Foreign Central Banks Research Articles

The Geoeconomics of Regional Currency Contest: How Bilateral Swap Arrangements of India and Japan Counter the Rise of RMB

ABSTRACT India and Japan are the only two non-dollar issuing countries that have signed dollar-denominated bilateral swap arrangements (BSAs) with foreign central banks. These arrangements indicate that India and Japan are committed to protect their BSA partners’ financial security even at the expense of their own dollar reserves. What has motivated the two countries to make such policy choices? This article argues that India and Japan’s dollar-denominated BSAs not only enhance financial security but also limit the recipients’ motivations to look for alternative settlement currencies for trade or investment. Even if the BSAs are not directly aimed to contain China, therefore, this effectively limits the potential expansion of the RMB’s influence and allows India and Japan to maintain their structural power by supporting regional dollar dominance. This article finds, therefore, that India and Japan’s dollar-denominated BSAs serve as a tool in the geoeconomic competition with a rising China in support of the incumbent regional powers.

Blowing against the Wind? a narrative approach to central Bank foreign exchange intervention

Most countries in the world use foreign exchange intervention, but measuring the success of the policy is difficult. By using a narrative approach, I identify interventions when the central bank manages to influence the exchange rate based on pure luck. I separate them from interventions when the central bank actually impacted the exchange rate. Because intervention records are daily aggregates, an intervention might appear to have changed the direction of the exchange rate, when it is more likely to have been caused by market news. This analysis allows to have a better understanding of how successful central bank operations really are. I use new daily data on Bank of England interventions in the 1980 s and 1990 s. Some studies find that interventions work in up to 80 % of cases. Yet, by accounting for intraday market moving news, I find in adverse conditions, the Bank of England managed to influence the exchange rate only in 8 % of cases. I use natural language processing to confirm the validity of the narrative approach. Using lasso and a VAR analysis, I investigate what makes the Bank of England intervene. I find that only movement on the Deutschmark and not US dollar exchange rate made the Bank intervene. Also, I find that interest rate hikes were mostly a tool for currency management and accompanied by large reserve sales.

The Impact of Board Size and Audit Committee Characteristics on Financial Performance in Foreign Exchange Banks: Evidence from Indonesia

The Impact of Board Size and Audit Committee Characteristics on Financial Performance in Foreign Exchange Banks: Evidence from Indonesia

The Influence of The Value of Oil and Gas Exports and Imports on The Country's Foreign Exchange from 2010-2017

International trade requires a very important source of financing, namely foreign exchange reserves. Foreign exchange reserves are the net position of foreign assets of the government and foreign exchange banks, which must be maintained for international transaction purposes. This research aims to determine the effect of oil and gas exports, namely crude oil, oil and gas products on foreign exchange reserves in Indonesia. The type of data used in this research is secondary data obtained from the Central Statistics Agency website, data taken from BPS is the value of oil and gas exports and imports for 1996-2017 and the position of foreign exchange reserves for 2005-2018. The method used in this research is the Simple Linear Regression Method which is used to see the form of relationship between variables through an equation. From the research results above, it can be concluded that oil and gas exports and imports in 2010-2017 did not have a significant effect on the country's foreign exchange reserves. This shows the lack of contribution of exports and imports of crude oil, oil and gas products in influencing the country's foreign exchange reserves.

Inflation targeting, exchange rate and output gap in Central and Eastern European countries

This paper aims at empirical assessment of monetary policy relationships in Central and Eastern European countries (Czechia, Hungary, Poland, Romania), which practise the monetary regime of inflation targeting. Using quarterly data for the period of 2004-2019, the authors examined the relationship between the output gap, nominal and real exchange rate misalignment, consumer price inflation and the central bank policy rate, using the panel vector autoregression (PVAR) model. According to estimates, the central banks of the CEE-4 countries react with an increase of their policy rate to the output gap and inflation, as implied by the Taylor rule. At the same time, a monetary reaction to nominal (real) exchange rate misalignment is lost in the estimates for the post-crisis period of 2010-2019. An increase of the central bank rates does not seem to have unfavourable output effects, while the nominal exchange rate is likely to depreciate with three to five quarter lags. However, there is evidence of the price puzzle when monetary tightening is followed by a counterintuitive increase in the inflation rate. In full accordance with the New Keynesian framework, inflation depends on the output gap, while being expansionary in the real sector. Evidence of the exchange rate pass-through (ERPT) to inflation is mixed. This article provides insights into the average monetary policy reaction function and its macroeconomic effects in the CEE-4 countries, with the value added in that following the Taylor rule does not guarantee effectiveness in tackling inflation in the presence of the price puzzle. Based on the estimated exchange rate effects on the output gap and inflation, deliberate currency appreciation resulting from the central bank foreign exchange interventions and/or fiscal austerity measures can be helpful for such a disinflation that minimises output losses.

The external financial spillovers of CBDCs

We set up a DSGE model to study the macroeconomic consequences of a foreign central bank digital currency (CBDC) available to residents in a small open economy. We find that a gradual and permanent increase in the domestic households' preferences toward the foreign CBDC leads to a structural reduction in economic activity, especially if the CBDC is designed to be similar to domestic deposits. Imposing capital flow management measures on outflows, relaxing macroprudential policy, or selling foreign reserves can smooth the transition. A Taylor rule that targets PPI inflation is more effective in limiting the disruptive effects than a CPI targeting or an exchange rate peg. A central bank's liquidity facility available to commercial banks is able to avoid the long-run GDP loss, at the cost of a larger short-run consumption fall. We also show that an economy with a large stock of foreign CBDC is better shielded from exogenous increases in the interest rate on foreign debt, if the CBDC remuneration remains constant.

Do preferred habitat investors exist? Evidence from the UK government bond market

The existence of investors with non-pecuniary preferences for particular assets is central to the rationale and efficacy of unconventional monetary policies. Using a new, granular dataset for the UK government bond (gilt) market, we identify preferred habitat behaviour directly from the amount of variation investors allow in the average duration of their gilt portfolios. We find investors with particular duration habitats exist across the yield curve. These investors can be reasonably proxied by specific sectors - like foreign central banks, insurance companies and pension funds - and their behaviour conforms to a number of predictions from preferred habitat theory.

Illegal, Unless: Freezing the Assets of Russia’s Central Bank

Abstract In response to the Russian invasion of Ukraine on 22 February 2022, the European Union (EU) and states such as Canada, Japan, Switzerland, the United Kingdom and the United States of America froze assets of the Russian central bank held in their jurisdictions. The sanctions fit in a longer pattern of states freezing assets of foreign central banks, which has been criticized by several states to be incompatible with the law of state immunity. The criticism on these types of sanctions raises the question whether freezing assets of Russia’s central bank complies with the law of state immunity. This article answers this question by investigating whether the law of state immunity is confined to the jurisdiction of courts or if it also applies in the context of executive action. Considering that the law of state immunity also applies to executive action, these sanctioning states (and the EU) violated Russia’s state immunity by freezing assets of Russia’s central bank. These sanctions, however, could be justified as (third party) countermeasures in response to Russia’s invasion of Ukraine.

Analisis Pengaruh Rasio Keuangan Terhadap Profitabilitas Pada Bank Devisa Yang Terdaftar Di BEI Periode 2017-2022

The purpose of this study is to determine the effect of Net Interest Margin (NIM), Operating Costs on Operating Income (BOPO), Loan to Deposit Ratio (LDR), and Non Performing Loan (NPL) on Profitability as proxied by Return on Assets (ROA). This research uses data sourced from foreign exchange bank companies listed on the Indonesia Stock Exchange (IDX) starting from 2017-2022 and financial ratio reports obtained from the Financial Services Authority (OJK). The total number of foreign exchange bank companies listed on the IDX is 32 companies and those that enter the test criteria are 12 companies. The total panel data of 288 comes from 6 years of quarterly data for 12 Foreign Exchange Banks. The results of panel data regression analysis with the help of E-Views software show that the best estimation choice is Fixed Effect Model (FEM). Based on FEM output, it was found that the NIM variable had a positive and significant effect on Profitability (ROA). BOPO variables have a negative and significant effect on Profitability (ROA). And NPL has a negative and significant effect on Profitability (ROA). The LDR variable has no effect on Profitability (ROA). The coefficient of determination of this FEM model is 95%.
 Keywords: NIM, BOPO, LDR, NPL, Profitability, FEM

Evaluation of prospects for the development of the currency market of Russia

The article discusses the prospects for the development of the Russian foreign exchange market within the framework of international organizations and at the level of individual countries. Recommendations for the stable functioning of the Russian foreign exchange market and the development of the national economy of the country are proposed.In modern conditions, in order to ensure the stable functioning of the foreign exchange market and foreign exchange banking systems, there is a need to revise the monetary policy of both the Central Bank of Russia and at the level of commercial banks. In view of the ongoing sanctions policy of unfriendly countries against Russian commercial banks and the economic system, it is advisable to consider the strategy of the country's economic and political development, as well as the prospect of entering the foreign exchange market of the countries of Central and East Asia.

Confiscation of Russian Assets for the Restoration of Ukraine: Legal Problems of Implementation

The article is devoted to the problem of creating and applying legal mechanisms for blocking and confiscating Russian assets in order to use them for the restoration of Ukraine, which suffered from Russian aggression. The subject matter of the study is the analysis of international legal norms, national law, international and national judicial practice. The purpose of the article is to study and assess the legal possibilities of compensation for damages caused by Russian aggression against Ukraine. The research methodology involves an analysis of the rules of public international law, international humanitarian law and international criminal law, which the states that have imposed anti-Russian sanctions may rely on when seeking mechanisms for confiscation of Russian assets under sanctions in order to satisfy Ukraine's claims for reparations against Russia. Achieving the objectives of the study also involves an analysis of international and national law on the issue of foreign sovereign immunity in the context of the possibility of confiscation of assets of the Russian Central Bank. The author examines the issue of freezing (blocking) of assets of persons under the jurisdiction of the countries initiating anti-Russian sanctions. The author proves that these actions are a widely used policy tool of the United States, the European Union and other states which seek to punish the government of a particular country in this way. As part of the blockade, assets may be held until the country that violates international law changes its policy. In the case of Russian aggression, the United States and other countries that have frozen Russian assets may refuse to return them as a countermeasure until Moscow not only stops its aggression against Ukraine but also pays reparations to Ukraine. It is established that the general trend (albeit with some exceptions) of the last two decades has been to strengthen the immunity from enforcement of foreign central banks' property, which is in line with the approach adopted in the UN Convention on Jurisdictional Immunities of States and Their Property. The author considers the possibility of creating legal mechanisms for the confiscation of Russian assets frozen by Western countries and a number of other states, both at the international and national levels. Based on the study, the author formulates conclusions regarding the existence of legal (both at the level of international and national law) and political (primarily, the fear of retaliatory sanctions, and most importantly, the possibility of withdrawal of assets of foreign investors and central banks of individual states from the United States) obstacles to the confiscation of Russian assets.

Confiscating Russia’s Frozen Central Bank Assets: A Permissible Third-Party Countermeasure?

The war of aggression by a permanent member of the Security Council, combined with the availability of its assets on the territory of other states, creates an opportunity to solve one of international law’s enigmas: the legality of third-party countermeasures in the general interest. Would confiscating Russia’s frozen Central Bank assets and making the proceeds available to repair the war damage in Ukraine be permissible as such a countermeasure? This paper argues that state immunity cannot be relied upon to prevent the freezing or confiscation of foreign central bank assets by direct executive action; that freezing foreign state assets is permissible as a third-party countermeasure to stop a serious case of aggression; and that confiscation would not qualify as a countermeasure but may be permissible as a ‘lawful measure’ to repair the damage. Recent changes in Canadian legislation support the existence of such a permissive rule. On the other hand, controversial measures by the United States to control the assets of the Afghan Central Bank demonstrate the need for safeguards against abuse.

Comparative Analysis Of Performance Appraisal Foreign Banks And Non Foreign Bank Conventional In Indonesia

This study aims to compare the performance of conventional foreign exchange banks and conventional non-foreign exchange banks in Indonesia during 20 20 -20 2 1 using the RGEC method (Risk Profile, Good Corporate Governance, Earnings, Capital). This study using ROA, NPL, CAR, LDR, Institutional Ownership, Managerial Ownership, and the Commissioner of the Independent variable Samples were selected in this study with purposive sampling method amounted to 105 foreign banks and 15 non-bank foreign exchange during 20 20 -20 2 1. Analysis that using Independent t-tests on the data were normally distributed and the Mann Whitney-U test on the data is not normally distributed. In the test results stated that there are no differences in the financial performance of foreign exchange banks and non-foreign exchange banks if in view of the ratio of ROA, NPL , CAR, and LDR. And there are differences in the level of performance when viewed in terms of ownership and leadership.

Cost channel, determinacy, and monetary policy in a two-country new Keynesian model

This study examines the role of the cost channel of monetary policy in a two-country new Keynesian model. The results demonstrate that the presence of the cost channel significantly affects worldwide equilibrium determinacy. A greater foreign cost channel widens worldwide equilibrium indeterminacy when home and foreign central banks respond strongly to inflation and the output gap. This phenomenon is exacerbated when a greater cost channel exists simultaneously in both countries. • We examine determinacy analysis in a two-country model with a cost channel. • The degree of the cost channel affects worldwide equilibrium determinacy. • The central bank s stronger reaction to inflation exacerbates indeterminacy. • This result is worsened whencost channels become more severe in both countries.

Blowing against the Wind? a Narrative Approach to Central Bank Foreign Exchange Intervention

Blowing against the Wind? a Narrative Approach to Central Bank Foreign Exchange Intervention

COVID-19 and the effect of central bank intervention on exchange rate volatility in developing countries: The case of Uganda

<abstract> <p>The COVID-19 crisis has not only manifested as a tragic public health crisis but also as an unprecedented economic disruption characterized by economic deterioration, the sharp increase in market volatility and the blinding uncertainty about the impact of the pandemic, especially in the context of developing countries. It is therefore not surprising that central banks seeking to maintain macroeconomic and financial stability, which are critical for sustained economic development, have maintained the practice of central bank intervention, especially in developing countries. This paper empirically examines the effect of central bank foreign exchange interventions on the level and volatility of the Uganda shilling / US dollar exchange rate (UGX/USD). Utilizing daily data spanning the period December 30, 2016, to 1 December 2021, we estimate a foreign exchange intervention model within a GARCH theoretical framework. Empirical results indicate that foreign exchange interventions have had mixed impact on the volatility of the exchange rate. In addition, despite generating significant uncertainty, the COVID 19 pandemic adverse shock results in a 0.03 percent appreciation due to Uganda's policy response to the COVID-19 pandemic.</p> </abstract>

RELATIONSHIP BETWEEN EXCHANGE RATE AND FOREIGN EXCHANGE RESERVES

The main objective of this study is to examine the existence and nature of the relationship between the exchange rate and foreign exchange reserves. To avoid influencing foreign exchange market expectations, the intervention program should indicate in advance the nature, frequency, and size of the central bank's foreign exchange transactions. Thus, in this sense, it is essential to determine the nature of the relationship between the exchange rate and the interventions made from and for the official foreign exchange reserve. Following the realization of this study, it was highlighted the conclusion that through the application of Johansen cointegration tests, between the pairs of variables - NEER and the interventions from/for the foreign exchange reserve; official exchange rate and interventions in/for the foreign exchange reserve - there is at least one cointegration relationship. That is, between the exchange rate and the interventions in/for the foreign exchange reserve, a long-term relationship is highlighted, which can facilitate the forecast.

Comparative Analysis of Financial Distress Risk in Sharia Foreign Exchange Bank and Non-Foreign Exchange Sharia Bank in Indonesia in 2014-2018 Using the Method Altman Z-Score Modification

This study aims to perform a comparative analysis of predictions of financial distress at Sharia Foreign Exchange Banks and Non-Foreign Exchange Sharia Banks. This study uses the Modified Altman Z-score model to explain the prediction of financial distress at Sharia Foreign Exchange Banks and Non-Foreign Exchange Sharia Banks, then the Mann-Whitney U Test is used to show a comparative analysis of the Altman Z-score value. Data used in This research is time series data, data from 2014 to 2018. The data is obtained from the publication of each website of the Sharia Foreign Exchange Banks and Non-Foreign Exchange Sharia Banks. Sampling technique in research uses a purposive sampling method. This study uses a sample of as many as 4 Sharia Foreign Exchange Banks and 4 Non-Foreign Exchange Sharia Banks. The results showed that based on the calculation of the level of risk financial distress carried out at Sharia Foreign Exchange Banks and Non-Foreign Exchange Sharia Banks in 2014 to 2018, can be concluded that no bank predicting to experience financial distress. Average The Z-score value of the two groups of Islamic Commercial Banks is above the cut value off the risk of financial distress. The results of the comparison of financial distress risk between Sharia Foreign Exchange Banks and Non-Foreign Exchange Sharia Banks on the calculation of the Z-score and Test Mann-Whitney U test shows that there is no difference in the risk of financial distress between Sharia Foreign Exchange Banks and Non-Foreign Exchange Sharia Banks as evidenced by: The significance value is more significant than 0.025, which is 0.685.

The Influence of Intellectual Capital on Financial Leverage Through Firm Risk and Profitability

Data from IDX Statistics 2020 state that the financial sector, especially banking sector has market capitalization rate at 33% of all the total market capitalization in Indonesia. The rate of the market capitalization of banking sector shows that bank sector has a big role in economics of country. This study analyzes the effect of intellectual capital on financial leverage with firm risk and profitability as mediating variables of conventional commercial foreign exchange banks in Indonesia Stock Exchange. The data collection method for this research is a literature study and documentation method, that is the financial statements of conventional commercial foreign exchange banks in the Indonesia Stock Exchange that collecting from 2016 to 2020. There are 29 populations who are all sampled. This research method is descriptive data and Partial Least Square (PLS). The results of the study show that only VACA, VAIC indicator, shaping the value of intellectual capital. Intellectual capital has a negative and significant effect on financial leverage. Intellectual capital has a positive and significant effect on firm risk. intellectual capital has a positive and significant effect on profitability. Firm risk and profitability are not able to mediate the influence of intellectual capital on financial leverage. Firm risk has a positive and insignificant effect on financial leverage. Profitability has a positive and significant effect on financial leverage. Keywords: Financial Leverage, Firm Risk, Intellectual Capital, Profitability

����� �� ������ �������� ������ �����

Abstract. Introduction. The activity of banks in foreign exchange markets, which consists in the management of assets and liabilities in foreign currency and in bank metals, is associated with currency risks (one of the elements of market risk), which arise in connection with the use of various currencies and bank metals during conducting banking operations. Risk means the uncertainty associated with the occurrence of any event or its consequences. The continuous functioning of the foreign exchange market is its main feature, which leads to the fact that a bank that has an open position in foreign currency is exposed to currency risk even when it is not working. Under such circumstances, the analysis and assessment of currency risks in the bank becomes very relevant, the results of which will ensure the creation of conditions for its stable and efficient functioning. Purpose. The purpose of the work is the analysis and assessment of the bank's currency risk. Results. The article examines the nature and types of currency risk, analyzes the structure and dynamics of currency assets and liabilities on various grounds. Also, the work identifies the risk of currency operations of JSC "Ukrsibbank" and draws relevant conclusions. Conclusions. The work draws the following conclusions: in the composition of foreign currency assets, a significant share of loans to legal entities is almost 33% and other currency assets - almost 62%, the lowest share is loans to individuals and funds in other banks; the dynamics of all currency assets is not uniform, there is a clear growth trend only in other currency assets, and only through them the bank increases currency assets in general; the largest share in the bank's monetary assets and liabilities is made up of US dollars and Euros; in terms of the number of currencies that the bank uses in foreign exchange operations, the currency portfolio is not diversified, which causes additional risk. Therefore, the bank's foreign exchange risk management policy can be assessed as positive, since banks, in contrast to risks, create reserves for assets from conversion into the reporting currency, in recent years have followed the norms of the foreign exchange position and used favorable trends in exchange rate changes in the formation of foreign currency assets and liabilities.