Exchange Rate Volatility Research Articles

The Role of Currency Fluctuations in Shaping Kenya’s Export Performance

This study explores the impact of exchange rates on Kenya’s export performance from 1990 to 2022. The study utilizes a causal research design and time series data to assess the influence of exchange rate fluctuations, volatility, and relative price levels on export volumes and their contribution to GDP. Descriptive statistics reveal considerable variability, with exports displaying slight positive skewness and exchange rates exhibiting a slightly left-skewed distribution. Unit root tests confirm non-stationarity in the level forms of exports, exchange rates, the export unit value index, and the price level ratio, which become stationary after first differencing, thus suitable for econometric modeling. The Vector Error Correction Model results indicate insignificant long-run effects of exchange rates, export unit value index, andprice level ratio on exports, despite significant short-run adjustments correcting deviations from the long-run equilibrium by approximately 73.4% per period. Short-run analyses show insignificant effects of lagged exchange rate andexport unit value index differences on exports, while price level ratio exhibits a marginally significant negative effect. The research emphasizes the necessity for stable exchange rates to foster a predictable export environment, crucial for attracting investments and sustaining economic growth. The study recommends diversification of Kenya’s export base, enhanced competitiveness through technological advancements and skill development, and creation of financial instruments to mitigate exchange rate risks. Strengthening export promotion initiatives and improving data collection and research are also advocated to support informed policymaking. The study’s findings are pertinent to policymakers, investors, and researchers, highlighting how currency fluctuations affect economic stability, job creation, and living standards.

The Impact of Currency Fluctuations on Import Cost and Export Revenue of Tolar Ocean Products

This study examines the impact of currency fluctuations on Tolar Ocean Products, a seafood exporter and importer. The research finds that exchange rate volatility significantly affects both import costs and export revenues for the company. To mitigate these risks, Tolar Ocean Productsshould implement hedging strategies, diversify its markets, and closely monitor exchange rate movements. Effective risk management is crucial for the company's long-term success in the global seafood market.

The Role of Forecasting Exchange Rate Volatility and Its Impact on Inflation in Sierra Leone: Evidence from a GARCH-MIDAS approach

The Role of Forecasting Exchange Rate Volatility and Its Impact on Inflation in Sierra Leone: Evidence from a GARCH-MIDAS approach

On the relevance of realized quarticity for exchange rate volatility forecasts

<p>High-frequency tick data have proved helpful for forecasting volatility across asset classes. In the finite samples typically faced by practitioners, however, noise inherent in tick-level prices creates inaccuracies in model parameter estimates and resulting forecasts. A remedy proposed to alleviate these measurement errors is to include higher-order moments, more specifically the realized quarticity, in volatility prediction models. In this paper, we investigate the relevance of this approach in foreign exchange markets, as represented by EURUSD and USDJPY data from 2010 to 2022. Using well-established realized volatility models, we find that including realized quarticity leads to higher precision in daily, weekly, and monthly out-of-sample forecasts. These results are robust across estimation windows, evaluation metrics, and model specifications.</p>

Impact of Exchange Rate Volatility on Trade Balance: Evidence from Pakistan and its Major Trading Partners

Impact of Exchange Rate Volatility on Trade Balance: Evidence from Pakistan and its Major Trading Partners

Impact of Exchange Rate Volatility on the Manufacturing Sector Growth Performance in Nigeria

Impact of Exchange Rate Volatility on the Manufacturing Sector Growth Performance in Nigeria

An Empirical Analysis of Exchange Rate Volatility and Foreign Investment Inflows from the Post-Reform Period to 2020 in India

An Empirical Analysis of Exchange Rate Volatility and Foreign Investment Inflows from the Post-Reform Period to 2020 in India

Analysing the Role of Money Supply on Inflation: A case Study of Pakistan

Monetary tools, money supply, and exchange rates play a significant role in a country's growth and substantially impact its development trajectory. In order to address this issue, the study empirically examines the relationship between money supply, exchange rate, and Inflation in Pakistan. The study utilized annual time series data from 1990-2020 from the State Bank of Pakistan (SBP) and World Development Indicators (WDI). To avoid spurious results, the Phillips-Perron unit root test and the Augmented Dickey-Fuller test were applied to check the data stationarity, which was integrated at different orders of integration. The exchange rate and inflation are stationary at the 1st difference I(1), while the money supply is stationary at the same level I(0). The Autoregressive Distributed Lag (ARDL) model analyzes the variables' short- and long-term relationships. The study confirms the presence of both short-run and long-run relationships among the variables. The results show that money supply and exchange rates significantly impact inflation positively. A negative and significant error correction term (ECT) indicates strong equilibrium convergence among variables. The upper and lower bounds values are below the F-statistics, indicating a significant long-term association between the statistically significant variables. The research contributes to current knowledge by presenting new awareness into the dynamic relations among money supply, exchange rate, and inflation. Furthermore, this study will help to design monetary policy to achieve specific targets to control inflation and volatility in exchange rates. It will help regulators and policymakers stabilize financial markets and the supply and demand of products, prevent pricing mechanisms and import exports, and increase the balance of payment accounts.

주가와 환율 변동성에 관한 실증연구

China's tourism industry has mainly focused on inbound tourism. Starting in 1995, the Chinese government introduced a weekend holiday system, and this policy served as an opportunity to develop China's domestic tourism industry. Thanks to the golden week system introduced in 1999, domestic tourism in China has grown explosively. Accordingly, social overhead capital such as railways, aviation, and highways was rapidly expanded. From then on, the tourism industry developed simultaneously into inbound tourism, domestic tourism, and outbound tourism. It is examine the volatility spillover effect between stock returns and exchange rates for Chinese tourism companies. For the empirical analysis, we use the BEKK-GARCH model of Engle and Kroner (1995). From the empirical analysis, we find the following results. First, the shock that occurred in the previous year was found to have a statistically significant positive effect on the current stock return rate and exchange rate change rate. Second, all conditional volatility spillover effect coefficients were found to have a statistically significant positive effect. Third, a negative spillover effect was found to occur between exchange rate volatility and Shanghai Composite Stock Index returns.

Shifting the paradigm for securing efficient management of exchange rate in Nigeria: A GARCH and BEKK-MGARCH analysis

The influence of foreign exchange on all spheres of any economy is germane to determining its extent of development. Most developing countries have been subjected to managing the integrity of the exchange rate arising from their disadvantageous position in world trade. Nigeria is not an exemption either; this is due to its constant interventions in the foreign exchange market from time to time and by the policy of the existing government in power. However, the interventionist policy framework has been more harmful to Naira as the currency depreciates unabatedly. The pertinent question is whether monetary policy should be the only approach to effective exchange rate management or be combined with fiscal and income policies. Irrespective of the policy choice, the aim, target, and instrument must be complementary without unnecessary disruptions midway, as usually experienced in Nigeria. These inconsistencies have come to bear enormously on the country's exchange rate management. Rather than focusing on the impact of exchange rate volatility on industrial development that could warrant foreign exchange inflows, this paper considers industrialization as an approach to effectively managing exchange rates in Nigeria. This analysis employs a univariate GARCH and BEKK-MGARCH model, using high-frequency monthly time series data from 2000 to 2019, to examine the volatility transmission between the foreign exchange market and the industrial sector. The model estimation uses the Conditional Maximum Likelihood Technique (CMLT). It was discovered that industrial development positively influenced the official market exchange rate compared to the parallel market exchange rate, reducing its volatility. The study thus suggests the vigorous pursuit of foreign exchange earnings and usage policy by earning entities, floating Diaspora bonds, enhancing and encouraging remittances and repatriation of illicit financial outflows to enhance industrialization. This will discourage arbitraging, increasing foreign exchange inflows and stabilizing the economy.

Harmony and Discord: Unraveling the response of Yields of Fixed Income Securities against Economic Instabilities

In the times of macroeconomic and financial instability, governments are prone to issue excessive fixed-income securities in local as well as international markets while offering excessive rates of returns to fill their financing gaps. Therefore. this study aims to investigate the effect of the prevalent macroeconomic and financial instability of a country on the yields of Sukuk (Islamic bonds) and conventional bonds. The study collects the monthly data from Pakistan for the period 2015 to 2022 considering that the country has been facing such economic instabilities for the last few years. The findings reveal that there is a positive effect of inflation, interest rate, and the risk premium on the yields of both conventional and sukuk bonds. However, foreign exchange volatility and the performance of the stock exchange affect the conventional yield negatively. This study revealed lucrative prospects for investors who choose to invest in fixed-income assets, in terms of diversification gains by investing in both conventional and Sukuk bonds.

Effects of Exchange Rate Variations on Imports and Exports: A Case Study of Pakistan

This study examines the impact of exchange rate fluctuation on Pakistan's exports and imports throughout 2000 to 2019. The current study uses a non-probabilistic approach for the sample selection. Descriptive statistics are used in order to assess the data based on mean, medium, and standard deviation; however, regression analysis is used to analyze the relationship between variables. The purpose of this study is to investigate whether trade flows are influenced by exchange rate volatility symmetrically or asymmetrically, as the exchange rate variations have shown an empathic impact on the economies of developing nations in the past years. The existing study investigates the effect of currency fluctuation in the context of Pakistan. It is generally recommended that policymakers in Pakistan consider the existence and degree of exchange rate volatility as well as the predicted impact of this volatility on specific macroeconomic variables when implementing trade strategies. This will allow for increased trade and foreign direct investment potential. The results of the study show that there is a substantial correlation between exports and exchange rates, with a t-statistics value of 2.01 for the independent variable of currency rates. We find that the exchange rate significantly affects the exports and imports of Pakistan. As the results show, currency fluctuation does affect the imports and exports, so automatically, the economic growth of the country is concerned. Inflation and interest rates are taken as control variables in the existing article.

Exchange Rate Responses and Volatility Spillover Effects during the COVID-19 Pandemic in Indonesia

This paper aims to assess the impact of the confirmed COVID-19 cases, the timing of the outbreak, and physical measures on the returns and spillover effects of exchange rate in Indonesia. The model will be tested by the exponential generalized autoregressive conditional heteroskedastic (EGARCH) process and the spillover volatility index. The study discovers that the confirmed cases, outbreak news, and the implementation of large-scale social restrictions simultaneously contribute to a leverage effect on the volatility of a direct quote of Indonesian Rupiah to Australian Dollar, Euro, US Dollar, Singapore Dollar, and Great British Pound. To a certain extent, the heatwave as well as the meteor-shower effects as a result of clustering events and intense spillover effects in the currency market of Indonesia are observed.

Asymmetric Volatility Spillover among Macroeconomic Variables and Pakistan Stock Exchange

The present research focused on the association of macroeconomic variables uncertainty with the volatility of stock market in Pakistan. The research explored uncertainties in macroeconomic series by common version of EGARCH and GARCH variances were used as proxies of volatilities. Furthermore, the series were incorporated into mean and variance equations to model spillover effect between stock market and indicators of macroeconomy. The association was additionally checked through VECM and Wald test methods. The investigation used monthly observations from January 2001 to December 2020. Findings revealed a significant causality amid macroeconomic volatility and stock exchange volatility. The outcomes also reconciled with Banumathy and Azhagaiah (2015); Wang (2011). A bilateral causal relationship was found between volatilities of gold prices and manufacturing output with stock market, whereas uni-directional causality was from exchange rate, inflation and oil prices toward stock market.

THE CURRENT STATE OF THE KAZAKHSTAN TOURIST MARKET

For many developed and developing countries, the tourism sector is the main source of employment, government revenue and foreign exchange earnings. The most important parameters of tourism development in the country are indicators of inbound and outbound tourism. Before the pandemic, both at the republican and regional levels, a lot of work was carried out to attract foreign tourists to Kazakhstan, measures were taken in the field of image policy and popularization of tourist destinations of the country. But many Kazakhstanis prefer to rest abroad, rather than in the resort areas of their homeland. The interrelation of the tourist attractiveness of the country with the category of tourist potential, factors of tourist attractiveness are considered. Tourist attractiveness is based on the tourism potential of the country, contributes to the growth of its competitiveness, the transformation of tourist supply into demand, is associated with various types of its assessment and is the result of its previous development. republic. Tourism activity is influenced by many factors of an economic, political, social, natural and technical nature, including: terrorism, the process of ensuring the safety of tourists, man-made disasters; uneven distribution of tourist flows; political instability in some regions of the world; prolonged global recession; volatility of exchange rates; priority of national rather than international norms in tourism, etc. The negative factors hindering the development of inbound tourism in the country have been identified, recommendations for eliminating existing problems have been proposed. The considered resources and tourist opportunities of Kazakhstan lead to the expediency of forming a modern tourist product. The development of a new tourist product in Kazakhstan would be competitive in the world market of tourist services and would help attract foreign tourists to Kazakhstan. The ways of development of domestic tourism in Kazakhstan, the creation of a competitive tourism industry, including the development of infrastructure and improving the quality of services provided, are proposed.

Do Financial Markets Respond to Populist Rhetoric?

AbstractWith the global rise in populism over the last decade, there has been an increase in political commentaries (PC) by leaders that criticize their central banks and argue for lower interest rates. We analyse the effects of PCs on exchange rates, bond yields, and the risk premium for six countries that are subject to political pressures. Utilizing a specification with time‐varying parameters, we show that PCs affect the level and the volatility of exchange rates, bond yields and the risk premium in Turkey. The response increases over time. In other countries, there is a significant impact on exchange rate volatility.

Asymmetric Response of Fiscal Sustainability to the Financial Development in Nigeria

This study examines the asymmetric response of fiscal sustainability to financial development in Nigeria while augmenting the model with exchange rate volatility within the non-linear autoregressive distributed lag framework. The empirical evidence reveals that positive and negative shocks in domestic credit to the private sector result in significant unsustainable fiscal balance and fiscal sustainability both in the short run and long run respectively. Increase and decrease in annual market capitalization have a positive and negative significant impact on the fiscal sustainability in the long run respectively. Exchange rate devaluation or depreciation has a devastating effect on fiscal sustainability both in the short run and long run. Wald test revealed that credit to the private sector and annual market capitalization have an asymmetric effect on fiscal sustainability both in the short run and long run, while the exchange rate has no asymmetric effect on fiscal sustainability. For a sustainable fiscal stance, we recommend a financial model that channels credits towards productive activities to boost GDP as this will go a long way in reducing the debt-to-GDP ratio and enhancing solvency.

EFFECTS OF EXCHANGE AND INTEREST RATES ON MANUFACTURING SECTOR PERFORMANCE IN NIGERIA: ARCH AND GARCH APPROACH

This study evaluates the effects of exchange, and interest rates on manufacturing sector performance in Nigeria. The data were sourced from the World Bank's World Development Indicators (WDI) and the Statistical Bulletin of the Central Bank of Nigeria (CBN) for the analysis. The unit root test was performed on the formulated model using the Augmented Dickey Fuller (ADF) method. The log of manufacturing sector contribution to GDP (MUFQ), exchange rate (LEXR), inflation rate (LIFR), and bank size (LBKS) were integrated at order zero I(0) while and the log of interest rate spread (LIRS). was stationary at order one I(1), as shown by the Augmented Dickey Fuller unit root test. In order to determine whether there is a long-run relationship between interest rate, exchange rate, and inflation, a bound test was conducted using the Auto-regressive Distributive Lag (ARDL) model. High volatility in exchange and interest rates have a positive effect on manufacturing sector performance, as shown by the results of the Auto-regressive Distributive Lag (ARDL) bound test, and the results from Arch and Garch corroborate these findings. Auto-regressive Distributive Lag (ARDL) results indicated a positive and statistically significant relationship between the exchange rate and the performance of the manufacturing sector over time at 0.05 level. However, bank size revealed a positive but insignificant relationship with manufacturing sector performance in the short-run, while the coefficient of interest rate spread and inflation rate were both negative and significantly influenced manufacturing sector performance in the current year period. The paper concludes that Nigeria's manufacturing sector is strongly correlated with the country's exchange and interest rates. The study recommended amongst others that as a result of too much dependence on oil, the federal government should peg the local currency rate and mandate the deposit money banks through the Central bank of Nigeria (CBN) to maintain a single digit interest rate. This would boost investors’ confidence on the Nigerian economy as well as the financial system while efforts should be taken to diversify the economy to ease the pressure from the local currency.

DETERMINANTS OF VIETNAM’S AGRICULTUAL EXPORTS, FOCUSING ON ITS TRADING PARTNERS’ CHARACTERISTICS

This study investigates the determinants of Vietnam’s agricultural exports, focusing on its trading partners’ characteristics. The author adopts Poisson Pseudo-Maximum Likelihood estimators to estimate a gravity model covering bilateral agricultural exports from Vietnam to 187 of its trading partners during 1996-2021. The empirical results reveal that exchange rate volatility and geographical distance hamper exports, while regional trade agreements (RTAs), shared borders, and dependent relationships in the past boost exports. When considering the features of importing countries, I find that population, GDP per capita, policy stability, and financial development are crucial in promoting Vietnam's agricultural exports. The findings of this study imply that it is necessary to maintain stable exchange rates and actively join RTAs to increase the agricultural exports of Vietnam. Moreover, to enhance agricultural exports, exporting firms should target trading partners in countries with large economic size, high per capita income, good governance quality, developed financial markets, or those who share a common border or have ever in dependent relationship with Vietnam.

Key Macroeconomic Variables under Exchange Rate Volatility: Time-Varying Causality in the Presence of Structural Breaks and Nonlinearity

Key Macroeconomic Variables under Exchange Rate Volatility: Time-Varying Causality in the Presence of Structural Breaks and Nonlinearity