Terms Of Foreign Currency Research Articles

The Effect of the Dollar, Euro, and Sterling Exchange on the Tourism Index in the Turkish Economy

The exchange rate expresses the value of the national currency in terms of foreign currency. While foreign currency is an important investment tool in the portfolio of all kinds of investors in our modern world, it is also one of the most important elements of international trade. In particular, the impact of exchange rates on the tourism sector cannot be ignored. The aim of this study is to examine the relationship between monthly data and BIST tourism index (XTRZM) for the period January 2011 – July 2022 and exchange rates (US Dollar exchange rate, Euro exchange rate and Sterling exchange rate) by using the time series process. Whether there is a relationship between the variables was analyzed by econometric analysis method. In the study, in which the Granger model was applied, it was determined that there was a causal relationship between all four variables. A bidirectional relationship was found only between dollar and sterling exchange rate changes. A unilateral causality relationship was found between all other variables. 

Оцінка сучасного стану державного боргу України

The article is concerned with assessing the current state of public debt and the State-guaranteed debt of Ukraine, their essence is considered and the dynamics for the period 2017-2021 are analyzed. It is noted that public debt is the result of the movement of borrowed capital, which has a significant impact on the state of public finances, the investment climate, money circulation, and the development of international cooperation. It is determined that a significant amount of public debt, which was formed during the period of Ukrainian independence, negatively affects the economic situation in the country, and debt servicing creates a burden on the State budget. At the moment, the debt policy needs to find improved ways to attract credit funds and identify effective ways to use them to better the financial situation and strengthen Ukraine’s economy. The article defines the structure of the State debt of Ukraine in terms of foreign currencies. It is proved that the debt mostly consists of borrowings denominated in foreign currencies. An analysis of both the public and the State-guaranteed debt by type of interest rates during the analyzed period was carried out and it was noted that borrowings include a significant share of debt instruments with a fixed rate. The structure of the public debt by type of creditor during 2017-2021 is presented. It is proved that issued securities in the domestic and foreign markets occupy the largest share in the structure of the debt. The economic essence of domestic and foreign government bonds is defined. Domestic government bonds (OVDPs), which are in circulation at nominal depreciation value during 2017-2021, are considered in terms of foreign currencies and owners. Based on the carried out analysis, the main reasons that led to the growth of the volume of both the public and the State-guaranteed debt in Ukraine and the directions of their optimization in public debt management are identified.

Управління державним боргом України: проблеми та напрями оптимізації

The article analyzes the current state of Ukraine’s debt in unstable conditions. The economic essence of the term «public debt management», as well as regulatory and legal support for the implementation of debt policy in the State, is given. It is noted that the management of both the public and the State-guaranteed debt is carried out by the Ministry of Finance of Ukraine. A dynamic analysis of Ukraine’s public debt for 2017-2021 was carried out. The structure of the total amount of the public debt and the State-guaranteed debt of Ukraine for 2017-2021 is examined in terms of internal and external debt. During the research, a structural analysis of public debt in Ukraine in terms of foreign currencies as of 2021 was carried out, the amount of funds allocated from the State Budget of Ukraine for debt servicing and payments on the State derivatives during 2017-2021 was analyzed. The ratio of public debt to gross domestic product is computed. The main problems of the government borrowing market are given. The peculiarities of the risks of the public debt of Ukraine are characterized. Modern sources of financing of the State budget are considered. The directions of optimization of the State policy in the field of public debt management of Ukraine are allocated.

Unleashing the indirect influence of oil prices on food prices via exchange rate: New evidence from Pakistan

Oil prices not only affect the agricultural commodity directly but also indirectly through different channels. However, among these channels, the most important is the channel of exchange rate. The reason for putting emphasis on the mediating role of exchange rate between the oil prices and food prices nexus is that the oil‐importing counties like Pakistan pay their import bills in terms of foreign currency in the international market which as a result escalates the demand for foreign currency in oil‐importing countries. This study has analyzed the indirect influence of oil prices on food prices via exchange rate. We developed a Composite Index (CI) of the agricultural commodity prices including wheat, cotton, rice, gram, sugar cane, and maize. This index is generated by using Principal Component Analysis (PCA). Further, to construct our econometric model, we used mediation approach by applying Seemingly Unrelated Regression (SUR) model. The results indicate a positive relationship between exchange rate and prices of oil. We also found the same relationship between exchange rate and the food prices. In addition to this, we witnessed positive effects of prices of oil on the food prices in the presence of exchange rate. Our study confirms that exchange rate partially mediates between the nexus of oil prices and food prices. Our analysis explains the impact of oil price on agricultural commodity prices through the channel of exchange rate by using time series data of Pakistan.

Pricing-to-Market and Exchange Rate Pass-Through in the Sri Lankan Crepe Rubber Export Markets

This article analyses the impact of the pricing-to-market (PTM) strategy on the Sri Lankan crepe rubber. The fluctuation in the value of the Sri Lankan rupees can alter the prices of exported goods in terms of foreign currencies. This affects the Sri Lankan products either to be more or less expensive to the foreign buyers and consequently, it effects on export demand. Hence, analyzing the effects of PTM is an important element in assessing the relationship of the exchange rates and export prices of tradable goods. Within and between models of panel regression was used to analyse the exchange-rate-pass -through (ERPT) of Sri Lankan crepe rubber in the world market. The within model was used to analyse the short-run pricing-to-market and the between model was used to analyse the long-run pricing-to market. Data of eight export market destinations spans from 2003 to 2014 were used in the analysis. Results indicated that the short-run pricing-to market is a strategically viable plan to expand the Sri Lankan crepe rubber market via exchange rate pass through.

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The estimate of regional balances of payments in Croatia

Neither the region, as part of the state, nor regional development has occupied the centre of attention in the theory of international trade. There are several reasons, both theoretical and methodological, as well as entirely practical, including the want of any adequate statistics, particularly those necessary for the construction of Croatian regional balances of payments. Accordingly, there are several objectives to this work. After the introduction in which reference is made to the limitations of the running of individual regional economic policies, comes a chapter in which the content of an ideal regional balance of payments is defined. On the way from the ideal to the objective content of regional balances of payments, that is, one reflecting the available data, many methodological problems had to be solved and suitable statistics set up. In the sequel, the analysis of the balances of payments reveals a whole scale of regions that are negative or positive in terms of foreign currency. Although the quantities of the individual balances and items are interesting in themselves, it is important to understand that the different regional exposures to monetary policy possibly require a selective approach from economic policy. At the end, making use of the regional balances of payments, the influence of the depreciation of the kuna on the gross domestic product of the regions is analysed. It is established that in some hypothetical depreciation, if foreign currency transactions were treated ceteris paribus in relation to other economic aggregates, there would be important gains and losses, which would lead to ever greater developmental inequality in Croatia.

Revisiting the Concept of Dollarization: The Global Financial Crisis and Dollarization in Low-Income Countries

The economic literature has examined deposit dollarization in nominal terms, typically focusing on the ratio of foreign currency deposits to broad money. However, while private agent demand for foreign currency may remain unchanged in foreign currency terms, there could be large fluctuations in the dollarization ratio simply due to exchange rate movements. This paper proposes a new approach to measuring dollarization that removes these exchange rate effects, and demonstrates that beyond the variance of inflation and depreciation, the level of inflation and size of depreciation also matter for dollarization. While dollarization in nominal terms surged during the recent global financial crisis, there was a downward trend in real terms. Employing a set of econometric estimators, this paper investigates whether “real” dollarization during 2006–09 was associated with the crisis, and the role of initial macroeconomic conditions, quality of institutions, risk aversion, and prudential measures. We find that exchange rate appreciation and reductions in sovereign risk do moderate dollarization; but the results for global volatility have low statistical significance, perhaps because global shocks tend to preserve, to a large extent, relative attractiveness of foreign assets. Nonetheless, estimated impulse-response functions point to a large but short-lived positive impact of global volatility on dollarization, which could reflect economic agents heightened concerns about spillover effects of global uncertainty on the domestic economy.

Revisiting the Concept of Dollarization: The Global Financial Crisis and Dollarization in Low-Income Countries

The economic literature has examined deposit dollarization in nominal terms, typically focusing on the ratio of foreign currency deposits to broad money. However, while private agent demand for foreign currency may remain unchanged in foreign currency terms, there could be large fluctuations in the dollarization ratio simply due to exchange rate movements. This paper proposes a new approach to measuring dollarization that removes these exchange rate effects, and demonstrates that beyond the variance of inflation and depreciation, the level of inflation and size of depreciation also matter for dollarization. While dollarization in nominal terms surged during the recent global financial crisis, there was a downward trend in real terms. Employing a set of econometric estimators, this paper investigates whether “real” dollarization during 2006–09 was associated with the crisis, and the role of initial macroeconomic conditions, quality of institutions, risk aversion, and prudential measures. We find that exchange rate appreciation and reductions in sovereign risk do moderate dollarization; but the results for global volatility have low statistical significance, perhaps because global shocks tend to preserve, to a large extent, relative attractiveness of foreign assets. Nonetheless, estimated impulse-response functions point to a large but short-lived positive impact of global volatility on dollarization, which could reflect economic agents heightened concerns about spillover effects of global uncertainty on the domestic economy.

What Does the Exchange Rate Do? A Status Symbol?

This paper aims to assess the harmful impacts of exchange rate depreciations on Pakistan’s economy, including impacts on international capital movements, wages, the domestic price level, and development. Devaluation of a currency in terms of foreign currencies or metallic standards was for long considered to be undesirable and, if unavoidable, a sign of failure. Attitudes have since changed and devaluation is thought to bring advantages, especially by making economies more competitive exporters. This paper is intended to show that it has disadvantages that outweigh any supposed advantages, notably its effects on inflation, income distribution, service on foreign debt and incentives. It does so by describing in concrete terms the relations between foreign and domestic prices and the costs of untradeable goods and services that are components of the price of any good in any domestic price index. It also discusses the motives, official and unofficial, that have prompted the monetary authorities of Pakistan to make a practice of regular depreciation of the rupee and to question their justification.

An Analysis of Demand for Money in the Lao People’s Democratic Republic

This paper is aimed at exploring the dynamic relationship between money bal- ance and four other macroeconomic variables: real GDP, expected inflation, exchange rates, domestic and foreign interest rates by modeling and testing for sta- bility of money demand functions in the Lao People’s Democratic Republic (PDR) during the period of 1993:Q1-2010:Q2. Demands for narrow money, broad money and board money in foreign currencies were estimated. The estimated results sug- gested that all demand functions are stable. They can be intermediate targets of the Bank of the Lao PDR. The substantial results point out: (i) there is an evidence of ample influence of exchange rates and interest rate on money balances in the Lao PDR; (ii) expected inflation indicates the effect of high inflation episodes on money balances, especially in terms of foreign currency, and (iii) the local currency, the Kip, is used predominantly for transaction purposes rather than foreign currencies.

External Debt Accumulation and Its Impact on Economic Growth in Pakistan

The accumulation of external debt is common phenomenon of the developing countries and it has become a common feature of the fiscal sectors of most of the economies. A country with lower saving rate needs to borrow more to finance the given rate of economic growth. So external debt is obtained to sustain the growth rate of the economy, which is otherwise not feasible with the given domestic resources. Pakistan is one of the developing countries and faces serious debt problems, according to World Bank Report 2000-2001, Pakistan is among the Highly Indebted Countries (HICs); because Pakistan’s present and future debt situation is very grim. According to the World Bank total external debt may be defined as debt owed to non-resident repayable in terms of foreign currency, goods or services. External debt is the composition of long term debt (public and publicly guaranteed debt plus private non guaranteed debt), short term commercial debt and International Monetary Fund (IMF) loans. Prior to early 1970s the external debt of developing countries was primarily small and official phenomenon, the majority of creditors being foreign governments and international financial institutions offer loan for development project [Todaro (1988)]. At the same time current account deficit was common which increased the external indebtedness of the developing countries, until when Mexico, despite an oil exporter, declared in august, 1992 that it could not services its debt ever since, the issue of external debt and its servicing has assumed critical importance and introduced the debt crises debate [Were (2001)].

The Fault Lines in Cross-Border Banking

This paper discusses the fault lines in cross-border banking, both at the global level and at the European Union/European Economic Area (EU/EEA) level, using the case of the three Icelandic cross-border banks as an example. Cross-currency liquidity risk built up prior to the crisis, especially maturity mismatches in foreign currency. This risk tended to be grossly underestimated at the time. There was a run on banks’ FX liabilities after the collapse of Lehman Brothers in September 2008. The Icelandic banks were highly vulnerable to such a run and lacked a credible lender of last resort (LOLR) in terms of foreign currency. The crisis also exposed serious flaws in the EU and EEA framework for cross-border banking, including deposit insurance. One of the main lessons of the Icelandic experience is that sizeable cross-border banking operations in small countries with their own currency come with very significant risks. The Icelandic experience suggests that further reforms are needed for cross-border banking activities in the Single Market, where the key issue is to match the European passport for banks with pan- European supervision, deposit insurance and LOLR. Domestic banks could remain in the domestic system.

Export taxes in times of trade surpluses

This paper studies the comparative effects between an exchange rate appreciation and the introduction of an export tax as alternative policy responses to address trade surplus concerns in a country with a fixed exchange rate regime facing a downward-sloping world demand curve for its exports. It is found that an exchange rate appreciation would not alter the nature of the long-run equilibrium, and would thus be welfare-neutral. The appreciation would merely supplant foreign reserve accumulation as the mechanism that transits an economy from the short- to long-run equilibria, resulting in a lower long-run stock of foreign reserves. By comparison, an export tax would raise the export price in foreign-currency terms. Provided that the tax revenue is transferred back to consumers in a non-distorting manner, the welfare consequence of the tax would depend largely on the elasticity of the world demand for the country's exports. If the demand is inelastic, both national welfare and the stock of foreign reserves would necessarily rise in the long run as much of the tax burden would be shifted forward to foreign consumers. If the demand is elastic, the change to national welfare would depend on the relative magnitudes of a number of parameters, including most notably the import content of exports.

The economic impact of the Euro‐Mediterranean free trade area on Mediterranean non‐member countries

The new Euro‐Mediterranean Partnership will deepen the asymmetric trade interdependence between the EU and Mediterranean Non‐Member Countries. An even larger share of the latter's imports will originate in the EU displacing not only inefficient local producers (quite likely in the case of Morocco and Tunisia) but also non‐EU foreign suppliers (more likely in the case of Jordan or Egypt). This may have a negative effect on the income side of the Mediterranean Non‐Member Countries’ budgets (since tariff revenue will sharply decrease) and on their balance of payments (in terms of foreign currency spent on imports).The most promising feature of the new Partnership is its South‐South component provided that the plan allowing for the diagonal cumulation of origin rules is implemented.

The Influence of Exchange Rate Changes on Prices: A Study of 18 Industrial Countries

A key issue in contemporary economic policy-making concerns the effect of rate changes on prices. The traditional view of rate movements, prevalent up to the 1 960s, took it almost for granted that a devaluation would reduce the foreign currency price of exports and increase the home currency price of imports. The empirical debate centred on the price elasticities of demand for those exports and imports. If the elasticities were sufficiently large, the devaluation would work; i.e., the volume effects (higher exports, lower imports) would outweigh the adverse movement in the terms of trade (cheaper exports, dearer imports) and the trade balance would improve (Robinson, 1947). This classic analysis was essentially static and was attacked on the grounds that it ignored the long-run effect on prices of a parity change. These effects are taken account of by the monetary view of the balance of payments, which stresses the effect of balance of payments disequilibrium on the supply and hence on prices. On this view (summarized in Johnson, 1972) a devaluation may initially create a balance of payments surplus, but this will then increase the supply and set in motion an inflationary process which restores the price level of the devaluing country, measured in foreign currency terms, to its pre-devaluation level. At this point the external surplus disappears and the country is back in its original position, but with a once-for-all increase in its reserves, accumulated while the price adjustment was occurring. The above analysis justifies the claim that the rate, being an essentially monetary phenomenon, can affect only money things (i.e. the general price level) and cannot permanently change the underlying phenomena such as the trade balance or the terms of trade. This view of rate changes can be justified by another line of argument: the tradeable output of each country has a determinate value. In other words, if trade was conducted by barter, a hundred Leyland Minis would be freely exchanged for some definite number of Volkswagen Golfs or Renaults 5s, the real barter rate of exchange of those goods. In equilibrium, UK, French and German prices and rates should be such that the sterling value of the hundred Minis should, when converted into German marks or French francs at the market rate of exchange, exactly purchase the number of Volkswagens or Renaults given by the barter rate of exchange. Clearly, a change in the rate is not going to alter people's preferences for Minis as against Volkswagens or Renaults. Hence, starting from a position in which prices and rates are in equilibrium, any rate change must in the long run be completely offset by price movements which restore the rate at which Minis are exchanged for Volkswagens and Renaults.

Aspects of Speculation in the Canadian Market for Foreign Exchange

Since the fourth quarter of 1950 the Canadian dollar has been allowed to find its price in terms of foreign currencies, usually with little official interference. During this period special interest groups have occasionally complained about the level of the rate of exchange, but, on the whole, the operation of the new system of exchange has met with satisfaction at home and admiration abroad. This success has depended on the small amplitude of the fluctuations that have taken place in the rate of exchange during short periods of time, say quarter to quarter. However, very little is known about the mechanism that has operated to maintain such stability as the rate has shown in practice. Confidence in the future stability of the rate can easily be mistaken under these circumstances. It is the purpose of this paper to shed some light on the equilibrating process in the market in foreign exchange by identifying the stabilizing influences in the balance of payment and by developing a possible explanation of their movement.The items in the balance of international payments can be divided into two categories according to the manner in which they are related to the rate of exchange if it is assumed that they have demand and supply functions that are independent of each other and that they have ordinary Marshallian elasticities. The appropriate assumptions about other things to be held constant when analysing merchandise trade, for instance, include income and its distribution, relative prices, tastes, and production functions. The things held constant do not include other items in the international accounts such as movements of capital from which come the offsetting net supply or demand for foreign exchange. Some of the items are not independent: freight and shipping are obviously related to trade; but the smaller items are not taken up separately in this analysis.

Multipliers and Elasticities in Foreign-Trade Adjustments

TN THE last fifteen years many contributions Have altered the theory of balance-of-trade adjustments to accommodate Keynesian income analysis. Under the classical mechanism of adjustment, price elasticities played the paramount role in bringing about a correction whenever an international imbalance existed. National price levels were altered in relation to one another, either through gold movements or through exchange-rate adjustments; and these adjustments caused relative prices of home and imported goods to alter. Substitution against imports and in favor of home goods took place in the country with the reduced price level, and the reverse process took place abroad. WYhen the foreign-trade multiplier was introduced by the work, notably, of Robinson, Salant, Metzler, and Machlup, attention was concentrated for a time on this mechanism. It was used to show how economic fluctuations were transmitted between countries; how capital and reparations transfers could be made; and how an exchange depreciation could be used to raise a country's income and employment at the expense of its neighbors. More recently the price-substitution and multiplier mechanisms have been combined to describe the simultaneous effects of the two on domestic income, foreign income, and the balance of trade. Contributions to the solution of this problem have been made by Tinbergen, IHarberger, and Polak.2 More recently still, Alexander has treated the international adjustment mechanism in a novel fashion, which he calls the approach.3 Alexander concludes that, in general, an exchange-rate adjustment will not succeed in improving significantly the trade balance of a deficit country, for any improvement in the balance (in foreign-currency terms) must be met by a greater increase in real income than in real absorption (domestic consumption and investment). But generally, according to Alexander, absorption will change by just as much as income, because the marginal propensity to absorb is usually in the neighborhood of unity.4 This disarmingly simple approach, which, its author thinks, says everything important about devaluation and its effects, has been criticized by Machlup, who believes that he has found a number of defects in the income-absorption treatment, in particular its complete neglect of the price-substitution effects which played such an important role in other formulations.5 My present purpose is to clarify Alexander's approach and to show how it fits in with more accepted versions of the adjustment mechanism, such as those of Polak and Harberger. By using standard definitions and behavioral relations, I shall derive results which can easily be trans-

The Brazilian Exchange Auction System

Brazil emerged from World War II with a single exchange rate, applicable to all transactions.' This rate was equal to the prewar effective export rate and was very slightly 2 relative to the prewar import rate. During and after the war, however, Brazil experienced substantial inflation so that the postwar par value of the cruzeiro has been at all times, despite a considerable improvement in the terms of trade. Thus, Brazil's large exchange reserves fell rapidly as soon as imports became readily available, and her industries, which had greatly expanded during the war, were threatened by foreign competition.3 Exchange control alone was unable to restrain imports sufficiently, and Brazil contracted substantial foreign debts. Beginning in 1947, therefore, increasingly comprehensive direct import controls were introduced -controls which nonetheless proved an inefficient means of limiting and selecting imports. Rising domestic prices also impaired Brazil's ability to acquire foreign exchange; with the notable exceptions of coffee and cocoa, her exports were being priced out of world markets. A first attempt to promote foreign sales was made through the permission of private barter deals,4 a second attempt through mixing the parity in various proportions with the free market rate of exchange after a legal free market in foreign exchange for financial transactions had been established early in I953. But neither of these attempts was successful. Brazil's international accounts were thus subjected to increasing pressure on both the import and export sides. This pressure led to the introduction of the exchange reform of which the auction system is the outstanding feature. This system had been successfully employed by Raul Prebisch in Argentina during the I930's. It was subsequently incorporated into the exchange laws of Paraguay and Guatemala when those laws were revised under the influence of Federal Reserve System missions headed by Robert Triffin, and auctions were conducted sporadically by the Paraguayan authorities. Never before, however, had the echange auction system been applied to the bulk of a country's general imports. The exchange reform of 1953 should be judged against the conditions which have characterized the Brazilian economy in the postwar period. The persistent and substantial inflation reflects a high propensity to invest on the part of government and private entrepreneurs as well as an increasingly important tendency to wage inflation. A further outstanding feature of Brazil's postwar economy has been the rapid growth of real income, based on a high rate of domestic investment and substantial improvement in the terms of trade. It is significant that domestic investment was as* I am indebted to Professor Gottfried Haberler fcr suggesting that I write this article. I should also like to thank him and Professor Seymour E. Harris and Mr. Peter B. Kenen for their very great help in revising the first draft of this paper. My gratitude is also due to Professors Eugenio Gudin and Ota'vio Bulhoes and Drs. Jayme Bastian Pinto, E. M. Bernstein, Herculano Borges da Fonseca, Roberto de Oliveira Campos, and Sidney A. Latini, all of whom read the first draft and made many helpful suggestions. 'For a short time after the war, a three per cent surcharge on imports was maintained. This premium was abolished but was reintroduced at five per cent in I947 and was later raised to eight, then ten, per cent. 2 The terms appreciated and depreciated will be used throughout this paper to signify changes in the value of the Brazilian currency, the cruzeiro, in terms of foreign currencies. The words overvalued and undervalued will be used in the same manner. The par value of the cruzeiro is Cr$i8.5o per U.S. dollar. ' Brazil's system of specific duties, dating back to 1934, was rendered obsolete by rising world prices and affords very little protection to industry in general. 4 Under this system, licenses for certain profitable imports were issued provided only that equivalent exports of certain slow-moving Brazilian products. were undertaken simultaneously; the profit on imports subsidized the export, i.e., there was a disguised devaluation.

The Forward Exchanges-(Continued)

H ' tAVING described the operations of the bank dealer in buying, selling, and covering his transactions on the forward exchange market, we turn to an analysis of certain typical transactions in forward exchange. 2. Types of transactions in which forward contracts are used.The type of transaction generally cited by the textbooks as giving rise to a forward exchange contract is the purchase by an importer, or sale by an exporter, of goods in terms of a foreign currency. An importer who has contracted, or is about to contract, for goods in some foreign currency, wishing to insure himself against fluctuations in the exchange rate, buys the currency which he will need to meet his obligation one, two, or three months hence in the form of forward exchange. By doing so he knows immediately what his cost will be in terms of his own currency. If he waited, he might have to pay considerably more for his goods than the spot exchange rate existing at the time of making his decision would have indicated. Of course, he might have to pay considerably less, in terms of sterling (which I will use throughout as the domestic currency) if the rate rose. But the merchant is ordinarily not an exchange speculator, and he desires every bit of certainty he can get in his business. The existence of a forward market enables him to quote his buying prices in terms of foreign currencies and at the same time know what they will be in terms of his own. Similarly, the exporter who makes, or is about to make, a sale to a foreign buyer in terms of the buyer's currency is enabled to sell the currency forward, and thus insure his sterling price against a rise in the rate. To the merchant making this sort of a transaction, the amount of the discount, if he is a seller, or of the premium, if he is a buyer, on forward, as compared to spot, is considered as an insurance cost. If the forward rate is at a premi-