Impact Of Exchange Rate Fluctuations Research Articles

Impact of exchange rate fluctuations on US stock market returns

PurposeThe authors analyze the relationship between exchange rate fluctuations of a number of major currencies and its impact on US stock market returns, as proxied by the S&P 500. Many studies have explored this topic since the early 1970s with varied results and with no evidence that clearly explains the relationship between exchange rates and stock market returns. This study takes a different look at this hypothesis and investigates the pairwise relationship between various exchange rates and the United States stock market returns (S&P 500 INDEX) from January 2000 to December 2019.Design/methodology/approachThe authors test the data for unit roots using Phillip-Perron method. They use Johansen cointegration model to determine whether returns on S&P 500 are integrated with S&P 500. They use the VAR/VECM analysis to test whether there are any interdependencies between exchange rates and stock market return. Finally, they use various GARCH models, including the EGARCH and TGARCH models, to determine whether there exist volatility spillovers from exchange rate fluctuations in various markets to the volatility in the US stock market.FindingsUsing GARCH modeling, the authors find volatility in Australian dollar, Canadian dollar and the euro impact market return, and the volatility of Australian dollars and euro spills over to the volatility of S&P 500. They also find that the spillover is asymmetric for Australian dollars.Research limitations/implicationsOne of the limitations could be that the authors use different bivariate GARCH models rather than the MV-GARCH models. For future project(s), they plan to do this analysis from the perspective of a European Union or a British investor and use returns in those markets to see the impact of exchange rates on those markets. It would be interesting to know how the relationship will change during periods of financial crises. This could be achieved by employing structural break methodology.Originality/valueMany studies have explored the relation between stock market returns and exchange rates since the early 1970s with varied results and with no evidence that clearly explains the relationship between exchange rates and stock market returns. This paper contributes by adding to the existing literature on impact of exchange rate on stock returns and by providing a detailed and different empirical analysis to support the results.

The Impact of Exchange Rate Fluctuation on Toyota Financial Performance and Its Hedging Strategy

In today's globalised economy, the majority of businesses operate in many nations, utilising foreign exchange for imports and exports to expose them to foreign exchange risk. Every business is more or less affected by foreign exchange risk, which is made up of transaction risk, translation risk, and economic risk. By analyzing Toyota's financial reports and comparing financial data of multiple fiscal years (2018 is the base year), including Toyota's derivatives trading volume, foreign exchange income, exchange rate fluctuations of Japanese yen relative to other major currencies, and the average transaction price of currency trading, this study studied the role of financial derivatives in Toyota's foreign exchange risk management. The research results show that Toyota's derivatives transactions in 2018, including forward foreign exchange future contracts and foreign exchange options, strongly offset the foreign exchange risk caused by the appreciation of the yen against the US dollar and the euro. In addition to the derivatives transactions, Toyota also used other risk management policies to reduce its foreign exchange risk. Although the use of financial derivatives can hedge risks, but it will also bring losses to the enterprise. In today's volatile global business environment, each enterprise must choose the appropriate risk management tools for it.

Studying the Impact of Exchange Rate Fluctuations on Tax Revenues in Iran's Economy

Studying the Impact of Exchange Rate Fluctuations on Tax Revenues in Iran's Economy

Analyzing and Measuring the Impact of Exchange Rate Fluctuations on Economic Growth in Iraq for The Period (2004-2022)

This study investigated the exchange rate on Iraq’s economic growth situation. It examined the exchange rate’s effect on GDP, GNP, and INF. An ex-post facto research design was used to collect secondary data from the Central Bank of Iraq and macro trends Statistical Bulletin from 1 January 2004 to 30 November 2022. Hypoth- esis analysis used Least Squares. Exchange rates affect GDP, GNP, and INF. As a result, GDP can be used as an essential basis for economic development, and the GNP is a vital factor for economic infrastructure to change people’s living conditions. The exchange rate positively and significantly impacted GDP, and the analysis sug- gests a significant association between the independent and dependent variables, except for GNP. The study rec- ommends that Iraq’s currency authority manage exchange rates in response to the U.S. dollar to boost economic growth. Price stability can also boost Iraqi economic growth, boosting the dinar’s value.

An Empirical Examination of the Impact of Exchange Rate Fluctuation on Economic Growth in Sierra Leone

Exchange rate fluctuation is considered in the literature as an essential driver of economic growth. This paper aims to investigate the impact of exchange rate fluctuation on economic growth of the Sierra Leone economy. As a whole, the period under consideration is a thirty-nine year period spanning from 1980 to 2018 inclusive. Previous researches show that there can be both positive and negative impact of exchange rate fluctuation on economic growth of a nation’s economy, and in this paper, we discovered that exchange rate fluctuation (depreciation of the Leones) has a positively significant relationship with economic growth in Sierra Leone. We used both ADF-test and PP-test to check for stationarity of the variables. The ordinary least square method was used to analyse data and results are based on regression analysis conducted from available data.

УПРАВЛІННЯ ВАЛЮТНИМИ РИЗИКАМИ БАНКІВСЬКИХ УСТАНОВ В СУЧАСНИХ УМОВАХ

The scientific work examines the processes of currency risk management of banking institutions in modern conditions. The article analyzes the impact of exchange rate fluctuations and the process of globalization on the financial stability and profitability of banks. It also examines the role of regulators, particularly national banks, in setting standards and requirements for currency risk management. The main purpose of the scientific article is to determine the strategies and methods that banking institutions can use to reduce currency risks and ensure financial stability in conditions of constant currency fluctuations. The study includes an analysis of innovative approaches and technologies that can help banks optimize their foreign exchange risk management. It has been proven that banks, carrying out international operations and operating in conditions of global economic instability, face significant currency risks. Scientific approaches to the definition of the term «currency risks» are highlighted. The author’s vision of the concept of «currency risk» is presented. In the scientific work, the classification of currency risk was carried out. It is noted that the main types of currency risk are direct, transactional and translational risks. The dynamics of the official exchange rate of the hryvnia in relation to foreign currencies for 2018–2023 have been analyzed. It has been proven that high levels of currency fluctuations can lead to large losses that are difficult to prevent or repay, jeopardizing the financial stability of banks and their ability to provide services to customers on stable terms. The list of systemically important banks of Ukraine is highlighted. The regulatory requirements, which are regulated by the National Bank of Ukraine and affect the activities of systemically important banks of Ukraine, have been studied. Factors that have a positive and negative influence on the process of currency risk management in banking institutions are considered. The main strategies of currency risk management in banking institutions are defined and characterized.

Modelling the dynamics of firm valuation: An assessment of impact of exchange rate fluctuations on firm value using system dynamics

AbstractExchange rate volatility is a vital issue in international finance due to its effect on the value of the firm, depending on firm's exposure to the exchange rate risk. However, this impact is not clear in literature as evidence is mixed. This article analyses the impact of exchange rate fluctuations on firm value. A system dynamics‐based corporate planning model has been developed that incorporates the modules for financial and physical processes, firm valuation and exchange rate determination. Simulation results reveal that a stronger home currency leads to an increase in market price per share of the firm and vice versa. The results provide counter intuitive evidence on the impact of exchange rate on firm value and provide nonlinear feedback loop‐based explanation. The study fills the gap in literature by incorporating a systemic approach in the strategic planning process to assess the composite impact of parameter changes on key variables.

Time-varying and asymmetric impact of exchange rate on oil prices in India: Evidence from a multiple threshold nonlinear ARDL model

This study investigates the time-varying and asymmetric impact of exchange rate fluctuations on crude oil from January 2004 to July 2022 by using the multiple threshold nonlinear autoregressive distributed lag model (MTNARDL). Evidence of minor to major fluctuations in exchange rate shows the time-varying and asymmetric impact on oil prices. Similarly, the findings indicate that the sign and magnitude of coefficients change across different quintiles over different sub-sample periods. Moreover, exchange rate fluctuations affect imports, exports, investment, and other economic activity. Thus, worsening the current accounts, and also hindering economic growth in oil-importing countries.

Impact of Exchange Rate Fluctuations on Economic Growth in Nigeria (1987-2020)

This study is to examine the impact of exchange rate fluctuations on economic growth in Nigeria. The independent variables used for this study are money supply, interest rate, inflation rate and real exchange rate. The data used for this study is obtained from CBN statistical bulletin, 2019. The study used cointegration and Error correction mechanism to estimate the long run and short run relationship between the dependent variable and independent variables. The cointegartion result shows that there is a long run relationship between the dependent and the independent variables. The ECM results of the estimate shows that real exchange rate have positive and significant impact on Real GDP at 5% level of significance. The study therefore recommend that the CBN should track and effectively monitor all operators in the foreign exchange market, especially parallel market operators and other speculators so as to stabilize the Naira exchange rate and achieve steady economic growth. DOI: 10.7176/JESD/13-14-06 Publication date: July 31 st 2022

The Impact of Exchange Rate Fluctuation on the Economic Growth of Somalia

The purpose of this paper was to empirically investigate the impact of fluctuating exchange rates and inflations rates on the economic growth of Somalia. Due to Somalia’s well-documented exchange rate fluctuations, it became imperative to investigate the impact that the exchange rate fluctuations have on the country’s economic performance. In this study, secondary data was used which was obtained from the Central Bank of Somalia, World Bank, Statista, and International monetary fund. The scope of the data was from the years 2005-2020. The ordinary least square (OLS) correlation and multiple regression analysis were used by this paper in order to examine the influence of fluctuating currency exchange has on the economic growth of Somalia. According to the findings, the exchange rate shows a slight positive association with little statistical significance (r = .184; p = .496) with GDP growth, implying that changes in the exchange rate account for 1.84 percent of total GDP. In addition, the results indicate that the relationship between inflation rate and economic growth is a weak positive correlation with no significance statistically (r = .205; p = .447). The finding of this paper will aid Somalia and other comparable countries in improving their monetary policies in general; it might be utilized by Somalia's central bank as a roadmap for effective monetary policy. Keywords: Economic growth, Exchange rate, Gross Domestic Product, Inflation rate, Somali Shilling and US Dollar. DOI: 10.7176/EJBM/14-7-02 Publication date: April 30 th 2022

Analyzing the impact of exchange rate fluctuations and inflation on the GDP in Iraq using the modern methodology of Cointegration for the period (1988-2020)

The research aims to analyze the impact of exchange rate fluctuations (EXM and EXN) and inflation (INF) on the gross domestic product (GDP) in Iraq for the period 1988-2020. The research is important by analyzing the magnitude of the macroeconomic and especially GDP effects of these variables, as well as the economic effects of exchange rates on economic activity. The results of the standard analysis using the ARDL model showed a long-term equilibrium relationship, according to the Bound Test methodology, from explanatory (independent) variables to the internal (dependent) variable, while the value of the error correction vector factor was negative and moral at a level less than (1%). The relationship between EXM and GDP was inverse, with partial flexibility for EXM (-7.666), meaning that an increase in EXM (1%) will lead to a decrease in GDP (7.666%). This applies to the reality of the Iraqi economy, as the method used in recent times is to devalue the local currency. The effect of EXN was steady in the long run, with the partial flexibility of EXN (5.785), that is, an increase of EXN (1%) will lead to an increase in GDP (5.785%), and the model as a whole is statistically significant. The explanatory power of the model is high, as it was (R2=0.816), indicating that 81% of the changes in GDP in constant prices are due to the change in (EXM, EXN, and INF). The study concluded that in light of the outbreak of the coronavirus, the disruption of most economic projects, and the decline in the prices of the Iraqi government, as a result of the decrease in the balance of oil and oil revenues, as a result of the balance of the government part of the solution is to devalue the local currency by controlling the nominal exchange rate. At present, the Iraqi Monetary Authority recommends that the Managed Flexible Exchange System be continued as an effective means of avoiding external shocks for the Iraqi economy, as it allows for appropriate adjustments to be made continuously

Perbandingan Kinerja Peramalan Kurs di Indonesia

Fluctuations in the exchange rate on the money market, both appreciating and depreciating, indicate the volatility that occurs in a country's currency with the currencies of other countries. To overcome the magnitude of the impact of exchange rate fluctuations on the economy, a forecasting model is needed that can predict the exchange rate effectively. This study aims to find the exchange rate forecast that produces the best model in analyzing the exchange rate using the Box-Jenkins/ARIMA, ARCH and GARCH models. The data used in this study is secondary data in a time series pattern in the form of Rupiah/USD exchange rate data obtained from Bank Indonesia in daily form (five days a week), starting from January 2, 2015 to December 31, 2021 with out of sample starting from 3 January 2022 to December 31, 2024. Some of these models are compared with each other so that the best model is obtained, and the forecasting results are 782 days ahead. This study shows that the ARIMA (1,1,0) model is better at predicting the exchange rate than the ARCH (1) model which has the smallest RMSE, MAE and MAPE values. Forecasting results on January 3, 2022 are Rp. 14,298.22/USD with actual data of Rp. 14,270.00/USD. There is shadow forecasting starting from January 3, 2022 to February 11, 2022, so the comparison can be seen with the actual data. For investors, companies or parties with an interest in forecasting the exchange rate, they can use the ARIMA (1,1,0) model in predicting the exchange rate for forecasting several periods in the future.

Exchange Rates, Optimization of Industrial Resources Allocation Efficiency, and Environmental Pollution: Evidence from China Manufacturing

The impact of exchange-rate fluctuations on resource reallocation is of particular interest to researchers and policymakers with China’s further opening to the international market and the transformation of economic growth. With high-speed growth, pollution issues have become an international concern. This paper examines how RMB exchange-rate movements affect resource allocation efficiency within industries at different pollution levels, based on the data of Chinese industrial enterprises during 1998–2007. Unlike previous studies, we analyze how within-industry productivity dispersion reacts to exchange-rate appreciation from the perspective of the heterogeneity across firms in their exposure to foreign competition in each industry. Our findings suggest that appreciation causes an increase in productivity dispersion, which implies a decrease in resource allocation efficiency. The increased dispersion of industries with higher pollution levels is more diminutive than lower levels. The productivity dispersion is intended to shrink for high-polluting industries due to the real exchange-rate appreciation. Appreciation plays a positive role in efficiency for pollution-intensive industries.

The Impact of Exchange Rate Fluctuations on the Market’s Index at Emerging Market: Evidence from Palestine

In this study, the researcher investigates the influences of exchange rate and stock market index in Palestine exchange. Least Square Testing approach has been used on daily data ranging from January 2012 to December 2021. The researcher investigates the impact in the long term from 2012 to 2021 and in the short term in one year, 2021. Findings of the study suggest that USD exchange rate negatively affects the stock index of Palestine exchange in both the long and short term.

Exchange Rate Fluctuations and the Quality of Products Imported by Chinese Manufacturing Firms

ABSTRACT Based on firm-level Chinese Customs and Industrial Production micro data for 2000–2013, this study investigates the impact of exchange rate fluctuations on the quality of products imported by Chinese manufacturing firms. The empirical results show that exchange rate appreciation upgrades the quality of imported products through the price effect, new product variety effect, and competitive effect channels, and by improving the quality of exported products. Our empirical results are robust after considering several potential problems. Furthermore, we find that the quality of products imported by firms with lower productivity, fewer financing constraints, non-core products, low market share, foreign-invested and private enterprises and countries with higher level of economic development upgrade more in respond to exchange rate appreciation. These results imply that exchange rate appreciation is an important way to encourage firms to upgrade the quality of imported products.

Testing for asymmetric nonlinear short and long-run relationships between remittances and exchange rate volatility

The purpose of this paper is to examine the determinants of emigrant remittances by highlighting the impact of asymmetric exchange rate volatility. We have estimated an asymmetric ARDL-PMG panel model on a sample of MENA countries observed over the period 1980-2017. The results of the ARDL-PMG nonlinear model estimates indicate that, in the long-run, economic growth and fixed capital accumulation both have significant upward impacts on emigrant remittances. The incorporation of the exchange rate asymmetry assumption suggests a positive and significant effect only for downward movements in the exchange rate. The impact of exchange rate fluctuations on emigrant remittances is significant only for negative changes.

Exchange Rate Fluctuation and the Stock Return of Listed Multinational Companies in Sri Lanka

According to the availability of resources, countries make the choice between production, export, and import, and they usually attempt to gain competitive advantages through foreign trade activities. Thus, internationally active firms have to face the currency fluctuation risk frequently and disclose the foreign currency gains and losses during the year in their financial statements. Though the literature provides empirical evidence on the impact of exchange rate fluctuation on stock return in foreign countries, studies about the Sri Lankan context are limited. This study, following a quantitative research approach, investigates the relationship between the exchange rate fluctuation and the stock return based on secondary data from selected 31 listed multinational companies in Sri Lanka for the period from 2010 to 2020. ‘Exchange rate fluctuation’ and ‘stock return’ are measured using the change in the trade-weighted exchange rate, and stock prices plus dividends respectively. Market portfolio rate of return (MPRR) and inflation rate are used as control variables. By applying panel regression analysis, findings reveal a significant negative relationship between stock returns and trade-weighted exchange rate (TWER). However, control variables (MPRR and the inflation rate) show divergent results with the stock return. Accordingly, the market portfolio rate of return shows a significant positive relationship with the stock return. Contrary to MPRR, there is a significant negative relationship between inflation rate and stock return. Thus, as a fresh study conducted in the Sri Lankan context, these findings reveal that high variations in the exchange rate could lead to uncertain stock returns whereas increased exchange rates and inflations rates reduce firms’ market- based performance in terms of stock returns. These findings provide insights and directions towards introducing and regulating policies connected with the exchange rate to mitigate the abrupt impacts of exchange rate fluctuations on individual firms and the economy. Accordingly, the findings of this study would be beneficial for policymakers in taking policy decisions for promoting the international trade of the country while regulating exchange rate and monetary policies.

Asymmetric Exchange Rate Pass-Through in Southeast Asian Rice Trade

AbstractAsian countries consume approximately 90% of the world’s rice supply. Between 2007 and 2014, Thailand, Vietnam, and India accounted for 60% of the world’s exports of rice. A nonlinear autoregressive distributed lag (NARDL) econometric model is utilized to estimate the impact of exchange rate fluctuations on rice trade in Southeast Asia. Focusing on the largest importing countries and exporting country by volume, the analysis considers Malaysian, Indonesian, the Philippines, and Chinese rice imports from Thailand. Results show that importing countries’ state trading enterprises (STEs) generally do not follow profit-maximizing behavior in reacting to exchange rate volatility.

Impact of Exchange Rate Fluctuations on India’s Manufacturing Exports: An Empirical Investigation on Long-Run Relation

After the collapse of the fixed exchange rate system of Bretton Woods, the fluctuations of exchange rate and its impact on macroeconomic performance and trade in countries around the world are becoming an increasing debate among researchers and policymakers. This study empirically investigates whether fluctuations in real exchange rate may affect real exports in the Indian context. The study has employed autoregressive distributed lag (ARDL) bound test procedure to analyse the long-run relationship among variables using quarterly data from 2005Q1 to 2017Q4. The results of the ARDL bound test reveal that real exports are cointegrated with relative prices, real exchange rate volatility and world real GDP. The study has found negative but insignificant impact of exchange rate volatility on exports, but world GDP as a proxy of foreign economic activity and real effective exchange rate as relative prices have positive and statistically significant impact on Indian manufacturing exports. Further, the ARDL short-run error correction model implies that while the model may temporarily deviate from its long-run equilibrium, the deviations adjust towards the equilibrium level in the long run. JEL Codes: F01, F31, F14

Asymmetric Impact of Exchange Rate Fluctuations on Money Demand in Sudan

This study aims to examine the asymmetric impact of exchange rate fluctuations on money demand in Sudan. The non-linear autoregressive distributed lag (ARDL) model was applied to data pertaining to 1960–2018. The empirical results suggest that the impact of the exchange rate is asymmetric in the long and short terms. In the short term, a positive change in the exchange rate increases money demand, while a negative change in the exchange rate has no effect. However, in the long term, a positive change in the exchange rate increases money demand, and a negative change has the same effect. In the long term, a negative change in the exchange rate has a greater effect than a positive change, indicating that a depreciation of the Sudanese pound has a greater effect. The difference between the positive and negative changes in the exchange rate indicates its asymmetric effect on money demand in Sudan. This study recommends that monetary policy in Sudan should target such positive and negative changes in the exchange rate, and that decision makers should adopt policies that achieve exchange rate stability. In addition, policymakers should also aim to establish an industrial production base to reduce reliance on imports.