Foreign Exchange System Research Articles

The Impact of Exchange Rate Changes and Diversified Revenue Structure on The Profitability of Commercial Banks

All the income of commercial banks is divided into traditional interest rate spread income and various non-interest income, all along, the bank's income mainly comes from its deposit and loan spread, that is, net interest income, and other businesses develop slowly. However, with the deepening of interest rate market-oriented reform and foreign exchange system reform, the diversified development of commercial banks has become increasingly prominent, becoming one of the basic hubs for bank transformation and financial risk prevention and control. Based on the revenue data of 10 listed commercial banks in China from 2011 to 2021, this paper analyzes the impact of commercial banks' profitability on their income structure and exchange rate changes, so as to explore the business strategies that can bring profit improvement to banks in the context of changing macro economy.

INFLUENCE OF MACROECONOMIC VARIABLES ON EXCHANGE RATE: A STUDY ON BANGLADESH

Exchange rate plays an imperative role in international trade of the country. The exchange rate is an important macroeconomic variable used as parameter for determining international competitiveness and indicates the global position of economy of the country. The development of the country is closely related with its foreign exchange system. The construction of this study is to determine the influential macroeconomic variables of the exchange rate by considering 20 years, from 2002 to 2021, data of Bangladesh. Pearson’s correlation and multiple linear regression are used to analyse the data. The results indicate that current account balance, foreign exchange reserve, remittances, and GDP growth rate has a significant positive correlation with the exchange rate. However, interest rate and current account balance have no statistically significant relationship with the exchange rate. Therefore, current account balance, foreign exchange reserve, remittances, and GDP growth rate are the most influential factors in determining the exchange rate. Therefore, this research concludes that policymakers can change these influential factors to get the best exchange rate for the benefit of the growing economy of Bangladesh.

Analysis on the Impact of the Foreign Exchange Reserves of China on Its Macro Economy

China has the largest foreign exchange reserve in the world, but the high foreign exchange reserve is a double-edged sword for the country. There are two kinds of analysis for this. First, China's foreign exchange reserves have far exceeded the reasonable scale, which will cause China to pay extremely high management costs. Second, China's foreign exchange reserves are considerable, but this is the objective demand of the economy. Sufficient foreign exchange reserves can make China occupy a favorable position in international development. Based on the data on China's foreign exchange reserve, foreign debt scale and GDP from 1985 to 2019, this paper analyzes the positive and negative effects of high foreign exchange reserve on China's economic development. By analyzing the current situation of China's foreign exchange, the author gives some policy suggestions: (1) appropriately reduce foreign exchange reserves; (2) promote the reform of the exchange rate system; (3) reform the foreign exchange system

Foreign Exchange System in Nepal: A Theoretical Perspective

International economic relation and trade are occurred in different currency system. The currency of one country may not be tendered in another country. So, the natural person or organization requires buying the currency of target country. In fact it is the process of converting one currency into another currency, which makes globalization and international trade possible. Buying and selling of currency is made in spot market, forward market, futures market, swap market, and option market. Additionally, change in real price, structural change, speculation, inflation, interest rate, public debt, and status of terms of trade make effect in equilibrium position of exchange rate. Yet, demand and supply of the currency determine appreciation and depreciation of currency. Policy exchange rate is accepted as fixed rate, floating rate, crawling band, crawling peg, conventional fixed peg arrangement, pegged exchange rate within horizontal band peg, currency board, dollarization and no separate legal tender. Earlier mint par theory was universally accepted. However, in contemporary time, balance of payment theory and purchasing power parity theory are accepted as theories of foreign exchange. Market transaction is made through hedging, speculation, and arbitrage etc. Exchange control is made through unilateral method and bilateral method. Unilateral method includes bank rate policy, import and export policy, exchange equalization fund, exchange pegging, multiple exchange rates, rationing of foreign exchange, and blocked account whereas bilateral method includes clearing agreement, payment agreement, installment agreement, differed payment agreement, and compensation agreement etc as per necessity. Nepal has accepted fixed peg exchange rate regime with Indian currency and flexible exchange rate regime with rest of the currencies.

Late-Copper-Age decorated bowls from the Trieste Karst (north-eastern Italy): What can typology, technology and non-destructive chemical analyses tell us on local vs. foreign production, exchange systems and human mobility patterns?

Twenty-two Late-Copper-Age decorated cross-footed bowls from the Trieste Karst (north-eastern Italy) and the Deschmann's pile dwellings (Ljubljansko barje, Slovenia), recently investigated using X-ray computed microtomography (microCT), have been studied and chemically analysed using non-destructive prompt gamma activation analysis (PGAA). The main aim of our research was to determine whether the cross-footed bowls found in the Trieste Karst were locally produced or if they might have been imported from central Slovenia or even from more distant regions. The PGAA results, combined with the microCT ones, have shown that only 1 bowl from the Karst might have been imported from Ljubljansko barje, while other 4 Karst vessels were most probably imported but not from central Slovenia. In more detail, K2O contents, higher than values reported from local Karst and Slovenian soils, have been recorded in two of these Italian bowls. The Karst bowls represent, according to their morphology and rich ornamentation manly consisting of cord impressions, a special variant of cross-footed bowls with relevant typological comparisons in the Carpathian basin (Hungary, Slovakia and the Czech Republic). A possible central European origin of some Karst bowls would be in agreement with high K2O soil contents in some areas of the Czech Republic. Cross-footed bowls from the Trieste Karst might be considered as evidence of long distance connections, movements of ideas, artefacts and/or even movements of people, triggered by large-scale migrations from the north Pontic steppe region to central Europe, revealed by recent genetic studies.

Modern Investment Legislation in Egypt

The main purpose of the article is to determine and analyze the essence and role of contemporary investment legislation in Egypt within the process of active “authoritarian modernisation”. The latter has been evolving in the Egyptian political and economic institutional structure in the latter half of 2010s, after the failure of the previous reforms and their driving political forces connected to and supporting the “Arab spring” of 2011-2013. The attention is concentrated on the recent legislative regulating instruments, designed to stimulate the investment activities of both local and foreign businesses, especially with the aim to direct their financial, managerial, technological and other resources, starting with the hard currency inflows, to the execution of new projects selected by the state due to their strategic importance for modern Egyptian economy. Most importance in this context is the analysis of the Investment Law No. 72 of 2017 and the Law No. 72 of 2017 Promulgating the Investment Law. The study reveals that those documents, less than a year after their coming into force, have already proved ample potential to accelerate economic development of the Arab country under review, i.e. serving as a means to increase the attraction of incoming foreign direct investments (FDI). The new laws should compliment other economic reforms, which have been recently implemented, including: 1) the shift from the previous sales tax regime to a comprehensive value added tax (VAT) system; 2) the liberalisation of the foreign exchange system; 3) the adoption of a flexible exchange rate regime; and 4) the gradual reduction of energy subsidies. The author admits that it is rather difficult to separate the effects of each one of the mentioned reforms, the more so that some of the results are not devoid of contradictions. Yet there is hardly any doubt as to their positive synergetic influence improving the overall investment climate in the Arab Republic of Egypt (ARE). The analyses supported by the latest consolidated statistics of the IMF reveal that the growth in ARE accelerated for four consecutive quarters, reaching 5.2% in July-September 2017, compared to 3.4% in the same quarter of the previous year, unemployment has declined, inflation continued to go down from the peaks reached following the pound floatation and energy price reforms, and the external position strengthened, while inflows exceeded original program expectations. Positive market sentiment reflects growing credibility of the economic management. To unlock Egypt’s growth potential, raise export competitiveness and create more private sector jobs, the authorities are enhancing the modern broad-based strategy of market-friendly reforms. In 2017, apart from the mentioned new investment law, the Egyptian parliament passed an industrial land and licensing law. Access to industrial land has become more readily available as nearly 17 mln sqm of land was provided in 2016/17 compared to 9.5 mln for the whole period of 2007-15. Key reforms in the pipeline include a new bankruptcy law and a single proprietor company law that aims to encourage small and medium sized enterprises (SMEs). With improved overall confidence and growing credibility of the governmental program, the private sector entrepreneurship become more visible, and there is a growing interest by foreign investors, including in the newly established industrial free zones. Thus Egypt has been highlighted as the fastest growing location for start-ups with growth of over 100 percent in the previous year, reaching over 500 registered startups, and with very promising prospects for rapid growth.

The Foreign Exchange System in Korea: A Literature Survey

The foreign exchange system of a country refers to the laws, regulations, and institutions that govern foreign exchange transactions between residents and non-residents and determine movement of exchange rates. The foreign exchange system in Korea has gone through a lot of changes in a relatively short time period. This paper presents a summary of the major changes in the foreign system in Korea together with a review of the academic literature on the foreign exchange system in Korea. In particular, the paper addresses four aspects about the foreign exchange system in Korea: the exchange rate regime, the capital account liberalization, the Asian currency crisis and the policy response, and the global financial crisis and the foreign exchange macro-prudential regulations.

Network analysis and systemic FX settlement risk

Abstract A proposal for applying network analysis to a foreign exchange (FX) settlement system is considered. In particular, network centrality metrics are used to analyse payments of financial institutions which settle through CLS Bank (CLS). Network centrality metrics provide a way to study settlement members’ connectivity, obtain a sense of their payments evolution with time, and measure their network topology variability. The analysis shows that although the continuous link settlement (CLS) network structure can be approximated with a power law degree distribution for many trade days, this is not always the case. A network community detection algorithm is applied to the FX settlement network to explore relationships between communities and to detect classification patterns in the FX trading net payments. A metric called SinkRank is used to build a ranking of the most systemic settlement risk important financial institutions trading on the FX system, and to understand how the metric depends on network’s connectivity. Since network metrics do not fully explain the dynamics of the settlement process, the CLS’ settlement system is simulated to measure the contagion of unsettled trades and its spread among network members. The effect of settlement failure and contagion on the settlement members is also explored.

An Examination of Foreign Exchange Reserve and Inflation Relationship of Four West African Countries: Evidence from ADRL Model

The objective is to provide the empirical evidence regarding the relationships between foreign exchange reserves and inflation for four West African countries namely Cote d’Ivoire, Senegal, Ghana and Nigeria. A comparison of empirical evidence is obtained from the Autoregressive distributive lag model (ARDL) proposed by Pesaran, Shin and Smith (2001) using annual data running the period of 1972 to 2014. The empirical result shows that the relationship between the change in foreign exchange reserves and inflation rate is positive for the countries cited above in long run but the overall short run estimation of our model is insignificant at the conventional level. This means that rise in foreign exchange reserves leads to increase the rate of inflation. Regarding our investigation results, the study suggests that governments of these countries cited above should pay more attention to foreign exchange system management by enlarging open market operations. Moreover, they can use sterilization or other policy instruments to reduce foreign exchange reserves to stabilize domestic economy. According our overall empirical results, we propose the following suggestions. First, the central bank expands the base money supply channels and offers a variety of sterilization methods. Second, reinforce coordination of monetary and fiscal policy, and adopt comprehensive measures to promote the international payments balance. As West African countries’ economy is growing rapidly, exchange reserves will still growth and the inflation is an urgent issue too. Therefore, it’s still very important for these countries to reduce the negative effect of the excessive foreign exchange reserves.

DEPRESIASI RUPIAH TERHADAP DOLAR AS DAN PENGARUHNYA TERHADAP EKSPOR DAN IMPOR

The depreciation of rupiah against US dollar will make positive and negative implications on the economy of Indonesia. This is a consequence of the open economy system and embraced free foreign exchange system. This paper aims to discuss and analize some implications of the depreciation of Indonesian rupiah upon foreign trade, foreign loans, and government reserve money. This paper uses a qualitative approach with a descriptive-analysis method supported with relevant data and references to the above topic discussed. It was concluded that condition of high depreciation of the rupiah in-mid and long-term should have to encourage surplus of foreign trade balance and decreasing import. This is a constraint on condition of rupiah’s depreciation. Moreover, depreciation of rupiah will be a benefit in competing similar products traded in international market. Depreciation of rupiah also can increase foreign direct investment to finance overall of businesses, as well as finance for development.

Long-memory exchange rate dynamics in the euro era

We investigate the long-run dynamics of a system of eight major exchange rates in the euro era using both integer and fractional cointegration methodologies. Contrary to the fragile evidence in the pre-euro era, robust evidence of linear cointegratedness is obtained in the foreign exchange market during the euro era. Upon closer examination, deviations from the cointegrating relationship exhibit nonstationary, long-memory dynamic behavior (Joseph effect). We find the long-memory evidence to be temporally stable in the most recent era. Finally, the foreign exchange system dynamics appears to be characterized by less persistence (smaller fractional exponent) in the euro era (as compared to pre-euro time periods), potentially indicating increased policy coordination by central banks in the recent period.

(Analysis on the Expansion of Financial Opening and Changes in the Effects of Exchange Rates)

(Analysis on the Expansion of Financial Opening and Changes in the Effects of Exchange Rates)

The Economic Implications of Financial Opening and Future Tasks

This study examines the evolution of South Korean foreign exchange system and effects of changes in foreign exchange supply channel on exchange rates. Furthermore, this study conducts the VAR analysis and the variance decomposition analysis on the effects of exchange rates to examine effects of exchange rates on financial (inflation rate) and real (economic growth, trade balance) economy, then derives policy implications.

Escaping the macroeconomic trilemma: the Belgian two-tier foreign exchange system under Bretton Woods

In introducing a two-tier foreign exchange market under the Bretton Woods system, the Belgian monetary authorities aimed to insulate the domestic currency from (speculative) capital flows. By thus escaping the macroeconomic trilemma, they should have been able in practice to avoid taking account of foreign exchange developments in the determination of the monetary policy interest rate. The goal of this paper is to test this assumption empirically. Using a Taylor-rule approach, the paper shows that towards the collapse of the Bretton Woods system the volatility of the spread between the two segments of the foreign exchange market played a growing role in the determination of the monetary policy interest rate.

The Economic Implications of Financial Opening and Future Tasks

This study examines the evolution of South Korean foreign exchange system and effects of changes in foreign exchange supply channel on exchange rates. Furthermore, this study conducts the VAR analysis and the variance decomposition analysis on the effects of exchange rates to examine effects of exchange rates on financial (inflation rate) and real (economic growth, trade balance) economy, then derives policy implications.

Dynamic Analysis of Dual Exchange Rates in Small Open Economy

Using a model of a small open economy operating under dual foreign exchange markets, free exchange rate for financial transactions and quasi-fixed exchange rate for commercial transactions, this paper analyses the dynamic adjustment of the foreign exchange rates, when terms of trade, and monetary disturbance shocks hit the economy. The results indicate that under such a dual foreign exchange system, the stability of a foreign exchange system requires a sufficient level of official reserves that can accommodate adverse terms of trade and monetary disturbance shocks. Under insufficient reserves, adverse shocks can lead to official reserve depletion and exchange rates divergence.

Governance and enterprise restructuring: the case of Macedonia

Purpose– This paper is a case study of the Republic of Macedonia and focuses on the development of governance and enterprise restructuring. Thus, country's effective corporate governance and corporate control, which impact enterprise restructuring, are essential in the analysis of market-driven restructuring through domestic financial institutions and markets. The data used in this article are analyzed with an econometric regression model, which as employed in this study examines the interrelationships between governance and enterprise restructuring and set of policies that influence the governance patterns. Two basic hypothesis are taken in the analysis: first, governance and enterprise restructuring depend on set of policies, such as, large-scale privatization, small-scale privatization, price liberalization, competition policy, trade and foreign exchange system, banking reform and interest rate liberalization, securities markets and non-bank financial institutions and overall infrastructure reform; and second, governance and enterprise restructuring improves over time due to imposed policies. The paper aims to discuss these issues.Design/methodology/approach– The data used in this article are analyzed with an econometric regression model, which as employed in this study examines the interrelationships between governance and enterprise restructuring and set of policies that influence the governance patterns.Findings– There is still more to be done in order to bring these economies closer to the standards of developed ones. Indeed, it is needed considerable improvement of corporate governance, institution-building to control agency problems and imposing already adopted regulation, as well as, enforcing new enterprise restructuring policies, within existing policies of overall transition economy restructuring.Originality/value– This paper is a contribution to the research developing the business aspects of the Macedonian economy, as there is constant lack of scientific papers that deal with the specific issues of corporate governance and enterprise restructuring.

Research of Foreign Exchange Management Legal System

As the foreign exchange management mode undergoes the conversion from direct-management to indirect-management, foreign exchange and financial supervision system have being perfected by relative department. Especially in recent years, financial laws and regulations have got further regulation adjustment. However, in the whole financial law system, foreign exchange control in the whole system. So, consummating the currency law in force has become the most significance in building laws of foreign exchange.

Dynamic analysis of dual exchange rates in small open economy

Using a model of a small open economy operating under dual foreign exchange markets, free exchange rate for financial transactions and quasi-fixed exchange rate for commercial transactions, this paper analyses the dynamic adjustment of the foreign exchange rates, when terms of trade, and monetary disturbance shocks hit the economy. The results indicate that under such a dual foreign exchange system, the stability of a foreign exchange system requires a sufficient level of official reserves that can accommodate adverse terms of trade and monetary disturbance shocks. Under insufficient reserves, adverse shocks can lead to official reserve depletion and exchange rates divergence.

エマージング諸国の為替レジームとアジア通貨制度の実証分析

エマージング諸国の為替レジームとアジア通貨制度の実証分析