High Exchange Rate Volatility Research Articles

Strategic impact of knowledge entrepreneurship on foreign direct investment in Nigeria

The study investigated the strategic impact of knowledge entrepreneurship on Foreign Direct investment in Nigeria. This study examined the rate of foreign Direct Investment (FDI) in Nigeria because the country has witnessed massive downward sliding of foreign direct investment in recent times. To solve this problem, this study is aimed at ascertaining the nature of impact Knowledge entrepreneurship has on foreign direct investment. The study also investigated the cause of the massive downward sliding of foreign direct investment in Nigeria. This study adopted the survey design. Simple random sampling technique was used in selecting the 200 staff of selected foreign direct investment firms in Nigeria. Findings revealed that there is a positive and significant relationship between knowledge entrepreneurship and Foreign Direct investment in Nigeria. This means that the knowledge of Foreign Direct Investment opportunity in another country will accelerate the action of the entrepreneur in taking advantage of the opportunity to make profit in that country. This is in tandem with Knowledge Spillover Theory of Entrepreneurship. Knowledge entrepreneurship has the potency to attract foreign direct investment hence the positive and significant correlation. The study also found that knowledge entrepreneurship has resulted in technological transfer to Nigeria and employment generation as well as increased profitability and market share of the FDI operating in Nigeria.The study concludes that knowledge entrepreneurship is a viable business model in Nigeria and that the reason for the massive and downward sliding of Foreign Direct Investment in Nigeria currently is as a result of the national challenges of high insecurity and exchange rate volatility.

Exchange Rate Volatility and Governance Indicators

This study investigates the relationships between exchange rate volatility and governance indicators for emerging economies. Government effectiveness and regulatory quality as main indicators of governance are analyzed in terms of their implications for exchange rate volatility for a selected group of emerging countries consisting of Argentina, Mexico, South Africa and Turkey covering the period from 1996 to 2022. Government effectiveness indicator captures perceptions of the quality of public services, the quality of policy formation and implementation, the credibility of the government’s commitment to designed policies, the quality of the civil service and the degree of its independence from political pressures. Regulatory quality indicator measures perceptions of the ability of the government to formulate and implement sound policies and regulations that allow and promote private sector development. It is shown that countries with higher degrees of government effectiveness exhibit lower exchange rate volatility. In addition, higher levels of regulatory quality turn out to be associated with lower exchange rate volatility. These findings yield significant policy implications for emerging countries that experience high exchange rate volatility, which constitutes the major contribution of this study to the literature.

EXCHANGE RATE AND FIRM-LEVEL INVESTMENTS: EVIDENCE FROM BORSA ISTANBUL

The relationship between exchange rates and firm-level investments of the companies operating in the manufacturing sector listed on Borsa İstanbul (BIST) was investigated over a period of 2008 to 2021 using panel data analysis. A total of 81 companies from 7 industries within the manufacturing sector were examined. Exchange rate and firm-level relationships were identified using the Euro-USD basket standard deviation and real exchange rates index. The findings indicated a negative relationship between firm-level investments and exchange rate volatility for all industries, but a positive relationship between firm-level investments and real exchange rates for most industries. Furthermore, it is found that the effects of exchange rate volatility and real exchange rates on investments are realized with a delay for most industries. Overall, the results suggest that firms are reluctant to invest in times of high exchange rate volatility, but are more willing to invest when the value of Turkish Lira appreciates in real terms.

Peculiarities of financial dollarization during martial law: case of Ukraine

The article evaluates the peculiarities of banking sector dollarization in Ukraine with the use of econometric tools and a systems approach, conducts a scenario analysis for dollarization dynamics during martial law, and develops a framework for recommendations with the consideration of long-term financial stability goals.The study finds that the inflation-targeting regime has gradually reduced the dollarization of loans and deposits, but levels remain high. During the full-scale invasion of Russia in Ukraine, the record-low levels of dollarization and NBU restrictions prevented the rapid increase in dollarization as was previously observed during economic crises. The study also finds that loan dollarization is highly dependent on deposit dollarization and that economic agents tend to choose a more stable currency during periods of high inflation and exchange rate volatility. The scenario analysis forecasts that deposit dollarization will continue to grow during the crisis period and high uncertainty, while loan dollarization will stabilize on a new, higher level.To ensure financial stability on a long-term horizon, the de-dollarization strategy should include monetary policy, vertical development of the financial market, in particular, the development of the bonds market and alternative hryvnia instruments, as well as the use of macroprudential tools.
 JEL classification: E52, E58, E63, C30, C53

Market crash factors and developing an early warning system: Evidence from Asia

Market crashes pose significant risks to the stability and performance of financial markets, making the development of an early warning system crucial. This study utilizes exchange rate volatility and investor sentiment to predict market crashes. While several studies have examined factors affecting market crashes in developing countries. This study aims to develop an early warning system for investors to minimize investment risk using Exchange Rate Volatility and Investor Sentiment. The study focused on seven countries: Indonesia, Malaysia, Singapore, the Philippines, Thailand, Vietnam, and Mongolia. The stock exchanges examined included Jakarta Stock Exchange Composite, FTSE Malaysia KLCI, FTSE Singapore, SET Index, PSEi, HNX/HNXI, and MNE Top 20/MNETOP20. The analysis involved assessing early warning systems to provide valuable supplementary information for decision making and evaluating market vulnerabilities. The logistic regression equation was utilized to model market crashes, incorporating variables such as exchange rate volatility and investor sentiment while considering their interactions as moderating factors. The results indicate that exchange rate volatility and investor sentiment have a significant negative effect on market crashes, with probabilities of 0.0082 and 0.000 Furthermore, investor sentiment acts as a mediator for exchange rate volatility, amplifying its impact on market crashes. This suggests that higher exchange rate volatility and negative investor sentiment increase the likelihood of market crashes. Exchange rate volatility and investor sentiment can serve as early warning indicators, emphasizing the importance of monitoring these factors for market participants and policymakers.

Market concentration and producer prices

This study investigates the role of sectoral market structure in the inflationary dynamics of the domestic producer prices (D-PPI) in Türkiye. We start by reporting the fact that industries with intense competition had lower producer price inflation compared to industries with low-competition in the past few years. Further investigation shows that this differentiation across industries corresponds to the years with higher exchange rate volatility. The industries characterized with low-competition have higher annual producer price inflation on average than those that are characterized with high-competition especially during the periods of high exchange rate volatility. Results are robust to a wide set of additional specifications and cast light on the role of market structure on firms’ pricing behavior in Türkiye.

Modeling the Impact of Pandemic-Induced Shocks and Support Measures with an Emerging Market Economy

Purpose: This paper analyzes the impacts of COVID-19 shocks on an emerging market economy using a Graphical User Interface (GUI) model. Methods: Event study analysis has been adopted using secondary data for measuring the impacts and impulse responses of different shocks. Results: The paper shows how the shocks affect the economy using graphical presentations of impulse responses of major macroeconomic indicators. The shapes and movements of the impulse response curves indicate how the effects pass through from one sector to another; how long the effects may persist in the economy, and how much time will be required for recovery. All these simulations suggest that immediate supportive measures from both fiscal and monetary sides help recover the economy, although marginally due to the required higher costs stemming mainly from the higher exchange rate volatility. Implications: Several policy implications such as sector-specific support measures, prioritization of sectors, rationing of credit facilities, efficient exchange rate management, etc., can be followed by the countries regarding fiscal and monetary policy measures towards reducing COVID-19-induced similar shocks.

Atração de investimentos privados para a infraestrutura no Brasil

Abstract This study sought to identify the main drivers of and barriers to attracting capital market investments to the infrastructure sector in Brazil. The research findings indicate that the incentives vary according to the type of investor. Individual investors are strongly attracted by the tax exemption provided for in Statute 1,2431/2011 to purchase incentivized debentures, and, today, they represent one of the main investors in infrastructure in the country. On the other hand, domestic pension funds have no incentives based on this piece of legislation (their investments are exempt from income tax). For these pension funds, the spread paid by the issuers of incentivized debentures is low. Foreign investors consider the investment environment in the country to be unfavorable due to factors such as high exchange rate volatility and political instability. Therefore, broader institutional reforms are needed to fill the gap in infrastructure investments and attract long-term investors. Green certification of infrastructure projects represents another interesting strategy for attracting investments, especially foreign investors.

An Analysis of Exchange Rate Pass-Through to Domestic Prices: Evidence from Turkey

Assessing the impact of exchange rate shocks on domestic prices (Exchange Rate Pass-through) has a crucial role, particularly for the inflation targeting countries. This paper aims to clarify some aspects of ERPT to domestic prices in Turkey, an emerging country. Specifically, this study investigates if ERPT in Turkey is complete and how the behavior of ERPT has changed after the adoption of a flexible exchange rate regime in 2001. A Vector Auto Regression (VAR) framework is used to analyze the impact of exchange rate shocks on CPI Inflation. This study provides empirical evidence on the incompleteness and the pattern of ERPT on Turkey’s CPI inflation based on the VAR Model. The findings demonstrate that ERPT is not only incomplete but also has a different pattern during the floating exchange rate period. The pass-through has decreased from 2001 to 2017, and it has increased dramatically after 2017 to a large extent because of very high inflation and high exchange rate volatility in this period.

Accounting for real exchange rates in emerging economies: The role of commodity prices

A puzzling feature of international price data is that real exchange rates are much more volatile than macroeconomic fundamentals. This study empirically disaggregates international prices into their component parts to examine the key sources of high real exchange rate volatility with emphasis on Emerging Market Economies (EMEs). Using quarterly data over 1985–2015 for 28 countries, we document that 1) relative tradeable goods prices account for most of the observed volatility, 2) world commodity prices explain about 30% of real exchange rate fluctuations, and 3) commodity price shocks are associated with large and persistent real exchange rate appreciations in EMEs. Our results underscore the importance of commodity prices for the conduct of exchange-rate policy in EMEs.

Exchange Rate Volatility and Economic Growth: Managed Floating and Free-Floating Regime

Indonesia's economy has been in its worst period. At that time, economic growth was below zero percent. One of the reasons is the high volatility of exchange rates in 1997-1998 when the exchange rate regime was transferred from managed floating to free-floating. Now, the high volatility of the exchange rate is feared to have an impact on the economy, especially economic growth, because it is one of the main focuses of the government's current achievements. Therefore, this study aims to see whether volatility impacts Indonesia's economic growth, especially in two different exchange rate regimes, managed floating and free-floating. This empirical research is based on quarterly data for 1994 - 2020, using the estimation method of Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and Vector Autoregressive Model (VAR). The result shows that exchange rate volatility has a significant negative effect on economic growth, while the exchange rate regime moderates the impact of exchange rate volatility on economic growth.

Exchange rate misalignments, capital flows and volatility

This study investigates the effect of three dimensions of exchange rate misalignments—(i) distance (absolute misalignments), (ii) direction (overvaluation or undervaluation), and (iii) degree (small or large misalignments)—on the overall as well as short-cycle exchange rate volatility. Using data from 1988 to 2014, we find that relative PPP-based exchange rate misalignments increase exchange rate volatility. For developed and developing countries, this increase in volatility is driven mainly by large undervalued misalignments of the U.S. dollar. This finding might be linked to interventions targeting the loss in domestic producers’ competitiveness in global markets. Interestingly, in the case of developed countries, we find this adverse effect on exchange rate volatility also for small absolute misalignments; exchange rate movements close to equilibrium may be associated with ambiguity with respect to future movements in developed countries, which can result in higher exchange rate volatility. Further, the results suggest that, when the dollar is highly undervalued, capital flows have a stabilizing effect on exchange rate volatility in developed countries but a destabilizing effect in developing countries. The finding is consistent with investors’ strategy of taking exchange rate overvaluation and undervaluation into account when engaging in cross-border investments.

РЕЖИМ ВАЛЮТНОГО КУРСУ ЯК ОБ’ЄКТ РЕГУЛЯТОРНОЇ ПОЛІТИКИ ДЕРЖАВИ В УМОВАХ ВІДКРИТОСТІ НАЦІОНАЛЬНОЇ ЕКОНОМІКИ

The article summarizes the patterns of development of exchange rate policy in Ukraine as the transition from administrative to economic methods of regulating the foreign exchange market in the process of increasing the degree of its liberalization. It is shown that the evolution of the exchange rate regime is described by the following chain: fixed, currency corridor, flexible, adjustable-floating, floating. The change in the objects of monetary targeting took place in the following sequence: credit channel, monetary aggregates, exchange rate, inflation. The main task of the NBU's exchange rate policy is to ensure price stability, and an additional one is the impact on the hryvnia exchange rate. It is determined that currently the main instrument of the NBU's monetary policy is the interest rate, and foreign exchange interventions are ancillary to the inflation targeting and floating exchange rate, which acts as a compensator for negative foreign exchange shocks and supports the competitiveness of producers. It is shown that within the current exchange rate regime in Ukraine foreign exchange interventions are carried out on the principles of reducing the role, scale and frequency as the currency market is liberalized, non-interference in its fundamental trends, priority of foreign exchange demand by foreign exchange market participants. and transparency of the criteria for the participation of entities in auctions and bidding. It is argued that the purpose of foreign exchange interventions is: replenishment of official foreign exchange reserves, smoothing the shortcomings of the foreign exchange market in case of its limited ability to self-regulate, loss of benchmarks for pricing, high exchange rate volatility, which negatively affects the currency security of the state and businesses. It is established that between foreign exchange interventions and the interest rate there is a transmission mechanism to strengthen the main instrument in regulating the foreign exchange and monetary markets on the principles of effectiveness of its consequences for the economy in case of adequate perception of NBU signals.

Currency depreciations in emerging economies: A blessing or a curse for external debt management?

We investigate the long-term effect of domestic currency depreciation on external debt for a panel of 41 emerging economies over the years 1999–2019 based on quarterly data. Using heterogeneous panel cointegration methods, we find that domestic currency depreciation leads to an increase in the external debt to GDP ratio over the long-term and it might, therefore, reduce the sustainability of external debt. This is particularly the case for larger depreciations, while smaller depreciations might even reduce the external debt burden over the long-term for more developed emerging economies. Poorer emerging economies face a greater increase in external debt burden following domestic currency depreciation. We also find that higher exchange rate volatility and the use of floating exchange rates contribute to a greater increase in external debt burden over the long-term following currency depreciation. Furthermore, we find asymmetric effects of exchange rate depreciation on external debt: greater central bank independence limits the effect of currency depreciation on external debt, while higher financial development and illicit financial flows augment the effect of depreciation on external debt.

Exchange rate uncertainty and cereals exports: A panel VAR approach

This paper empirically investigates the effect of exchange rate uncertainty on cereals export flows for a broad sample of 75 countries during the 2010/01 - 2016/12 period. To do this, we first estimate the exchange rate volatility, and then, we estimate the cereals export demand by using a panel data model with autoregressive vectors (P-VAR). This strategy of analysis is applied over different groups of countries, which are obtained by cluster analysis based on the level of exchange rate volatility and the volume of cereals exports. The empirical results suggest a significant negative effect of exchange rate uncertainty on cereals exports in countries characterized by high and persistent exchange rate volatility or high volume of cereals exports.

The effects of FX-interventions on forecasters disagreement: A mixed data sampling view

We analyse the heterogeneity of exchange rate forecasts by a panel of professional forecasters. Adopting the view that forecasters’ economic behaviour is such that they constantly collect, process and analyse relevant information when producing forecasts, we apply a Mixed-Data Sampling (MIDAS) regression approach. This enables us to explore the roles played by key drivers for which available data are at different frequencies from forecast disagreement. Examining the Colombian peso/U.S. dollar exchange rate, we find that central bank intervention is most effective in reducing heterogeneity in the very short-run, and when conducted against a background of high exchange rate volatility.

A Comparative Analysis on Probability of Volatility Clusters on Cryptocurrencies, and FOREX Currencies

In recent years, the attention of investors, practitioners and academics has grown in cryptocurrency. Initially, the cryptocurrency was designed as a viable digital currency implementation, and subsequently, numerous derivatives were produced in a range of sectors, including nonmonetary activities, financial transactions, and even capital management. The high volatility of exchange rates is one of the main features of cryptocurrencies. The article presents an interesting way to estimate the probability of cryptocurrency volatility clusters. In this regard, the paper explores exponential hybrid methodologies GARCH (or EGARCH) and through its portrayal as a financial asset, ANN models will provide analytical insight into bitcoin. Meanwhile, more scalable modelling is needed to fit financial variable characteristics such as ANN models because of the dynamic, nonlinear association structure between financial variables. For financial forecasting, BP is contained in the most popular methods of neural network training. The backpropagation method is employed to train the two models to determine which one performs the best in terms of predicting. This architecture consists of one hidden layer and one input layer with N neurons. Recent theoretical work on crypto-asset return behavior and risk management is supported by this research. In comparison with other traditional asset classes, these results give appropriate data on the behavior, allowing them to adopt the suitable investment decision. The study conclusions are based on a comparison between the dynamic features of cryptocurrencies and FOREX Currency’s traditional mass financial asset. Thus, the result illustrates how well the probability clusters show the impact on cryptocurrency and currencies. This research covers the sample period between August 2017 and August 2020, as cryptocurrency became popular around that period. The following methodology was implemented and simulated using Eviews and SPSS software. The performance evaluation of the cryptocurrencies is compared with FOREX currencies for better comparative study respectively.

Exchange rate volatility and pass‐through to inflation in South Africa

AbstractDoes the South African rand's relatively large volatility affect inflation? To shed some light on this question, a standard estimation technique of exchange rate pass‐through to inflation is extended to incorporate exchange rate volatility. Estimated results suggest that higher exchange rate volatility tends to increase core inflation but to a relatively limited extent in South Africa. The finding lends support to the policy of allowing the rand to float freely and work as a shock absorber, consistent with the nation's successful inflation targeting regime.

СИСТЕМНИЙ ПІДХІД ДО ОБҐРУНТУВАННЯ КАТЕГОРІЇ «МЕХАНІЗМИ РЕГУЛЮВАННЯ ВАЛЮТНОГО РИНКУ НАЦІОНАЛЬНОЇ ЕКОНОМІКИ»

The relevance of the article is determined by the fact that in modern conditions the effective functioning of the foreign exchange market is impossible without the mechanisms of its effectivestate regulation. The main features of the functioning of the foreign exchange market of Ukraine are: uncertainty due to differences in the motives of its subjects, which has the opposite effect on the dynamics of exchange rates; financial instability of economic entities due to high volatility of exchange rates; the frequency of currency crises that threaten the economic and national security of the country; the possibility of long periods of currency instability, which poses a risk to the functioning of economic entities. As a result of applying a systematic approach to the study of the national economy as a large economic self-regulatory system, it is established that the main principles of its operation are: openness; multidimensionality; dynamic equilibrium; stability. The historical aspects of the formation of the national economy on the basis of ethical economic order as a closed economic system, incapable of self-organization, self-regulation, fully controlled state, which had a monopolistic character and developed extensively. The dialectical connections between Ukraine’s political and economic sovereignty are generalized, and it is established that the guarantee of the latter in the conditions of open economy is the international economic competitiveness of the country. The concept of sovereignty is considered everywhere through the prism of institutional theory and ensuring order of open access to political and economic resources on a competitive basis and limited access to them on the basis of rent-oriented behavior. It is shown that at present Ukraine has a mature order of limited access. The features of classification of national economies as objects of regulation are systematized and its types are distinguished: by possibilities of formalization, by degree of development of external relations, by ability to balance, by economic order, by spheres of economic relations, by size.

Balıkesir Mixed Feed Production and Current Situations of Feed Mills in Province

Bu çalışmada, Balıkesir ilindeki yem fabrikalarının mevcut durumlarının tespit edilmesi ve karma yem sektörünün sorunlarına yönelik çözümler önerilmesi amacıyla ildeki fabrikaların idari ve teknik alt yapıları, üretim, pazarlama, hammadde, kalite, kapasite kullanım oranı (KKO), istihdam ve sorunları araştırılmıştır. Bu amaçla, ildeki faal haldeki 24 yem fabrikası ziyaret edilmiş ve toplam 48 sorudan oluşan anket uygulanarak elde edilen veriler analiz edilmiştir. Araştırma sonucunda, Balıkesir ilindeki yem fabrikalarının kurulu kapasitelerinin yaklaşık 4.5 milyon ton yıl yem olduğu, bu kurulu kapasiteye karşılık 2018 yılında 1.87 milyon ton yem üretimi ile KKO’nun %41.5 olduğu tespit edilmiştir. İldeki yem fabrikalarının 17’si anonim şirket, 7’si limitet şirket iken; fabrikaların %37.5’inin otomatik, %41.7’sinin yarı otomatik ve %20.8 ’inin ise manüel olduğu ve yem fabrikalarında toplam 1005 kişinin istihdam edildiği saptanmıştır. Anket sonuçlarına göre ildeki yem fabrikalarının %66.7’sinde hammadde ve yem analiz laboratuvarlarının bulunduğu ve %83.3’ününde bir rasyon hazırlama programı kullandıkları, fabrikaların %95.8’i hammadde ve yem depolamada kullanılmak üzere hem dikey hem yatay siloya sahip olduklarını bildirmişlerdir. İlde 2018 yılında üretilen karma yemin %50’sini kanatlı, %45’ini büyükbaş, %5’ini ise küçükbaş hayvan yemleri oluşturmuştur. Üretim maliyetlerinin %79’unun hammadde, geri kalan %21’inin ise işletme maliyetlerinden oluştuğu tespit edilmiştir. Hammadde fiyatlarının yüksekliği ve temin zorluğu, döviz kuru yüksekliği ve kur oynaklığı, haksız rekabet ve kayıtsız üretim ile iç talep yetersizliği en önemli sorunlar olarak belirlenmiştir. Sonuç olarak, ildeki yem fabrikalarının çoğunluğunun idari ve teknik donanımları ile laboratuvar altyapılarının yeterli olduğu, fabrikaların en önemli sorunlarının ise KKO’larının düşüklüğü ve hammadde fiyatlarının yüksek olması olarak belirlenmiştir.