International Foreign Exchange Research Articles

FACTORS AFFECTING THE TOTAL FOREIGN EXCHANGE RESERVE ADEQUACY OF THE CENTRAL BANK: TURKEY AND AZERBAIJAN

International foreign exchange reserves are widely acknowledged as a global medium of exchange that possesses a readily available characteristic. Official public assets, which are foreign assets kept and organized by the monetary authorities of countries, serve as a complement to foreign exchange reserves. Adequate levels of foreign exchange reserves are necessary for nations to meet their payment commitments and sustain the stability of their currency. The primary rationale for the Central Bank's decision to maintain liquid foreign exchange reserves is to establish a safeguard against any speculative assaults or fluctuations in the trade balance. The primary objective of this research was to ascertain the many elements that influence the sufficiency of the aggregate foreign exchange reserves in Azerbaijan and Turkey. The article examined the sufficiency of the gross foreign exchange reserves of the Central Bank of the Republic of Azerbaijan (CBAR) and the Central Bank of the Republic of Turkey (CBRT) based on the ideal reserve ratios recommended by the IMF. Following an extensive examination of theoretical and conceptual literature, this study aims to assess the sufficiency of the Gross Foreign Exchange Reserves held by the CBAR and CBRT. The proposed optimal reserve ratios are utilized to elucidate the reserve adequacy of these countries, while considering the theoretical relationship between the variables. To achieve this objective, a logit regression analysis was conducted using the data spanning from 2012 to 2022. The results indicate that there is a positive and statistically significant relationship between interest rates and the overall adequacy of foreign exchange reserves. Considering the influence of interest rates on economic stability and financial performance, this outcome is anticipated. Furthermore, it was shown that the exchange rate variable exhibited a statistically significant negative impact on the preceding period. The present empirical study offers an overview of the various elements that influence the sufficiency of the aggregate foreign exchange reserves of Azerbaijan and Turkey. The findings of this study offer crucial insights to decision makers regarding the variables that must be considered when overseeing foreign exchange reserves.

Exchange Rate Management Reforms and Restoring the Dignity of the Naira

This article provides comprehensive advice to the Federal Government of Nigeria (FGN) on exchange rate management in order to restore exchange rates to pre-President Buhari administration levels. Nigeria's exchange rate dynamics have witnessed significant changes in recent years, and this article presents a multifaceted approach to address the challenges faced by the FGN. By examining the historical context and global economic trends, this article offers policy recommendations encompassing fiscal, monetary, and structural reforms. It aims to guide the FGN in achieving stability and competitiveness in the international foreign exchange market. Keywords: Fiscal policy, Monetary policy, Exchange rate management, Structural reform

The Economic Consequence of Feds Monetary Policies in 2022: An Internal Perspectives

US interest rate hikes due to COVID-19 and high inflation have affected the country's stock market and the international foreign exchange market. The authors analyze the willingness of U.S. interest rate hikes to cause inflation at the micro level through changes in the amount of money held by residents because of U.S. policies. This paper analyzes the impact of the U.S. interest rate hike by collecting various information on rental housing, GDP and spot exchange rates of countries affected by the U.S. According to the findings of this paper: 1. US interest rate hikes lead to a rise in the amount of currency held by citizens. 2. Interest rate hikes affect the GDP growth rate, and the stock market are positively correlated. 3. US monetary policy affects the world economy. The point of studying the Fed's rate hikes is to analyze the strengths and weaknesses of the policy and to find better ways to control inflation and make the economy stable. According to this paper, the authors propose that the United States should stop raising interest rates at the right time when the inflation rate falls to the right value and let interest rates return to their previous levels, otherwise it will stagnate the country's economic development and cause turmoil in the country's stock and foreign exchange markets.

Foreign Exchange Committee Master Agreements as International Contractual Standards for Foreign Exchange Derivatives

INTRODUCTION. The ISDA Master Agreement is possibly the most authoritative cross-border contractual standard in the world of financial markets. It also serves as an example for the local transactional documentation drafters in various countries to regulate the conclusion and performance of over-the-counter derivatives transactions by means of bilateral contracts. However, international master agreements for derivatives and other financial products are not limited to the templates produced by International Swaps and Derivatives Association (ISDA). Foreign Exchange Committee (FXC) suggests a remarkable alternative to the documents maintained by this powerful industry club as far as transactions with foreign currency are concerned.MATERIALS AND METHODS. International Foreign Exchange and Currency Option Master Agreement (IFXCO) and other FXC master agreements served as primary sources of the present article. Its methodological base is represented by general scientific methods (analysis, synthesis, induction, deduction) as well as specific legal research methods. In particular, formal legal method was employed for the literal interpretation of the provisions of FXC standard documentation, historical method was invoked to describe the evolution of standard FXC templates, while comparative legal method was used to undertake a comparative analysis of insolvency laws where appropriate.RESEARCH RESULTS. The article gives a general overview of master agreements in financial markets to put FXC documentation into a broader context of standard contracts publication in financial markets. The analysis of FXC master agreements is carried out through conclusion and performance of FX transactions as well as risk mitigation mechanisms analysis such as close-out netting and collateral. Moreover, the article covers governing law and enforceability issues as well as puts FXC documentation into Russian legal context. Although Russian court, with a high degree of probability, will recognize the choice of governing law made by the parties to the relevant master agreement published by FXC, the enforceability of collateral and close-out netting provisions amidst the bankruptcy of a Russian entity is not secured due to non-recognition of FXC documentation by the Russian authorities.DISCUSSION AND CONCLUSIONS. Author comes to conclusion that despite FXC master agreements are not able to compete with ISDA documentation. However, they are popular with certain financial institutions active in foreign exchange markets. To facilitate the development of Russian financial market the list of recognized master agreements should be broadened by addition of documentation produced by FXC. Arguably, it is necessary to amend these provisions and make them compliant with UNIDROIT as well for the purposes of transactions with banks from the countries considered “friendly” to Russia.

Reaction of the USD/PLN currency pair exchange rate to the published macroeconomic data

Abstract The results of the research presented in the article regard the importance of publication of macroeconomic data from the United States for the short-term USD/PLN currency pair exchange rate volatility. The main purpose of the research was to indicate what macroeconomic data is important for the short-term USD/PLN exchange rate volatility. The following research questions have been posed does the USD/PLN exchange rate react to the published macroeconomic data from the American economy and second could greater USD/PLN exchange rate volatility be observed during the COVID pandemic and has the war in Ukraine impacted the USD/PLN exchange rate volatility. International Foreign Exchange Market is the largest and most dynamically developing financial market in the world. In the globalized world the exchange rates are mainly influenced by economic factors. The most significant economic factors that impact short-term exchange rate volatility are primarily macroeconomic data from the American economy. Therefore in this article the author attempts to analyze macroeconomic data and their impact on short-term USD/PLN exchange rate volatility. Data based on which the research was made is as follows: Consumer Price Index, Non-Farm Payrolls (NFP), Services PMI, Manufacturing PMI, Empire State Manufacturing Index or Retail Sales. The analysis of connections between the publication of macroeconomic data and the reaction of exchange rates was carried out using the linear regression model with GARCH process for the random parameter. Conclusions of this research is exchange rate volatility USD/PLN was higher after publications of the macroeconomic data from Americans economy. The strongest exchange rate reaction was after publication of data regarding inflation, Manufacturing PMI and Retail Sales. In the COVID (1.03.20—14.02.22) period we observed increased USD/PLN exchange rate volatility. Exchange rate volatility was expressly larger in the period of war in Ukraine (15.02.22 – end of experiment).

The Impact of Russia's "De Dollarization" on the International Status of the US Dollar

After the Ukraine incident, the United States and European countries jointly implemented economic sanctions against Russia. In order to get rid of the impact of the US dollar on the Russian financial sector, Russia comprehensively carried out the wave of "de dollarization", implemented "de dollarization" in foreign exchange reserves, settlement fields and clearing systems, and issued the "ruble settlement order", forming a model effect in the world. In combination with Russia's "de dollarization" measures, this paper quantifies the extent of Russia's dollarization by means of asset substitution, quantifies the international status of the U.S. dollar by the global share of the U.S. dollar reserves, and conducts regression analysis. It is concluded that although Russia's "de dollarization" cannot shake the hegemony of the U.S. dollar in the short term, this measure has a negative impact on the international status of the U.S. dollar in the field of international foreign exchange reserves, promoting the internationalization of the RMB, It provides reference for countries around the world to "de dollarize".

A compound Tobin tax: A political economy investigation

The paper focuses on international tax proposals and analyzes rationales and challenges for adopting a com-pound global tax. It is proposed here that such a compound global tax instrument would mainly need to focus on two tiers. The one, based on the U.S. President Joe Biden?s 2021 suggestion, would need to close off tax avoidance and tax evasion possibilities for large multinational and transnational corporations; and the other, based on the James Tobin?s 1972-tax proposal, would seek to eliminate the speculative dimension of international foreign exchange dealings. These tiers are discussed extensively in this contribution, concluding with the suggestion that policy coordination is paramount.

CROSS-BORDER INTERBANK PAYMENT SYSTEM (CIPS) И ЕЕ РОЛЬ В ПРОЦЕССЕ ИНТЕРНАЦИОНАЛИЗАЦИИ НАЦИОНАЛЬНОЙ ВАЛЮТНОЙ СИСТЕМЫ ЮАНЯ

Since the beginning of the global financial crisis of 2008-2009, which highlighted the weakness of the international monetary system due to its complete dependence on the US dollar as the main world currency, the leadership of the People’s Republic of China, like many other states, felt its dependence and, taking advantage of the situation, used the full potential of opportunities and efforts to raise the status of the yuan to the level of the international reserve currency currencies and put an end to the dominance of the dollar. The PRC’s efforts were aimed at promoting the yuan in international payments, creating its own global financial infrastructure and networks in yuan and reforming the international monetary system. The creation of China’s own cross-border interbank payment system (CIPS) has become an integral part of building a global financial infrastructure in yuan. Combined with other anti-crisis measures to internationalize the yuan, CIPS helped achieve a sharp increase in the use of the yuan as an international payment currency in less than two years after the system was fully launched in 2018. CIPS is designed in the likeness of the existing market-leading payment systems CHIPS and SWIFT, uses their operational functions that are deeply embedded in the global financial system. Based on key literature in English and Chinese, assessing historical precedents and economic data, the authors try to assess the role of the CIPS system and the yuan in international foreign exchange reserves and payments, the problems of finding global recognition and prospects for improving the supranational use of the Chinese currency

Analysis of the development of the foreign exchange market in the Russian Federation

The article focuses on the financial foreign exchange market, the development and condition of which determines the financial well-being of most commercial enterprises of the Russian Federation. The purpose of the research is to give review of the Russian foreign exchange market’ development and situation. The main factors influencing the level of the exchange rate of foreign currencies expressed in national currency are considered.
 The domestic and international foreign exchange market of Russia for the period 2016-2020 is analyzed. The dynamics of conversion operations, the structure of participants in the domestic foreign exchange market by type of currency. The results of trading on the foreign exchange market, futures and options as a currency instrument, the share of options and futures on the futures market of the Russian Federation, as well as the dynamics of the US dollar against the ruble and exchange trading indicators for the period from 2016 to 2020.
 The conditions, results and prospects of the development of the financial foreign exchange market of the Russian Federation are discussed in this article

ЎЗБЕКИСТОНДА ДАВЛАТ МОЛИЯВИЙ ХАВФСИЗЛИГИНИ ТАЪМИНЛАШ ИНДИКАТОРЛАРИ

This article is devoted to the description of the socio-economic essence of financial security, indicators of financial security, different opinions on the concept of monetary security, issues of ensuring the financial security of the Republic of Uzbekistan.The aim of the study is to investigate indicators of state financial security and identify threats to financial security at the macro level in Uzbekistan, determine the intensity, content, sources, and causes of the impact of threatening factors, create a unified approach to limiting threats and develop recommendations for its practical application.The scientific novelty of the research:1. It was proposed to abolish the practice of issuing loans at preferential interest rates, giving commercial banks the right to independently set interest rates by introducing mechanisms to compensate for a certain part of interest costs, to improve the diversification of international gold and foreign exchange reserves of Uzbekistan;2. Developed the parameters of the zones that determine the state of each security indicator by studying the indicator of the level of financial security by comparing the current (real) situation with a certain class (nominal) in terms of security;3. The system of indicators and the approach based on threshold values in the study of financial security problems have been analyzed. Developed and grouped program measures to limit and neutralize security threats

ХЕДЖУВАННЯ ВАЛЮТНИХ РИЗИКІВ У МІЖНАРОДНОМУ БІЗНЕСІ З ВИКОРИСТАННЯМ МОЖЛИВОСТЕЙ МІЖНАРОДНОГО ВАЛЮТНОГО РИНКУ

The article is devoted to the study of currency risk hedging in international business. The article notes that the international foreign exchange market is the largest and fastest growing of all world markets. The characteristic features of the international currency market are substantiated and offered. It is also noted that foreign exchange transactions provide economic ties between participants located on different sides of state borders: settlements between firms from different countries for the supply of goods and services, foreign investment, international tourism and business travel. It is determined that hedging of currency risks is the protection of funds from the unfavorable movement of exchange rates, and is carried out in fixing the current value of funds by concluding an agreement on the foreign exchange market. When hedging, the risk of exchange rate changes disappears, and this makes it possible to forecast the company's activities and see the financial result, which is not distorted by exchange rate fluctuations, which will allow you to determine product prices, calculate profits, etc. The main difference between hedging and other types of transactions is that its purpose is not to generate additional profits, but to reduce the risk of potential losses, as risk reduction is almost always necessary to pay, hedging, of course, involves additional costs. Hedging is a way to improve business planning. An enterprise wishing to use this service shall pledge the specified amount, from which losses on its positions will be deducted. In today's conditions, thanks to the foreign exchange market, there is a very reliable way to hedge currency risk. This method is to fix the current value of funds by concluding agreements in this market. With hedging, the company eliminates the risk of exchange rate fluctuations, and this allows you to forecast activities and see the financial result, which is not changed by exchange rate fluctuations. Allows you to pre-determine product prices, determine profits, etc. Thus, the principle of hedging in international business is to open a currency position in a foreign currency account for future transactions to convert funds.

Relationship between International Reserves and FX Rate Movements

This paper investigates the relationship between international reserves changes and foreign exchange rate movements for five Far Eastern countries (China, Japan, Taiwan, Hong Kong, and Korea) from January 1997 to May 2020. We use the quantile Granger causality test and the quantile autoregressive model to capture the monetary authorities’ motivations for intervention. The primary results of this study are as follows. First, in China and Hong Kong, we capture the mercantilists’ motive of accumulating their international reserves for the purpose of responding to the appreciation of currencies. Relatively speaking, the monetary authorities’ motivation for precautionary stabilizing their currencies is high in Korea and Japan. Second, we identify the asymmetric causal relationship between the variables. Considering the causal relationship with significant regression coefficients, these characteristics are found to be more evident in all countries. Last, we confirm the properties of the quantile- and tail-dependent relationship between the variables. In particular, Korea has a relatively stronger tail-dependence than other countries. That is, the causal relationship between the Korean foreign exchange reserves and the exchange rate is stronger at the rapid fluctuations of the variables, and this relationship is weakened at the moderate fluctuations of them.

INTERNATIONAL CRUISE TERMINAL

Since the beginning of the fall in oil prices and the problems arising from international foreign exchange markets, Saudi Arabia has witnessed one of the slowest economic growth rates in the world. Accordingly, the government designed a plan to cover the period up to 2030, part of the program required diversification of the economy. Thus, this work presents the development of the International Cruise Terminal in Jeddah, as part of the diversification process, which aims to open up Saudi Arabia to economic growth and to expose the economy to rigorous development. In this work, three case studies related to cruise terminal were analysed. Based on the analysis of the case studies, the estimated the estimated gross area for the cruise terminal is 29908 m2. The cruise terminal is designed to comprise several zones, such as departure area, arrival area, administration department, building general area, maintenance, passport control, other facilities, clinic, commercial, outdoor area and parking area. The terminal cruise will be developed at a development site located at Jeddah Al Kornaysh road near to Al balad. The International Cruise Terminal is designed with modern facilities and it is expected to diversify and contribute to the economy of Saudi Arabia.

Determinants of foreign exchange reserves in Serbia and North Macedonia

This paper employs a quantile regression approach to explore the determinants and properties of international foreign exchange reserves in Serbia and North Macedonia, at various foreign exchange levels. The observed period covers quarterly data for 2005q1-2019q1. The results reveal quantile-dependent determinants of foreign exchange reserves and enable comparison between the two countries, showing co-movements between monetary policy and economic fluctuations. Following the estimates obtained in this research, the paper compares the role of foreign exchange reserves in Serbia and North Macedonia.

Kako možemo posmatrati promene deviznog kursa? Pregled odabranih faktora uticaja na međunarodno devizno tržište

This paper defines the participants in the international foreign exchange market and the influence of natural, political, and economic factors on the movement of the exchange rate, and analysis of circumstances that may contribute to the change of the exchange rate. The paper aims to present the analysis of the exchange rate through macroeconomic phenomena and define the factors influencing the change in the exchange rate and the impact on the work of participants in that process. As risk management measures can prevent the influence of significant factors defined in the paper, measures, and types of risk exposure are determined.

It-Based Usury Free Financial Innovations

Despite development and extension of different ways of financing in financial markets, encompassing Islamic and conventional financing, the mechanism of Electronic Funds Transfer (EFT) of project financing both as borrowed and non-borrowed methods has not been considered at most. Moreover overall IT infrastructures development namely Real Gross Settlement System (RTGS), Automatic Clearing House (ACH), Scriptless Security Settlement System (SSSS) and International Bank Account Number (IBAN) for authentication process and the international meta bank network of Single Euro Payment Area (SEPA) and also international integrated banking networks including the Society For Worldwide Interbank Financial Telecommunication (SWIFT) and Interbank Information Transfer Network (Shetab), and other accomplished endeavors are not efficient in absorbing international contributions for project financing through foreign exchange funds in the different countries, satisfactory E-Payment mechanism in informative portal systems for investment projects are weak. In this way, the role of applying E-Payment systems for attracting foreign investment through retail resources mobilization and design of financial instruments with the capability of transacting in the secondary markets should be reconsidered. In this paper by having a glance at different types of investment project financing, we introduce a new project financing mechanism based on E-Payment with non-usury financial instruments to complete investment project financing chain in the form of Rastin Profit and Loss Sharing (PLS) banking.Sharia compliance of financing instruments in one side and accessibility in absorbing international retail foreign exchange sources on other side are two fundamental discussible items in this paper. In this way by designing a new system of "Non-Usury Scriptless Security Settlement System" (NSSSS) with non-usury mechanisms -avoiding legislative (Sharia) circumvention- can provide the two cited goals in designing non-usury financing instruments through IT-based non-usury financial innovations which includes of Rastin Certificates in Rastin PLS banking, and Non-Usury Bonds namely Rastin Swap Bonds.

Европейский экономический и валютный союз: 20 лет спустя

The authors identify structural and institutional problems of the European EMU that significantly aggravated after the global financial and economic crisis of 2008–2009, evaluate new approaches to the reform of EMU, reveal the main directions of action by the EU authorities to overcome its systemic crisis. The proposed classification of anticrisis measures in the post-2015 period includes: a) updated conceptual approaches of the ECB’s leadership to the strategy of a single monetary policy with an assessment of the results of its implementation; b) conceptual approaches and practical measures for structural reforms in EMU for the period from 2015 to 2025; and b) an action plan to strengthen the international role of the euro. Despite the EU’s ambitious goals, the euro could not outcompete the US dollar in the global monetary system. The stagnation of the international position of the euro is due to the dominant role of the US dollar in commodity markets, as well as its key role in the international lending and foreign exchange markets. Although London is part of the EU, its globally oriented financial markets are more closely linked to New York than to Frankfurt and Paris. A UK exit from the EU could negatively affect the Eurozone’s global competitiveness and significantly narrow the EU’s ability to attract financial resources on international capital markets. The risks of EU destabilization are also magnified by huge euro-denominated financial obligations cleared through London. In December 2018 the European Commission pushed a number of initiatives to strengthen the international role of the euro, including the completion of the Banking Union and the EU Capital Markets Union. However, as the experience of previous years shows, the EU countries do not demonstrate the necessary coherence to achieve their goals. The deterioration of the EU’s relations with the United States and Brexit are additional factors for the uncertainty of the further development of European integration processes in the monetary and financial sphere. The conclusion is made about the strategic and practical significance of the concept of a renewed consolidated EMU, implemented in order to level the accumulated internal and external imbalances in the euro area, and the transition to a model of sustainable economic growth in the region. The prospects of the European Union largely depend on the efficiency and adequacy of the measures taken by the EU authorities to neutralize new challenges and risks, resolve problems of economic integration, put into practice structural and institutional reform programs. Acknowledgements. The study was supported by the Russian Foundation for Basic Research, project № 17-02-00347-OGN (“Development of a model for rational monetary and financial regulation in Russia in the context of increased instability of global finance”).

Trends in the Development of Russian Currency Markets in the Context of Global Structural Transformations and Sanctions

The article analyzes factors, features and trends in the development of the Russian foreign exchange market as an integral part of international currency market in the context of global financial imbalances, de-globalization processes, new protectionism and sanctions regime in relation to Russia. Particular attention is paid to assessing the impact of forms and methods of managing international foreign exchange reserves on structure of Russian foreign exchange market, as well as characterizing the channels of impact of the current conditions for functioning of the Russian foreign exchange market on the currency policy strategy.

EMPIRICAL ANALYSIS OF FOREIGN EXCHANGE RATE AND STOCK PRICE INDICES: EVIDENCE FROM EMERGING COUNTRIES

Döviz kurlarının hisse senedi piyasalarındaki oynaklığa etkisini araştıran bu çalışma, Ocak 2000 - Aralık 2016 yılları arasında 22 ülkenin para birimlerinin ABD Dolarına karşı değerleri ve hisse senedi endekslerinin aylık verileri kullanılarak sabit ve rasgele etki modellerinin test edilmesiyle gerçekleştirilmiştir. Sabit etki modeli endeksler ile döviz kurları arasında bir korelasyon olduğunu gösterirken rasgele etki modeline göre herhangi bir korelasyon bulunamamıştır. Breusch ve Pagan LR testi kullanılarak ülkelere özgü hisse senedi getirilerinin varyansları hesaplanmış ve ülkelere özgü oynaklık riski bulunamamış olup, hisse senedi endeksleri ve döviz kuru arasındaki varyans sıfırdır. Buna ek olarak rasgele etki modeli hisse senedi endeks getirileri ve döviz kurları arasındaki ilişkiyi açıklamak için uygundur. Bu uygunluk, modelde herhangi bir ülkeye özgü etki olmadığından dolayı orta ve uzun vadede uluslararası işlemlerde herhangi bir arbitraj fırsatı olmadığı anlamında yorumlanabilir. Son olarak döviz kurundaki değişimin endeksler üzerinde negatif bir etkisi olduğu gözlenmiştir. Yapılan AR ve MA terimlerine göre geçmiş ay endeks getirilerinin endeks getirileri üzerinde herhangi bir etkiye sahip olmadıkları anlaşılmıştır. Bütün bunlara ek olarak günlük modellerde kısa süreli arbitraj imkânı bulunsa da uluslararası döviz piyasaları ve hisse senedi piyasaları aylık bazda herhangi bir arbitraj fırsatına olanak sağlamayacak şekilde birlikte hareket etmektedir.

Causal relationship between the global foreign exchange market based on complex networks and entropy theory

The foreign exchange (FX) market is a typical complex dynamic system under the background of exchange rate marketization reform and is an important part of the financial market. This study aims to generate an international FX network based on complex network theory. This study employs the mutual information method to judge the nonlinear characteristics of 54 major currencies in international FX markets. Through this method, we find that the FX network possesses a small average path length and a large clustering coefficient under different thresholds and that it exhibits small-world characteristics as a whole. Results show that the relationship between FX rates is close. Volatility can quickly transfer in the whole market, and the FX volatility of influential individual states transfers at a fast pace and a large scale. The period from July 21, 2005 to March 31, 2015 is subdivided into three sub-periods (i.e., before, during, and after the US sub-prime crisis) to analyze the topology evolution of FX markets using the maximum spanning tree approach. Results show that the USD gradually lost its core position, EUR remained a stable center, and the center of the Asian cluster became unstable. Liang's entropy theory is used to analyze the causal relationship between the four large clusters of the world.