Free Floating Exchange Rate Research Articles

Parallel Currencies under Free Floating Exchange Rates: A Model Setting Out the Conditions for Stable Currency Competition

We use a theoretical model to set up the conditions for a country to attain monetary stability by allowing for two freely tradable currencies to circulate in parallel. For this parallel system to function properly, confidence in the good behavior of the monetary authorities in charge of the two currencies is key. Our model shows how a floating exchange rate between the two can keep the issuers of the local currency in check. The results from our model show the conditions under which a parallel currency system disciplines the issuers of the currencies and thus maintains their purchasing power. In non-volatile economies, it also discourages governments (or private issuers) from inflating one of the currencies as a means to raise seigniorage, as this policy results in the displacement of the currency from the market. When foreign payments shortfall—such as in Greece and Cyprus during the ‘euro crisis’ in the mid-2010s, or intractable hyperinflation—leave the country without a medium of exchange, our model shows how currency choice can restore monetary circulation and offer a path to achieving and maintaining monetary stability.

Exchange rate, external reserves and current account balance nexus in oil-dependent countries: A Toda-Yamomoto-based Panel Vector Autoregressive (PVAR) approach

The international monetary authorities have been consistently advising oil-dependent countries to change their exchange rate policy from a fixed to a floating exchange rate regime. While some of these countries including Nigeria have announced their adoption of a free-floating exchange rate system, evidence shows that the majority are suffering from “fear of floating”, hence operating an abridged exchange rate system. This study employs the Toda-Yamomoto-based Panel Vector Autoregressive (PVAR) model to use the causality approach to determine the exchange rate system that best explains the de facto exchange rate policy system operating in these countries. This is explained by the dynamic causality between exchange rates and foreign reserves. The dynamic causality between the exchange rate and current account balance also explains the potential effect of devaluation to improve the external trade balance, which implies the J-curve and Marshall Lerner condition. The results show that there is no significant causality from foreign reserves and trade balance to the exchange rate, suggesting that oil-dependent countries are more aligned to a fixed exchange rate regime than a floating exchange rate regime. We also find significant negative causality from the exchange rate to foreign reserves, while foreign reserves have a positive causal effect on the current account balance. This implies that the expected devaluation gains that may be prompting oil-dependent countries to stick to fixed exchange rate regimes are not there, as currency devaluation tends to worsen trade performance and foreign reserves rather than improve them. While oil-dependent countries are not benefiting much from a fixed exchange rate system, it is recommended that appropriate policy to boost private sector generation of foreign exchange should be put in place before the adoption of a full-fledged floating exchange rate system.

International Monetary Fund Stabilization Programme and External Sector Development in Nigeria

The impact off the International Monetary Fund (IMF) stabilization programme has been a subject of great controversies. This study therefore investigated the impact of policy recommendations contained in the IMF stabilization Programme on the development of Nigeria’s external sector. In specific terms, the study examined the impact of fiscal deficit, exchange rate, foreign direct investment (FDI), degree of trade openness, interest rate and bank credit to the domestic economy on two indicators of external sector development namely; balance of payments (BOPs) and external reserves. A variety of analystical techniques including Phillips-Perron unit root test, autoregressive distributed lag (ARDL) model, error correction model (ECM) and Granger causality test was applied on annual time-series data from 1986 to 2021. The findings indicated that fiscal deficit has significant negative impact on balance of payments while exchange rate and interest rate have insignificant negative impact on BOPs. Also, degree of trade openness has significant positive impact on BOPs while FDI and bank credit to the domestic economy have insignificant positive impact on BOPs performance. Similarly, fiscal deficit, exchange rate and interest rate have insignificant negative impact on external reserves while foreign direct investment, degree of trade openness and bank credit to the domestic economy have insignificant positive impact on external reserves. In line with the IMF recommendations, the study recommended that the Nigerian government should reduce the size of its fiscal deficit; encourage the inflow of FDI and open up the economy to international trade. However, against the IMF recommendations, the study recommended that a managed free floating exchange rate policy should be adopted while the interest rate should be lowered. It is also recommended that bank credit to the private sector should be expanded.

Currency risk and the dynamics of German investors entry and exit in Russia

Using a complete manually collected set of 3435 Russian firms with German capital in 2003–2020, we examine the effect of currency risk on the dynamics of German investors' entry and exit into the Russian market via foreign direct investment. We document that German investors were relatively tolerant towards currency risk before 2014, and became highly sensitive post 2014. We conclude that, along with geopolitical factors, the free floating exchange rate regime adopted by the Central Bank of Russia in 2014 affected the incentives of German investors. We discuss various mechanisms to explain these findings.

IMPACT OF FLOATING EXCHANGE RATE ON ECONOMIC INDICATORS OF BANGLADESH: A CASE STUDY

In past few years there has been a lot of controversy about the appropriateness of the exchange rate system adopted by the country. Bangladesh has been pursuing a liberal trade policy consistent with the trend of free market economy and WTO agreement. In process of liberalization of the economy, Bangladesh adopted a free-floating exchange rate system since May 31, 2003. The level and extent of movement of exchange rate have a significant impact on the macroeconomic variables of the economy. On the other hand, unsustainable economic policies and other factors also lead to a volatile exchange rate. Both the fixed and floating exchange rates have their own merits and demerits. The present article offers an analytical discourse on the prospects and implications of floating exchange rate in Bangladesh. The study is mainly exploratory in nature. In this study the authors have tried to assess the impact of new exchange rate system on the economy of an underdeveloped country like Bangladesh.

Faktor yang Mempengaruhi Nilai Tukar Rupiah Terhadap Dolar Amerika, Euro dan Poundsterling

The currency exchange rate is a macro indicator that reflects the strength of the economy as a result of the global economy. With the existence of currency exchange rates, it can facilitate international trade transactions with currency agreements that will be used by the two countries. The exchange rate system used in Indonesia is a free-floating exchange rate system since 1997, all of which are left to the market. This study aims to analyze the effect of the money supply, inflation and foreign exchange reserves on the rupiah exchange rate of against the US dollar (USD), euro (EUR), and pound sterling or Great Britain Pound (GBP). The ECM (Error Correction Model) the analysis method is the method used in this study. The results of the research that has been carried out are both in the long term and in the low term, the money supply, inflation and foreign exchange reserves have a significant influence on the exchange rate of the rupiah against the US dollar (IDR/USD). The money supply and foreign exchange reserves and in the short term have a significant effect on the rupiah exchange rate against the euro (IDR/EUR), while only the money supply in the long term has a significant effect on the rupiah exchange rate in the euro (IDR/EUR). Foreign exchange reserves in the short term have a significant effect on the rupiah exchange rate against the pound sterling (IDR/GBP), while only the money supply in a long term has a significant effect on the rupiah exchange rate against the pound sterling (IDR/GBP).

The Dynamic Impact of COVID-19 Pandemic on Stock Returns: A TVP-VAR-SV Estimation for G7 Countries

The COVID-19 pandemic has profoundly and negatively impacted the global stock markets. Hence, we investigated the time-varying impact of the COVID-19 pandemic on stock returns during the period from January 27, 2020 to December 23, 2021 using the TVP-VAR-SV model and used G7 countries as our research sample. Our results imply that (i) the spread of the COVID-19 pandemic has a significant negative impact on stock returns, but the impact decreases as the time window increases; (ii) the timeliness, compulsoriness, and effectiveness of anti-epidemic policies implemented by governments are the important adjustment factors for stock returns; (iii) the impact of the early stage of the COVID-19 pandemic on the stock market trend gradually weakens as the intermediate time interval increases. In addition, over time, the duration of the negative impact of the COVID-19 pandemic on the stock returns became shorter, and the recovery rate of the impact became faster; (iv) under the managed floating exchange rate regime, the stock returns changed synchronously with the pressures of exchange rate appreciation and depreciation, and under the free-floating exchange rate regime, the effect of the exchange rate on stock returns was almost zero, while the impact of exchange rate channels in eurozone countries was related to the characteristics of national economies. Thus, governments should make greater efforts to improve the compulsion and effectiveness of epidemic prevention policies and strengthen their control over exchange rate fluctuations to alleviate the negative impact of the COVID-19 pandemic on the stock markets.

Analisis fenomena Kurva J di Indonesia

The free-floating exchange rate system in Indonesia has consequences for fluctuations in the Rupiah exchange rate. In accordance with the J-Curve theory, will the weakening of the Rupiah value have an impact on improving the trade balance in the long term or will it worsen the trade balance condition in the long term. This study will examine how the influence of the Rupiah exchange rate on the trade balance in both the short and long term and whether the J-Curve phenomenon occurs in Indonesia using the Vector Error Correction Model (VECM) analysis technique in the observation period 2015.1-2020.12. The results of this study prove that the J-Curve phenomenon occurs in the Indonesian economy. The findings show that the depreciation of the Rupiah in the short term will cause a trade balance deficit, but in the long term, the depreciation of the Rupiah will cause a trade balance surplus. The results of the variance decomposition show that the exchange rate has a major role in the formation of fluctuations in the trade balance. In addition, shocks that occur in the exchange rate will be responded to by movements in the trade balance position and permanent, namely for the next ten periods. The limitation of this research is that the identification of the existence of the J curve phenomenon is generally carried out on the entire trade balance. Further research is expected to identify the J curve phenomenon specifically in several trading partner countries of Indonesia.

MODELING THE EXCHANGE RATE OF THE KAZAKHSTANI TENGE

The article discusses the role of key factors in the exchange rate formation of the Kazakhstani tenge. The study analyzes which factors are key for short-term and long-term forecasting. A linear regression model is built, with the STEP function on quarterly data from 01/01/2005 to 06/01/2021 using free statistical software with open source access and the R programming language. The STEP function allows you to choose the best model from one dependent and 14 independent variables. An analysis of domestic and foreign studies is carried out to identify the degree of relationship (positive or negative) between the key factors affecting the nominal exchange rate of the national currency of Kazakhstan. The relationship between the nominal exchange rate and direct or indirect state intervention is investigated. Access to data is a key issue for qualitative forecasting of the nominal exchange rate of the Kazakhstani tenge and affects the predictive power of the model. As recommendations, it is proposed to provide economic agents with KASE data. In conclusion, conclusions are drawn about the presence of objective prerequisites that impede the transition to a free-floating exchange rate in Kazakhstan.

MODELLING FIVE VARIABLES BVAR FOR ECONOMIC POLICIES AND GROWTH IN AZERBAIJAN, KAZAKHSTAN AND RUSSIA: 2005–2020

The paper applies the Bayesian Vector Auto Regression (BVAR) framework to analysis of the influence of world oil price and exchange rate and interest rate policies on economic growth and consumer inflation in three post-Soviet oil exporters: Azerbaijan, Kazakhstan and Russia. It is shown that transition to inflation targeting regime with floating exchange rate in 2014 – 2015 weakened the link between economic growth and world oil price in Russia and Kazakhstan. In Azerbaijan previously nonexistent systemic link between GDP growth and world oil price has emerged. It is also shown that all three countries de facto diverted from free floating exchange rate regime after 2017.Keywords: Brent Oil Price, Nominal Exchange Rate, Economic growth, Interest Rate, Inflation.JEL Classifications: С11, C32, E37, E61, F43DOI: https://doi.org/10.32479/ijeep.11324

How exchange rate regimes are exacerbating or mitigating the resource curse?

This paper investigates the role of different exchange rate regimes in exacerbating or mitigating the resource curse. The resource curse, in general, and its specific instances such as Dutch Disease may strictly be dependent on the exchange rate movement, which is subjected to the de facto exchange rate regime any country follows, at least in the short run. Using panel data of resource-abundant economies, we structure our model to disentangle the relationship between natural resources and economic growth under different de facto exchange rate regimes. We find that free-float economies are subject to a higher degree of the resource curse. The free-floating exchange rate regime's intrinsic role is conducive to growth, but it can exacerbate the degree of resource curse in resource-rich economies.

경제정책 불확실성 지수가 환율결정에 주는 영향분석

The free-floating exchange rate system was applied in South Korea after the 1997 Asian financial crisis. Since then, a lot of studies on exchange rate determination were conducted based on the monetary approach. However, after the 2008 global financial crisis, the economic policies of major countries had a greater impact on financial markets, but fewer studies were published on how the exogenous changes in economic policies affect the foreign exchange market of small open economies. Based on the related literature, we selected explanatory variables such as money supply, income, interest rate, terms of trade, and capital account, and then constructed a Won/Dollar exchange rate determination model by adding Economic Policy Uncertainty(EPU) indexes Baker, Bloom, and Davis(2016) devised as supplementary variables. The empirical analysis period is from October 2000 to December 2020, and regression analysis was performed using both a linear multiple regression model a non-linear VECM model. Monetary model-related variables, such as money supply and interest rate were proved to be more significant factors before the financial crisis. On the other hand, the influence of the EPU indexes was greater after the financial crisis and in particular, the Korea EPU index and Japan EPU index had a significant impact.

Монетарна безпека: окремі визначення та оцінки

For almost 30 years of independence, Ukraine has experienced a number of deep economic, financial, banking, debt, currency and inflation crises. In some cases, they were extraordinary. As a result, the current real GDP of the country remains a third less than in 1990. One of the reasons for this was the unstable nature of economic recovery and currency price stabilization at the beginning of the zero years and in 2010-2013. After all, during the crises of 2008-2009 and 2014-2015, Ukraine set world anti-records due to falling its GDP up to 14.8 % and 15.8%, respectively. This was accompanied by the deep devaluation crises and the recurrence of uncontrolled inflation. In principle, the systemic relationship between the fragility of production, exchange rate and price dynamics appeared in Ukraine in the 1990s when its real GDP fell by 59%. The scale of that crisis was twice the scale of the Great Depression in the United States, accompanied by devastating devaluation and inflationary shocks. The article is devoted to the study of methodological and practical approaches to the definition of monetary security. The experience of their implementation in Ukraine is considered. The criteria of successful monetary policy applied within the neoliberal discourse are analyzed. The logic and reasons for their gradual transformation over the last 30 years are shown. The decisive role of the global crisis of 2008-2009 in the theoretical and practical changes observed in the world’s leading economies in terms of defining the goals, objectives and instruments of their monetary policy is reflected. An analysis of some outcomes of the implementation of domestic monetary strategy is given. The problematic nature of determining its priority goal is shown. The ambiguity of methods and consequences of targeted reduction of inflation in Ukraine is noted. The impossibility of maintaining its low and stable level under the conditions of free floating exchange rate of hryvnia is substantiated.

The Impact of Exchange Rate on Bangladesh’s Export: A Cointegration Approach

The purpose of the paper is to see if there is any relationship exist between free floating exchange rate and export performance of Bangladesh. It inspects the monthly data of exchange rate and export value for the time period between year 2000 and 2017. It utilized the Johansen [1] cointegration approach to identify the extent of long run and short run relationship between them. The study could not establish neither any long term trend nor any short term dynamics between the variables. Respective variables are significantly related to their own immediate past values. Distant past values do not have any implications. This study suggests that short run macroeconomic policy would be beneficial to influence the foreign exchange market and eventually the performance of export of Bangladesh.

The impact of exchange rates on stock market returns: new evidence from seven free-floating currencies

ABSTRACTThis paper provides evidence of a significant exchange rate effect on stock index returns using data from seven selected countries practicing free-floating exchange rate regimes. This research uses parity and asset pricing theories, thus placing it within the monetary-cum-economics framework for international asset pricing. In this study, we apply a system of seemingly unrelated regression to control for unobserved heterogeneity and cross-sectional dependence. The findings constitute evidence of a statistically significant exchange rate impact on stock index returns across selected countries. These findings can be considered as falling under the arbitrage pricing approach of the international capital asset pricing model of Solnik who also used the parity-theoretical framework on exchange rate determination.

외환위기 이후 적정환율제도 선택 논의와 한국의 환율제도 선택(Discussions on the Selection of Appropriate Exchange Rate Regime After the Foreign Exchange Crisis)

Korean Abstract: 우리나라는 1997년 12월 16일 외환위기를 계기로 원화절하압력을 견디지 못하고 자유변동환율제도로 이행하게 되었다. 그러나 당시의 급박했던 상황을 고려하면 이러한 환율제도 변경이 여러 가지 요건을 고려하여 신중하게 선택되었다고 보기는 어렵다. 본고는 이러한 문제의식을 갖고 1990년대 중남미․동아시아 위기를 계기로 제기되고 있는 적정환율제도 선택논의를 개관한 후 우리나라의 변동환율제도 운용 경험을 평가하고 앞으로 어떠한 환율제도를 채택해야 바람직한지를 검토해보았다. 주요 시사점으로는 우선 신흥시장국에 적정환율제도로 제시된 양극단의 환율제도 역시 실행경험을 볼 때 외환위기의 원인으로 지목된 중간단계의 환율제도처럼 위기에 취약해질 수 있다는 것이다. 이는 어떠한 환율제도도 모든 국가 또는 모든 시기에 적합하지 않다는 주장(Frankel 1999)과도 부합되는 것으로서 최근 국제회의에서 제기되는 것과 같이 각국의 고유한 사정에 알맞은 환율제도를 채택하는 것이 바람직하다는 시사점을 준다. 둘째 1997년 위기이후 우리나라의 변동환율제도 운용경험을 평가해볼 때 환율의 변동이 상당히 완화된 것으로 나타나 실제로는 관리변동환율제도처럼 운용된 것으로 분석되었다. 그러나 위기이후 자본․외환시장의 급속한 개방 추진, 금융․기업 구조조정 추진 등에 따른 불확실성을 감안해볼 때 사실상의(de facto) 관리변동환율제도를 통해 환율변동을 완화시킨 것은 비용보다 편익이 컸을 것으로 보인다. 그렇지만 2001년부터는 자유변동환율제도가 정착되어 가는 것으로 분석되었다. English Abstract: On December 16, 1997, Korea was unable to withstand the depreciation of the Korean won due to the currency crisis. However, considering the imminent situation of the time, it is difficult to consider that the change of the exchange rate regime has been carefully selected considering various requirements. After reviewing the discussion on the selection of appropriate exchange rate regime, which has been raised in the wake of the crisis in Latin America and East Asia in the 1990s, I have evaluated the experience of operating the floating exchange rate regime and examined what kind of exchange rate regime should be adopted in the future. The main implication is that the exchange rate regime, which is presented as a proper exchange rate regime for emerging market countries, can be vulnerable to crisis as the exchange rate regime, which is pointed out as the cause of the foreign exchange crisis. This implies that any exchange rate regime is consistent with the claim that it is not suitable for all countries or at all times (Frankel 1999), suggesting that it is desirable to adopt the exchange rate regime appropriate to the unique circumstances of each country as recently presented at international conferences. Second, when Korea experienced the experience of operating the floating exchange rate system after the 1997 crisis, the exchange rate fluctuation was considerably eased. However, considering the uncertainties caused by the rapid opening of the capital and foreign exchange markets and the restructuring of the financial and corporate structure after the crisis, the fact that the exchange rate fluctuations were mitigated through the de facto managed floating exchange rate system. However, since 2001, free floating exchange rate system has been operated.

Determinants of the Real Equilibrium Exchange Rate in Albania: An Estimation Based on the Co-Integration Approach

Problem/Relevance: Investigation of exchange rate behaviour has been an important topic in international monetary economics because of the impact of exchange rates on economies. One strand of the literature has focused on explaining the observed movement of the nominal or real exchange rate in terms of macroeconomic variables. Another strand of the literature has evaluated the behaviour of the real exchange rates in relation to the equilibrium exchange rate, which is the real exchange rate that is consistent with macroeconomic balances. Albania implements a free floating exchange rate regime; therefore, evaluating whether the actual real exchange rate is too strong or too weak compared with the real equilibrium exchanges rate has great relevance for the Albanian economy. Research Objective/Questions: Generally, the real exchange rate is defined as the nominal exchange rate adjusted for the relative price differential between domestic and foreign goods and services. So, an appreciation of the nominal exchange rate or higher inflation at home relative to other countries may lead to an appreciation of the real exchange rate. Such appreciation weakens the competitiveness of a country, widens the current account deficit and increases vulnerability to financial crises. The opposite holds true when the real exchange rate depreciates. The aim of this paper is, first, to estimate the equilibrium real exchange rate for the Albanian currency against the euro and, second, to assess the total exchange rate misalignment during the period of 2001Q1-2017Q1. Thus, the equilibrium real exchange rate is used as a benchmark for evaluating the misalignment of the actual real exchange rate. Methodology: This paper explores the determinants of the real exchange rate for Albania, during the period of 2001Q1-2017Q1, based on the stock-flow approach, the so called Behavioural Equilibrium Exchange Rate (BEER), which effectively employs reduced-form modelling of the exchange rate based on standard co-integration techniques. The stock of net foreign assets and productivity changes has been considered fundamental for the real exchange rate. We have used the Johansen co integration technique to test the existence of long-run relationships between our main variables and to evaluate the path of the equilibrium real exchange rate based on vector error correction model (VECM) results. Then the analysis is completed by calculating the degree of misalignment as the difference between the actual real exchange rate and the equilibrium real exchange rate. Major Findings: Based on the Johansen co-integration approach, we find one long-run relationship between the real exchange rate of the Albanian lek against the euro, relative productivity and net foreign assets during the period of 2001Q1 to 2017Q1. The model implies that the real exchange rate is affected, as we expected, by relative productivity and net foreign assets, confirming that an increase in both variables leads to an appreciation of the real exchange rate in the long run. Our results show that the behaviour of the actual real exchange rate is similar to the path of the equilibrium exchange rate and that the degree of misalignment throughout the period is estimated to be moderate. Implications: Our empirical results confirm that the degree of misalignment is reasonable, suggesting a consistency between macroeconomic (especially monetary) policies and the free floating exchange rate regime. Assessing real exchange rate misalignment is a very important issue for policy makers because of the severe welfare and efficiency costs that such misalignment can have for an economy.

Cointegration Relationships Between Markets Under Different Currency Systems: Post 2007 Financial Crisis

In this study, we examine the cointegration relationships between the US stock market and those of 76 international markets (with 22 developed, 24 emerging, and 29 frontier markets) in the post 2007 Financial Crisis period. Overall, we find that international stock markets are not cointegrated with the US stock market. Over the long run, international portfolio diversification is an effective way to manage country risk. Stock markets in countries with free-floating exchange rate system seem to be more integrated with the US stock market. In other words, US investors may enjoy greater benefits from portfolio diversification by investing in countries whose currencies are not free-floating. However, during a crisis, stock markets becomes more cointegrated as observed by the spike in the recursive cointegration graphs. A financial crisis in one country can have an impact on the stock market of another country. The observed contagion effect makes international portfolio diversification strategy less effective during a crisis.

Assessment of Key factors of the foreign Exchange Rate formation in armenia

Usually, it is diffcult for developing countries to choose a currency regulation policy because of institutional inadequacy, including a signifcant level of concentration in commodity markets, and a high degree of dependence of the national market and fnancial system on exogenous factors and a huge external debt. This article is dedicated to the analysis and evaluation of key factors affecting the formation of the Armenian national currency (dram) exchange rate, as well as to the choice of the currency regulation policy in Armenia. The authors carried out a statistical and econometric analysis of the factors of the foreign exchange rate formation, taking into account the specifcs of the transition economy as a whole, as well as the features of the Armenian economy, in particular. The authors have identifed the exogenous and endogenous factors of the foreign exchange rate formation of the dram, depending on the inflow and outflow of foreign currency. Further, the authors specifed the influence of dominant factors on the choice of the currency regulation policy in the country. The authors carried out an econometric analysis of the factors identifed at the frst stage of the study using the VAR model. The results obtained from this model proved the hypothesis of the non-market nature of the dram’s exchange rate formation. The authors concluded that the dram’s exchange rate formation has non-market nature because of signifcant intervention on the currency market by the “monetary authorities”. The key conclusion of this study is the thesis about the need to change the approaches to currency regulation in Armenia in favour of the transition to a free-floating exchange rate policy in order to stimulate sustainable rates of economic growth in the long term.

Are BRICS exchange rates chaotic?

ABSTRACTIn this paper, we focus on the stochastic (chaotic) attributes of the US dollar-based exchange rates for Brazil, Russia, India, China and South Africa (BRICS) using a long-run monthly dataset covering 1812M01-2017M12, 1814M01-2017M12, 1822M07-2017M12, 1948M08-2017M12, and 1844M01-2017M12, respectively. For our purpose, we consider the Lyapunov exponents, robust to nonlinear and stochastic systems, in both full – samples and in rolling windows. For comparative purposes, we also evaluate a long-run dataset of a developed currency market, namely British pound over the period of 1791M01-2017M12. Our empirical findings detect chaotic behavior only episodically for all countries before the dissolution of the Bretton Woods system, with the exception of the Russian ruble. Overall, our findings suggest that the establishment of the free floating exchange rate system have altered the path of exchange rates removing chaotic dynamics from the phenomenon, and hence, the need for policymakers to intervene in the currency markets for the most important emerging market bloc, should be carefully examined.