Foreign Exchange Rate Fluctuations Research Articles

Stochastic intervention control of mean-field jump system with noisy observation via L-derivatives with application to finance

In this paper, we investigate stochastic optimal intervention control of mean-field nonlinear random Poisson-jump-system with related noisy process. We derive the necessary conditions of optimality for partially observed optimal intervention control problems of mean-field type. The coefficients depend on the state of the solution process as well as of its probability distribution and the control variable. The proof of our main result is obtained by applying L-derivatives in the sense of Lions. In our control model, there are two models of jumps for the state process, the inaccessible ones which come from the random Poission process and the predictable ones which come from the intervention control. Finally, we apply our result to study conditional mean-variance portfolio selection problem with interventions, where the foreign exchange interventions are intended to contain excessive fluctuations in foreign exchange rates and to stabilize them.

Exploring the Critical Risk Factors of Public–Private Partnership City Hospital Projects in Turkey

Governments face challenges in delivering essential public services due to their limited funds. This has led to an increasing reliance on the Public–Private Partnership (PPP) model, an alternative financing model involving a long-term collaboration between the private and public sectors to provide public services. Turkey, as a developing country facing financial limitations, has embraced the PPP model to address urgent public needs. Over the past decade, the Turkish Government has extensively utilized the PPP model, particularly in executing city hospital projects. However, investors have faced challenges in project execution due to various risk factors. Therefore, the main objective of this study is to explore the critical risk factors associated with PPP city hospital projects in Turkey. In this context, a comprehensive literature review was conducted to identify potential risks related to PPP city hospital projects. A questionnaire survey was implemented to assess the probability of occurrence and the severity of the impact of these risk factors. The collected data underwent analysis to determine the priority of these risk factors. The findings revealed that the top five most critical risk factors in PPP city hospital projects in Turkey are “foreign exchange rate fluctuations”, “inflation rate volatility”, “high finance costs”, “fiscal issues”, and “economic crises”. Conversely, “unavailability of equipment” was identified as the least significant risk factor. The insights gained from this research can offer valuable guidance for prospective investors interested in participating in PPP city hospital projects in Turkey and other developing countries with similar conditions.

Hedging Training for Export and Import Business

Globalization causes changes and provides convenience in trading activities between countries, exports, and imports. This community service program was conducted for a company engaged in the field of iron trading, which deals with imported products from Japan, America, Europe, China, and Taiwan. The main problem faced by this community service partner was the profit uncertainty due to fluctuations in the foreign exchange market. As a way to avoid currency exchange rate uncertainty, companies can hedge. One of the hedging activities carried out by company management in dealing with fluctuations in foreign exchange rates is the alternative use of derivative instruments. The method for implementing the community service activities was in the form of onsite training which was divided into two sessions. In the first session, the community service team gave a lecture on a general overview of hedging. In the second session, the community service team carried out a simulation of calculating the costs of hedging using appropriate tools. This community service program provides results in the form of developing partner's know-how that provides benefits to mitigate risk through hedging capabilities. Based on the simulation results using the hedging cost calculation tool, partners can see that hedging in the money market is more profitable than forward contracts.

The Impact of Fluctuations in Foreign Exchange Rates on Financial Performance: An Applied Study on the Industrial and Service Companies Listed on the Palestine Exchange During 2014-2019

The Impact of Fluctuations in Foreign Exchange Rates on Financial Performance: An Applied Study on the Industrial and Service Companies Listed on the Palestine Exchange During 2014-2019

Nexus between foreign exchange rate and stock market: evidence from India

This study examines the impact of foreign exchange rate fluctuations on various NSE capitalized indices of India. Five exchange rates were chosen based on trading contracts in the currency derivative segment of NSE. These exchange rates are US Dollar-Indian Rupee (USD/INR), Euro-Indian Rupee (EUR/INR), Great Britain Pound-Indian Rupee (GBP/INR), Chinese Yuan-Indian Rupee (CNY/INR) and Japanese Yen-Indian Rupee (JPY/INR), which are used as a regressor in this study. The data of NSE Nifty large-cap 100, Nifty mid-cap 100 and Nifty small-cap from December 1, 2012 to December 1, 2022 was considered for the study. GARCH (1, 1) model was used to analyze the nexus between exchange rate fluctuations and capitalized indices, and it was further validated by DCC GARCH to evaluate the volatility spillover. The result shows that exchange rate fluctuations have a positive effect on stock market volatility along with a varying degree of incidence on small-cap, mid-cap, and large-cap. DCC α has been found to be significant in USD & GBP for small-cap, and GBP & CNY for mid-cap. On the other hand, USD, Euro, CNY and JPY have a significant impact on the large-cap index in the short-run. Further, it is found that there is long-run spillover effect (DCC β) of exchange rates on all capitalized indices of the Indian stock market, and it is highest in in the large-cap case.

Kur Farklarının Nakit Akış Tablosuna Etkisi Üzerine Analitik Çalışma

This study investigates the effect of foreign exchanges differences on the cash flow statement, the applied part of this study depends on the actual real data of one of the banks in Syria related to 2013. There have been significant fluctuations in exchange rates as a result of the Syrian crisis, these fluctuations have affected all financial transactions, especially banks transactions. The study aims to investigate that effect on the cash flow statement practically to provide more transparency and fairness with related to the statement of cash flow. This investigation has been done depending on the financial statements of an Islamic bank located in Syria for the year 2013, during the investigation it has been noticed that some accounts in foreign currency have been fixed balances with no changes during the year such as deposits, but because of the fluctuations in foreign exchange rates those accounts have shown a change in the balance in local currency, which was reflected on the financial statements, especially cash flows statement. The main conclusion of this study is that changes in foreign exchange rates that affect the value of fixed balances should be considered separate from actual changes and should not be included in the preparation of financial statements. Instead, they should be shown as separate items, specifically in the cash flow statement. Additionally, the study recommends that these effects should be disclosed and explained in the financial report to provide more transparency, clarity, and fairness for readers.

The Moderating Role of Foreign Exchange Rate in the Relationship between Outward Foreign Direct Investment and Economic Growth in Kenya (1986-2021)

Purpose: The purpose of this study was to investigate the moderating role of foreign exchange rate in the relationship between outward foreign direct investments and economic growth in Kenya. The central purpose of any government is to formulate strategies that boost economic growth and correct capital flight. The Foreign Exchange Rate (FER) fluctuations generated by globalization are expected to leverage the effect of capital flight and boost economic growth, but this seems not to happen. Further, the loss of foreign exchange reserves resulting from capital flight demonstrates that some financial savings are lost to the economy. Since FER is a strong determinant of Gross Domestic Product (GDP), the effects of this scenario are a great economic concern. The dependent variable for this study was economic growth, while the independent variable was outward foreign direct investments. The general objective of this study was to investigate the moderating role of foreign exchange rate in the relationship between outward foreign direct investments and economic growth in Kenya. The specific objective was to determine and evaluate the effect of outward foreign direct investments on the economic growth in Kenya as well as to investigate the moderating role of foreign exchange rate in the relationship between outward foreign direct investments and economic growth in Kenya. The indicator of economic growth was the percentage change in GDP.
 Methodology: This study adopted an ex-post facto research design with a sample size of 35 years from 1986 to 2021 and relied on secondary data from Kenya National Bureau of Statistics (KNBS), International Financial Statistics (IFS), Central Bank of Kenya (CBK), International Monetary Fund (IMF), World Development Index (WDI), United Nations Commodity Trade (UN Comtrade) and African Development Indicators (ADI).
 Findings: Using a panel data model, the study found that outward foreign direct investments did not have any significant effect on economic growth when foreign exchange rate was included in the model as an interaction variable. Foreign exchange rates had a significant effect on economic growth. The relationship was inverse indicating that the foreign exchange rate affected economic growth negatively. The interaction variable had a positive and significant coefficient indicating that the foreign exchange rate moderated the relationship between outward foreign direct investment and economic growth.
 Unique contribution to theory, practice and policy: From the empirical findings, we can infer that outward foreign direct investment did not constrain resources and did not affect economic growth.

The Asymmetric Effect of Political Risk and Exchange Rate Fluctuations on Foreign Direct Investment Inflows in South Africa

Most developing countries rely heavily on foreign direct investment (FDI) inflows for economic growth and stability. However, political risk and the foreign exchange rate could direly affect FDI inflows as investors seek stable markets. The most recent example of political risk interactions, the exchange rate and FDI has been the trade war between the United States (US) and China, where the US increased tariffs on Chinese goods worth over $16 billion. A crucial debate is needed regarding the importance of FDI inflows in developing countries, such as South Africa. FDI is observed as a crucial component in providing resources, and it is critical in facilitating globalisation and providing financial assistance to countries in need, especially developing countries such as South Africa. This study aimed to examine the long- and short-run effects of political risk ratings and foreign exchange rate fluctuations on FDI inflows in South Africa. The literature review provided evidence of long- and short-term relationships between political risk ratings, the real effective exchange rate, and the GDP's balancing variable on the dependent FDI inflows. The study utilised both the autoregressive distributed lag (ARDL) and non-linear autoregressive distributed lag (NARDL) models to analyse quarterly data from 1995 to 2020. The Variables included in the study were political risk, the real effective exchange rate, FDI inflows and GDP. The study revealed that political risk ratings and the real effective exchange rate have long-run effects on FDI inflows. The real effective exchange rate has an asymmetric long-run effect. It was also found that FDI inflows respond more to real effective exchange depreciations than real effective exchange rate appreciations, implying that the exchange rate is an important economic factor in explaining the investment inflows. Consequently, the study recommends that policymakers deploy responsive policy measures to deal with currency fluctuations and political instability. In South Africa, the negative effect of political risk affects FDI and impacts the overall country risk ratings and the country's ability to borrow. The study also recommends that further research be employed to understand other impacts on FDI inflows and the interaction of political risk and the real effective exchange rate on other critical economic factors.

Penerapan Hedging di Perbankan Syariah sebagai Mitigasi Risiko Pasar Akibat Fluktuasi Kurs

This research aims to determine the application of hedging in Islamic Banking Indonesia in mitigating the market risk resulting from fluctuations in foreign currency exchange rates. Researchers using qualitative methods, techniques Miles and Huberman Model. The object of this study is that adopted sharia hedging instrument of Conventional Banking products and prescribed and packaged in provisions DSN- MUI Fatwa No. 96/DSN-MUI/IV/2015, PBI 18/2/PBI/2016 and DPS Opinion No. 17/26/DPS/XII/2015 concerning the Proposed Transaction Hedging (Hedging) Sharia. The purpose and object of concern to researchers, then pure researchers took samples at PT. Bank Syariah Mandiri (BSM) that have implemented sharia hedging through forward contracts agreement. The results of this study, it can simply be concluded that the application of hedging has been implemented by BSM in accordancewith the provisions of both the provisions of the DSN-MUI, PBI and DPS. But on the other hand there are things that must be considered more serious for banks to implement sharia hedging instruments. This is because there is the inherent nature of the hedging diinstrument which is difficult to be avoided and eliminated.
 Keywords: Hedging, Forward Contract Agreement

Benefits of Fluctuating Exchange Rates on the Investor’s Wealth

We consider a problem of maximizing the utility of an agent who invests in a stock and a money market account incorporating proportional transaction costs λ > 0 and foreign exchange rate fluctuations. Assuming a HARA utility function U c = c p / p for all c ≥ 0 , p < 1 , p ≠ 0 , we suggest an approach of determining the value function. Contrary to fears associated with exchange rate fluctuations, our results show that these fluctuations can bring about tangible benefits in one’s wealth. We quantify the level of these benefits. We also present an example which illustrates an investment strategy of our agent.

The Effects of Trade Openness, Foreign Direct Investment and Exchange Rate Fluctuations on Non-oil Gross Domestic Product Growth

The Effects of Trade Openness, Foreign Direct Investment and Exchange Rate Fluctuations on Non-oil Gross Domestic Product Growth

Dampak Pengaruh Kurs Valuta Asing Dan Inflasi Terhadap Jakarta Islamic Index

Jakarta Islamic Index (JII) is one of the sharia-based stock indexes in Indonesia that provides benefits for capital owners to make investments in accordance with Islamic sharia on the Stock Exchange. This study aims to analyze the Effect of Foreign Exchange Rate Fluctuations (US Dollar and Euro) and Inflation on the Jakarta Islamic Index (JII), with an observation period during July 2017-August 2019. The data used in this study is time series data that is quantitative. which consists of data on the monthly closing value of the JII Variable, Inflation and data on the monthly closing value of the Rupiah exchange rate against the Dollar and EURO. The analytical method used is Multiple Linear Analysis, Hypothesis Testing, and Coefficient of Determination Test. The data processing is carried out using the SPSS 20.0 application. Based on the results of the t test, it partially shows that the value of the US Dollar Exchange Rate (US$) variable has a positive and not significant effect, the EURO exchange rate variable has a positive and insignificant effect while the inflation variable has a positive and insignificant effect on the Jakarta Islamic Index in the 2017-2019 period. . Variables US$, EURO, and inflation simultaneously or together do not have a positive and significant effect on the stock of the Jakarta Islamic Index.

The Effect of Rupiah Exchange Rate, Firm Size, Leverage and Liquidity on Hedging Decision Making Using Derivative Instruments

Companies facing the risk of fluctuations in foreign exchange rates can hedge with derivative instruments such as forward, future, swap and option contracts. The purpose of this study was to determine the effect of exchange rates, firm size, leverage and liquidity on hedging decision making using derivative instruments in BUMN companies listed on the Indonesia Stock Exchange for the period of 2016-2018. The method of determining the sample using purpose sampling technique and obtained 12 samples that meet the criteria and 144 firm-quarter observation. The analysis technique used is descriptive statistics and logistic regression. The test results show that the rupiah exchange rate has positive no significant effect on hedging decision making using derivative instruments. Firm size variable has a positive significant effect on hedging decision making using derivative instruments. The leverage variable which is proxied by debt to ratio has a negative significant effect on hedging decision making using derivative instruments. Liquidity which is proxied by current ratio has a negative significant effect on hedging decision making using derivative instruments

The Risk of Foreign Exchange Exposure of Stock Returns Concerning Non-Financial Listed Firms

The foreign exchange rate fluctuations do create an impact on stock returns, which has been investigated for non-financial listed Pakistani firms. The real effective exchange rate has been used as the true measure of foreign exchange exposure. The modelled econometric equation includes; firm size, firm liquidity, money supply and inflation as predictors of stock returns. Twenty-five non-financial listed firms have been evaluated for the study period 2004 to 2013, which signifies the military regime era proceeded by peoples party rule in Pakistan. Financial data analysis, including; ADF unit root and Johansen Co-integration tests, have been applied to evaluate financial data, which further led to correlation, descriptive stats and panel data regression analysis. The results have suggested a very weak relationship between stock returns and foreign exchange exposure. Therefore, sample non-financial listed firms have not been foreign exchange exposed; however, firm size, liquidity, money supply and inflation rates have definitely created an impact on stock returns.

A temporal study of the responsiveness of foreign private investment to exchange rate in Nigeria, 1981 – 2018

This study examined the response of foreign private investment flows to fluctuations in foreign exchange rates in Nigeria. The empirical analysis was conducted using ordinary least square Multiple Regression on E-view 10 Econometric model for the period 1981 to 2018. Preliminary analysis was carried out with Jarque Bera normality test and Johnson’s transformation test to confirm normal distribution of data and the transformation is effective. A negative relationship between foreign exchange fluctuation and foreign private investment is found. Also, that Bank lending interest rate, market capitalization, external debts and trade openness have a significant effect on the foreign private capital flows in Nigeria while foreign exchange rate fluctuation does not significantly affect private investment. From the findings of the study, we recommend i) That policymakers in Nigeria should seek and implement appropriate exchange rate that will boost foreign private investment; ii) Ensure enlarge trade relationship by allowing international organizations and citizens of other countries access to the financial market in the domestic economy; iii) They should discourage external borrowing to significantly reduce debt service burden.

Trade Imbalance Network and Currency Risk Premia

This paper proposes a new risk factor based on a multi-country’s trading imbalance network to explain foreign exchange rate fluctuations and currency risk premia associated with a currency carry trade strategy. We build a directed in-degree trading network of global countries linked by their pair wise trading deficit using import and export trading data collected from UN comtrade. After sorting currencies portfolios based on the centrality scores, the new risk factor, i.e., CMP, Central Minus Peripheral is created by buying central countries currency and shorting peripheral countries currency. We then use this factor to explain the risk premium of the foreign currency and currency excess returns cross sectional variations. Our results confirm the explanatory power of the new risk factor. We show that the new measure has signifcant explanatory power to currency risk premium and corsssectional foreign currency excess returns after controlling the existing risk factors of e.g., Lustig and Verdelhan (2011), Corte et al. (2016), and Richmond (2019).

Pengaruh Leverage, Profitabilitas dan Likuiditas terhadap Keputusan Hedging

International transactions carried out by companies in Indonesia have some implications related to foreign exchange rates. Fluctuations in foreign exchange rates make the companies experience financial risks resulting in a decrease in profits or an increase in debts, which eventually will raise losses and weaken the financial performance. To avoid these financial risks, companies can make hedging decisions to maintain currency exchange rates and avoid excessive risks.
 
 The purpose of this study is to determine and analyze the effects of leverage, profitability and liquidity on hedging decisions in manufacturing companies listed on the Indonesia Stock Exchange in 2015 - 2018.
 
 The research method used is a quantitative analysis method with purposive sampling technique. Data are obtained from a research sample of 28 companies. This study uses logistic regression analysis techniques to determine the variables that influence companies in hedging decisions. Secondary data were gathered from the Indonesia Stock Exchange, the companies’ websites and their annual financial statements.
 
 The results show that leverage and profitability partially have no effects on hedging decisions, with calculated t scores of 0.578 and 0.198. However, liquidity has an influence on hedging decisions with calculated t score of 0.003. Leverage, profitability and liquidity simultaneously have an influence on hedging decisions with calculated f score of 0.001.
 
 Keywords: hedging, leverage, profitability, liquidity

Variabel Fundamental Perusahaan Dalam Memprediksi Hedging Decision (Studi Perusahaan Automatif dan Komponen Serta Pertambangan Batubara Periode Tahun 2014-2017)

One of the major risks facing multinational companies in international trade is the risk of fluctuations in foreign exchange rates. The company makes an effort to reduce the impact of these risks through risk management using a hedging decision. This study aims to test empirically the effect of the company's fundamental variables in predicting hedgings decision. Fundamental variables in this study use financial ratios, namely profitability, leverage, liquidity and growth opportunities. The data in the study used panel data from 2014 to 2017. This study used data analysis techniques using logistic regression tests. Logistic regression test is used because the dependent variable uses dummy data, namely companies that do hedging are given a score of 1 and those who do not do hedging are given a score of 0. The results of the study show that the variable profitability, leverage, and growth opportunities have a positive effect on the hedging decision. The variable liquidity has a negative effect on the hedging decision.

ANALYSIS OF THE RELATION BETWEEN INFLATION AND FOREIGN EXCHANGE RATES FOR THE NORTHERN REGION OF IRAQ

The purpose of this study is to examine the relation between the inflation rate, foreign exchange rates of the major currencies used in the northern region of Iraq (NRI), money supply and gross domestic product (GDP) for the period 2008-2016. It is notable that the region suffers from high inflation rates and there were fluctuations in foreign exchange rates after the fall of the former Iraqi regime in 2003. This is the first article about this subject for NRI using an error correction model and the results indicate that there is a long-run relation between variables. The relation between US Dollar and inflation in the region is positive and statistically significant. There is a negative relation between Euro and inflation, which is also statistically significant. NRI imports many goods and services from Turkey, but a surprising result is that the Turkish Lira variable is not statistically significant. This may be due to the fact that import payments are done with Dollars and not Turkish Liras. There is also a negative long-run relation for the variables GDP and money supply, which are not statistically significant. In the analysis, money supply by the Iraqi Central Bank was used as the money supply variable, but the amount of money supply in the NRI is not proportional to the amount offered by the Central Bank, there is no advanced banking system in the region. The amount of Dinar coming into the region consists of converting the oil export revenues into Iraqi dinar and supplying these Dinars as payments to the market. Therefore, the NRI money supply will depend on the oil revenues and the Dollar, which makes money supply variable statistically insignificant.

PENGARUH LEVERAGE, FIRM SIZE, PROFITABIlITAS TERHADAP KEPUTUSAN HEDGING PADA PERUSAHAAN MANUFAKTUR DI BURSA EFEK INDONESIA

International trade by multinational company can result in risk borne by the company. Foreign exchange rate fluctuation risk is the biggest rist that affect international trading activity. Therefore to reduce that risk, the company using hedging policy as risk management. This study is aimed to analyse the impact of leverage , firm size, and profitability of the hedging decision using derivative instruments in manufacturing companies listed in Indonesia Stock Exchange in 2013 until 2017. Sampling using purposive sampling techniques and according to the criteria established company obstained 107 sample and 535 dirm year observation. Logistic regression techniques was used to test this research. The result of this study indicates that variables debt to equity ratio as a proxy for leverage has a positive and significant effect on hedging activites, variables Ln(total asset) as a proxy for firn size has a positive and significant effect on hedging activities, and return on asset as proxy for profitability has a posistive and significant on hedging activities. 
 Key Word: leverage, firm size, profitability, hedging.