for inflation. We also find that the net benefits of flexible exchange rates as a shock absorber are in general larger for emerging economies in Latin America than in Asia, particularly during crises periods. Finally, while we find that the stabilization role of exchange rates hinges upon the nature of underlying structural shocks, there is also a positive association with structural determinants such as a country's degree of exchange rate flexibility and trade openness.

Comparison of Nonparametric Regression Nadara - Watson Estimator Kernel Function And Local Polynomial Regression In Predicting USD Against IDR

Introduction: Macroeconomic problems such as inflation and exchange rates are often highlighted as benchmarks for achieving economic progress. The stability of both must be monitored by the government in order to control the inflation rate and exchange rate. This instability is a phenomenon of fluctuation, namely the phenomenon of the rise and fall of the exchange rate of a currency based on demand and supply. Given the large impact of exchange rate fluctuations on the economy, the prediction of the wage exchange rate against the US dollar is considered necessary because it is useful to anticipate and minimize bad possibilities that arise. Method: Methods that can be used to analyze fluctuating currency exchange rate data are nonparametric regression, Nadaraya-Watson estimator, Gaussian kernel function, and Local Polynomial Regression. Results and Discussion: The results of a nonparametric regression comparison between the Nadaraya-Watson estimator, Gaussian kernel function, and local polynomial regression were obtained by MAPE of 2.508% and 0.179%, respectively. This shows that the best model uses the local polynomial regression method and predicted USD exchange rate data against IDR using the best model, namely Local polynomial Regression where the MAPE value is less than 10%, which means the prediction rate is very good. Conclusion: The nonparametric regression method of the Nadaraya-Watrson estimator, Gaussian kernel function, and local polynomial regression shows that the best model uses the local polynomial regression method.

STRATEGIC PLANNING USING THE TOTAL COST OF OWNERSHIP MODEL

In a highly competitive global scenario, companies seek new ways to optimize production and implement continuous improvement mechanisms to reduce costs. An essential tool in this context is the Total Cost of Ownership model, applied to the acquisition processes of inputs to determine the costs involved and compare the economic viability between domestic and international suppliers. Given the unstable economic scenario and high exchange rate fluctuations, the possibility of nationalizing production is evaluated. The case study method is adopted, characterized as applied and exploratory research, with the objective of generating knowledge for practical application and solving specific problems. This method combines a literature review with exploratory field analysis. The studied company faces a loss of profitability due to rising import costs, reduced demand, and the loss of purchasing power of the national currency against international suppliers. The increase in costs resulting from exchange rate fluctuations necessitates the search for new supply options, primarily in the domestic market, where exchange rate influence is lower. Thus, the nationalization of inputs becomes crucial in business decisions to minimize costs and maintain competitiveness. The results indicate that the nationalization of production using the Total Cost of Ownership model is viable. This model considers all costs involved in the acquisition of inputs, unlike the traditional acquisition model, which focuses exclusively on the unit price.

Risks of managing financial resources of the agricultural sector of Ukraine in the zone of military conflict: Challenges, threats, ways of counteraction

This study was aimed at identifying the risks that affect financial management in the agro-industrial sector of Ukraine during military operations in order to develop effective countermeasures. The research methodology included an analysis of the main risks, such as exchange rate fluctuations, inflation, disruption of supply chains and political instability, as well as an assessment of strategies to minimise these risks. The main stages of risk management are identified as identification, assessment, and monitoring of risks, as well as development of appropriate strategies, such as investment diversification, insurance, and hedging. The study results showed that the key factors for ensuring stability are the introduction of technological innovations, government support, creation of reserve funds and diversification of funding sources. In particular, the development of modern agricultural technologies, subsidies, soft loans and investments in infrastructure significantly increase the resilience of the agricultural sector to crisis conditions. It is also important to plan cash flows to maintain liquidity and meet financial obligations in a timely manner. The experience of several countries, such as Israel and Georgia, which have faced similar challenges, was reviewed and analysed to see how they managed the financial resources of their agricultural sectors. The experience of these countries has shown that successful management of the financial resources of the agricultural sector in the context of military conflict requires a comprehensive approach that includes technological innovation, government support, financial planning and human capital development to ensure sustainable development of the agricultural sector in times of war. This approach allows not only preserving but also developing the agricultural sector, ensuring food security and economic stability of Ukraine

Rate of Return (RoR) and Return on Investment (RoI) of Indonesia and India

In the era of globalization and economic liberalization, cross-border investment has become the main strategy for developing countries to increase their economic growth and global competitiveness. This research aims to explore and compare RoR and RoI in Indonesia and India and identify key factors that influence the differences in RoR and RoI between the two countries. This research method uses literature study and conceptual analysis to collect and analyze data from various sources. The research results show that the comparison of RoR and RoI between Indonesia and India involves various factors such as macroeconomic conditions, infrastructure, political stability, investment regulations, labor market, market, and industry, as well as innovation and technology. The two countries show significant differences and similarities in these factors, which influence investment returns. Indonesia has relatively good political stability and a developed capital market, while India stands out in the technology sector and economic reform. However, challenges such as complex regulations, inadequate infrastructure, and fluctuations in currency exchange rates remain obstacles to achieving optimal ROI for investors.

Forward Contract Hedging Analysis as a Protection Effort Transaction Exposure

The purpose of this research is to identify the risks related to currency fluctuations that arise from transactions in foreign currencies or other currencies. A company must be capable of managing foreign exchange activities in order to reduce or eliminate risks. One way to do that is to carry out hedging trades. You may ensure that future fluctuations in foreign exchange rates won't affect the foreign exchange rate utilized for payments (outflow) or the amount of foreign currency received (inflow) by using hedging. Both a qualitative descriptive research design and a case study approach are used in this study. A case study called PT Akasha Wira International, Tbk was used

Analysis of Inflationary Burden Impact on The Consumption of Iraqi Households

The research focused on examining the connection between the inflationary burden and the consumption patterns of Iraqi families. Inflation significantly impacts consumption, and Iraq is grappling with rising prices, leading to a crisis in the cost of living due to increased prices for essential goods and reduced government subsidies. The study aimed to provide insights into the inflationary burden phenomenon, highlight the primary channels affecting Iraqi families, and explore short and long-term consequences. It also aimed to identify the variables and causes contributing to the wage-price gap. Ultimately, the research sought to address the issue of the inflationary burden in the Iraqi economy, which has adversely affected the standard of living for families, resulting in reduced consumption and a diminished real value of money. The goal was to propose solutions to enhance living standards and manage price stability. Key findings :Recent years have seen a sharp increase in consumer spending as a percentage of total income, reaching 70%. This reflects the high prices of essential goods and services. The Iraqi economy has faced various crises, including war, the COVID-19 pandemic, exchange rate fluctuations, and global conflicts, leading to economic decline and worsened family conditions. Recommendations :Promote consumer spending awareness among Iraqi families through visual and audio advertising, encouraging responsible consumption and savings for future crises. Protect local products by imposing customs taxes on imports, except for essential items. Ensure coordination between fiscal and monetary policies to maintain price stability and boost consumer goods production, granting the central bank independence for policy development.

Tác động của biến động tỷ giá hối đoái đến xuất khẩu nông nghiệp của Việt Nam và vai trò của tự do hóa tài chính tại nước đối tác

This study assesses the impact of real exchange rate volatility on Vietnam’s agricultural exports, considering the role financial liberalization in its trading partners. The author employs Poisson pseudomaximum likelihood estimators to estimate a gravity model covering bilateral agricultural exports from Vietnam to 187 its trading partners during 1996-2021. The empirical results of this study indicate that exchange rate volatility hampers agricultural exports of Vietnam and financial liberalization in its trading partners is crucial for alleviating this adverse nexus. Therefore, maintaining stable exchange rate is necessary to boost agricultural exports of Vietnam. In addition, under great turmoil in global economy with strong fluctuations in exchange rates, Vietnam still has a chance to increase its agricultural exports to countries that have high levels of financial liberalization. This finding has an important implication for selecting trading partners to improve export performance of agricultural sector in Vietnam.

Exchange Rate Disconnect and the Trade Balance

We propose a model with costly international financial intermediation that links exchange rate movements to shifts in the demand for domestically produced goods relative to the demand for imported goods (trade rebalancing). Our model is consistent with stylized facts of exchange rate dynamics, including those related to the trade balance, which is typically overlooked in the literature on exchange rate determination. In a quantitative assessment, trade rebalancing explains nearly 50 percent of exchange rate fluctuations over the business cycle, whereas exogenous deviations from the uncovered interest rate parity—the primary source of exchange rate fluctuations in the literature—account for just above 20 percent. Using data on trade flows or the trade balance is key to properly identifying the determinants of the exchange rate. Thus, our model overcomes the sharp dichotomy between the real exchange rate and the macroeconomy embedded in other models of exchange rate determination.

STATISTICAL METHODS FOR MANAGING RISKS IN PLANNING FOREIGN ECONOMIC AND LOGISTICS ACTIVITIES FOR SUSTAINABLE DEVELOPMENT OF THE ENTERPRISE

The article examines the topical issue of risk management in foreign economic and logistics activities, which is closely related to the enterprise’s chosen strategy and ensures its sustainable development. The study considers the issue of developing a hedging strategy using statistical methods since adequate forecasting allows predicting the impact of external environment factors on the exchange rate, which will allow the enterprise to timely predict and mitigate the risks in foreign economic and logistics activities. The authors have used general scientific and special methods of systemic and structural analysis to clarify the directions of sustainable performance and risk management tools; formulate the goals and steps in choosing a strategy of hedging; compare the methods of foreign exchange rate risk hedging and perform correlation and regression analysis of factors that impact exchange rate under crisis conditions. The purpose of the paper is to study the specifics of ensuring the sustainable performance of an enterprise using statistical methods in risk management for planning foreign economic and logistics activities. The authors have proposed a definition of a hedging strategy based on the concepts, approaches, and ideas of asset and/or investment management with the aim of reducing loss through hedging instruments, whose feasibility can be substantiated by statistical methods. It has been found that the formation and successful implementation of a hedging strategy requires the use of statistical analysis in order to timely predict fluctuations in exchange rates. The findings of the research were tested based on the performance of PrJSC "Linde Gas Ukraine". In the strategy of hedging the exchange rate risks, it has been proposed to simultaneously open a foreign currency deposit and take a loan in the national currency to replenish the company's working capital. The perspective of further research is the implementation of the proposed hedging strategy and assessment of its effectiveness.

Modeling Asymmetric Effects of Exchange Rate Fluctuations on Agricultural Trade Balance: Evidence from Iran and Iraq

The exchange rate plays a crucial role in foreign trade and has asymmetric effects. This study examines the asymmetric effects of exchange rate volatility on the trade balance in the agricultural sector between Iran and Iraq, using the non-linear ARDL model from 1998 to 2020. The results show that Iraq's GDP and oil price fluctuations positively affect the trade balance. In contrast, Iran's GDP and the U.S. economic sanctions against Iran have negative and significant effects on the trade balance of Iran with Iraq in the agriculture sector. The results do not confirm the existence of the J-curve effect in the trade relations between Iran and Iraq, because an increase in the bilateral exchange rate, in both the long-run and short-run, improves the trade balance of Iran with Iraq in the agriculture sector. Furthermore, the positive and negative fluctuations of the bilateral exchange rate have different effects on the trade balance. While the devaluation of the national currency does not cause a downward trend in the short run, the exchange rate policy can improve the trade balance from the beginning.

FACTORS AFFECTING THE FINANCIAL PERFOMANCE OF AGRICULTURAL COMPANY’S: EVIDENCE FROM THE INDONESIA STOCK EXCHANGE

The Indonesian economy is primarily based on the agriculture sector, even growing when other sectors are down. This role is supported by the existence of agricultural companies that run businesses with profit-oriented goals. The company's ability to generate profits reflects the company's financial performance and is influenced by various factors. Using panel data for the years 2015–2021 from 17 agricultural companies listed on the Indonesia Stock Exchange (IDX), this study aims to determine the influence of internal and external factors on the financial performance of agricultural companies in Indonesia. The results of static panel data regression found that the company's growth and the dummy of the Covid-19 pandemic had a positive and significant effect on the company's financial performance which was proxied through the profitability ratio (ROA). Debt asset ratio (DAR), COGS/sales, and exchange rate have a negative and significant effect on ROA. In general, these results confirm the pecking-order theory in the relationship between ROA and DAR, as well as the ability of agricultural companies in Indonesia to survive in the conditions of the Covid-19 pandemic. The implication for improving the performance of agricultural companies in Indonesia is that companies must be able to reduce the percentage of production costs (COGS/sales) and implement an optimal capital structure mix. Companies are also required to carry out good risk management to anticipate exchange rate fluctuations.

Symmetric and Asymmetric Response of the Renewable Energy Market to Indonesian Economic Trends

This study digs into the complex interplay between renewable energy market development and Indonesian economic trends. Our rigorous study aims to investigate the impact of crucial economic indicators, including gross domestic product (GDP), exchange rates, inflation, real interest rates, net inflow of foreign direct investment (FDI), and urbanisation, on the renewable energy landscape in Indonesia between 1973 and 2022. This study provides a novel insight by investigating both symmetric and asymmetric impacts in the context of Indonesia. While previous studies have limited scope with linear relationships, this study fills a gap by capturing the dynamic interplay between renewables and economic indicators. By employing a robust econometric model, we reveal interesting patterns highlighting the multidimensional nature of the renewable energy market's responses to economic trends and find that there is a long-term interplay among the variables under linear and non-linear models. We found empirical evidence indicating that the nexus is asymmetric. However, in the long term, GDP exhibits an asymmetric positive impact on renewable energy consumption in the linear model. This shows that economic growth positively correlates with Indonesia's adoption of sustainable renewable energy sources. Similarly, urbanisation shows a positive response, with expanding cities boosting demand for cleaner and greener energy. Surprisingly, exchange rates show an asymmetric response, demonstrating that depreciation of local currency has a disproportionate negative impact on renewable energy investment during economic downturns. Inflation also exhibits a negative asymmetric response due to eroding purchasing power that reduces investment in renewables. Meanwhile, net inflow of FDI emerges as a critical driver in favourable economic conditions, dramatically amplifying renewable energy capacities. Therefore, during economic recessions, FDI’s impact diminishes and emphasises the significant importance of tailored interventions. Based on the findings of this study, which demonstrate the profound interplay of how the Indonesian economy shapes and is affected by the renewable energy market, we encourage the adoption of policies that promote sustainable energy development while increasing economic resilience. We recommend that policymakers support renewable energy diversification to lessen the vulnerability of exchange rate fluctuations. Attracting FDI is also crucial, as policies can help strengthen the investment climate and bolster the renewable energy sector. Inflation-indexed incentives can help maintain confidence and foster economic growth.

Dynamic analysis of the relationship between exchange rates and oil prices: a comparison between oil exporting and oil importing countries

Addressing the interconnectedness of oil prices and foreign exchange rates poses a substantial challenge and raises significant questions within economic research. Existing studies reveal a fragmented understanding of the dynamics between these crucial variables, highlighting a need for deeper investigation. This study extends previous research by employing the time-varying parameter VAR extended joint connectedness model and using the baseline approach called the generalized connectedness approach. Our research findings indicate that exchange rates and crude oil prices exhibit pairwise and total connectedness, varying over time. Furthermore, this connectedness experiences substantial increases during severe crisis periods. We uncover that exchange rates and crude oil prices not only share a dynamic, pairwise, and total connectedness but these results are stronger for oil exporting countries. However, these methods yield inconsistent results for various countries. Moreover, there is compelling evidence that fluctuations in exchange rates and oil prices can cause bi-directional and time-dependent shocks.

Impact of Monetary Policy on Exchange Rate Stability in Nigeria

This study investigates the impact of interest rates, money supply, and Central Bank reserves on exchange rate stability in Nigeria. Utilizing quarterly economic data from 1980 to 2023, sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, the research employs a longitudinal survey design to assess the relationships between these monetary variables and exchange rate volatility. The findings indicate that interest rates, money supply, and Central Bank reserves significantly influence exchange rate fluctuations, with Central Bank reserves having the most substantial impact. Specifically, interest rates exhibit a moderate effect on exchange rate volatility (t = 3.513, p = .001, Beta = .342), while money supply also significantly affects exchange rate volatility (t = 2.713, p = .010, Beta = .305). Central Bank reserves, however, have the most pronounced impact (t = 4.141, p = .000, Beta = .467). These results highlight the critical role of monetary policy in maintaining exchange rate stability. The significant positive relationship between interest rates and exchange rate volatility suggests that monetary authorities should carefully consider the ramifications of interest rate adjustments. Similarly, the influence of money supply underscores the need for meticulous management to prevent destabilization. Robust Central Bank reserves emerge as a crucial buffer against exchange rate fluctuations, emphasizing the importance of effective reserve management policies. The findings provide actionable insights for policymakers aiming to enhance exchange rate stability through strategic interest rate policies, careful money supply management, and maintaining adequate Central Bank reserves.

Analisis Resiko Operasional dalam Industri Travel Yuk Kita Tour Untuk Meningkatkan Efisiensi dan Kepuasan Pelanggan

This study aims to investigate the identification, assessment, and control of operational risks in the travel industry, with a focus on PT Yuk Kita Tour. Direct observation and interview methods are used to identify the risks faced by the company. Risk assessment is conducted by considering the likelihood of occurrence and its impact on the company's operations, followed by appropriate mitigation strategies. The analysis results show that risks such as online booking system disruptions, lack of staff training, currency exchange rate fluctuations, regulatory changes, natural disasters, disease outbreaks, transportation delays, and terrorism threats affect operational efficiency and customer satisfaction.To control these risks, PT Yuk Kita Tour implements a comprehensive mitigation strategy, including improved cybersecurity systems, staff training programs, currency hedging strategies, active regulatory monitoring, travel insurance, strict health policies, cooperation with transportation operators, and clear security information to customers. The implementation of these risk control strategies has had a positive impact on the company's performance, with year-on-year increases in revenue and customer satisfaction. This study provides insights into the importance of operational risk management in the travel industry and demonstrates that a proactive approach to risk identification, assessment, and control is possible. This study provides insight into the importance of operational risk management in the travel industry and demonstrates that a proactive approach to risk identification, assessment, and control can improve operational efficiency and customer satisfaction. The practical implication of this study is the importance of continuously monitoring existing risks, adapting control strategies, and involving stakeholders in risk management to ensure sustainable business continuity and superior customer service in a dynamic business environment.

Analyzing the Impact of Monetory Policy Shocks on Output, Inflation and Exchange Rate Dynamics of Pakistan

The major objective of this study is to analyse that how monetary policy of Pakistan had impact on output, inflation and exchange rate fluctuations during Global Financial Crisis 2008-2009 in Pakistan. Quarterly data was used for this purpose. Data spans from 1990Q1 to 2022Q4. Time varying parameter – vector auto regression model (TVP-VAR) of Jouchi Nakajima (2011) has been used for analysis. Through this model we selected the time horizons such as 2008, 2009 and 2015 mainly to study the impact of monetary policy on different selected variables. Our empirical finding indicates that monetary policy shock plays an important role in the economic dynamics of Pakistan. The impulse response of inflation is negative to tight monetary policy shock (εi↑→ p), this is in accordance with the standard economic theory. In case of Pakistan, after 1990 there is declining trend in volatility of output and a considerable reduction in business cycle fluctuations. Policy rate is more volatile during 1998. After 2000 there is decline in volatility of policy rate but in 2008-09 there is rise in interest rate because of Global Financial Crises in 2007 and 2008. The response of policy rate to inflation shock is in rising trend in 2007 and 2008. The inflation is increasing as a response to positive output shocks after 12th quarter this rising trend is also evident during 2008 where the impact of output on inflation is long term.