Impact Of Exchange Rate Changes Research Articles

Currencies and culture: An amusing journey into the impacts of exchange rates on global creative industries

AbstractThis paper examines the impact of exchange rate changes on cultural services trade balances in China, Japan, the United States, United Kingdom, France, and Germany from 2006 to 2015. These six countries represent dominant players whose experiences reflect global impacts. Autoregressive distributed lag (ARDL) models test for J‐curve effects. Cultural distance matrices combined with cluster analysis explore how cultural proximity influences trade structures. Results demonstrate a J‐curve effect in China contrasting with a reverse J‐curve in the United States. China and Japan form one cultural trade cluster distinct from a Western bloc of the United States, United Kingdom, and France. This signifies emerging economies have developed unique cultural trade models. The research enriches empirical evidence on exchange rate impacts for understudied cultural services trade. Introducing cultural distance provides a novel perspective and policy insights for emerging economies.

Exchange Rate Changes and Trade Flows in East Asia

This study investigates the impact of exchange rate changes on trade flows among East Asian countries spanning 1990–2021, using pooled mean group estimator, within the framework of panel data analysis. Findings indicate that world income, trade openness, and the real effective exchange rate strongly affect trade balance, and that the real depreciation of exchange rate exerts strong positive benefits on trade flows in the long run. The study also infers that trade openness and real effective exchange rate had strong influence on exports and imports for Hong Kong, Japan, and South Korea in the short run. However, the depreciation of their currencies discouraged imports in the long run. More so, world income strongly affects the exports and imports of Hong Kong and Japan, while trade openness is advantageous for all the countries. The study recommends the continuation of the prevailing trade-growth pattern, and the existing bilateral pegged exchange rate policy with their trading partners.

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.

The impact of exchange rate changes on the trade balance: Evidence from Saudi Arabia vs her major trading partners

This study aims to analyse the short- and long-term effects of real exchange rate changes on the bilateral trade balance between Saudi Arabia and its major trading partners. The study used the aggregated and disaggregated panel data for the analysis. The autoregressive distributed lag (ARDL) model in error correction is used to analyse the short and long-term relationship between exchange rate and trade balance. It was discovered that the real exchange rate (RER) had no appreciable impact on the trade balance over the long run using the panel data linear ARDL model. The first leg of RER is determined to have a very negative short-term impact on the trade balance. However, the non-linear ARDL model, which took into account non-linear trade balance adjustments in reaction to exchange rate fluctuations, demonstrated a significant and adverse long-term link between the two variables. It shows that depreciation leads to the deterioration of the trade balance. Finally, the study extends the analysis to disaggregated data country-wise. The results of the linear ARDL model revealed that 3 out of 13 cases have significantly short-term relationships. Still, it is observed that no specific short-term patterns are in line with the J-curve hypothesis. The investigation discovered evidence for the J-Curve and the new definition of the J-curve using the non-linear ARDL model in three of the 13 cases. The study concluded that Saudi Arabia must not rely on devaluation as a policy instrument to improve its trade balance. It should maintain its fixed exchange rate for extended periods.

Exchange Rate Pass-through to Consumer Prices in Pakistan: Does Misalignment Matter?

This study investigates the impact of exchange rate changes on consumer prices (commonly known as exchange rate pass-through (ERPT)) in Pakistan for the period 1995M1 to 2009M3. The study estimates short-run and long-run ERPT in Pakistan while taking into account the existing real exchange rate misalignment (RERM). The results suggest that the ERPT to consumer price inflation in Pakistan is very low (close to zero). The impact of the previous periods’ misalignment on inflation is found significant in managed exchange rate regime. However, the overall sample misalignment does not affect inflation. The impact of foreign inflation on domestic inflation is positive and statistically significant. JEL classification: F31, F41, E31 Keywords: Pass-through, Misalignment, Inflation

Korean Trade in 10 Service Industries and Role of the Won? An Asymmetric Analysis

International trade includes trade not just in goods but also in services. Introduction of internet technology has helped to boost trade in services by more than trade in goods. What has been the role of the exchange rate in this journey? While many studies have investigated the link between the exchange rate and trade in goods, only three studies in the literature have assessed the impact of exchange rate changes on trade in services. Two have used data from the U.S., and one from China. We add to this new emerging literature by assessing the symmetric and asymmetric effects of changes in the real effective exchange rate of the Korean won on Korean trade in 10 service categories with the rest of the world. Considering the symmetric (linear) models and asymmetric (nonlinear) models to be complementary, we find short-run effects of imports and exports of almost all 10 service industries. Short-run effects translate into the long run in little over 50% of industries. These findings did not change significantly when we considered real trade in services versus nominal trade. Our findings were industry-specific.

The Time-Varying Impact of Exchange Rate Changes on Disney Stock Returns and Volatility: Evidence from the Fed's Rate Hike

In the world economy and financial markets, exchange rates fluctuate continuously over time. This paper assesses the effects of exchange rate fluctuations on the return and volatility of Disney's stock. A VAR model and an ARMA-GARCH model were developed to analyze the changes in stock prices in terms of value and volatility. This paper finds that changes in exchange rates have a limited impact on Disney stock prices and have no significant effect on the daily volatility of its returns. However, because the appreciation of the U.S. dollar triggered by the Fed's rate hike will offset this positive and negative effect, investors should keep their perspective elsewhere without caring about the volatility of Disney stock prices due to exchange rate changes.

Assessment of an Exchange Rate’s Fluctuations Impact on the Foreign Exchange Market

The article analyzes the foreign exchange market functioning under the influence of exchange rate fluctuations. The main factors determining the exchange rate in the existing conditions have been determined. All course-forming factors are divided into fundamental ones, which include the main economic indicators; technical conjunctural; extraordinary (unexpected) and non-economical. The formation of the forward currency operations market trends, in particular forward contracts, currency swaps, options and other financial instruments, was also investigated. The income trends of the current currency market from quotes of the most used currency pairs are briefly described.It was concluded that the most predictable indicator in the current currency operations market is the standardized exchange rate, determined on the basis of currency quotes of at least 6 commercial banks. When calculating the average arithmetic rate, the highest and lowest quotation rates are not taken into account.The future foreign exchange market trends depend on the choice of the monetary policy vector, which is based on a qualitative and quantitative assessment. Since the processes in the currency market have a fractal structure and cannot be predicted using classical methods, the provisions of the fractal statistics theory are used for this purpose.In particular, on the basis of existing quotations of the currency pair US dollar/Ukrainian hryvnia, the Hurst indicator, which reflects the level of anti-persistence of the national currency exchange rate dynamics, was calculated, and accordingly, its ability to change trends to the opposite in periods of high volatility and in the presence of factors that cause it. The volatility of the national currency rate and the level of anti-persistence of currency fluctuations depends on a number of measures in the field of currency regulation and currency and monetary policy. At the same time, any intervention of the state government in the exchange rate formation process causes a change in the trend. The results of the calculations can be used for operational and strategic planning of the business entities behavior on currency markets and measures aimed at countering the negative impact of exchange rate changes.

The asymmetric impact of exchange rate changes on bilateral trade balance: evidence from China and its trade partners

The purpose of this paper is to re-examine the impact of exchange rate changes on the trade balance of China and its major trading partners. In the past, many studies have been focussed on the linear effect of exchange rate change, but in this paper, a non-linear Autoregressive Distribution Lag (NARDL) model is proposed. Empirical results show that there are nonlinear and asymmetric effects on the trade balance of exchange rate. In particular, the effect of exchange rate appreciation on Sino-US trade balance is more significant than that of depreciation. A genuine devaluation of the domestic currency would improve the balance of the domestic trade. However, the opposite effect is found in the case of Sino-Japan and the Euro, and the depreciation of the currency will make the trade balance worse. These results provide a solid basis for understanding the relation of exchange rate variation and trade balance. In terms of economic reality, it is also a useful reference for adjusting exchange rate and commercial policy.

Asymmetric Impact of Exchange Rate Changes on Money Demand in Malaysia

The relationship between exchange rate and money demand has long been debated among macroeconomists due to its impact on the stability of money demand and monetary policy. Following the significant depreciation in the currency exchange associated with the political instability in Malaysia in recent years, examining the relationship between exchange rate and money demand is crucial to ensure the monetary policy remains prudent. This study examined the asymmetric impact of exchange rate changes on money demand in Malaysia using both linear and nonlinear ARDL approaches. The findings reveal that the money demand responds asymmetrically to exchange rate changes both in the short and long run, whereby the response to a negative shock (local currency depreciation) outweighs the positive shock (local currency appreciation). The result also suggests that the substitution effects dominate the exchange rate and money demand relationship. Consequently, with the economic and political instability continuing, the currency exchange is expected to depreciate further, contributed by the strong substitution effects. This will greatly affect the stability of money demand and the monetary policy and thereby call upon a policy intervention to strengthen the currency exchange and sustain the long-run economic performance.

China’s trade in services and role of the exchange rate: An asymmetric analysis

Nearly all studies in the literature have assessed the impact of exchange rate changes on trade flows for goods. Service industries, however, have not received much attention. Two studies have assessed the effects of exchange rate changes on U.S. service trade with its partners. We add to this literature with a new study that assesses the symmetric and asymmetric effects of changes in the real effective rate of the yuan on China’s trade in 11 service industries with the world. While we find short-run effects on imports and exports for almost all service categories, short-run effects last into long-run asymmetric effects in six Chinese importing service industries and eight Chinese exporting service industries.

The impact of exchange rate changes on the Japanese chemical industry

We investigate how exchange rates affect the Japanese chemical industry. This industry exports sophisticated products to downstream firms. Since more complex products are less substitutable in international trade, we investigate whether they have lower price elasticities. We measure complexity using Hidalgo and Hausmann’s (2009) product complexity index. We find that price elasticities are lower for more complex chemical goods. We also find that stock returns of chemical firms that occupy vital niches in the world economy are harmed less by yen appreciations. These results indicate that exporting sophisticated products can reduce export volatility and profit volatility arising from exchange rate swings.

Volatility Exchange Rate and Economic Growth: Insight from ASEAN Member Countries

This study aims to determine the effect of exchange rate volatility on economic growth in the ASEAN member countries (Indonesia, Thailand, Vietnam, and Cambodia) through investment. Based on the previous studies, the researcher focuses on developing the initial research analysis because it can control different company levels' characteristics and then determine the impact of exchange rate changes on economic growth mediated by investment. There is a limited analysis of whether exchange rate movements encourage overall investment in this study's particular direction. The author's primary focus is whether the export or import channels or both play an essential role in determining a company's investment. This study's population is in ASEAN member countries that have been published by the World Bank (https://www.worldbank.org/) and continue to exist during the period 1998-2019. The sample selection in this study used a purposive sampling method. Some of the ratio data were available in the financial report summary. The analysis method used in the study is the path analysis.

On the asymmetric effects of exchange rate changes and Thailand's inpayments from and outpayments to its partners

A strand of the literature in international economics includes studies that have assed impact of exchange rate changes on inpayments and outpayments of a country with its trading partners. That strand now has a new direction where the analysis is extended to include asymmetric effects of exchange rate changes. We apply the new advances to bilateral trade data between Thailand and each of its 12 largest partners. Combining our findings from the old and new approaches, we find that a depreciation of baht will increase Thailand's outpayments to eight partners with almost 41% trade share and it will increase its inpayments from seven partners with almost 23% trade share.

Fed's Policy Changes and Inflation in Emerging Markets: Lessons from the Taper Tantrum

AbstractWe use the taper tantrum to measure the effects of a sudden depreciation of the exchange rate. We treat this announcement in the United States of America as an exogenous shock in emerging markets and use a difference‐in‐differences approach. We show that, before the tantrum, the impact of exchange rate changes on inflation is low in both the control and the treatment groups. However, the tantrum increased the gap between groups and impacted inflation regardless of the exchange rate regime or central bank practices. Nevertheless, inflation in economies with flexible exchange rate, inflation target, or highly credible central bank is less exposed to depreciations.

The Impact of Exchange Rate Changes on the Japanese Chemical Industry

The Impact of Exchange Rate Changes on the Japanese Chemical Industry

Linkage Between Exchange Rate and Stock Prices: Evidence from Vietnam

The study investigates the asymmetric effect of exchange rate changes on stock prices in Vietnam. We use the nonlinear autoregressive-distributed lag (ARDL) analysis for monthly data from 2001:01 to 2018:05, based on VN-Index stock price collected from Ho Chi Minh Stock Exchange (HOSE); the nominal exchange rate is separated into currency depreciation and appreciation through a partial sum decomposition process. Asymmetry is estimated both in the long-run relationship and the short-run error correction mechanism. The research results show that the effect of exchange rate changes on stock prices is asymmetrical, both in the short run and in long run. Accordingly, the stock prices react to different levels to depreciation and appreciation. However, the currency appreciation affects a stronger transmission of stock prices when compared to the long-run currency depreciation. In the absence of asymmetry, the exchange rate only has a short-run impact on stock prices. This implies a symmetrical assumption that underestimates the impact of exchange rate changes on stock prices in Vietnam. This study points to an important implication for regulators in Vietnam. They should consider the relationship between exchange rate changes and stock prices in both the long run and the short run to manage the stock and foreign exchange market.

Impact of Exchange Rate Changes on the Trade Balance of India: An Asymmetric Nonlinear Cointegration Approach

Applying an asymmetric model, the study reported no evidence of J-curve phenomenon in case of India. In the short-run currency appreciation deteriorates the trade balance and currency depreciation improves it. In the long-run, again the similar response is observed, however, only the impact of currency depreciation is statistically significant. Increase in domestic demand deteriorates the trade balance by a greater magnitude than improvement is observed due to the decline in domestic demand conditions. Finally, foreign demand hike improves the trade balance relatively by a higher magnitude; however, the impact of a foreign demand decline is statistically insignificant.JEL Codes: F4, F41, F42

Exchange rate factors, income levels, and investment abroad: An empirical study based on a sample of emerging economies

AbstractWith the continuous advancement of economic globalization, the rapid growth of investment abroad by emerging economies has become an important part of international capital flows. By building dynamic panel models using 1993–2016 data from 49 emerging economies, this study investigate the effects of exchange rate factors and economic development levels on investment by emerging economies. The findings are as follows. First, exchange rate changes and exchange rate flexibility had significant effects on investment abroad by emerging economies. Second, for emerging economies with different income levels, there are significant differences in factors affecting foreign investment. The impact of exchange rate changes, exchange rate flexibility, and the interaction between the two on a country's foreign investment is related to the country's income level.

Economic analysis of the impact of exchange rate changes on the production costs of wheat crop in Egypt

The decline in the exchange rate of the Egyptian pound and the decline in domestic production of wheat crop and its inadequacy for domestic consumption of wheat, and as the population widens the food gap of wheat and increases its cost. The study was based on descriptive and quantitative analysis methods to analyze the data on the subject of the study through the use of certain mathematical and statistical methods, The increase in costs was shown at an annual rate of increase influenced by changes in the exchange rate of the Egyptian pound estimated at 584.5 pounds per acre, at an annual rate of change of about 18.98% of the average, while the moral its of its impact on the total costs did not prove to be fixed prices because the stabilization of prices disappeared the impact of exchange rate changes. Recommendations suggested by farmers were as follows: 1. The need to provide production supplies at appropriate prices to encourage farmers and reduce dependence on abroad to provide foreign currency. 2. Search for alternatives to production supplies and encourage the industry of the national imported alternative.