Foreign Exchange Operations Research Articles

The Pricing of FX Forward Contracts: Micro Evidence from Bankss Dollar Hedging

Using contract-level supervisory data, we show that dollar forward sales by non-US banks that are initiated at the end of a quarter and mature shortly after it concludes trade at higher prices and higher volumes. These effects are driven by banks with large net on-balance-sheet dollar assets that they can hedge around quarter-ends by selling dollars forward (increasing off-balance-sheet short positions), which suggests regulatory arbitrage to reduce capital charges for open foreign exchange (FX) exposure. Our results indicate that demand effects related to banks’ management of FX exposure are an important driver of deviations from covered interest rate parity.

Analysis of Determinants The Foreign Exchange Earnings of Tourism Sector In Indonesia

This research aims to analyze determinants of the number of foreign tourist, average foreign tourist expenditure, average length of stay foreign tourist, and dollar exchange rate against rupiah on foreign exchange earnings of tourism sector in Indonesia 2009 – 2013 periods. The data is secondary from Indonesia Statistical Agency, Bank of Indonesia, Ministry of Tourism and Creative Economy, articles, journal, and result of previous researches. This research uses panel data regression analysis. The result shows that the number of foreign tourist, average foreign tourist expenditure, average length of stay foreign tourist and dollar exchange rate against rupiah are giving positive effect on foreign exchange earnings of tourism sector in Indonesia 2009 – 2013 periods. Average length of stay foreign tourist is a variable that mostly affecting on open foreign exchange earnings in Indonesia 2009 – 2013 periods. Based on the result, the government is targeting foreign tourist arrivals to Indonesia for foreign tourists bringing foreign currency so that the rupiah demand will rise and increase tourism foreign exchange. Government, investors and communities leveraging existing infrastructure so that the average length of stay of foreign tourists continues to increase so Enhancing tourism foreign exchange. Stability of rupiah should always be maintained.

Uganda: Technical Assistance Report-Monetary and Foreign Exchange Operations, Recapitalization, and Act Revision

This Technical Assistance Report discusses the findings and recommendations made by the IMF mission regarding monetary and foreign exchange operations in Uganda, Bank of Uganda (BOU) recapitalization, and Bank of Uganda Act revision. The presence of sizable precautionary and involuntary reserves and excessive short-end volatility has weakened the transmission mechanism in Uganda. The key challenge remains to enhance monetary and fiscal policy coordination and to ensure that institutional and operational arrangements are robust and conducive to efficient monetary operations framework. The BOU should raise the effectiveness of the monetary and foreign exchange operations framework. To foster further market development there is need to anchor short-term interest rates by using various fine-tuning instruments to ensure improved operational efficiency and strengthen transmission of policy signals across the curve.

EXTERNAL EXPERIENCE FOR THE EXECUTION OF EXCHANGE REGULATION AND POSSIBILITIES OF ITS APPLICATION IN UKRAINE

The aim of the article is to conduct a comparative legal study of statutory legal acts, which define the legal framework for the implementation of currency regulation in some foreign countries and in Ukraine and which determine on this basis ways to improve domestic legislation in this area. The subject of the research is the experience of currency regulation in some European countries, USA, China, and Ukraine. Methodology. The research is based on a comparison of foreign exchange regulation in Ukraine and in foreign countries. Advantages and disadvantages of different modes of state control over currency circulation are determined, on the basis of the analysis of peculiarities of the state regulation of currency circulation in the United Kingdom, Germany, France, Poland, the USA, China, and in some other countries: from floating rate regime to rigorous state control. On the basis of the comparative legal study of certain provisions of the administrative legislation of Ukraine, the possibilities and limits of the application of positive foreign experience in this field are determined. The results of the study have shown that in order to implement foreign exchange management experience, it is necessary to postpone the final transition untill establishing a floating rate regime. It is possible to make it by reinforcing state interference. At the same time, it is necessary to strengthen currency control not only over the implementation of foreign exchange operations but also over the activities of subjects that determine the state policy in the field of currency regulation, as well as over those, who directly carry out the corresponding activity using the tools specified by provisions of the current legislation. Practical impact. The positive experience of the formation of the foreign exchange market in foreign countries shows that the gradual transition from a fixed to a floating exchange rate is the beginning of a natural market exchange rate and the equalization of the balance of payments and the gradual release of the national economy from the pressure of administrative and corruption restrictions. Value/originality. Conducting the comparative analysis of foreign exchange regulation in foreign countries is the basis for developing the most promising directions for the development of domestic legislation in this field.

THE LEGAL FRAMEWORK FOR THE IMPLEMENTATION OF CURRENCY REGULATION IN SOME FOREIGN COUNTRIES AND IN UKRAINE

The purpose of the article is to conduct a comparative legal study of laws and regulations that determine the legal framework for the implementation of currency regulation in some foreign countries and in Ukraine and to define ways for improving domestic legislation in this area on this basis. The subject of the study is the experience of currency regulation in some European countries, USA, China, and Ukraine. Methodology. The research is based on a comparison of foreign exchange regulation in Ukraine and abroad. Based on the analysis of peculiarities of the state regulation of currency circulation in Great Britain, Germany, France, Poland, the USA, China, and in some other countries, the advantages and disadvantages of different regimes of state control over currency circulation are determined: from the regime of the floating rate to the rigorous state control. On the basis of the comparative legal study of certain provisions of the administrative legislation of Ukraine, the possibilities and limits of the application of positive foreign experience in this area are determined. The results of the study showed that in order to implement foreign exchange management experience, it is necessary to postpone the final transition to establishing a floating rate regime, reinforcing state interference. At the same time, it is necessary to strengthen currency control not only over the implementation of foreign exchange operations but also over the activities of entities that determine the state policy in the field of currency regulation, as well as directly implement the relevant activities using the instruments determined by provisions of the current legislation. Practical implications. The positive experience of the formation of the foreign exchange market in foreign countries shows that the gradual transition from a fixed to a floating exchange rate is the beginning of a natural market exchange rate formation, equalization of the balance of payments, and the gradual liberation of the national economy from the pressure of administrative and corruption restrictions. Value/originality. Conducting a comparative analysis of foreign exchange regulation in foreign countries is the basis for developing the most promising directions for the development of domestic legislation in this area.

Kurs walutowy a inflacja w Polsce. Wpływ kredytów walutowych

It has been widely believed that the exchange rate depreciation of local currency results in an increase of domestic inflation. This notion is based on the assumption that depreciation of local currency will give the economy’s competiveness a boost in international trade which in turn will increase overall demand and inflation. Additionally, some prices set on the international market will increase directly in terms of local currency after such a depreciation. The purpose of this article is to verify the hypothesis that local currency depreciation has a negative impact on inflation in Poland through the credit channel, i.e. foreign currency denominated loans. In Poland a significant open foreign exchange position is related to households’ exposure to foreign currency loans (particularly Swiss franc mortgages). Taking this into consideration the depreciation of the Polish zloty results in lower demand from households indebted in foreign currencies and imbalances in the banking system. The hypothesis was verified through observation of the dependence between the share of foreign currency loans and core inflation in 2015-2016 for Poland and comparable economies. Observation of data in most of the countries confirms the hypothesis that the higher the share of foreign currency loans, the lower the core inflation (in the environment of local currency weakness). The article enriches economic science with an analysis of an open foreign exchange market position and its impact on inflation as potential tool for government and central bank policy. An analysis of the entire open foreign exchange position of the economy, including an analysis of the international trade channel could provide important findings in the area of optimal portfolio building in the foreign exchange market and can have possible regulatory implications.

(Accountable Regulation of Foreign Exchange Operations)

(Accountable Regulation of Foreign Exchange Operations)

Analysis of Determinants the Foreign Exchange Earnings of Tourism Sector in Indonesia

This research aims to analyze determinants of the number of foreign tourist, average foreign tourist expenditure, average length of stay foreign tourist, and dollar exchange rate against rupiah on foreign exchange earnings of tourism sector in Indonesia 2009 – 2013 periods. The data is secondary from Indonesia Statistical Agency, Bank of Indonesia, Ministry of Tourism and Creative Economy, articles, journal, and result of previous researches. This research uses panel data regression analysis. The result shows that the number of foreign tourist, average foreign tourist expenditure, average length of stay foreign tourist and dollar exchange rate against rupiah are giving positive effect on foreign exchange earnings of tourism sector in Indonesia 2009 – 2013 periods. Average length of stay foreign tourist is a variable that mostly affecting on open foreign exchange earnings in Indonesia 2009 – 2013 periods. Based on the result, the government is targeting foreign tourist arrivals to Indonesia for foreign tourists bringing foreign currency so that the rupiah demand will rise and increase tourism foreign exchange. Government, investors and communities leveraging existing infrastructure so that the average length of stay of foreign tourists continues to increase so Enhancing tourism foreign exchange. Stability of rupiah should always be maintained.

International Parity Conditions and the Possible Impact on the International Business Operations

There is not only one currency and an exact predictable parity for each currency in the globe. This makes the accomplishment of international business and trade operations complicated owing to the fact that the mandatory usage of strong currencies in international trade. However, business cycles, alternating macroeconomic variables, political conditions and government interventions impact on the value of currencies and international parity conditions. Turkey is at the convergence of Eurasia and serves as a trade route among many regions. It also derives a considerable part of its GDP from international trade operations. However, the variations in the international trade volume, foreign exchange operations and international parity conditions impact on the economic and commercial potential sweepingly. Thus, the objective of this paper is to review the international business and trade potential of the Republic of Turkey with respect to foreign exchange and international parity conditions depending on credible national and international publications.

Capital Flight from Burkina Faso: Drivers and Impact on Tax Revenue

AbstractThe drivers of capital flight and its effect on tax revenue have not been investigated in the literature for the case of Burkina Faso. We undertake a qualitative analysis, which concludes that capital flight is the result of ineffective regulation of foreign exchange operations, a permissive tax system, and collusion between a politico‐administrative elite and the business sector. We also conduct an econometric analysis, which reveals that a decline in tax revenue and in the GDP growth rate, changes in economic policy regimes, and an increase in natural resource rents, external debt, and political violence induce substantial capital flight. The results show a negative impact of capital flight on tax revenue. The econometric results are consistent with the qualitative analysis with regard to mechanisms of capital flight in both the public and private sectors.

Elasticity and Discipline in the Global Swap Network

Abstract:This article sketches the outlines of the new international monetary system that has emerged in the aftermath of the global financial crisis. At the center of the system, a network of central bank swaps between the six major central banks serves as an elastic backstop for private foreign exchange operations. Farther out on the periphery, an added network of central bank swaps operates to economize on scarce reserves of the major currencies. Meanwhile, in the private foreign exchange market, basis swaps are emerging as the central location where liquidity is explicitly priced, inside the bounds set by central bank swaps.

Strained Relations: US Foreign-Exchange Operations and Monetary Policy in the Twentieth Century By Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz. Chicago: The University of Chicago Press, 2015. Pp. x, 442, $97.50, cloth.

Strained Relations: US Foreign-Exchange Operations and Monetary Policy in the Twentieth Century By Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz. Chicago: The University of Chicago Press, 2015. Pp. x, 442, $97.50, cloth.

Elasticity and Discipline in the Global Swap Network

:This article sketches the outlines of the new international monetary system that has emerged in the aftermath of the global financial crisis. At the center of the system, a network of central bank swaps between the six major central banks serves as an elastic backstop for private foreign exchange operations. Farther out on the periphery, an added network of central bank swaps operates to economize on scarce reserves of the major currencies. Meanwhile, in the private foreign exchange market, basis swaps are emerging as the central location where liquidity is explicitly priced, inside the bounds set by central bank swaps.

Book Reviews

Jeffry Frieden of Harvard University reviews “Strained Relations: US Foreign-Exchange Operations and Monetary Policy in the Twentieth Century”, by Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz. The Econlit abstract of this book begins: “Explores the evolution of US policy regarding currency market intervention and the interaction of currency market policy with monetary policy, and explores this evolution by drawing on foreign exchange transactions conducted through the Federal Reserve Bank of New York between 1962 and 1995. Considers how changing economic and institutional circumstances and political and bureaucratic factors affected foreign exchange policy. Discusses the evolution of US foreign exchange market intervention—thesis, theory, and institutions; exchange market policy in the United States—precedents and antecedents; introducing the Exchange Stabilization Fund, 1934-61; US intervention during the Bretton Woods era, 1962-73; US intervention and the early dollar float, 1973-81; US foreign exchange market intervention during the Volcker-Greenspan era, 1981-97; lessons from the evolution of US monetary and intervention policies; and foreign exchange market operations in the twenty-first century.” Bordo is a Board of Governors Professor of Economics at Rutgers University. Humpage is a senior economic advisor in the Research Department of the Federal Reserve Bank of Cleveland. The late Schwartz was a research associate of the National Bureau of Economic Research.

Strained relations: US foreign-exchange operations and monetary policy in the twentieth century

Drawing on a trove of previously confidential data, Strained Relations reveals the evolution of US policy regarding currency market intervention, and its interaction with monetary policy. The authors consider how foreign-exchange intervention was affected by changing economic and institutional circumstances - most notably the abandonment of the international gold standard - and how political and bureaucratic factors affected this aspect of public policy.

Federal Reserve Policy and Bretton Woods

During the Bretton Woods era, balance-of-payments developments, gold losses, and exchange-rate concerns had little influence on Federal Reserve monetary policy, even after 1958 when such issues became critical. The Federal Reserve could largely disregard international considerations because the U.S. Treasury instituted a number of stop-gap devices — the gold pool, the general agreement to borrow, capital restraints, sterilized foreign-exchange operations — to shore up the dollar and Bretton Woods. These, however, gave Federal Reserve policymakers the latitude to focus on domestic objectives and shifted responsibility for international developments to the Treasury. Removing the pressure of international considerations from Federal Reserve policy decisions made it easier for the Federal Reserve to pursue the inflationary policies of the late 1960s and 1970s that ultimately destroyed Bretton Woods. In the end, the Treasury’s stop-gap devices, which were intended to support Bretton Woods, contributed to its demise.

Veće novčane kazne i duži rokovi zastare težih prekršaja

In this paper we discuss fines for serious violations, the method of prescribing penalties in general and individual regulations, as well as connection between such penalties and prescribing longer periods of limitation. Some areas of law require protection with the penal provisions, which are more stringent than general regime of fines and have longer periods of limitation. It is logical to prescribe more severe penalties for certain offenses, but the question is whether this is always done properly. The analysis also deals with the issue what are the right areas, how are they regulated by the Law on Minor Offences and how are they regulated by the certain laws, whether this is in accordance with general principles. The paper also deals with the issue if there are deficiencies in the regulations, whether general or individual. Certain legal areas deserve special legal regime, such as public revenue, customs operations, foreign exchange operations, environment, trade securities, protection of competition, finance and other areas. The importance of these areas speaks in favour of special rules, both in prescribing the punishment, and in terms of statute of limitation.

A Study on Promoting Inclusive Growth with Reference to Axis Bank

Axis Bank was formed as UTI when it was incorporated in 1994 when Government of India allowed private players in the banking sector. The bank was sponsored together by the administrator of the specified undertaking of the Unit Trust of India, Life Insurance Corporation of India (LIC) and General Insurance Corporation ltd. and its subsidiaries namely National insurance company ltd., the New India Assurance Company, the Oriental Insurance Corporation and United Insurance Company Ltd. Promoting inclusive growth has been top priority area of the Axis Bank Foundation. They try to make the difference to their customers, to the society and to the nation's development directly through the products and services, as well as through developmental initiatives and community outreach its main areas of focus is for promoting inclusive growth consisting of education, public health and medical relief, sustainable livelihoods and improving access to financial services and technology initiatives. These can be achieved through active collaboration with the government and independent organizations. I. Introduction AXIS Bank is one of the fastest growing banks in private sector. The Bank operates in four segments, namely treasury, retail banking, corporate/ wholesale banking and other banking business. The treasury operations include investments in sovereign and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange operations on the account, and for customers and central funding. Retail banking includes lending to individuals/ small businesses subject to the orientation, product and granularity criterion. It also includes liability products, card services, Internet banking, automated teller machines (ATM) services, depository, financial advisory services, and non-resident Indian (NRI) services. The corporate/ wholesale banking segment includes corporate relationships not included under retail banking, corporate advisory services, placements and syndication, management of publics issue, project appraisals, capital market related services, and cash management services. The Bank's registered office is located at Ahmedabad and their Central Office is located at Mumbai. Axis Bank recognizes its duty as a responsible corporate citizen to help strengthen the communities in which we live and work. Axis Bank Foundation (ABF) was setup as a Public Trust in 2006 to carry out the Corporate Social Responsibility initiatives of Axis Bank. ABF has partnered with several NGOs to provide equitable education to various underprivileged individuals across 13 states of India. With the continued efforts to elevate the education levels in India, in 2011 they ventured into the domain of providing sustainable livelihoods. These programs will aim at alleviating poverty and providing livelihood options for economically weak households. Besides the philanthropic initiatives of ABF, they have setup a Volunteering program, encouraging the employees of the Bank to get involved and become socially responsible citizens. ABF is also actively involved in making steps towards reversing the effects of our ecological footprint, by implementing several Sustainability Initiatives. The mission of the foundation is articulated by the MD as; at Axis Bank, strongly believe, that we should participate in the well being of our society. Axis Bank Foundation was set up to give strategic direction to the philanthropic activities of our Bank and its officers. In tune with our desire that the Bank should not only be profitable but also socially relevant, we set apart up to 1% of our profits every year for the activities of our foundation. The foundation has so far been focusing primarily on initiatives in the field of education. We are also engaged in highway trauma care and rural medical relief, in a modest way. Objectives of the study This paper focuses on the initiatives taken by Axis Bank for promoting inclusive growth.

Foreign Exchange Determination in Ghana

In Ghana, most of the time imports exceed exports, so the demand for foreign exchange (dollar) always exceeds supply and this puts intense upward pressure on the exchange rate. There has been continuous depreciation of the cedi against most of the major currencies especially the US dollar, which is largely use for commercial transactions. Since the demand for dollar most of the time exceeding supply, international dollar values seldom have impacts on cedi dollar rates. The declared regulatory framework in which the banks conduct foreign exchange operations is broadly consistent with international practices. Banks are in principle free to act in both spots and forward markets as they see fit, subject to the prudential regulations governing their net open position limits. In practice, however, there is strong evidence that the cedi is prevented from depreciation too rapidly in the past three to five years. This is the result of Bank of Ghana (BOG) exercising “influence” over the commercial banks through suasion and also on occasion through temporally intervention via foreign exchange swap arrangements. This temporary intervention is inconsistent with the BOG’s freely floating foreign exchange policy. (Year of research - 2006. As at posting this material the exchange rate is what is changed: now a dollar is exchanged for about One Ghana Cedi Fifty Pese was, subsequent to a recent cedi redenomination, however the process of determining exchange rate in Ghana currently is not changed from the findings made in 2006 by the author.)

An Analysis Of Central Bank Interventions: Evidence From Turkey

This paper investigates the characteristics of the foreign exchange operations of the CBRT during the period following the Turkish economic crisis in February 2001. Using time series based econometric models, we estimate the parameters of the FOREX market, along with the degree of effectiveness of the interventions of the monetary authority and the inflation targeting framework it employs. The results indicate that the CBRT interventions are inefficient and are mainly influenced by the uncertainties inherent in the economic environment, and cannot decrease the volatility of the exchange markets.