High Exchange Rate Volatility Research Articles

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.

Relationships between exchange rate regime, real exchange rate volatility and currency structure of government bonds in emerging markets

Abstract Public foreign currency borrowing is a common problem of emerging markets. Scholars named it the original sin of foreign debt. It has a proven negative influence on economic growth and development, undermining financial stability, and increasing the probability of monetary crises. The roots of the original sin often lay in emerging markets’ institutional underdevelopment, with low-quality monetary policy, inappropriate exchange rate regime choice, and exchange rate mismanagement being stated among the most important causes. This paper evaluates the influence of the exchange rate policy on the emission of foreign currency sovereign bonds in emerging markets. The relationship is estimated using panel data and GMM approach, with exchange rate regime type (both de jure and de facto) and real exchange rate volatility serving as explanatory variables. The findings reveal that fixed exchange rate regime and high real exchange rate volatility is promoting the foreign currency borrowing. Thus countries that want to reduce the burden of the original sin should lean towards a more flexible exchange rate policy while maintaining their real exchange rate stable.

Examining the asymmetric monetary policy response to foreign exchange market conditions in emerging and developing economies

In many emerging market economies that have adopted inflation targeting, policymakers are concerned with the effects that strong appreciation/depreciation pressures and excessive volatility in exchange rates may have on economic stability and their ability to reach their inflation targets. The research in this paper addresses whether central banks have an asymmetric response to exchange rate conditions with respect to meeting their monetary policy objectives. Using a panel of 30 emerging market and developing economies, we employ a panel threshold regression analysis to determine whether policymakers respond differently during appreciation versus depreciation periods, during periods of high versus low exchange rate volatility, or when the country has a relatively high exchange rate pass-through effect. We find that policymakers react more strongly and significantly to depreciations with increases in domestic interest rates, while remaining inactive during periods of appreciation. Yet, during appreciationary periods, they react more strongly to deviations in output from its potential, suggesting a concern over competitiveness. Furthermore, volatility in exchange rates is a significant concern to policymakers, as they regularly claim, and when volatility is sufficiently high, policymakers react with higher interest rates to maintain stability and mitigate capital outflows. Lastly, with a stronger exchange rate pass-through effect, policymakers are more responsive to depreciationary pressure as it affects their ability to reach inflation targets.

Exchange Rate Volatility and Pass-Through to Inflation in South Africa

Does 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.

Coping with the Exceptional Economic Problems in Turkey: A Field Survey on SMES

Abstract Developing countries need higher economic growth to reach the level of developed countries. When developing countries exceed the potential economic growth, problems, such as, high external debt and high current deficit emerge. Such situations increase the financial risk of the country; in addition, international political risks, fluctuations in capital inflows and some manipulative movements have subjected countries to extreme exchange rate fluctuations. Purposes of this research: (1) to uncover the impact of high exchange rate volatility on small business activities and (2) to determine whether the level of exposure of the exchange rate shock on business owners varies by age. The methodology of the study involved a survey administered to 390 small and medium-sized enterprises (SMEs). The findings of the study show that after a period of significant exchange rate fluctuations, business activities were negatively affected, sales decreased, and job cuts increased. On the other hand, the exchange rate effect was mostly felt by all business owners of different ages. According to the study, it can be concluded that small enterprises are vulnerable to rising exchange rate volatility. The effect on SMEs with more work experience is not different. In order to alleviate the effects of adverse exchange rate movements, enterprises should be more cautious in their activities. Two suggestions can be made at this point: (i) Governments should follow optimal growth policies and (ii) Small businesses that have an important place in the economy should be made aware of the exchange rate risk and crisis management.

Exploring the driving forces of the Bitcoin currency exchange rate dynamics: an EGARCH approach

Bitcoin is a virtual currency scheme that is characterised by a decentralised network and cryptographic transfer verification. It has attracted much public attention due to its innovative technology and its high currency exchange rate volatility. In this paper, Bitcoin’s exchange rate movement from 2011 to 2018 and its relationship with the global financial markets are explored using an EGARCH framework. The results are as follows. First, fundamentals and Bitcoin-related specific events play a critical role in the formation of its exchange rate. Second, the impact on Bitcoin of regulation-related events indicates that market sentiment responds to market regulation statements. Third, news coverage is an essential factor in driving its volatility. Fourth, Bitcoin can be a hedge in times of low uncertainty in global financial markets and can also serve as a safe haven against high economic uncertainty worldwide, but with increasing global financial uncertainty, it is likely to move with the markets and therefore cannot serve as a hedge or safe haven against stock market crashes. Lastly, the positive effect of global expansionary monetary policy on Bitcoin’s exchange rate is marginal enough to rule out the involvement of central banks worldwide in the inflation of Bitcoin’s exchange rate over the years, as may have been the case with many asset prices after the 2008 US financial crisis.

Impact of exchange rates on ASEAN's trade in the era of global value chains: An empirical assessment

ABSTRACTExchange rate risk remains a key concern for export-oriented economies in Southeast Asia. Traditionally, export performance is thought to be adversely affected by exchange rate appreciation and high exchange rate volatility. Nonetheless, in the context of global value chains where export production relies heavily on imported inputs, the trade effects of exchange rate may be weakened. Using the OECD-WTO Trade in Value-added (TiVA) database, this paper seeks to tease out the association between exchange rate movements, volatility and aggregate exports of goods and services among ASEAN economies. More importantly, it investigates whether integration into GVCs affects these relationships. Applying panel regression techniques to a sample of eight ASEAN countries over the period 1995–2011, we found that high share of foreign value added (FVA) embodied in exports almost completely offsets the negative effect of an appreciation in the real effective exchange rate (REER) on real gross exports. At the same time, high FVA share also dampens the negative association between exports and increased REER volatility.

Exchange Rate Volatility and Pass-Through to Inflation in South Africa

Does 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.

Software system exchange operations immediate estimation for mobile devices running

Here described the essentials of a problem-solving environment that was developed for mobile devices running under Android operating system, which was destined for exchange operations immediate estimation in the context of stochastically indefinite external economic environment. Given the chance to exchange funds in native currency for freely convertible currency and conversely, it’s viable to compare the results of available funds direct distribution to bank deposit or intermediated through another currency. The application system allows evaluating the deposit effectiveness for following schemes: opening deposit in foreign exchange with double conversion, opening deposit in native currency without conversion, opening deposit in native currency with double conversion. Interval analysis and Euclidean arithmetic used to perform accounting. System implements accounting based on interval axiom classical scheme and substandard axiom scheme. When choosing the formula structure used those which provides the least width of interval of uncertainty. Developed “Banking Forex transaction” application oriented toward students of economical specialty, bank official and all people that want to evaluate the efficiency of funds exchange and percentage buildup. In the conditions of high volatility of exchange rates, currently observed all over the world, the success of economic agents depends on correctly taken decisions in the foreign exchange market and thus raises the level of economic knowledge of the process owner, that’s required for making correct and an efficient solution on the currency market. Developed application helps to evaluate efficiency of the double conversion and make an efficient solution.

Uncertainty and Exchange Rate Volatility: The Case of Mexico

This paper investigates the effect of domestic and global uncertainty on the volatility of the Mexican peso US dollar exchange rate during the period January 1999 - July 2018. The analysis is performed in two stages. In the first stage, we derive an exchange rate volatility measure by estimating a univariate GARCH(1,1) model. In the second stage, we regress the estimated exchange rate volatility on domestic and global uncertainty proxies, built with data from the survey of professional forecasters conducted monthly by Banco de Mexico since 1999. In order to capture the expectations of a broad set of economic agents, we also include as regressors both the Chicago Board Options Exchange Volatility Index (VIX) and Baker, Bloom and Davis global economic policy uncertainty index (EPU). A trade uncertainty index based on Google trends is incorporated in the model to analyze if uncertainty regarding NAFTA and Mexico’s trade liberalization policies has had an impact on the exchange rate volatility. The price of a barrel of Mexican oil mix is also included since the price volatility of this commodity has been shown to affect the peso US dollar exchange rate volatility. In order to control for the surprise component of macroeconomic data announcements the analysis controls for an inflation surprise and a GDP surprise. Finally, we assess whether the effect of domestic political uncertainty and domestic economic uncertainty on exchange rate volatility is amplified in election and recession periods. The main results show that the domestic political uncertainty measure, the VIX and the global EPU indices are the main drivers of the exchange rate volatility. We also find that in recession periods, higher domestic economic uncertainty is associated with higher exchange rate volatility. These findings are robust to alternative exchange rate volatility proxies and econometric techniques.

Carry trades and endogenous regime switches in exchange rate volatility

This paper investigates the profitability of carry trades by taking into account the endogeneity of regime switching between low and high states of exchange rate volatility. The analysis uses an endogenous regime switching model with an autoregressive latent factor, in which the future transition between states depends on the current state as well as the realization of the underlying time series. The results show that carry trades are profitable in a regime with low exchange rate volatility, signifying the failure of uncovered interest rate parity (UIP). However, carry trades yield losses in a regime with high exchange rate volatility, which implies a reversion to UIP. The endogenous latent factor obtained from the model represents historical economic downturns associated with carry trade losses well. It also appears to exhibit a similar pattern to those of two measures of uncertainty, macroeconomic uncertainty and economic policy uncertainty.

Informal one‐sided target zone model and the Swiss franc

AbstractThis paper develops a new theoretical model with an asymmetric informal one‐sided exchange rate target zone, with an application to the Swiss franc following the removal of the minimum exchange rate of CHF 1.20 per euro in January 2015. We extend and generalize a standard target zone model by introducing perceived uncertainty about the lower edge of the band. We find that informal soft edge target zone bands lead to weaker honeymoon effects, wider target zone ranges, and higher exchange rate volatility than formal target zone bands. These results suggest that it would be beneficial for exchange rate policy intentions to be stated clearly in order to anchor exchange rate expectations and reduce exchange rate volatility. We also study how exchange rate dynamics can be characterized in models in which financial markets are aware of occasional changes in the policy regime. We show that expected changes in the central bank's exchange rate policy may lead to exchange rate oscillations, providing an additional source of exchange rate volatility, and to capture this it is important to take into account the possibility of regime changes in exchange rate policy.

Conditioning carry trades: Less risk, more return

Prior studies show that extreme interest rate differentials (IRDs) and high foreign exchange rate (FX) volatility have substantial explanatory power for the validity of UIP. We show that these contemporaneous drivers also have predictive power by implementing a conditional currency carry trade (CT) strategy that excludes regimes for which UIP is likely to hold. Conditioning high FX volatility only, or on both FX volatility and extreme IRDs outperforms the base-case unconditional CT strategy in virtually any of the settings analyzed. Conditioning on very large IRDs only shows mixed findings. Our strategy works best for smaller CT portfolios.

Creation of Trust in the Russian Cryptocurrency Market

A significant increase in the cash value of Bitcoin in the beginning of 2017 led to growth in people’s interest in cryptocurrency. The uniqueness of this type of money is that the transaction occurs only with the approval of a network of participants, and the funds themselves are beyond the control of any state. At the same time, the Russian government, represented by the Ministry of Finance, did not approve a cryptocurrency until 2018. Despite the large number of studies that reveal the main advantages and disadvantages of cryptocurrency, as well as the motivation of the participants, the issue of building trust in cryptocurrencies remains relevant. The main goal of this study is to identify the mechanisms of trust building among the participants of the cryptocurrency market. The research information base was based on 15 semi-structured interviews with active participants of the cryptocurrency market. Based on collected data, a typology of cryptocurrency users was made, and ways of managing risks in interacting with the market and insight into the role of the state in this market were examined. Cryptocurrency users can be divided into those who use it for consumption of various goods (including those who are prohibited in the territory of the Russian Federation) and those who seek to derive financial benefit from the current market situation. Although both groups exist in the same market, they have different expectations: consumers strive to ensure that the cryptocurrency exchange rate remains stable, whereas the other group hopes for a long period of high exchange-rate volatility to increase their own earnings. The position that the local state should take is an important factor of trust for each of the groups represented. Cryptocurrencies are still at an early stage of development. A large group of people on the market is trying to monetize the weaknesses that exist at the moment. Over time, the situation on the cryptocurrency market stabilizes, and it can then move to a qualitatively different stage of development.

Efeito da volatilidade da taxa de câmbio nas exportações brasileiras

Uma economia com alta volatilidade no câmbio gera incertezas em seu fluxo de comércio internacional, o que acaba por impactar suas exportações. Tais incertezas ensejam pesquisas que procuram identificar os efeitos da volatilidade da taxa de câmbio sobre as exportações dos países. O presente trabalho visa investigar o impacto da volatilidade do câmbio de dólar estadunidense nas exportações do Brasil com foco em certos setores relevantes da economia brasileira. Assim, tomam-se como variáveis independentes quatro métricas distintas de volatilidade cambial e, como variáveis dependentes, os volumes exportados de alguns produtos e setores. As estimativas foram realizadas pelo Método Generalizado dos Momentos, por este apresentar melhores propriedades para amostras finitas e tratar problemas de endogenia. Os resultados demonstram que alguns produtos e setores são afetados pela volatilidade da taxa de câmbio do dólar estadunidense de forma negativa, enquanto outros produtos ou setores parecem não sofrer efeito algum.

Exchange Rates, Prices and Trade Costs

The purchasing power parity (PPP) puzzle refers to the inability to reconcile the high short-run volatility of exchange rates with the glacial speed at which deviations from parity seem to damp out. Despite this, there is strong evidence of the long-run relationship between exchange rates and international price differentials. More recently, the alternative notion of non-linear mean reversion dynamics of rates is attracting substantial attention: as a consequence of various adjustment costs, there is a sizeable buffer region within which exchange rates can move independently of prices, generating persistent deviations from parity. This study seeks to integrate the idea of this “inaction band” with trade costs. When deviations fall within the band, movements in rates are close to a random walk; but when the threshold of the band is crossed, arbitrage causes movements back toward the band. To test this approach, we use a large number of disaggregated and highly tradable agricultural products over time in a large number of countries. We find some evidence in favour of the approach.

Does gold Liquidity learn from the greenback or the equity?

This study seeks to understand and elucidate shifts of gold, dollar, and stock market liquidity, both before and after the 2008 financial crisis. The relationship among these assets is examined by allowing for nonlinear dynamics in the speed of adjustment to the equilibrium. The findings document the predictability role of liquidity proxies of dollar and equity on gold liquidity even after accounting for macroeconomic variables, suggesting that liquidity of both assets maintains an influence on gold behavior. During periods of high exchange-rate volatility between currencies, gold liquidity becomes highly affected by dollar liquidity movements through a nonlinear smooth transition framework. Yet evidence reveals that to fully understand the movements of gold and dollar it is necessary to factor in stock market liquidity as well.

Exchange rate forecasting with DSGE models

We run an exchange rate forecasting “horse race”, which highlights that three principles hold. First, forecasts should not replicate the high volatility of exchange rates observed in sample. Second, models should exploit the mean reversion of the real exchange rate over long horizons. Third, they should account for the international price co-movement seen in the data. Abiding by the first two principles an open-economy dynamic stochastic general equilibrium (DSGE) model performs well in forecasting the real but not the nominal exchange rate. Only approaches that conform to all three principles tend to outperform the random walk.

International portfolio flows and exchange rate volatility in emerging Asian markets

This paper investigates the effects of equity and bond portfolio inflows on exchange rate volatility using monthly bilateral data for the US vis-a-vis seven Asian developing and emerging countries (India, Indonesia, Pakistan, the Philippines, South Korea, Taiwan and Thailand) over the period 1993:01–2015:11. GARCH models and Markov switching specifications with time-varying transition probabilities are estimated in addition to a benchmark linear model. The evidence suggests that high (low) exchange rate volatility is associated with equity (bond) inflows from the Asian countries toward the US in all cases, with the exception of the Philippines. Therefore, capital controls could be an effective tool to stabilise the foreign exchange market in countries where flows affect exchange rate volatility.

Exchange Rate Volatility, Earnings Uncertainty and Bidirectional Trade Flows: Empirical Evidence on Ghana

ABSTRACTAlthough the empirical findings on the impact of exchange rate volatility on trade is diverse, the growing consensus in the literature appears to suggest that for developing economies, the theoretically expected negative relationship almost always exists. The paper takes a different approach to empirically assess this relationship by analysing the impact of exchange rate volatility independently on total trade, imports and exports. The intuition behind this approach is to assess exactly how exporters and importers are incentivised (differently or similarly) by exchange rate volatility costs. Whereas adequately risk-aversed Ghanaian exporters in the presence of higher exchange rate volatility and the absence of hedging facilities effectively compensated against exchange rate risk by increasing volume of exports, import decisions were to some extent (although not effectively) negatively affected by exchange rate volatility. The different responses by Ghanaian exporters and importers to higher exchange rate volatility costs are reflected in the relationship between volatility and total trade. The useful policy lessons and the challenges that the empirical evidence present are discussed.