WorldWideScience

Sample records for currency exchange rate

  1. DOES CURRENCY SUBSTITUTION AFFECT EXCHANGE RATE VOLATILITY?

    Directory of Open Access Journals (Sweden)

    Hisao Kumamoto

    2014-10-01

    Full Text Available This study investigates the impacts of the degree of currency substitution on nominal exchange rate volatility in seven countries (Indonesia, the Philippines, the Czech Republic, Hungary, Poland, Argentina, and Peru. We use the Threshold ARCH model to consider the ratchet effect of currency substitution and sample periods in the 2000s, during which time the economies of the sample countries stabilized, while the U.S. dollar and euro depreciated against other major currencies following the recent global financial crisis. The presented empirical analyses show that the degree of currency substitution has significant positive effects on the conditional variance of the depreciation rate of the nominal exchange rate in most sample countries. Moreover, a shock to the depreciation rate of the nominal exchange rate has asymmetric effects on the conditional variance, depending on the sign. One possible explanation for these differential effects is the existence of the ratchet effect of currency substitution.

  2. 38 CFR 3.32 - Exchange rates for foreign currencies.

    Science.gov (United States)

    2010-07-01

    ... Exchange rates for foreign currencies. When determining the rates of pension or parents' DIC or the amounts... parents' DIC. (1) Because exchange rates for foreign currencies cannot be determined in advance, rates of... 38 Pensions, Bonuses, and Veterans' Relief 1 2010-07-01 2010-07-01 false Exchange rates for...

  3. Persistence and predictability of forward exchange arbitrage in managed rate currencies in comparison to free-floating currencies

    OpenAIRE

    Jayasundera, T. (Thanushka)

    2014-01-01

    Abstract This paper attempts to analyse whether forward exchange arbitrage in currencies of managed rate regimes behave differently from currencies of free floating regimes in the forward exchange market. For this purpose, currencies of Great Britain, the European Union, and Japan are used as proxy currencies for free floating currencies. Proxy currencies for managed rate currencies are the Sri Lankan Rupee, the Indian Rupe...

  4. Impact of Exchange Rate Fluctuation to the Romanian Foreign Currency Reserve

    Directory of Open Access Journals (Sweden)

    Lavinia Diana Vasile

    2006-10-01

    Full Text Available In this article, we intend to indentify the impact of the currency rate of exchange variation of the two main currencies which represent Romania’s foreign currency reserve and the stress test it submits the latter. Up to the present moment there not established a cause-effect relationship or correlation between the foreign currency exchage rate was variation and the foreign currency reserve. In this respect we used an econometrics model based on cointegration analysis of the three series of data corresponding to the period of time 31.01.1995-31.06.2006 (the EURO exchange rate, the USD exchange rate and the foreign currency reserve.

  5. Currency wars, what drives the wild fluctuations in exchange rates?

    OpenAIRE

    Petridis, George; Πετρίδης, Γεώργιος

    2016-01-01

    Currency wars or competitive devaluation has change dramatically throughout history. The meaning of currency wars is completely different in comparison with that before the change of currency rates system. Firstly, in my thesis, there will be a brief history of currency wars and a reference of quantitative easing in US, Europe and Japan. Then the factors which determine the currency exchange rates and the reasons for the wild fluctuation in currency rates during a currency war will be mention...

  6. World currency exchange rate cross-correlations

    Science.gov (United States)

    Droå¼dż, S.; Górski, A. Z.; Kwapień, J.

    2007-08-01

    World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign exchange rates within the basket of 60 currencies in the period December 1998 May 2005. Such a dynamics turns out to predominantly involve one outstanding eigenvalue of the correlation matrix. The magnitude of this eigenvalue depends however crucially on which currency is used as a base currency for the remaining ones. Most prominent it looks from the perspective of a peripheral currency. This largest eigenvalue is seen to systematically decrease and thus the structure of correlations becomes more heterogeneous, when more significant currencies are used as reference. An extreme case in this later respect is the USD in the period considered. Besides providing further insight into subtle nature of complexity, these observations point to a formal procedure that in general can be used for practical purposes of measuring the relative currencies significance on various time horizons.

  7. Essays on Currency Competition, Institutional Restrictions and Exchange Rates

    OpenAIRE

    Bhattacharya, Arghya

    2017-01-01

    This dissertation consists of three essays on currency competition, institutional restrictions and exchange rates. When faced with currency competition, a country's government has two tools at its disposal: reduce the level of inflation or place institutional barriers to the use of foreign currency. In the first chapter, I propose a two-country, two-currency New Monetarist model to study currency competition. I model institutional barriers as a `tax' on the real value of foreign currency hol...

  8. Recurrence plots of exchange rates of currencies

    OpenAIRE

    Sparavigna, Amelia Carolina

    2014-01-01

    Used to investigate the presence of distinctive recurrent behaviours in natural processes, the recurrence plots can be applied to the analysis of economic data, and, in particular, to the characterization of exchange rates of currencies too. In this paper, we will show that these plots are able to characterize the periods of oscillation and random walk of currencies and enhance their reply to news and events, by means of texture transitions. The examples of recurrence plots given here are obt...

  9. A structural investigation of third-currency shocks to bilateral exchange rates

    OpenAIRE

    Melecky, Martin

    2007-01-01

    An exchange rate between two currencies can be materially affected by shocks emerging from a third country. A US demand shock, for example, can affect the exchange rate between the euro and the yen. Since positive US demand shocks have a greater positive impact on Japanese interest rates than on eurozone rates, the yen appreciates against the euro in response. Using quarterly data on the U.S., the euro area and Japan from 1981 to 2006, this paper shows that the third-currency effects are sign...

  10. Testing of currency substitution effect on exchange rate volatility in Serbia

    Directory of Open Access Journals (Sweden)

    Petrović Predrag

    2016-01-01

    Full Text Available Despite numerous different definitions existing in the literature, currency substitution is generally understood as a phenomenon when domestic residents prefer to use foreign currency rather than domestic currency. The main reasons for such phenomenon include high and volatile inflation, strong depreciation of national currency and high interest rate differential in favour of foreign currency. Currency substitution, as a monetary phenomenon, is widely spread in Latin American, Eastern European and some Asian countries. This paper is dedicated to the influence of currency substitution on exchange rate volatility in Serbia. The research included testing of three hypotheses: (i currency substitution positively affects depreciation rate volatility, (ii depreciation rate volatility has stronger responses to the past negative than to the past positive depreciation shocks, and (iii currency substitution positively affects expected depreciation rate. The analysis was implemented for the period 2002:m1-2015:m12 (2004:m1- 2015:m12, applying modified EGARCH-M model. Based on the obtained results, all three hypotheses have been supremely rejected regardless of the manner of quantification of currency substitution.

  11. An improved shuffled frog leaping algorithm based evolutionary framework for currency exchange rate prediction

    Science.gov (United States)

    Dash, Rajashree

    2017-11-01

    Forecasting purchasing power of one currency with respect to another currency is always an interesting topic in the field of financial time series prediction. Despite the existence of several traditional and computational models for currency exchange rate forecasting, there is always a need for developing simpler and more efficient model, which will produce better prediction capability. In this paper, an evolutionary framework is proposed by using an improved shuffled frog leaping (ISFL) algorithm with a computationally efficient functional link artificial neural network (CEFLANN) for prediction of currency exchange rate. The model is validated by observing the monthly prediction measures obtained for three currency exchange data sets such as USD/CAD, USD/CHF, and USD/JPY accumulated within same period of time. The model performance is also compared with two other evolutionary learning techniques such as Shuffled frog leaping algorithm and Particle Swarm optimization algorithm. Practical analysis of results suggest that, the proposed model developed using the ISFL algorithm with CEFLANN network is a promising predictor model for currency exchange rate prediction compared to other models included in the study.

  12. Chaoticity in the time evolution of foreign currency exchange rates in Turkey

    Science.gov (United States)

    Cakar, O.; Aybar, O. O.; Hacinliyan, A. S.; Kusbeyzi, I.

    Tools from chaos theory that have found recent use in analysing financial markets have been applied to the US Dollar and Euro buying and selling rates against the Turkish currency. The reason for choosing the foreign exchange rate in this analysis is the fact that foreign currency is an indicator of not only the globalization of economy but also savings and investment. In order to test the globality assumption and to ascertain the degree of involvement of local conditions in Turkey, the Euro and US dollar exchange rates have been subjected to the same analysis.

  13. Some stylised facts about the exchange rate behaviour of Central European currencies

    Directory of Open Access Journals (Sweden)

    Jan Vejmělek

    2016-04-01

    Full Text Available The paper investigates developments of exchange rate time series of Central European currencies and tries to find evidence of some stylised facts. Statistical methods and an econometric approach to the univariate time series modelling of high-frequency data, i.e., daily, are used. The main conclusions are as follows: (1 All the CE nominal exchange time series are not stationary: nevertheless, stationarity of all the return time series was confirmed. (2 Volatility clustering was proven and the GARCH modelling approach was successfully applied, including asymmetric modelling of volatility. (3 The more flexible an exchange rate regime is, the more volatile the respective currency. This is true for both nominal and real exchange rates. While nominal volatility is lower than real volatility in a system of fixed or less flexible exchange rates, the opposite is true for flexible systems: exchange rate volatility is higher in nominal terms than in real terms.

  14. Currency Risk Management under Floating Rates

    Directory of Open Access Journals (Sweden)

    Nicu Duret

    2016-09-01

    Full Text Available As for the research into this subject, we find, therefore, that one of the most important indicators that quantify the international competitiveness is the exchange rate, together with other fundamental macroeconomic variables such as the size of the potential GDP, the equilibrium real exchange rate, gives a certain insight into the functioning of the fundamental macroeconomic mechanisms and their regulation. Commercial and financial operations imply relationships between partners from different currency countries or areas that involve conversion operations, of replacement of a currency to another. Exchange rate fluctuations of one currency create currency risk, to the extent that it is used to carry out international transactions. These operations are subjected to currency risk as exchange rates change frequently from one period to another and, on the other hand, speculations in the forex market influence the exchange rate by the interventions of those who perform them.

  15. Combining Unsupervised and Supervised Statistical Learning Methods for Currency Exchange Rate Forecasting

    OpenAIRE

    Vasiljeva, Polina

    2016-01-01

    In this thesis we revisit the challenging problem of forecasting currency exchange rate. We combine machine learning methods such as agglomerative hierarchical clustering and random forest to construct a two-step approach for predicting movements in currency exchange prices of the Swedish krona and the US dollar. We use a data set with over 200 predictors comprised of different financial and macro-economic time series and their transformations. We perform forecasting for one week ahead with d...

  16. Can producer currency pricing models generate volatile real exchange rates?

    OpenAIRE

    Povoledo, L.

    2012-01-01

    If the elasticities of substitution between traded and nontraded and between Home and Foreign traded goods are sufficiently low, then the real exchange rate generated by a model with full producer currency pricing is as volatile as in the data.

  17. Currency option pricing in a credible exchange rate target zone

    NARCIS (Netherlands)

    Veestraeten, D.

    2013-01-01

    This article examines currency option pricing within a credible target zone arrangement where interventions at the boundaries push the exchange rate back into its fluctuation band. Valuation of such options is complicated by the requirement that the reflection mechanism should prevent the arbitrage

  18. Currency option pricing in a credible exchange rate target zone

    NARCIS (Netherlands)

    Veestraeten, D.

    2012-01-01

    This article examines currency option pricing within a credible target zone arrangement where interventions at the boundaries push the exchange rate back into its fluctuation band. Valuation of such options is complicated by the requirement that the reflection mechanism should prevent the arbitrage

  19. The impact of currency clause and exchange rate on Serbian economy

    Directory of Open Access Journals (Sweden)

    Popov Đorđe

    2012-01-01

    Full Text Available In nineties Serbia survived the disintegration of the former Yugoslavia, intense UN sanctions, and 1999 78 days of bombing by NATO. This has resulted in a drop in production and hyperinflation. The confidence in the national currency the dinar has been lost. In order to do business in Serbia returned to normal framework the Law on Foreign Exchange imposed the possibility of nomination the loans in foreign currencies. This prompted the business, but it meant a de facto legalization of dual currency system. The logical consequence was the high degree of dollarization. It is important to mention that the dual currency system limited the possibilities of monetary policy of the National Bank of Serbia. Dollarization after the first positive results showed their expected bad sides. Appreciation of the dinar was one of the consequences. The trade deficit and foreign debt grew. Due to the appreciation production rate remained at 40% of its 1989 level, and unemployment has risen to 27%. The benefit of the appreciation had only importers and foreign-owned banks. They take out the capital abroad. Therefore, it is necessary to make changes to the Foreign Exchange Law and abolish foreign currency clause at least for a new loans.

  20. THE CHOICE OF THE EXCHANGE RATE REGIMES OF THE EUROPEAN UNION ACCESSION COUNTRIES INFLUENCED BY THE WORLD CURRENCY CONSOLIDATION

    Directory of Open Access Journals (Sweden)

    Marin Frâncu

    2004-05-01

    Full Text Available The pressure of the currency consolidation increased in the years 1990 as the world currency system became obviously too complicated and too costly. There are too many national currencies that generate artificial barriers and avoidable transaction costs, both for the domestic economies and for the world economy. The high costs and great vulnerability of the national currencies determined the financial and economic business of small open economies to move into the major currencies of the world. The world needs fewer national currencies, but does it need fewer central banks too? Or it needs central banks capable to pursuit sound monetary policies? What kind of institutional arrangements and international financial architecture are most suitable for the prospective environment of a greatly reduced multiplicity of currencies? A regional currency consolidation may be a good answer but a regional currency union is a better answer. Though, until membership of the Euro zone, what kind of the exchange rate regime is more suitable for Romania and other European Union accession countries? The hard peg regimes seem not to be a good solution. The best solution lays probable between managed floating regimes and intermediate regimes. This may be because emerging markets have both “fear of floating” and “fear of fixing”. But there is no ideal exchange rate regime”to suit everybody”. Once the exchange rate regime chosen, it evolves in time. So is the case with the exchange rate benchmarks for the national currency.

  1. "An Asymptotic Expansion Approach to Currency Options with a Market Model of Interest Rates under Stochastic Volatility Processes of Spot Exchange Rates"

    OpenAIRE

    Akihiko Takahashi; Kohta Takehara

    2007-01-01

    This paper proposes an asymptotic expansion scheme of currency options with a libor market model of interest rates and stochastic volatility models of spot exchange rates. In particular, we derive closed-form approximation formulas for the density functions of the underlying assets and for pricing currency options based on the third order asymptotic expansion scheme; we do not model a foreign exchange rate's variance such as in Heston[1993], but its volatility that follows a general time-inho...

  2. The importance of corporate foreign debt as an alternative to currency derivatives in actual management of exchange rate exposures

    DEFF Research Database (Denmark)

    Aabo, Tom

    This empirical study of the exchange rate exposure management of Danish non-financial firms listed on the Copenhagen Stock Exchange shows that debt denominated in foreign currency ("foreign debt") is a very important alternative to the use of currency derivatives. The results show that the relati...

  3. Currency Manipulation

    OpenAIRE

    Weithing Zhang; Thomas Mertens; Tarek Hassan

    2014-01-01

    Many central banks manage the stochastic behavior of their currencies' exchange rates by imposing pegs relative to a target currency. We study the effects of such currency manipulation in a multi-country model of exchange rate determination with endogenous capital accumulation. We find that the imposition of an exchange rate peg relative to a given target currency increases the volatility of consumption in the target country and decreases the volatility of the target currency's exchange rate ...

  4. OPPORTUNITIES FOR DECREASING EXCHANGE RISKS OF FOREIGN CURRENCY TRANSACTIONS IN ENTERPRISES WITH A SPECIAL REGARD ON CHANGING-OVER FOREIGN CURRENCY BOOKING

    Directory of Open Access Journals (Sweden)

    ROZSA ATTILA

    2014-07-01

    Full Text Available The profitability of the operation of an enterprise is influenced by several factors. Besides the tendency of market demand and supply, taking the changes of inflation, interest rate and exchange rate into consideration is necessary, as all these are risks. Since the start of the economic crisis in the autumn of 2008, changes in the exchange rate have been more and more emphasized. The article deals with methods for decreasing exchange risks of foreign currency transactions, without the need of completeness. In international trade due to the growth of the number of currency loans the significance of managing financial risks coming from the changes in exchange rates has increased. One of its tools is the currency based booking, which may make the effect of the change more predictable.

  5. MANAGING CURRENCY RISKINTERMSOF FLOATINGRATES

    Directory of Open Access Journals (Sweden)

    Carmen SANDU (TODERASCU

    2014-06-01

    Full Text Available Exchange rate fluctuations of a currency generate currency risk to the extent that it isused to make international transactions. These operationsare subject to currency risk, as exchange rates change frequently from one period to another, and on the other hand, speculation in the foreign exchange market affect the exchange rate through interventions they perform. This paper explores a topic of great interest, especially as exchange rate fluctuations and the uncertainty regarding the future of a currency relative to major currencies is a big problem for most economic actors. Regardless of whether they are importers or exporters or have significant debt currency depreciation or appreciation causes significant losses. Proper management and active currency risk is a way to reduce the damage caused by exchange rate fluctuations.

  6. Currency co-movement and network correlation structure of foreign exchange market

    Science.gov (United States)

    Mai, Yong; Chen, Huan; Zou, Jun-Zhong; Li, Sai-Ping

    2018-02-01

    We study the correlations of exchange rate volatility in the global foreign exchange(FX) market based on complex network graphs. Correlation matrices (CM) and the theoretical information flow method (Infomap) are employed to analyze the modular structure of the global foreign exchange network. The analysis demonstrates that there exist currency modules in the network, which is consistent with the geographical nature of currencies. The European and the East Asian currency modules in the FX network are most significant. We introduce a measure of the impact of individual currency based on its partial correlations with other currencies. We further incorporate an impact elimination method to filter out the impact of core nodes and construct subnetworks after the removal of these core nodes. The result reveals that (i) the US Dollar has prominent global influence on the FX market while the Euro has great impact on European currencies; (ii) the East Asian currency module is more strongly correlated than the European currency module. The strong correlation is a result of the strong co-movement of currencies in the region. The co-movement of currencies is further used to study the formation of international monetary bloc and the result is in good agreement with the consideration based on international trade.

  7. Exchange rate policy

    Directory of Open Access Journals (Sweden)

    Plačkov Slađana

    2013-01-01

    Full Text Available Small oscillations of exchange rate certainly affect the loss of confidence in the currency (Serbian dinar, CSD and because of the shallow market even the smallest change in the supply and demand leads to a shift in exchange rate and brings uncertainty. Some economists suggest that the course should be linked to inflation and thus ensure predictable and stable exchange rates. Real exchange rate or slightly depressed exchange rate will encourage the competitiveness of exporters and perhaps ensure the development of new production lines which, in terms of overvalued exchange rate, had no economic justification. Fixed exchange rate will bring lower interest rates, lower risk and lower business uncertainty (uncertainty avoidance, but Serbia will also reduce foreign exchange reserves by following this trend. On the other hand, a completely free exchange rate, would lead to a (real fall of Serbian currency, which in a certain period would lead to a significant increase in exports, but the consequences for businessmen and citizens with loans pegged to the euro exchange rate, would be disastrous. We will pay special attention to the depreciation of the exchange rate, as it is generally favorable to the export competitiveness of Serbia and, on the other hand, it leads to an increase in debt servicing costs of the government as well as of the private sector. Oscillations of the dinar exchange rate, appreciation and depreciation, sometimes have disastrous consequences on the economy, investors, imports and exports. In subsequent work, we will observe the movement of the dinar exchange rate in Serbia, in the time interval 2009-2012, in order to strike a balance and maintain economic equilibrium. A movement of foreign currencies against the local currency is controlled in the foreign exchange market, so in case economic interests require, The National Bank of Serbia (NBS, on the basis of arbitrary criteria, can intervene in the market.

  8. Forecasting of magnitude and duration of currency crises based on the analysis of distortions of fractal scaling in exchange rate fluctuations

    Science.gov (United States)

    Uritskaya, Olga Y.

    2005-05-01

    Results of fractal stability analysis of daily exchange rate fluctuations of more than 30 floating currencies for a 10-year period are presented. It is shown for the first time that small- and large-scale dynamical instabilities of national monetary systems correlate with deviations of the detrended fluctuation analysis (DFA) exponent from the value 1.5 predicted by the efficient market hypothesis. The observed dependence is used for classification of long-term stability of floating exchange rates as well as for revealing various forms of distortion of stable currency dynamics prior to large-scale crises. A normal range of DFA exponents consistent with crisis-free long-term exchange rate fluctuations is determined, and several typical scenarios of unstable currency dynamics with DFA exponents fluctuating beyond the normal range are identified. It is shown that monetary crashes are usually preceded by prolonged periods of abnormal (decreased or increased) DFA exponent, with the after-crash exponent tending to the value 1.5 indicating a more reliable exchange rate dynamics. Statistically significant regression relations (R=0.99, pcurrency crises and the degree of distortion of monofractal patterns of exchange rate dynamics are found. It is demonstrated that the parameters of these relations characterizing small- and large-scale crises are nearly equal, which implies a common instability mechanism underlying these events. The obtained dependences have been used as a basic ingredient of a forecasting technique which provided correct in-sample predictions of monetary crisis magnitude and duration over various time scales. The developed technique can be recommended for real-time monitoring of dynamical stability of floating exchange rate systems and creating advanced early-warning-system models for currency crisis prevention.

  9. Scale free effects in world currency exchange network

    Science.gov (United States)

    Górski, A. Z.; Drożdż, S.; Kwapień, J.

    2008-11-01

    A large collection of daily time series for 60 world currencies' exchange rates is considered. The correlation matrices are calculated and the corresponding Minimal Spanning Tree (MST) graphs are constructed for each of those currencies used as reference for the remaining ones. It is shown that multiplicity of the MST graphs' nodes to a good approximation develops a power like, scale free distribution with the scaling exponent similar as for several other complex systems studied so far. Furthermore, quantitative arguments in favor of the hierarchical organization of the world currency exchange network are provided by relating the structure of the above MST graphs and their scaling exponents to those that are derived from an exactly solvable hierarchical network model. A special status of the USD during the period considered can be attributed to some departures of the MST features, when this currency (or some other tied to it) is used as reference, from characteristics typical to such a hierarchical clustering of nodes towards those that correspond to the random graphs. Even though in general the basic structure of the MST is robust with respect to changing the reference currency some trace of a systematic transition from somewhat dispersed - like the USD case - towards more compact MST topology can be observed when correlations increase.

  10. 49 CFR 583.14 - Currency conversion rate.

    Science.gov (United States)

    2010-10-01

    ... 49 Transportation 7 2010-10-01 2010-10-01 false Currency conversion rate. 583.14 Section 583.14... conversion rate. For purposes of calculations of content value under this part, manufacturers and suppliers shall calculate exchange rates using the methodology set forth in this section. (a) Manufacturers. (1...

  11. NATIONAL CURRENCY INSTABILITY

    OpenAIRE

    Gherman Anca Maria; Huru Dragos

    2008-01-01

    The concept related to currency stability includes internal currency stability as intern price stability, the money demand and supply stability and the stability of the interest rate. Also it includes external currency stability through exchange rate mechanism. The equilibrium of national economy is determined by the evolution of inflation and by the evolution of nominal exchange rate mechanism as an expression of external stability.

  12. NATIONAL CURRENCY INSTABILITY

    Directory of Open Access Journals (Sweden)

    Gherman Anca Maria

    2008-05-01

    Full Text Available The concept related to currency stability includes internal currency stability as intern price stability, the money demand and supply stability and the stability of the interest rate. Also it includes external currency stability through exchange rate mechanism. The equilibrium of national economy is determined by the evolution of inflation and by the evolution of nominal exchange rate mechanism as an expression of external stability.

  13. Currency Boards; The Ultimate Fix?

    OpenAIRE

    Atish R. Ghosh

    1998-01-01

    The growing integration of world capital markets has made it fashionable to argue that only extreme exchange rate regimes are sustainable. Short of adopting a common currency, currency board arrangements represent the most extreme form of exchange rate peg. This paper compares the macroeconomic performance of countries with currency boards to those with other forms of pegged exchange rate regime. Currency boards are indeed associated with better inflation performance, even allowing for potent...

  14. The Effect of Monetary Policy on Exchange Rates during Currency Crises; The Role of Debt, Institutions and Financial Openness

    NARCIS (Netherlands)

    S.C.W. Eijffinger (Sylvester); B. Goderis

    2007-01-01

    textabstractThis paper examines the effect of monetary policy on the exchange rate during currency crises. Using data for a number of crisis episodes between 1986 and 2004, we find strong evidence that raising the interest rate: (i) has larger adverse balance sheet effects and is therefore less

  15. The Effect of Monetary Policy on Exchange Rates During Currency Crises : The Role of Debt, Institutions and Financial Openness

    NARCIS (Netherlands)

    Eijffinger, S.C.W.; Goderis, B.V.G.

    2007-01-01

    This paper examines the effect of monetary policy on the exchange rate during currency crises. Using data for a number of crisis episodes between 1986 and 2004, we find strong evidence that raising the interest rate: (i) has larger adverse balance sheet effects and is therefore less effective in

  16. 12 CFR Appendix A to Subpart A of... - Minimum Capital Components for Interest Rate and Foreign Exchange Rate Contracts

    Science.gov (United States)

    2010-01-01

    ... sheet interest rate and foreign exchange rate contracts: a. Interest Rate Contracts i. Single currency... Contracts i. Cross-currency interest rate swaps. ii. Forward foreign exchange rate contracts. iii. Currency... contracts traded on exchanges that require daily payment of variation margins are excluded from the minimum...

  17. In Search for a Measure of Currency Misalignment: the Case of the 1997 Asian Currency Crisis

    Directory of Open Access Journals (Sweden)

    Daekeun Park

    2000-03-01

    Full Text Available The paper searches for an appropriate measure of currency misalignment in light of the 1997 Asian currency crisis. A couple of measures of currency misalignment, one based on purchasing power parity and the other based on equilibrium real exchange rate that is consistent with internal and external equilibrium are used to estimate the degree of currency misalignment for Korea, Indonesia, Malaysia, and Thailand before the 1997 currency crisis. The paper finds that the purchasing power parity based methods show that the Asian currencies were not significantly overvalued on the eve of the crisis. On the other hand, measures based on the equilibrium real exchange rate concept demonstrate that the Asian currencies were significantly overvalued. In consequence, the equilibrium real exchange rate based method seems to be a useful candidate for a measure of currency misalignment.

  18. The evolutionary synchronization of the exchange rate system in ASEAN+6

    Science.gov (United States)

    Feng, Xiaobing; Hu, Haibo; Wang, Xiaofan

    2010-12-01

    Although there are extensive researches on the behavior of the world currency network, the complexity of the Asian regional currency system is not well understood regardless of its importance. Using daily exchange rates this paper examines exchange rate co-movements in the region before and after the China exchange rate reform. It was found that the correlation between Asian currencies and the US Dollar, the previous regional key currency has become weaker and intra-Asia interactions have increased. Cross sample entropy and cross entropy approaches are also applied to examine the synchrony behavior among the Asian currencies. The study also shows that the Asian exchange rate markets featured are neither stochastic nor efficient. These findings may shed some light on the in-depth understanding of collective behaviors in a regional currency network; they will also lay a theoretical foundation for further policy formulation in Asian currency integration.

  19. Aftershocks following crash of currency exchange rate: The case of RUB/USD in 2014

    Science.gov (United States)

    Usmanova, Vasilya; Lysogorskiy, Yury V.; Abe, Sumiyoshi

    2018-02-01

    The dynamical behavior of the currency exchange rate after its large-scale catastrophe is discussed through a case study of the rate of Russian rubles to US dollars after its crash in 2014. It is shown that, similarly to the case of the stock market crash, the relaxation is characterized by a power law, which is in analogy with the Omori-Utsu law for earthquake aftershocks. The waiting-time distribution is found to also obey a power law. Furthermore, the event-event correlation is discussed, and the aging phenomenon and scaling property are observed. Comments are made on (non-)Markovianity of the aftershock process and on a possible relevance of glassy dynamics to the market system after the crash.

  20. FOREIGN CURRENCY RISK HEDGING

    Directory of Open Access Journals (Sweden)

    Mihaela SUDACEVSCHI

    2017-05-01

    Full Text Available This paper presents the traditional types of exchange rate risk faced by firms and some of principal methods of exchange risk management that a company which make foreign currency operations can use. Foreign currency risk management involves both assessing the risk faced by the companies and adopting measures for the risk hedging or reduce the damage it may cause. The damages result from the company’s unfavorable difference between the exchange rates of the currencies in which the transactions are made.

  1. Fixing the Central Parity and the Evolution of the Currency within the Exchange Rate Mechanism II in the Countries that Joined the Euro Zone

    Directory of Open Access Journals (Sweden)

    Lucian ANGHEL

    2014-06-01

    Full Text Available The present paper presents the models used by the countries that joined the Euro zone after 2000, in fixing the central parity and the evolution of the local currency towards Euro, when participating in Exchange Rate Mechanism II (ERM II. It synthesizes the main theories for determining the equilibrium exchange rate. It also presents the modality of putting them into practice in the countries that had already become members of the Euro zone. The better we know the other countries’ experience in the respect of the joining process to the Euro zone, the better will Romania be able to prepare itself for adopting the unique European currency. Thus, we will be synthesize the main approaches within literature and also in the economic policy deciders’ practice concerning the estimation of the equilibrium exchange rate and implicitly, of the central parity. The paper presents the modality of fixing the central parity and the experience of participating in ERM II for a number of member states that joined the Euro zone after 2000: Greece, Slovakia, Slovenia, Malta, Cyprus and Estonia. For these states we also analyze the evolution of the currency towards Euro while participating in ERM II. Starting from these examples, we explain the advantages and the disadvantages in fixing the central parity over/at/under the value of the exchange rate on the market at the moment of joining ERM II and we underline the problems that might occur in the case of choosing a central parity that is not compatible with the equilibrium value of the exchange rate.

  2. Classical technical analysis of Latin American market indices. Correlations in Latin American Currencies (ARS, CLP, MXP) exchange rates with respect to DEM, GBP, JPY and USD

    Science.gov (United States)

    Ausloos, M.; Ivanova, K.

    2004-06-01

    The classical technical analysis methods of financial time series based on the moving average and momentum is recalled. Illustrations use the IBM share price and Latin American (Argentinian MerVal, Brazilian Bovespa and Mexican IPC) market indices. We have also searched for scaling ranges and exponents in exchange rates between Latin American currencies ($ARS$, $CLP$, $MXP$) and other major currencies $DEM$, $GBP$, $JPY$, $USD$, and $SDR$s. We have sorted out correlations and anticorrelations of such exchange rates with respect to $DEM$, $GBP$, $JPY$ and $USD$. They indicate a very complex or speculative behavior.

  3. Sparseness and Roughness of Foreign Exchange Rates

    Science.gov (United States)

    Vandewalle, N.; Ausloos, M.

    An accurate multiaffine analysis of 23 foreign currency exchange rates has been performed. The roughness exponent H1 which characterizes the excursion of the exchange rate has been numerically measured. The degree of intermittency C1 has been also estimated. In the (H1,C1) phase diagram, the currency exchange rates are dispersed in a wide region around the Brownian motion value (H1=0.5,C1=0) and have a significantly intermittent component (C1≠0).

  4. Application for Determination of the Forward Exchange Rate in Access 2003

    Directory of Open Access Journals (Sweden)

    Loredana MOCEAN

    2006-01-01

    Full Text Available The exchange rate set the present rate for a foreign currency transaction with payment or delivery at some future date. Forward rates are calculated by using the current exchange rate for the currency pair and the interest rates for the two currencies and allow you to lock in rate now for a future. This paper describes the formulas which determinate the forward exchange rate and how can we implement them in a short, but efficient informatics application.

  5. Investigating the effects of liquidity and exchange rate on Tehran Stock Exchange

    Directory of Open Access Journals (Sweden)

    Younos Vakil Alroaia

    2014-08-01

    Full Text Available This paper presents an empirical investigation to study the effects of two macroeconomic factors; namely exchange rate and liquidity on stock index. The proposed study was applied in Iran and on major index of Tehran Stock Exchange over the period 2001-2011. They reported that the currency exchange maintained negative impact on stock exchange for the period of investigation. This is due to the fact that when currency devalued, working capital decreases and firms did not enough money to purchase raw materials, pay wages, etc. In addition, liquidity marinated a direct and positive relationship with exchange index. However, the impact of liquidity seems to be bigger than currency exchange.

  6. Searching for an Appropriate Exchange Rate Regime

    Directory of Open Access Journals (Sweden)

    Yunjong Wang

    2001-06-01

    Full Text Available This paper attempts to survey current debates on the choice of exchange rate regime in emerging market economies. The issue of choosing an appropriate exchange rate regime is being actively discussed since the recent Asian crisis. As a lesson from the recent crises, one widely shared conclusion is that soft peg exchange rate regimes are extremely vulnerable in a world of volatile capital movements. Consequently, new orthodoxy based on the impossible trinity hypothesis favours two corner solutions ― greater flexibility or credible institutional assurance, like a currency board system or dollarization. Nevertheless, questions whether such corner solutions are adequate for developing countries are rising of late. "Fear of floating" is still conspicuous in many developing countries having adopted nominally a free-floating exchange rate regime. Developing countries are sensitive to exchange rate fluctuations because the cost of exchange rate volatility is greater than the benefit when compared to developed countries. Monitoring bands is a compromise solution, but it still needs further enhancement of estimation techniques for fundamental equilibrium exchange rates in order to make those estimation results more workable in practice. Other alternatives include the creation of soft peg of the G-3 currencies. Despite counterarguments, the stability of G-3 currencies could prove to be beneficial to emerging market economies.

  7. Foreign currency exchange network topology across the 2008 credit crisis

    Science.gov (United States)

    Sharif, Shamshuritawati; Ap, Nuraisah Che; Ruslan, Nuraimi

    2017-05-01

    A stable world currency exchange rate is a very important aspect to be considered for a developed country, i.e Malaysia. A better understanding about the currencies itself is needed nowadays. This project is about to understanding the fluctuation and to identify the most influential world currencies in the three different cases; before credit crisis, during credit crisis and after credit crisis. A network topology approach is use to examine the interrelationship between currencies based on correlation analysis. With this point of view, those relationships can be measured by a correlation structure among the currencies. The network can be analyse by filtering the important information using minimum spanning tree (MST) and interpret it using degree centrality as the centrality measure. This topology will give a useful guide to understand the behaviour and determine the most influential currency in the network as a part of a complex system. All currencies are compared among the three different cases; before credit crisis, during credit crisis and after credit crisis period. The result of this project shows that Unites State Dollar (USD), Brazilian Real (BRL), United Kingdom Pound (EUR) and Danish Krone (DKK) are the most influential currencies before the credit crisis period. With respect to during the credit crisis, New Zealand Dollar (NZD) dominates the network and it is followed by Singapore Dollar (SGD) for after the credit crisis period.

  8. FINANCIAL AND LEGAL CONSIDERATIONS OF THE FOREIGN EXCHANGE RATES ON BANK EXTERNAL TRADING OPERATIONS

    Directory of Open Access Journals (Sweden)

    Ignat Papazov

    2017-06-01

    Full Text Available The term "currency" has different meanings but is usually defined as any means of payment that is not in local currency units. The ratio between the foreign currency and local currency units results into exchange rate. When arranging payment transactions abroad, local entities - natural and legal persons must exchange their national currency in advance for the currency of the country in which they are due or in another currency commonly accepted as an international payment. Under this regime, the national currency is quoted in relation to another currency, that is exchange rate.

  9. Currency speculation and dollar fluctuations

    Directory of Open Access Journals (Sweden)

    Stephan Schulmeister

    1988-12-01

    Full Text Available In this study the reasons behind the wide fluctuations of the dollar exchange rate following the breakdown of the Bretton Woods system, for the most part unexplained by the prevailing exchange rate theories, are explored. To do so, the author investigates the exchange rate between the two most traded currencies, the dollar and the deutschemark, from 1973 to 1988. In the first part, the pattern of the daily exchange rate movements is examined to show that a sequence of upward and downward trends interrupted by non-directional movements is typical of exchange rate dynamics in the short run. Moreover, this pattern is systemically exploited through currency speculation, particularly through the use of “technical analysis”. In the second part, the author focuses on the medium-term, arguing that fluctuations can be explained as the result of interacting disequilibria in the goods and asset markets. Although currency speculation has been systemically profitable for most currencies, it should be considered to be destabilizing since the sequence of price runs caused large and persistent deviations of exchange rates from their equilibrium values (purchasing power parity.

  10. Application of Principal Component Analysis (PCA) to Reduce Multicollinearity Exchange Rate Currency of Some Countries in Asia Period 2004-2014

    Science.gov (United States)

    Rahayu, Sri; Sugiarto, Teguh; Madu, Ludiro; Holiawati; Subagyo, Ahmad

    2017-01-01

    This study aims to apply the model principal component analysis to reduce multicollinearity on variable currency exchange rate in eight countries in Asia against US Dollar including the Yen (Japan), Won (South Korea), Dollar (Hong Kong), Yuan (China), Bath (Thailand), Rupiah (Indonesia), Ringgit (Malaysia), Dollar (Singapore). It looks at yield…

  11. On cross-currency models with stochastic volatility and correlated interest rates

    NARCIS (Netherlands)

    Grzelak, L.A.; Oosterlee, C.W.

    2010-01-01

    We construct multi-currency models with stochastic volatility and correlated stochastic interest rates with a full matrix of correlations. We first deal with a foreign exchange (FX) model of Heston-type, in which the domestic and foreign interest rates are generated by the short-rate process of

  12. Influence of government controls over the currency exchange rate in the evolution of Hurst's exponent: An autonomous agent-based model

    Science.gov (United States)

    Chávez Muñoz, Pablo; Fernandes da Silva, Marcus; Vivas Miranda, José; Claro, Francisco; Gomez Diniz, Raimundo

    2007-12-01

    We have studied the performance of the Hurst's index associated with the currency exchange rate in Brazil and Chile. It is shown that this index maps the degree of government control in the exchange rate. A model of supply and demand based in an autonomous agent is proposed, that simulates a virtual market of sale and purchase, where buyer or seller are forced to negotiate through an intermediary. According to this model, the average of the price of daily transactions correspond to the theoretical balance proposed by the law of supply and demand. The influence of an added tendency factor is also analyzed.

  13. Effectiveness of high interest rate policy on exchange rates: A reexamination of the Asian financial crisis

    Directory of Open Access Journals (Sweden)

    Chin Diew Lai

    2006-09-01

    Full Text Available One of the most controversial issues in the aftermath of the Asian financial crisis has been the appropriate response of monetary policy to a sharp decline in the value of some currencies. In this paper, we empirically examine the effects on Asian exchange rates of sharply higher interest rates during the Asian financial crisis. Taking account of the currency contagion effect, our results indicate that sharply higher interest rates helped to support the exchange rates of South Korea, the Philippines, and Thailand. For Malaysia, no significant causal relation is found from the rate of interest to exchange rates, as the authorities in Malaysia did not actively adopt a high interest rate policy to defend the currency.

  14. Effects of Exchange Rate Instability on Imports and Exports of Pakistan

    Directory of Open Access Journals (Sweden)

    Atif Kafayat

    2014-04-01

    Full Text Available The instability in exchange rate (appreciation and depreciation in home currency is an important factor indetermination of trade balance of a country. Fluctuating exchange rates impacts the decision making of investors and traders, it shatters their confidence which ultimately leads to the slowness of trade process. In this research paper the effect of exchange rate instability is measured on imports and exports of Pakistan. For this purpose Regression analysis is used and it is calculated that if instability is created due to depreciation in home currency (Pak rupee then it has positive impact on Pakistan‘s exports, while it has absolutely no effect on imports of Pakistan. Since Pak rupee has very limited appreciation during last 20 years so appreciation effect of home currency can not be calculated on Imports and exports of Pakistan. In theoretical prospective the devaluation of home currency should decrease the volume of imports, because it will cost more for Pakistan to import goods from other countries. But our empirical findings show that, this is not the case between exchange rate and imports of Pakistan. The imports of Pakistan grew even in large figure as the home currency depreciated against other currencies. So this shows that depreciation of home currency do not effect the imports in of Pakistan. Our findings through regression analysis show that by decrease in value of home currency imports of Pakistan increase. So depreciation in home currency has no effect on imports volume.

  15. Where Would the EUR/CHF Exchange Rate be Without the SNB's Minimum Exchange Rate Policy?

    DEFF Research Database (Denmark)

    Hanke, Michael; Poulsen, Rolf; Weissensteiner, Alex

    2015-01-01

    Since its announcement made on September 6, 2011, the Swiss National Bank (SNB) has been pursuing the goal of a minimum EUR/CHF exchange rate of 1.20, promising to intervene on currency markets to prevent the exchange rate from falling below this level.We use a compound option pricing approach...

  16. Fluctuation Dynamics of Exchange Rates on Indian Financial Market

    Science.gov (United States)

    Sarkar, A.; Barat, P.

    Here we investigate the scaling behavior and the complexity of the average daily exchange rate returns of the Indian Rupee against four foreign currencies namely US Dollar, Euro, Great Britain Pound and Japanese Yen. Our analysis revealed that the average daily exchange rate return of the Indian Rupee against the US Dollar exhibits a persistent scaling behavior and follow Levy stable distribution. On the contrary the average daily exchange rate returns of the other three foreign currencies show randomness and follow Gaussian distribution. Moreover, it is seen that the complexity of the average daily exchange rate return of the Indian Rupee against US Dollar is less than the other three exchange rate returns.

  17. On the spillover of exchange rate risk into default risk

    Directory of Open Access Journals (Sweden)

    Božović Miloš

    2009-01-01

    Full Text Available In order to reduce the exchange-rate risk, banks in emerging markets are typically denominating their loans in foreign currencies. However, in the event of a substantial depreciation of the local currency, the payment ability of a foreign-currency borrower may be reduced significantly, exposing the lender to additional default risk. This paper analyses how the exchange-rate risk of foreign currency loans spills over into default risk. We show that in an economy where foreign currency loans are a dominant source of financing economic activity, depreciation of the local currency establishes a negative feedback mechanism that leads to higher default probabilities, reduced credit supply, and reduced growth. This finding has some important implications that may be of special interest for regulators and market participants in emerging economies.

  18. Optimal Currency Basket Pegs for Developing and Emerging Economies

    OpenAIRE

    Joseph Daniels; Peter G. Toumanoff; Marc von der Ruhr

    2001-01-01

    The exchange rate arrangement represents an important policy choice for emerging and transitional economies as they strive to become stable and market-driven. A wide variety of arrangements have emerged, ranging from currency boards, basket-currency pegs and single-currency pegs to floating rates. Recently the IMF has recommended that, if the exchange value of a currency is to be pegged, it is better to peg to a basket of currencies rather than a single currency. Nonetheless, there has been l...

  19. Introducing False EUR and False EUR exchange rates

    Science.gov (United States)

    Ausloos, M.; Ivanova, K.

    2000-10-01

    The Euro ( EUR) is a new currency introduced by the European Community. Its exchange rate is very puzzling. We have invented a false Euro ( FEUR) dating back to 1993 and have derived the exchange rates of the FEUR with respect to currencies not belonging to the EUR, i.e., DKK, CHF, JPY and USD. This allows us to search for correlations between the fluctuations preexisting to the introduction of EUR and present ones in such financial data. The detrended fluctuation analysis ( DFA) statistical method is used. This leads to assume a power-law behavior, i.e., a scaling hypothesis, through an exponent α. The latter has demonstrated its usefulness for the investigations of long-range power-law correlations in several types of financial sequences. Our findings show that the α exponent interestingly characterizes fractional Brownian motion of the currency exchange rates between EUR and DKK over a 25 day interval, and usual Brownian motion otherwise and for the three other investigated exchange rates. We can devise an investment strategy based on the localα technique and obtain appreciable gains for the time being.

  20. The Deceptive Resilience of Fixed Exchange Rates

    OpenAIRE

    Mushin, Jerry

    2004-01-01

    This paper is an examination of the experience of exchange-rate systems since 1978. Despite the accelerating trend in favour of floating exchange rates, a substantial minority of IMF members have continued to fix the value of their currencies. The recent incidence of each of the principal types of exchange-rate peg is described.

  1. Oil price fluctuations and U.S. dollar exchange rates

    International Nuclear Information System (INIS)

    Lizardo, Radhames A.; Mollick, Andre V.

    2010-01-01

    Adding oil prices to the monetary model of exchange rates, we find that oil prices significantly explain movements in the value of the U.S. dollar (USD) against major currencies from the 1970s to 2008. Our long-run and forecasting results are remarkably consistent with an oil-exchange rate relationship. Increases in real oil prices lead to a significant depreciation of the USD against net oil exporter currencies, such as Canada, Mexico, and Russia. On the other hand, the currencies of oil importers, such as Japan, depreciate relative to the USD when the real oil price goes up. (author)

  2. Choice of Monetary and Exchange Regimes in ECOWAS: An Optimum Currency Area Analysis

    OpenAIRE

    Chantal Dupasquier; Patrick N. Osakwe; Shandre M. Thangavelu

    2005-01-01

    There are plans by five West African countries to establish a second monetary zone in the sub-region by December 2009. In this paper we ask whether a monetary union is the appropriate exchange rate regime for the sub-region based on economic criteria. We address the issue using a rigorous theoretical framework that captures the crucial trade-off between the savings in transaction costs, resulting from a common currency, and the macroeconomic stabilization benefits of a flexible exchange rate ...

  3. Sovereign Risk and Currency Returns

    DEFF Research Database (Denmark)

    Della Corte, Pasquale; Sarno, Lucio; Schmeling, Maik

    We empirically investigate the relation between sovereign risk and exchange rates for a broad set of currencies. An increase in the credit default swap (CDS) spread of a country is accompanied by a significant depreciation of the exchange rate. More generally, CDS spread changes have substantial...... explanatory power for currency returns which is largely driven by shocks to global credit risk. Consistent with the notion that sovereign risk is priced, we find that a country's exposure to global credit risk forecasts excess returns to trading exchange rates as well as to trading on the volatility, skewness...

  4. Floating Exchange Rate Regime

    OpenAIRE

    Quader, Syed Manzur

    2004-01-01

    In recent years, many developing countries having a history of high inflation, unfavorable balance of payment situation and a high level of foreign currencies denominated debt, have switched or are in the process of switching to a more flexible exchange rate regime. Therefore, the stability of the exchange rate and the dynamics of its volatility are more crucial than before to prevent financial crises and macroeconomic disturbances. This paper is designed to find out the reasons behind Bangla...

  5. Role of Exchange Rate Volatility in Exchange Rate Pass-Through to Import Prices: Some Evidence from Japan

    OpenAIRE

    Guneratne Banda Wickremasinghe; Param Silvapulle

    2004-01-01

    This paper investigates the effect of exchange rate volatility on the degree of exchange rate pass-through in Japan for the period January 1975 to June 1997. Although several studies put forward theoretical arguments for the volatility-domestic import price relationship, only a very few studies produced empirical evidence. The volatility of contractual currency based exchange rate index returns was modelled using GARCH-type processes with skewed student t-distribution, capturing the typical n...

  6. Measuring the costs of exchange rate volatility

    OpenAIRE

    Paul R. Bergin

    2004-01-01

    Many countries go to great lengths to manage their exchange rates. Probably the most prominent recent example is the European Monetary Union, where all the members abandoned their national currencies and adopted the euro. A number of developing countries maintain other kinds of regimes of managed exchange rates, even though they face potent market pressures to let their exchange rates float. One of the main motives for these arrangements stems from the extreme volatility of exchange rates. Th...

  7. The determinants of exchange rate in Croatia

    Directory of Open Access Journals (Sweden)

    Manuel BENAZIC

    2016-06-01

    Full Text Available The dilemma for every country with an independent monetary policy is which kind of exchange rate arrangement should be applied. Through the exchange rate policy, countries can influence their economies, i.e. price stability and export competiveness. Croatia is a new EU member state, it has its own monetary policy and currency but it is on the way to euro introduction. Regarding the experiences from the beginning of the 1990s when Croatia was faced with serious monetary instabilities and hyperinflation, the goal of Croatian National Bank (CNB is to ensure price stability and one way to do so is through exchange rate policy. Croatia, as a small and open economy, has applied a managed floating exchange rate regime. The exchange rate is determined primarily by the foreign exchange supply and demand on the foreign exchange market, with occasional market interventions by the CNB. Therefore, in order to maintain exchange rate stability, policymakers must be able to recognize how changes in these factors affect changes in the exchange rate. This research aims to find a relationship among the main sources of foreign currency inflow and outflow and the level of exchange rate in Croatia. The analysis is carried out by using the bounds testing (ARDL approach for co-integration. The results indicate the existence of a stable co-integration relationship between the observed variables, whereby an increase in the majority of variables leads to an exchange rate appreciation.

  8. Modeling and predicting historical volatility in exchange rate markets

    Science.gov (United States)

    Lahmiri, Salim

    2017-04-01

    Volatility modeling and forecasting of currency exchange rate is an important task in several business risk management tasks; including treasury risk management, derivatives pricing, and portfolio risk evaluation. The purpose of this study is to present a simple and effective approach for predicting historical volatility of currency exchange rate. The approach is based on a limited set of technical indicators as inputs to the artificial neural networks (ANN). To show the effectiveness of the proposed approach, it was applied to forecast US/Canada and US/Euro exchange rates volatilities. The forecasting results show that our simple approach outperformed the conventional GARCH and EGARCH with different distribution assumptions, and also the hybrid GARCH and EGARCH with ANN in terms of mean absolute error, mean of squared errors, and Theil's inequality coefficient. Because of the simplicity and effectiveness of the approach, it is promising for US currency volatility prediction tasks.

  9. Asymmetric Exchange Rate Exposure - Research in Southeast Asian Countries

    Directory of Open Access Journals (Sweden)

    Minh Thi Hong Le

    2017-04-01

    Full Text Available The study aims to analyse the impact of exchange rate exposure on stock returns in six countries representative of Southeast Asia, including Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam from 2009 to 2014. Both nominal and real exchange rates are taken into account for evaluating exchange rate fluctuations via panel data. In order to achieve this goal, a panel regressive estimation approach is proposed in which a GLS model is firstly used to treat heteroscedasticity in the panel data and, then, a GMM estimator is employed to ensure the consistency of the estimates. The results point out that the exchange rate exposure of these countries is asymmetric. At market level, for a rise in the exchange rate (or local currency depreciates, the average stock returns tend to decrease. However, due to the favourable impact of currency depreciation on the net export position, the reduction speed of stock returns is faster than the rising speed of the exchange rate.

  10. Dynamic Global Currency Hedging

    DEFF Research Database (Denmark)

    Christensen, Bent Jesper; Varneskov, Rasmus T.

    2016-01-01

    This paper proposes a model for discrete-time hedging based on continuous-time movements in portfolio and foreign currency exchange rate returns. In particular, the vector of optimal currency exposures is shown to be given by the negative realized regression coefficients from a one......-period conditional expectation of the intra-period quadratic covariation matrix for portfolio and foreign exchange rate returns. These are labelled the realized currency betas. The model, hence, facilitates dynamic hedging strategies that depend exclusively on the dynamic evolution of the ex-post quadratic...... covariation matrix. These hedging strategies are suggested implemented using modern, yet simple, non-parametric techniques to accurately measure and dynamically model historical quadratic covariation matrices. The empirical results from an extensive hedging exercise for equity investments illustrate...

  11. The Pricing of Foreign Currency Futures Options

    OpenAIRE

    Chang Mo Ahn

    1996-01-01

    We derive semi-closed form solutions for the forward and futures exchange rates, European foreign currency options, currency forward options, and currency futures options when the domestic and foreign interest rate movements follow mean reverting diffusion processes. These solutions are consistent with the Black-Scholes option formula so that they can be easily applied. The impact of interest rate uncertainty on theoretical prices of currency futures options is too significant to be neglected.

  12. Exchange Rate and the PRC Foreign Trade

    Directory of Open Access Journals (Sweden)

    Izotov D. A.

    2009-09-01

    Full Text Available The stages of exchange rate regulation and foreign trade systems reforming in PRC during the period 1978-2008 are examined. A quantitative assessment of PRC foreign trade parameters reactions to the currency rate dynamics on the national and regional levels is made. Also the import and export impact of potential exchange rate changes is estimated

  13. What is the New Chinese Currency Regime?

    OpenAIRE

    Shah, Ajay; Zeileis, Achim; Patnaik, Ila

    2005-01-01

    The revaluation of the yuan in July 2005 was described by the Chinese central bank as a change in the currency regime, rather than merely a changed level of the exchange rate. The reform was said to involve a shift away from the fixed exchange rate, a gradual movement towards greater flexibility, and a peg to a basket of currencies. This paper closely examines the post-July Chinese currency regime utilising contemporary ideas in the econometrics of structural change. We find that the yuan has...

  14. Currency Crisis, Monetary Policy and Corporate Balance Sheet Vulnerabilities

    NARCIS (Netherlands)

    Eijffinger, S.C.W.; Goderis, B.V.G.

    2005-01-01

    This paper studies how the exposure of a country's corporate sector to interest rate and exchange rate changes affects the probability of a currency crisis.To analyze this question, we present a model that defines currency crisis as situations in which the costs of maintaining a fixed exchange rate

  15. EXCHANGE RATE VS. INTEREST RATE: HOW MUCH DOES UIP WORK FOR ROMANIA? (STUDY CASE ON THE EUR/RON CURRENCY

    Directory of Open Access Journals (Sweden)

    Haulica Dana

    2015-07-01

    Full Text Available This paper is part of a larger research that aims to analyze the deviation between the Real Exchange Rate and the Equilibrium Exchange Rate in Romania (EUR/RON currency and to come up with conclusions regarding this deviation and with solutions to minimize it, if the case. Because this is the most important discussion after having the empirical results: what do emergent markets like Romania need to do to keep up with the EU trend? Which are the concessions they have to make in order to maintain a sustainable growth? Do these concessions include breaking the present equilibrium for a future BETTER? Starting with the most well-known methods to calculate the Equilibrium Exchange Rate, this article`s purpose is to create an accurate overview on the UIP model in Romania (the interest rate differential, to verify, using the latest data if the economic environment has brought any changes on the results of this model in the latest years. Is the UIP model a trustworthy equation to establish the Equilibrium Exchange Rate? In order to verify if the UIP model was more reliable in returning a value for the Equilibrium Exchange rate in the latest years on the Romanian market, this paper presents an empirical study containing recent compiled data from the last 10 years, analyzing the 2005 – 2014 period. The NEW in this article is that the used data is very fresh, currently, most probably the only study that verifies the UIP model in Romania for this specific period of time. Why is it useful? Why is it important? Because it doesn`t only bring a confirmation of weather the UIP works for Romania or not but comes up with hints and conclusions regarding the current economic situation of Romania. We can see what has been changed in the local market in the last ten years in terms of monetary policy and what has this change brought with it – if the results are those expected or not and also, what would be the direction for the next years – to most suitable

  16. Exchange rate risks and their impact upon the energy market

    Directory of Open Access Journals (Sweden)

    Abed Al-Zabidi

    2007-04-01

    Full Text Available The expansion of international business in Slovakia brought not only the opening of markets and expansion of enterprise possibilities but also an increase in the competition and new risks. One of such risks is also the exchange rate risk. The business that realizes a financial transaction exceeding borders of the state or derives his buying or selling prices in Slovak crowns from the foreign currency, is subjected to the exchange rate risks. The exchange rate risks are caused by volatility of exchange courses of Slovak crowns related to foreign currencies. The progress of exchange rates can considerably influence a real result of a transaction negatively; therefore it is important for enterprises to identify possible risks resulting from changes in exchange rates, so they could react accordingly.The proposed article is aimed at the explanation of basic techniques of minimizing exchange rate risks with the use of financial tools available on the financial market.

  17. Interdependence and Exchange Rate Regimes in East Asia: Intra-regional Transmissions of Exchange Rate Policies after the Crisis (in Japanese)

    OpenAIRE

    OHNO Sanae; FUKUDA Shin-ichi

    2003-01-01

    Since the onset of the Asian crisis, what characterizes the East Asian exchange rates has been a topic of considerable discussion. In the pre-crisis period, the de facto pegs to the U.S. dollar sometimes destabilized the real "effective" exchange rates of these currencies. Several economists have, thus, proposed the desirability of intermediate exchange rate regimes in East Asia that might stabilize their effective exchange rates. The post-crisis experience in East Asia, however, taught us th...

  18. What determines the exchange rate: economic factors or market sentiment?

    OpenAIRE

    Gregory P. Hopper

    1997-01-01

    Do economic factors influence exchange rates? Or does market sentiment play a bigger role? Are short-run exchange rates predictable? Greg Hopper reviews exchange-rate economics, focusing on what is predictable and what isn't. He also examines the practical implications of exchange-rate theories for currency option pricing, risk management, and portfolio selection.

  19. Tassi di cambio fluttuanti, deprezzamento valutario e domanda effettiva (Floating exchange rates, currency depreciation and actual demand

    Directory of Open Access Journals (Sweden)

    Julio López

    2012-04-01

    Full Text Available Il presente articolo esamina i vantaggi relativi dei tassi di cambio fluttuanti nei confronti di un regime di tassi di cambio a parità rigidamente ancorate (hard peg, ponendo particolare enfasi sulle implicazioni per la domanda effettiva. In particolare, esso valuta se un deprezzamento della valuta abbia un effetto benefico sulla domanda aggregata e dunque sull’occupazione. Si sostiene che tale questione è centrale per il principio della domanda effettiva, e che l’idea che un deprezzamento valutario sia in grado di stabilizzare la domanda effettiva, equivale in larga misura a sostenere che la flessibilità (verso il basso dei salari nominali (e reali possa assicurare la piena occupazione. Coerentemente con ciò, viene analizzata la relazione tra la flessibilità verso il basso dei salari e la domanda effettiva, e viene valutata criticamente (dal punto di vista sia teorico sia empirico l’ipotesi che la flessibilità del tasso di cambio possa avere proprietà stabilizzanti quando si tenga conto di shock esogeni di varia natura. L’articolo si chiude con brevi deduzioni di teoria e di politica economiche.   This paper examines the relative advantages of floating exchange rates against a system of exchange rates for the same rigidly anchored (hard peg, with particular emphasis on the implications for effective demand. In particular, it will assess whether a currency depreciation has a beneficial effect on aggregate demand and hence employment. It is argued that this issue is central to the principle of effective demand, and that the idea that a currency depreciation is able to stabilize the effective demand, is equivalent to a large extent to support that flexibility (down in nominal wages (and real to ensure full employment. Consistent with this, we analyze the relationship between the downward flexibility of wages and effective demand, and is critically evaluated (in terms of both theoretical and empirical hypothesis that the flexibility

  20. The study of RMB exchange rate complex networks based on fluctuation mode

    Science.gov (United States)

    Yao, Can-Zhong; Lin, Ji-Nan; Zheng, Xu-Zhou; Liu, Xiao-Feng

    2015-10-01

    In the paper, we research on the characteristics of RMB exchange rate time series fluctuation with methods of symbolization and coarse gaining. First, based on fluctuation features of RMB exchange rate, we define the first type of fluctuation mode as one specific foreign currency against RMB in four days' fluctuating situations, and the second type as four different foreign currencies against RMB in one day's fluctuating situation. With the transforming method, we construct the unique-currency and multi-currency complex networks. Further, through analyzing the topological features including out-degree, betweenness centrality and clustering coefficient of fluctuation-mode complex networks, we find that the out-degree distribution of both types of fluctuation mode basically follows power-law distributions with exponents between 1 and 2. The further analysis reveals that the out-degree and the clustering coefficient generally obey the approximated negative correlation. With this result, we confirm previous observations showing that the RMB exchange rate exhibits a characteristic of long-range memory. Finally, we analyze the most probable transmission route of fluctuation modes, and provide probability prediction matrix. The transmission route for RMB exchange rate fluctuation modes exhibits the characteristics of partially closed loop, repeat and reversibility, which lays a solid foundation for predicting RMB exchange rate fluctuation patterns with large volume of data.

  1. A COMPARATIVE ANALYSIS OF ASEAN CURRENCIES USING A COPULA APPROACH AND A DYNAMIC COPULA APPROACH

    Directory of Open Access Journals (Sweden)

    CHUKIAT CHAIBOONSRI

    2012-12-01

    Full Text Available The ASEAN Economic Community (AEC will be shaped developing to be a single market and production base in 2015, moving towards regional Economic Integration, 2009. These developments in international financial markets do lead to some adverse cost for AEC country borrowers. The specific objective aims to investigate the dependent measures and the co-movement among selected ASEAN currencies. A Copula Approach was used to examine dependent measures of Thai Baht exchange rate among selected ASEAN currencies during the period of 2008-2011. Also, a Dynamic Copula Approach was tested to investigate the co-movement of Thai Baht exchange rate among selected ASEAN currencies during the period of 2008-2011. The results of the study based on a Pearson linear correlation coefficient confirmed that Thai Baht exchange rate and each of selected ASEAN currencies have a linear correlation during the specific period excluding Vietnam exchange rate. Furthermore, based on empirical Copula Approach, Thai Baht exchange rate had a dependent structure with each of the selected in ASEAN currencies including Brunei exchange rate, Singapore exchange rate, Malaysia exchange rate, Indonesia exchange rate, Philippine exchange rate, and Vietnam exchange rate respectively. The results of Dynamic Copula estimation indicated that Thai Baht exchange rate had a co-movement with selected ASEAN currencies. The research results provide an informative and interactive ASEAN financial market to all users, including Global financial market.

  2. An Empirical Test of Efficiency of Exchange-Traded Currency Options in India

    OpenAIRE

    Aparna Bhat; Kirti Arekar

    2015-01-01

    The objective of this paper is to examine efficiency of the exchange-traded currency options market in India. Put-call-futures parity for the USD-INR currency options is studied by analyzing daily closing prices of options and futures for thirty two months on the National Stock Exchange. The study reveals frequent violations of the put-call-futures parity creating significant arbitrage opportunities. The pattern of mispricing varies when examined for time to maturity, option moneyness, liquid...

  3. Currencies, competition, and clans

    Czech Academy of Sciences Publication Activity Database

    Kočenda, E.; Hanousek, J.; Engelmann, Dirk

    2008-01-01

    Roč. 30, č. 6 (2008), s. 1115-1132 ISSN 0161-8938 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : exchange rates * anchor currency * exchange rate regimes Subject RIV: AH - Economics Impact factor: 0.482, year: 2008

  4. Choice of optimal exchange rate system For the Republic of Croatia

    Directory of Open Access Journals (Sweden)

    Dražen Koški

    2008-12-01

    Full Text Available The aim of research whose results are presented in this article was to choose the optimal system of exchange rate for the Republic of Croatia, of course before its accession to EU. The analyzed exchange rate systems here range from free-floating exchange rate to system without domestic currency in circulation. Naturally, the classification of International Monetary Fond is included in it. After that, the comparison of basic economic advantages and disadvantages of the fixed exchange rate in relation to floating exchange rate were carried out. Although the question is about the extreme systems, disregarding the system without domestic currency in circulation, their comparison makes possible completely satisfactory basis for the right conclusions on the choice of optimal exchange rate system for the Republic of Croatia. Considering its economic particularities, the system of managed-floating exchange rate without proclaimed exchange direction in advance is certainly optimal for the Republic of Croatia. Namely, within the framework of this system the limited floating exchange rates decrease the foreign exchange risk allowing to monetary authorities, at least partly, the independent monetary policy

  5. ANALYSIS OF MACROECONOMIC DETERMINANTS OF EXCHANGE RATE VOLATILITY IN INDIA

    Directory of Open Access Journals (Sweden)

    Anita Mirchandani

    2013-01-01

    Full Text Available The Foreign Exchange Market in India has undergone substantial changes over last decade. It is imperative by the excessive volatility of Indian Rupee causing its depreciation against major dominating currencies in international market. This research has been carried out in order to investigate various macroeconomic variables leading to acute variations in the exchange rate of a currency. An attempt has been made to review the probable reasons for the depreciation of the Rupee and analyse different macroeconomic determinants that have impact on the volatility of exchange rate and their extent of correlation with the same.

  6. Exchange rate behavior with negative interest rates: Some early negative observations

    OpenAIRE

    Hameed, Allaudeen S.; Rose, Andrew

    2017-01-01

    This paper examines exchange rate behavior during the recent period with negative nominal interest rates. We use a daily panel of data on 61 currencies from January 2010 through May 2016, during which five economies - Denmark, the European Economic and Monetary Union, Japan, Sweden, and Switzerland - experienced negative nominal interest rates. We examine both effective exchange rates and bilateral rates; the latter typically measured against the Swiss franc since Switzerland has had the long...

  7. Intertemporal Risk-Return Trade-off in Foreign Exchange Rates

    OpenAIRE

    Christiansen, Charlotte

    2010-01-01

    We investigate the intertemporal risk-return trade-off of foreign ex-change (FX) rates for ten currencies quoted against the USD. For each currency,we use three risk measures simultaneously that pertain to that currency; its re-alized volatility, its realized skewness, and its value-at-risk. We apply monthlyFX excess returns and monthly FX risk measures calculated from daily ob-servations. We find that there is a positive and signi…cant contemporaneousrisk-return trade-off for most currencies...

  8. Currencies, competition, and clans

    Czech Academy of Sciences Publication Activity Database

    Kočenda, Evžen; Hanousek, Jan; Engelmann, D.

    2008-01-01

    Roč. 30, č. 6 (2008), s. 1115-1132 ISSN 0161-8938 R&D Projects: GA MŠk LC542; GA ČR(CZ) GA402/08/1376 Institutional research plan: CEZ:MSM0021620846 Keywords : exchange rates * anchor currency * exchange rate regimes Subject RIV: AH - Economics Impact factor: 0.482, year: 2008

  9. Unemployment Gap in the Currency Board Regime

    OpenAIRE

    Novak Kondić; Borivoje D. Krušković

    2013-01-01

    A currency board combines three elements: a fixed exchange rate between a country’s currency and an “anchor currency,” automatic convertibility, and a long-term commitment to the system, often made explicit in the central bank law. The main reason for countries to consider a currency board is to demonstrate that they are pursuing an anti-inflationary policy. The mechanism works through changes in the money supply, which lead to interest rate changes, which, in turn, encourage funds to move be...

  10. Hard pegs versus intermediate currency arrangements in the Pacific

    OpenAIRE

    Helble, Matthias; Prasetyo, Ahmad; Yoshino, Naoyuki

    2015-01-01

    The 14 Pacific developing member countries (DMCs) of the Asian Development Bank (ADB) have opted for very different exchange rate regimes with varying degrees of flexibility. Whereas several microstates have adopted an external currency as their legal tender, others have decided to use a basket currency and yet others have chosen a managed float. The choice of exchange rate regime can have far reaching economic consequences. In this paper, we first build a simple exchange rate model that illu...

  11. Exchange rate predictability and state-of-the-art models

    OpenAIRE

    Yeșin, Pınar

    2016-01-01

    This paper empirically evaluates the predictive performance of the International Monetary Fund's (IMF) exchange rate assessments with respect to future exchange rate movements. The assessments of real trade-weighted exchange rates were conducted from 2006 to 2011, and were based on three state-of-the-art exchange rate models with a medium-term focus which were developed by the IMF. The empirical analysis using 26 advanced and emerging market economy currencies reveals that the "diagnosis" of ...

  12. Exchange-Rate Unification with Black Market Leakages; Russia 1992

    OpenAIRE

    Linda S. Goldberg

    1993-01-01

    In 1992 Russia unified the multiple exchange rates that had applied to international transactions. This paper describes the multiple exchange rate system that existed in Russia prior to mid-1992 and undertakes a theoretical exploration of the effects of the exchange rate unification that took place in July 1992. The model developed here allows for leakages between official and black markets and permits flexibility of the exchange rates in both official and parallel currency markets. Within th...

  13. The Impact of Central Bank FX Interventions on Currency Components

    NARCIS (Netherlands)

    Beine, M.; Bos, C.S.; Laurent, S.

    2007-01-01

    This article assesses the impact of official FOREX interventions of the three major central banks in terms of the dynamics of the currency components of the major exchange rates over the period 1989-2003. We identify the currency components of the mean and volatility processes of exchange rates

  14. Monetary models and exchange rate determination: The Nigerian ...

    African Journals Online (AJOL)

    Monetary models and exchange rate determination: The Nigerian evidence. ... income levels and real interest rate differentials provide better forecasts of the ... partner can expect to suffer depreciation in the external value of her currency.

  15. Modelling Exchange Rate Volatility by Macroeconomic Fundamentals in Pakistan

    OpenAIRE

    Munazza Jabeen; Saud Ahmad Khan

    2014-01-01

    What drives volatility in foreign exchange market in Pakistan? This paper undertakes an analysis of modelling exchange rate volatility in Pakistan by potential macroeconomic fundamentals well-known in the economic literature. For this, monthly data on Pak Rupee exchange rates in the terms of major currencies (US Dollar, British Pound, Canadian Dollar and Japanese Yen) and macroeconomics fundamentals is taken from April, 1982 to November, 2011. The results show thatthe PKR-USD exchange rate vo...

  16. International trade and exchange rate volatility

    NARCIS (Netherlands)

    J.M.A. Viaene (Jean-Marie); C.G. de Vries (Casper)

    1992-01-01

    textabstractFor currencies with well developed forward markets several papers have investigated the conjectured negative relationship between trade and short term exchange rate volatility, without being very successful. A theoretical explanation for the empirical anomalies is provided by solving

  17. 19 CFR 351.415 - Conversion of currency.

    Science.gov (United States)

    2010-04-01

    ... 19 Customs Duties 3 2010-04-01 2010-04-01 false Conversion of currency. 351.415 Section 351.415... Conversion of currency. (a) In general. In an antidumping proceeding, the Secretary will convert foreign currencies into United States dollars using the rate of exchange on the date of sale of the subject...

  18. Currency Substitution and Inflation in Peru Currency Substitution and Inflation in Peru

    OpenAIRE

    Liliana Rojas-Suarez

    1992-01-01

    This paper shows that there is a long-run relationship between the expected rate of depreciation in the black-market-exchange rate and the ratio of domestic to foreign money in Peru: that is, the hypothesis of currency substitution can explain the behavior of real holdings of money in Peru. The paper also shows that, while, the importance of currency substitution as a transmission mechanism through which domestic policies affected the dynamics of inflation was relatively small during a period...

  19. Currency hedging with help of derivatives

    Directory of Open Access Journals (Sweden)

    Sylvie Riederová

    2011-01-01

    Full Text Available The high volatility combined with unpredictable fluctuations of CZK had shown one more time to the Czech exporting companies the necessity of currency hedging. This article is focused on finding of suitable currency hedging instrument for exporting company, working with the currency pair of CZK/EUR. In the first part, the time series analysis is made for volatility, interest rates and exchange rate. Based on the real market data – gained from Thomson REUTERS and CNB for the time period starting in 2002 – the detailed analysis is made in graphical form. The main goal is to find out the future trends with help of liner regression analysis, based on the historical data. Several graphs are provided with the trend line end estimated interval (min and max for the each variable. The calculated values are clearly marked, to be separated from the real market data. Exchange rate curve shows the market behaviour in the last years and is to be used as most important indicator for the future trends. Interest rates curves are very important for the calculation of the BIPS (basis points, determining the price of the forwards. The difference between landing and deposit rates for the same period of time and different currencies are showing the market estimation of the future development of each currency. Forward price is to be seen as a benchmark for the all other financial instruments. And finally the volatility (quoted as middle is very important part in the pricing of currency options.The second part is closely connected with the first one. Based on the results of provided analyses, it recommends a suitable hedging product for the next period of time. All of the analyses are taken as an input in different ways. The volatility is important for the decision of selling or purchasing the specific part of currency option. The exchange rate outlook together with the interest rates is the indicator of the future development of the currency pair and is playing

  20. Bitcoin as a decentralized currency

    Directory of Open Access Journals (Sweden)

    Dinić Vladimir

    2014-01-01

    Full Text Available Bitcoin is the first decentralized peer-to-peer crypto-currency founded in 2009. Its main specificity is the fact that there is no issuer of this currency. On the other hand, the supply of this currency is software-programmed and limited. Among other things, its main features are relatively secure payments, low transaction costs, anonymity, inability of counterfeiting, irreversibility of transactions, but also extremely unstable exchange rate. Despite many advantages, the use of this currency is subject of numerous discussions, as this currency offers the possibility of performing various abuses and criminal activities. The future of this and other currencies in this regard depends on both security and privacy of these currencies, and legal regulation of such payments.

  1. Towards an expanded role for Asian currencies: Issues and prospects

    OpenAIRE

    Chow, Hwee Kwan

    2011-01-01

    Notwithstanding incumbency advantages and network effects enjoyed by the United States (US) dollar, considerations about the stability of its value have led Asian countries to fear they are holding their foreign exchange reserves in a depreciating currency. At the same time, it pays for the regional countries to adjust their reserve currency composition to match the point of reference of their exchange rate policy. This paper examines empirically which regional currency or currencies seem to ...

  2. A Range-Based Multivariate Model for Exchange Rate Volatility

    OpenAIRE

    Tims, Ben; Mahieu, Ronald

    2003-01-01

    textabstractIn this paper we present a parsimonious multivariate model for exchange rate volatilities based on logarithmic high-low ranges of daily exchange rates. The multivariate stochastic volatility model divides the log range of each exchange rate into two independent latent factors, which are interpreted as the underlying currency specific components. Due to the normality of logarithmic volatilities the model can be estimated conveniently with standard Kalman filter techniques. Our resu...

  3. A Critical Appraisal of Exchange Rate Policies and the Value of ...

    African Journals Online (AJOL)

    This paper critically appraised exchange rate policies and its influence on the value of the domestic currency (i.e. Naira) in Nigeria for the period 1970 through 2002 within the framework of tabular approach. Exchange rate theories and the exchange rate policies prior to SAP, during SAP and after SAP were reviewed.

  4. Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through

    OpenAIRE

    Takatoshi Ito; Kiyotaka Sato

    2006-01-01

    Macroeconomic consequences of a large currency depreciation among the crisis-hit Asian economies had varied from one country to another. Inflation did not soar in most Asian countries, including Thailand and Korea, after the exchange rate depreciated during the crisis. Indonesia, however, suffered very high inflation following a very large nominal depreciation of the rupiah. As a result, price competitive advantage by the rupiah depreciation was lost in the real exchange rate terms. The objec...

  5. SOURCES OF ASIAN CURRENCY CRISIS

    OpenAIRE

    Muhd-Zulkhibri Abdul Majid

    2004-01-01

    This study examines the sources of currency crises in ASEAN. The empirical findings indicate that reserve inadequacy, increase of bank’s claims on private sector, deteriorating trade balance and misalignment of real exchange rate increase the probability of a speculative attack on a currency. The results also suggest that the currency crises could be contagious. The significant variables are closely related to the external factors and thus, indicate the openess of the ASEAN-4 economy. Hence, ...

  6. A free-floating currency regime during economic crisis: advantage or disadvantage?

    Directory of Open Access Journals (Sweden)

    Lubor Lacina

    2011-01-01

    Full Text Available The paper deals with the identification of potential disadvantages associated with the existence of national currencies with the floating exchange rate regime during the current financial and economic crisis in countries postponing their entry into the eurozone. The hypothesis is that the advantages of a floating exchange rate may be outweighed by their disadvantages (high volatility of exchange rates. First part of the paper provides evidence about the development of Czech crown exchange rate since transition from fix to free float regime. Special attention will be given to the period during the recent global economic crisis. For the sake of comparison, evolution of other currencies in the region (zloty, forint and Slovak crown, will be taken to consideration. Second part of the paper form case studies identifying impact due to volatility on national currencies. Case studies were used to identify possible negative impacts from volatility in national currencies on export firms in the Czech Republic and holders of mortgage loans denominated in foreign currencies in Hungary. The last part of the paper will formulate recommendations for businesses entering into foreign trade relationships, as well as for policy makers in countries using national currencies which are preparing for membership in the eurozone.

  7. VOLATILITY OF EXCHANGE RATE IN THE CONTEXT OF FOREIGN TRADE

    Directory of Open Access Journals (Sweden)

    Oleg STRATULAT

    2016-09-01

    Full Text Available Moderate fluctuation of the exchange rate, basically in its floating regime is considered normality. Meanwhile,excessive volatility of the exchange rate is an issue for many countries. Its elimination is directed to foreign trade, which, through essential exports, followed by significant currency inflows, contribute to the stability of exchange rates. Unfortunately, Moldova’s foreign trade has become a key factor in maintaining the stability of foreign exchange.

  8. Chartist Trading in Exchange Rate Theory

    OpenAIRE

    Selander, Carina

    2006-01-01

    This thesis consists of four papers, of which paper 1 and 4 are co-written with Mikael Bask. Paper [1] implements chartists trading in a sticky-price monetary model for determining the exchange rate. It is demonstrated that chartists cause the exchange rate to "overshoot the overshooting equilibrium" of a sticky-price monetary model. Chartists base their trading on a short-long moving average. The importance of technical trading depends inversely on the time horizon in currency trade. The exc...

  9. AN ANALYSIS OF MACRO- ECONOMIC DETERMINANTS OF EXCHANGE RATE VOLATILITY IN INDIA

    OpenAIRE

    Dr. S. Poornima; M. Ganeshwari

    2016-01-01

    The price of one currency in terms of another currency i.e., exchange rate is a very important variable for an open economy in the global market, because it affects the overall economic performance and growth of the economy. So, the relationship between the related macro-economic factor and exchange rate causing fluctuation in the value of the former carries a high degree of impact for any open economy. This paper empirically investigates the impact between macro-economic factors that affect ...

  10. Currency Policy Coordination оf Asean Countries: Foreign Trade Effects

    Directory of Open Access Journals (Sweden)

    Yana Valeryevna Dyomina

    2015-12-01

    Full Text Available The study estimates foreign trade effects of currency policy measures in ASEAN countries. On the base of exchange rate dynamics the author concludes that during the period of 2000-2014 ASEAN countries in general used competitive devaluation policy of national currencies to CNY, JPY, KRW and EUR and revaluation to USD. To eliminate negative effects of competitive devaluation policy the paper proposes currency policy coordination of ASEAN countries that could be done by pegging of national currencies to a common basket. Employing the SAC (Stable Aggregate Currency method the author suggests 4 options for a common currency basket. The researcher estimates foreign trade effects of currency policy coordination in ASEAN countries for every option of a currency basket in three following cases: ASEAN as a whole, ASEAN-6 and ASEAN-4. The author concludes that the optimal form of currency policy coordination in ASEAN is pegging of exchange rates of national currencies to a common basket composed of 13 East Asian currencies. This currency basket option has maximum foreign trade effects for the Association as a whole and by sub-groups of ASEAN-6 and ASEAN-4 when it devaluates to the U.S. dollar

  11. Evolutionary Topology of a Currency Network in Asia

    Science.gov (United States)

    Feng, Xiaobing; Wang, Xiaofan

    Although recently there are extensive research on currency network using minimum spanning trees approach, the knowledge about the actual evolution of a currency web in Asia is still limited. In the paper, we study the structural evolution of an Asian network using daily exchange rate data. It was found that the correlation between Asian currencies and US Dollar, the previous regional key currency has become weaker and the intra-Asia interactions have increased. This becomes more salient after the exchange rate reform of China. Different from the previous studies, we further reveal that it is the trade volume, national wealth gap and countries growth cycle that has contributed to the evolutionary topology of the minimum spanning tree. These findings provide a valuable platform for theoretical modeling and further analysis.

  12. Exchange Rate Expectations, Currency Crises, and the Pricing of American Depositary Receipts

    OpenAIRE

    Eichler, Stefan

    2012-01-01

    I.1 Motivation Exchange rates are a key issue in international economics and politics. While the determinants of exchange rates have been extensively studied in previous works, this dissertation contributes to the literature by deriving exchange rate expectations from stock market (ADR) data and analyzing their determinants. This exercise is done for three cases where one has to resort to exchange rate expectations since the national exchange rate is either manipulated by the central bank...

  13. The Prediction of Exchange Rates with the Use of Auto-Regressive Integrated Moving-Average Models

    Directory of Open Access Journals (Sweden)

    Daniela Spiesová

    2014-10-01

    Full Text Available Currency market is recently the largest world market during the existence of which there have been many theories regarding the prediction of the development of exchange rates based on macroeconomic, microeconomic, statistic and other models. The aim of this paper is to identify the adequate model for the prediction of non-stationary time series of exchange rates and then use this model to predict the trend of the development of European currencies against Euro. The uniqueness of this paper is in the fact that there are many expert studies dealing with the prediction of the currency pairs rates of the American dollar with other currency but there is only a limited number of scientific studies concerned with the long-term prediction of European currencies with the help of the integrated ARMA models even though the development of exchange rates has a crucial impact on all levels of economy and its prediction is an important indicator for individual countries, banks, companies and businessmen as well as for investors. The results of this study confirm that to predict the conditional variance and then to estimate the future values of exchange rates, it is adequate to use the ARIMA (1,1,1 model without constant, or ARIMA [(1,7,1,(1,7] model, where in the long-term, the square root of the conditional variance inclines towards stable value.

  14. Statistical Analysis of the Exchange Rate of Bitcoin.

    Science.gov (United States)

    Chu, Jeffrey; Nadarajah, Saralees; Chan, Stephen

    2015-01-01

    Bitcoin, the first electronic payment system, is becoming a popular currency. We provide a statistical analysis of the log-returns of the exchange rate of Bitcoin versus the United States Dollar. Fifteen of the most popular parametric distributions in finance are fitted to the log-returns. The generalized hyperbolic distribution is shown to give the best fit. Predictions are given for future values of the exchange rate.

  15. USD and Euro: competitive advantages of reserve currencies and leadership tussle

    Directory of Open Access Journals (Sweden)

    Gordyachkova O. V.

    2017-02-01

    Full Text Available the article describes the factors, affecting exchange rate, competitive advantages of USD and Euro as reserve currencies, the steps of fight of USD and Euro for the status of the “main” world's reserve currency. It was concluded that the main factor, affecting exchange rate, is a political impact.

  16. A Classroom Experiment on Exchange Rate Determination with Purchasing Power Parity

    Science.gov (United States)

    Mitchell, David T.; Rebelein, Robert P.; Schneider, Patricia H.; Simpson, Nicole B.; Fisher, Eric

    2009-01-01

    The authors developed a classroom experiment on exchange rate determination appropriate for undergraduate courses in macroeconomics and international economics. In the experiment, students represent citizens from different countries and need to obtain currency to purchase goods. By participating in an auction to buy currency, students gain a…

  17. The Importance of Corporate Foreign Debt in Managing Exchange Rate Exposure in Non-Financial Companies

    DEFF Research Database (Denmark)

    Aabo, Tom

    2006-01-01

    This empirical study of the exchange rate exposure management of Danish non-financial firms listed on the Copenhagen Stock Exchange shows that debt denominated in foreign currency (foreign debt) is a very important alternative to the use of currency derivatives. The results show that the relative...

  18. The optimal currency-peg for an oil exporting country: The case of Saudi Arabia

    International Nuclear Information System (INIS)

    Almasbahi, M.S.

    1990-01-01

    In a world of generalized floating exchange rates, it is not enough to solve the problem of exchange rate policy by determining whether to peg or float the currency under consideration. It is also necessary to choose to what major currency to peg. The main purpose of this study is to investigate and determine empirically the optimum currency peg for the Saudi riyal. To accomplish this goal, a simple conventional trade model, that includes variables found in many other studies of import and export demand, was used. In addition, an exchange rate term was added as a separate independent variable in the import and export demand equations in order to assess the effect of exchange rate on the trade flows. The criteria for the optimal currency peg in this study were based on two factors. First, the error statistics for projected imports and exports using alternative exchange rate regimes. Second, variances of projected imports, exports and trade balance using alternative exchange rate regimes. The exchange rate has a significant impact on the Saudia Arabian trade flows which implies that changes in the riyals value affect the Saudi trade deficit. Moreover, the exchange rate has a more powerful effect on its aggregate imports than on the world demand for its exports. There is also a strong support for the hypothesis that the exchange rate affects the value of the Saudi bilateral trade with its five major trade partners. On the aggregate level, the SDR peg seems to be the best currency peg for the Saudi riyal since it provides the best prediction errors and the lowest variance for the trade balance. Finally, on the disaggregate level, the US dollar provides the best performance and yields the best results among all the six currency pegs considered in this study

  19. Short-run Exchange-Rate Dynamics: Theory and Evidence

    DEFF Research Database (Denmark)

    Carlson, John A.; Dahl, Christian Møller; Osler, Carol L.

    Recent research has revealed a wealth of information about the microeconomics of currency markets and thus the determination of exchange rates at short horizons. This information is valuable to us as scientists since, like evidence of macroeconomic regularities, it can provide critical guidance...... of currency markets, it accurately reflects the constraints and objectives faced by the major participants, and it fits key stylized facts concerning returns and order flow. With respect to macroeconomics, the model is consistent with most of the major puzzles that have emerged under floating rates....

  20. Country Fundamentals and Currency Excess Returns

    Directory of Open Access Journals (Sweden)

    Daehwan Kim

    2014-06-01

    Full Text Available We examine whether country fundamentals help explain the cross-section of currency excess returns. For this purpose, we consider fundamental variables such as default risk, foreign exchange rate regime, capital control as well as interest rate in the multi-factor model framework. Our empirical results show that fundamental factors explain a large part of the cross-section of currency excess returns. The zero-intercept restriction of the factor model is not rejected for most currencies. They also reveal that our factor model with country fundamentals performs better than a factor model with usual investment-style factors. Our main empirical results are based on 2001-2010 balanced panel data of 19 major currencies. This paper may fill the gap between country fundamentals and practitioners' strategies on currency investment.

  1. THE IMPACT OF POLITICAL AND ECONOMIC NEWS ON THE EURO/RON EXCHANGE RATE: A GARCH APPROACH

    OpenAIRE

    Cristi Spulbar; Mihai Nitoi

    2012-01-01

    Within this study we try to capture the impact of political news and economic news from euro area on the exchange rate between Romanian currency and euro. In order to do this we used a GARCH model. As we observed, both variables influence the exchange rate, this fact implying national currency depreciation and a volatility growth. The political news and the economic news positively affect the euro/ron exchange rate volatility. The two factors conjugation, as it has happened in the recent peri...

  2. Statistical Analysis of the Exchange Rate of Bitcoin.

    Directory of Open Access Journals (Sweden)

    Jeffrey Chu

    Full Text Available Bitcoin, the first electronic payment system, is becoming a popular currency. We provide a statistical analysis of the log-returns of the exchange rate of Bitcoin versus the United States Dollar. Fifteen of the most popular parametric distributions in finance are fitted to the log-returns. The generalized hyperbolic distribution is shown to give the best fit. Predictions are given for future values of the exchange rate.

  3. Statistical Analysis of the Exchange Rate of Bitcoin

    Science.gov (United States)

    Chu, Jeffrey; Nadarajah, Saralees; Chan, Stephen

    2015-01-01

    Bitcoin, the first electronic payment system, is becoming a popular currency. We provide a statistical analysis of the log-returns of the exchange rate of Bitcoin versus the United States Dollar. Fifteen of the most popular parametric distributions in finance are fitted to the log-returns. The generalized hyperbolic distribution is shown to give the best fit. Predictions are given for future values of the exchange rate. PMID:26222702

  4. The Effect of Monetary Policy on Exchange Rates : How to Solve the Puzzles

    NARCIS (Netherlands)

    Kumah, F.Y.

    1996-01-01

    Recent empirical research on the effects of monetary policy shocks on exchange rate fluctuations have encountered the exchange rate puzzle and th e forward discount bias puzzle.The exchange rate puzzle is the tendency of the domestic currency (of non-US G-7 countries) to depreciate against the US

  5. Currency Wars: Who Gains from the Battle?

    NARCIS (Netherlands)

    P. Cumperayot (Phornchanok); R.R.P. Kouwenberg (Roy)

    2016-01-01

    textabstractWe study the growth effects of currency undervaluation when countries employ active exchange rate management policies or impose capital controls, using a panel dataset of 185 countries. Applying two-stage regressions, we find that changes in undervaluation driven by exchange rate

  6. Pricing Currency Risk under Currency Boards

    OpenAIRE

    Schmukler, Sergio L.; Servén, Luis

    2002-01-01

    Currency risk is one of the two components of the total interest rate differential. Hard pegs, such as currency boards, are meant to reduce or even eliminate currency risk, thus, reducing domestic interest rates. This paper investigates the patterns and determinants of the currency risk premium in two currency boards—Argentina and Hong Kong. Despite the presumed rigidity of currency boards, the currency premium is almost always positive and at times very large. Its term structure is usually u...

  7. INTEREST RATES AND CURRENCIES EFFECTS ON ISLAMIC AND CONVENTIONAL BONDS

    Directory of Open Access Journals (Sweden)

    Ghazali Syamni

    2011-09-01

    Full Text Available Bond markets have not been well developed in emerging countries. Realizing its important role, especially after the 1997 crises and the islamic economics development, emerging countries have started to develop such markets. This research examines the effect of interest rates and currencies on Islamic and conventional bonds in Bursa Malaysia. The analysis on Islamic bonds shows that interest rates and currencies do not influence Islamic bonds, which supports the prohibition of interest in Islam. The analysis on conventional bonds finds evidence that both interest rates and currencies affect conventional bond. It also finds evidence of a negative association between interest rates and a conventional bond. Keywords: Interest rate, currency, conventional bond, Islamic bond JEL classification numbers: G11, G12, G15

  8. The American Foreign Exchange Option in Time-Dependent One-Dimensional Diffusion Model for Exchange Rate

    International Nuclear Information System (INIS)

    Rehman, Nasir; Shashiashvili, Malkhaz

    2009-01-01

    The classical Garman-Kohlhagen model for the currency exchange assumes that the domestic and foreign currency risk-free interest rates are constant and the exchange rate follows a log-normal diffusion process.In this paper we consider the general case, when exchange rate evolves according to arbitrary one-dimensional diffusion process with local volatility that is the function of time and the current exchange rate and where the domestic and foreign currency risk-free interest rates may be arbitrary continuous functions of time. First non-trivial problem we encounter in time-dependent case is the continuity in time argument of the value function of the American put option and the regularity properties of the optimal exercise boundary. We establish these properties based on systematic use of the monotonicity in volatility for the value functions of the American as well as European options with convex payoffs together with the Dynamic Programming Principle and we obtain certain type of comparison result for the value functions and corresponding exercise boundaries for the American puts with different strikes, maturities and volatilities.Starting from the latter fact that the optimal exercise boundary curve is left continuous with right-hand limits we give a mathematically rigorous and transparent derivation of the significant early exercise premium representation for the value function of the American foreign exchange put option as the sum of the European put option value function and the early exercise premium.The proof essentially relies on the particular property of the stochastic integral with respect to arbitrary continuous semimartingale over the predictable subsets of its zeros. We derive from the latter the nonlinear integral equation for the optimal exercise boundary which can be studied by numerical methods

  9. Currency Crisis Revisited: A Literature Review

    Directory of Open Access Journals (Sweden)

    Teuta Ismaili Muharremi

    2015-12-01

    Full Text Available This paper elaborates on currency crisis, focusing on the main factors causing the currency crisis. After a brief overview of the main factors driving currency crisis, the paper provides a literature review highlighting that the history of the global economy experienced a number of currency crisis whereas as relates to the triggers of the currency crisis there are three generations of models that have been used to explain currency crisis during the last four decades. Underscoring the role of the government in financial market, in particular the evolution of this role as a result of the recent global financial crisis and highlighting other factors that trigger such crisis, the paper concludes that the potential financial crisis can be addressed using early warning system, which consists of indicators proven to be beneficial in anticipation of the currency crisis, and using the advanced empirical models of currency crisis. In this context the paper reveals that currency crisis are associated with all factors impacting them such as inflation, real exchange rate, import growth, US interest rates, public debt/GDP, and current account/GDP – all with a slightly different time lag.

  10. Modeling the Volatility of Exchange Rates: GARCH Models

    Directory of Open Access Journals (Sweden)

    Fahima Charef

    2017-03-01

    Full Text Available The modeling of the dynamics of the exchange rate at a long time remains a financial and economic research center. In our research we tried to study the relationship between the evolution of exchange rates and macroeconomic fundamentals. Our empirical study is based on a series of exchange rates for the Tunisian dinar against three currencies of major trading partners (dollar, euro, yen and fundamentals (the terms of trade, the inflation rate, the interest rate differential, of monthly data, from jan 2000 to dec-2014, for the case of the Tunisia. We have adopted models of conditional heteroscedasticity (ARCH, GARCH, EGARCH, TGARCH. The results indicate that there is a partial relationship between the evolution of the Tunisian dinar exchange rates and macroeconomic variables.

  11. Financial and fiscal crises, prices and EUR/USD rate of exchange

    Directory of Open Access Journals (Sweden)

    Slawomir I. Bukowski

    2017-09-01

    Full Text Available Purpose: The purpose of this paper is to answer the following question: How did the standard and non-standard ECB policy measures influence the price level and the EUR/USD rate of exchange in the period 2008 -2013? Design/methodology/approach: We formulated the following hypothesis: Depreciation of the Euro versus American dollar exchange rate occurred in the period of financial and fiscal crisis (2008-2014. The main reasons for that included: fiscal crisis in the euro area, implementation of standard and non–standard (quantitative easing ECB monetary policy measures and growth of money supply in the euro area. In that period, the economically and statistically significant impacts of money supply aggregate M2 and differences between interest rates and rates of inflation in the euro area and USA on changes in EUR/USD rate of exchange were noted. For verification of our hypothesis we used econometric modeling - model of regression estimated using the GARCH (0.1, using the monthly data for the period 1999:01-2013:12. Results of our research confirmed the hypothesis formulated by us. Findings: Our study confirmed the formulated hypothesis; the EBC monetary policy, both standard and non-standard, in the years 2008-2014 had a significant effect on the EUR/USD exchange rate, contributing largely to the depreciation of the euro in the same period. Research limitations/implications: The same method of research could be applied to other cases of currency area and central bank monetary policy. Originality/value: The results support the existence of statistically and economically significant impact of central bank policy on the rate of exchange, by the expansion of money supply, changes of differences between interest rates and rates of inflation inside and outside the currency rate area. Those results confirm conclusion formulated based on the theory of interest rate parity and assets theory of currency rates.

  12. THREATS AND BENEFITS OF EXCHANGE RATE REGIMES FOR UKRAINE IN TERMS OF EUROPEAN INTEGRATION

    Directory of Open Access Journals (Sweden)

    Svitlana Glushchenko

    2016-11-01

    Full Text Available The purpose of the paper is to determine threats and benefits of exchange rate regimes in terms of the integration of Ukraine into the European community. Emphasizing features of the manifestation of currency exchange rate in Ukrainian practice is a precondition for choosing the optimal exchange rate regime for Ukraine, which, in its turn, will provide an opportunity to reduce inflation and implement effective tools of monetary and fiscal policies to promote further economic growth and competitiveness of the country. The uses of free-floating exchange rate and «currency board» regimes have either positive effects for Ukraine or certain threats. Methodology. This research is based on a synthesis of data on the uses of exchange rate regimes in Ukraine as an independent. It is considered angular regimes, which are by far the most suitable for Ukraine in terms of the European vector of its development. Peculiarities of using these regimes are revealed and their major threats to the domestic economy are pointed out. This article analyzes the dynamics of the trade balance of payments of Ukraine, the dynamics of the commodity structure of Ukraine`s exports and imports and the external debt of Ukraine. Results. Taking into account the experience of countries, which were in crisis situations, they show the necessity of the uses of freefloating exchange rate regime and possibilities of «currency board» regime, despite threats that they may have. World experience testifies the implementation of structural reforms, effective monetary policy, fiscal policy and discipline of the government. Thorough preparation of Ukraine’s transition to the «currency board» regime can justify itself in conditions of crisis and provide impetus to Ukrainian economy benefits. The paper defines conditions under which the success of a new model of exchange rate policy will be achieved. Practical implications. The study accents attention on the specifics of the uses of the

  13. Analysis of Linkage Effects among Currency Networks Using REER Data

    Directory of Open Access Journals (Sweden)

    Haishu Qiao

    2015-01-01

    Full Text Available We modeled the currency networks through the use of REER (real effective exchange rate instead of a bilateral exchange rate in order to overcome the confusion in selecting base currencies. Based on the MST (minimum spanning tree approach and the rolling-window method, we constructed time-varying and correlation-based networks with which we investigate the linkage effects among different currencies. In particular, and as the source of empirical data, we chose the monthly REER data for a set of 61 major currencies during the period from 1994 to 2014. The study demonstrated that obvious linkage effects existed among currency networks and the euro (EUR was confirmed as the predominant world currency. Additionally, we used the rolling-window method to investigate the stability of linkage effects, doing so by calculating the mean correlations and mean distances as well as the normalized tree length and degrees of those currencies. The results showed that financial crises during the study period had a great effect on the currency network’s topology structure and led to more clustered currency networks. Our results suggested that it is more appropriate to estimate the linkage effects among currency networks through the use of REER data.

  14. Statistical Analysis of Pakistani Currency Regime before and after Floatation

    Directory of Open Access Journals (Sweden)

    Shahid ALI

    2011-05-01

    Full Text Available In this paper the trends of exchange rates for the foreign currency are studied yearly for Pakistan rupee. In 2000 State bank of Pakistan officially floated the rupee. In this studies the trends of the exchange rate before floating and after floating and then checks its impact on the GDP per capita of the country. Here we consider the daily data of exchange rates of Pakistani currency from 1995 to 2009. Data was analyzed from 1995 to 2000 in the first step. In the second step data from 2001 to 2009 was analyzed. The result shows that if one wants to fl oat currency he must keep in mind that the political condition or stable and that the economy is also stable so that the system of fl oat can perform its functions completely.

  15. Currency crises and the evolution of foreign exchange market: Evidence from minimum spanning tree

    Science.gov (United States)

    Jang, Wooseok; Lee, Junghoon; Chang, Woojin

    2011-02-01

    We examined the time series properties of the foreign exchange market for 1990-2008 in relation to the history of the currency crises using the minimum spanning tree (MST) approach and made several meaningful observations about the MST of currencies. First, around currency crises, the mean correlation coefficient between currencies decreased whereas the normalized tree length increased. The mean correlation coefficient dropped dramatically passing through the Asian crisis and remained at the lowered level after that. Second, the Euro and the US dollar showed a strong negative correlation after 1997, implying that the prices of the two currencies moved in opposite directions. Third, we observed that Asian countries and Latin American countries moved away from the cluster center (USA) passing through the Asian crisis and Argentine crisis, respectively.

  16. Effects of exchange rate volatility on export volume and prices of forest products

    Science.gov (United States)

    Sijia Zhang; Joseph Buongiorno

    2010-01-01

    The relative value of currencies varies considerably over time. These fluctuations bring uncertainty to international traders. As a result, the volatility in exchange rate movements may influence the volume and the price of traded commodities. The volatility of exchange rates was measured by the variance of residuals in a GARCH(1,1) model of the exchange rate. We...

  17. Productivity Demand Shocks And Asia-Pacific Real Exchange Rates

    OpenAIRE

    Ordean Olson

    2011-01-01

    The evidence for a productivity-based explanation for real exchange rate behavior of East Asian currencies is examined using sectoral output and employment data, relative prices and relative productivities for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. Time series regressions of the real exchange rate on relative productivity ratios indicate significant relationships for the Philippines, Hong Kong, Thailand, Singapore, Taiwan and Korea. Only when a...

  18. Exchange and Interest Rates prior to EMU: The Case of Greece

    OpenAIRE

    Antzoulatos, Angelos A.; Wilfling, Bernd

    2003-01-01

    Recently a variety of exchange and interest rate models capturing the dynamics during the transition from an exchange rate arrangement of floating rates into a currency union have been derived. While these stochastic equilibrium models in continous time are theoretically rigorous, a systematic and extensive empirical validation is still lacking. Using exchange and interest rate data collected prior to the Greek EMU-entrance on 1 January 2001 this paper tries to fill the gap between theory and...

  19. Capital accumulation, structural change and real exchange rate in a Keynesian-Structuralist growth model

    Directory of Open Access Journals (Sweden)

    Oreiro José Luis

    2015-01-01

    Full Text Available The aim of this paper is to show at theoretical level that maintaining a competitive real exchange rate positively affects the economic growth of developing countries by means of a Keynesian-Structuralist model that combines elements of Kaleckian growth models with the balance of payments constrained growth models pioneered developed by Thirlwall. In this setting, the level of real exchange rate is capable, due to its effect over capital accumulation, to induce a structural change in the economy, making endogenous income elasticities of exports and imports. For reasonable parameter values it is shown that in steady-state growth there is two long-run equilibrium values for real exchange rate, one that corresponds to an under-valued currency and another that corresponds to an over-valued currency. If monetary authorities run exchange rate policy in order to target a competitive level for real exchange rate, than under-valued equilibrium is stable and the economy will show a high growth rate in the long-run.

  20. On the roles of different foreign currencies in European bank lending

    OpenAIRE

    Krogstrup, Signe; Tille, Cedric

    2015-01-01

    We draw on a new data set on the use of Swiss francs and other currencies by European banks to assess the patterns of foreign currency bank lending. We show that the patterns differ sharply across foreign currencies. The Swiss franc is used predominantly for lending to residents, especially households. It is sensitive to the interest rate differential, exchange rate developments, funding availability, and to some extent international trade. Lending in other currencies is more used in lending ...

  1. The Effect of Exchange Rate Fluctuations on a Trade Balance, the case of Russia.

    OpenAIRE

    Masliukova, Tatiana

    2014-01-01

    This thesis examines the impact of exchange rate fluctuation on trade balance. In order to examine the effect of depreciation of domestic currency on the trade balance, the data for Russian Federation was used. The time series analysis includes quarterly data since 2000 till 2014. With help of cointegration model it was concluded that there is a long-term dependence between exchange rate and trade balance. Regression results suggest that the impact of depreciation of national currency on trad...

  2. Currency Substitution and Inflation in Peru

    OpenAIRE

    Liliana Rojas-Suárez

    1992-01-01

    This paper shows that there is a long-run relationship between the expected rate of depreciation in the black-market-exchange rate and the ratio of domestic to foreign money in Peru; that is, the hypothesis of currency substitution can explain the behavior of real holdings of money in Peru. The paper also shows that, while the importance of currency substitution as a transmission mechanism through which domestic policies affected the dynamics of inflation was relatively small during a period ...

  3. Partial delegation in a model of currency crisis

    OpenAIRE

    Boinet, V

    2002-01-01

    Stressing the inßuence of expected devaluation on currency crises, this paper shows that, in a Þxed exchange-rate system with an escape clause, partial delegation of exchange-rate policy to an inßation-averse central banker reduces the probability of crisis.

  4. Exchange rate volatility and oil prices shocks and its impact on economic sustainability

    Directory of Open Access Journals (Sweden)

    Khuram Shaf

    2015-01-01

    Full Text Available Impact of exchange rate volatility has received a great attention from the last century, its importance is certain in all sectors of the economy and it affects welfare as well as social life of the economy. Exchange rate between two currencies tells the value of one currency in terms of others one. Depreciation/Appreciation of exchange rate affects economic growth in terms of trade and shifts income to/from exporting countries from/to importing countries. The factors affecting exchange rate are inflation, interest rate, foreign direct investment, government consumption expenditure and balance of trade. This research study examines the impact of oil prices and exchange rate volatility on economic growth in Germany based on 40-year annual data. Cointegration technique is applied to check the impact of macroeconomic variables on exchange rate in the long run and short run. It is estimated that imports, exports, inflation, interest rate, government consumption expenditure and foreign direct investment had significant impacts on real effective exchange rate in the long run and short run. Sin addition, Engle Granger results indicate that relationship was significant for the long run and its error correction adjustment mechanism (ECM in short a run is significant and correctly signed for Germany.

  5. Choice of optimal exchange rate system For the Republic of Croatia

    OpenAIRE

    Dražen Koški

    2008-01-01

    The aim of research whose results are presented in this article was to choose the optimal system of exchange rate for the Republic of Croatia, of course before its accession to EU. The analyzed exchange rate systems here range from free-floating exchange rate to system without domestic currency in circulation. Naturally, the classification of International Monetary Fond is included in it. After that, the comparison of basic economic advantages and disadvantages of the fixed exchan...

  6. Explore the Application of Financial Engineering in the Management of Exchange Rate Risk

    Directory of Open Access Journals (Sweden)

    Yang Liu

    2015-01-01

    Full Text Available In the background where the domestic enterprises commonly have a weak protection consciousness against the exchange rate risk, this article makes a deep analysis based on the definition of exchange rate risk and its cause. By comparison of the traditional management method of exchange rate risk with another one based on financial engineering tools, it also deeply analyzes the method to use the financial engineering technology in the management of exchange rate risk, and concludes the primary purpose of exchange rate risk management is for hedging. This article proposes an optimal analysis method in two aspects, namely the minimum risk and maximum efficiency, for the forward-based optimal hedging, and proposes an optimal analysis method of dynamic hedging for the optimal hedging of option-based tools. Based on the description of the application of financial tools in foreign exchange futures, forward contract, currency exchange and foreign exchange option, it makes an empirical analysis on the management of foreign exchange risk by taking an assumed T company as the carrier and based on the trading tools of forward foreign exchange and currency option, which describes the operation procedure of financial tools in a more direct way and proves the efficiency of the optimal analysis method of this article.

  7. Currencies, Competition, and Clans

    Czech Academy of Sciences Publication Activity Database

    Engelmann, D.; Hanousek, Jan; Kočenda, Evžen

    -, č. 18 (2006), s. 1-37 Institutional research plan: CEZ:AV0Z70850503 Keywords : exchange rates * anchor currency * central bank policy Subject RIV: AH - Economics http://deepblue.lib.umich.edu/bitstream/2027.42/41248/1/IPC-working-paper-018-EngelmannHanousekKocenda.pdf

  8. Correlation networks among currencies

    Science.gov (United States)

    Mizuno, Takayuki; Takayasu, Hideki; Takayasu, Misako

    2006-05-01

    By analyzing the foreign exchange market data of various currencies, we derive a hierarchical taxonomy of currencies constructing minimal-spanning trees. Clustered structure of the currencies and the key currency in each cluster are found. The clusters match nicely with the geographical regions of corresponding countries in the world such as Asia or East Europe, the key currencies are generally given by major economic countries as expected.

  9. Institutional arrangements of Currency Boards - Comparative Macroeconomic Analysis

    OpenAIRE

    Lubomira Anastassova

    1999-01-01

    This paper is concentrated on the comparative macroeconomic analysis of the differences stemming from the extent to which the institutional framework of the currency board arrangement is implemented in the legal and regulatory systems in the different countries. The main objective of taking into consideration and examining the currency board institutional arrangements is to distinguish between the impact that currency board countries and countries with pegged exchange rate have on different m...

  10. Visibility graph approach to exchange rate series

    Science.gov (United States)

    Yang, Yue; Wang, Jianbo; Yang, Huijie; Mang, Jingshi

    2009-10-01

    By means of a visibility graph, we investigate six important exchange rate series. It is found that the series convert into scale-free and hierarchically structured networks. The relationship between the scaling exponents of the degree distributions and the Hurst exponents obeys the analytical prediction for fractal Brownian motions. The visibility graph can be used to obtain reliable values of Hurst exponents of the series. The characteristics are explained by using the multifractal structures of the series. The exchange rate of EURO to Japanese Yen is widely used to evaluate risk and to estimate trends in speculative investments. Interestingly, the hierarchies of the visibility graphs for the exchange rate series of these two currencies are significantly weak compared with that of the other series.

  11. 31 CFR 100.5 - Mutilated paper currency.

    Science.gov (United States)

    2010-07-01

    ... 31 Money and Finance: Treasury 1 2010-07-01 2010-07-01 false Mutilated paper currency. 100.5 Section 100.5 Money and Finance: Treasury Regulations Relating to Money and Finance EXCHANGE OF PAPER CURRENCY AND COIN Exchange of Mutilated Paper Currency § 100.5 Mutilated paper currency. (a) Lawfully held...

  12. The Official Use of International Currencies – Assessments and Implications

    Directory of Open Access Journals (Sweden)

    Orăștean Ramona

    2015-12-01

    Full Text Available The paper analyses the official use of international currencies as reserve currency (store of value and anchor currency (unit of account. Examining the role as a reserve currency we note that the US dollar is the main reserve currency even if it recorded a decline given the decrease of the value of the US dollar reserve holdings and the gradual diversification of the currencies used. Since 2010, the euro's share decreased continuously may be due to the Eurozone crisis and the euro's depreciation against the US dollar. Then we show that the US dollar dominates as an anchor currency, though it was temporary abandoned during crisis time, having more than a regional dimension. At the same time, the use of the euro in exchange rate arrangements appears mainly in the regions that have close links with the euro area. Over the last few years, we have witnessed a gentle orientation towards a multimonetary world, especially regarding the use of the international currencies as reserve currency given the diversification of the currencies in which central banks understand to hold international reserves and the increasing share of the nontraditional currencies in total foreign exchange reserves.

  13. Are pound and euro the same currency?

    International Nuclear Information System (INIS)

    Matsushita, Raul; Gleria, Iram; Figueiredo, Annibal; Silva, Sergio da

    2007-01-01

    Based on long-range dependence, some analysts claim that the exchange rate time series of the pound sterling and of an artificially extended euro have been locked together for years despite daily changes [M. Ausloos, K. Ivanova, Physica A 286 (2000) 353; K. Ivanova, M. Ausloos, False EUR exchange rates vs DKK, CHF, JPY and USD. What is a strong currency? in: H. Takayasu (Ed.), Empirical Sciences in Financial Fluctuations: The Advent of Econophysics, Springer-Verlag, Berlin, 2002, pp. 62-76]. They conclude that pound and euro are in practice the same currency. We assess the long-range dependence over time through Hurst exponents of pound-dollar and extended euro-dollar exchange rates employing three alternative techniques, namely rescaled range analysis, detrended fluctuation analysis, and detrended moving average. We find the result above (which is based on detrended fluctuation analysis) not to be robust to the changing techniques and parameterizing

  14. 31 CFR 100.6 - Destroyed paper currency.

    Science.gov (United States)

    2010-07-01

    ... 31 Money and Finance: Treasury 1 2010-07-01 2010-07-01 false Destroyed paper currency. 100.6 Section 100.6 Money and Finance: Treasury Regulations Relating to Money and Finance EXCHANGE OF PAPER CURRENCY AND COIN Exchange of Mutilated Paper Currency § 100.6 Destroyed paper currency. No relief will be...

  15. Some Tests of Random Walk Hypothesis for Bulgarian Foreign Exchange Rates

    OpenAIRE

    Nikolai Gueorguiev

    1993-01-01

    The objective of this paper is to check if the exchange rate in newly emerged, relatively thin foreign exchange markets, follows a random walk pattern. The findings of the current study cast doubts on random walk presence in Bulgarian exchange rates against major international currencies. It turns out that the series of daily returns are stationary but correlated and therefore can be modelled better by higher-order ARIMA processes than by random walk.

  16. China-U.S. Currency Conflict:The Economic and Legal Implications

    Directory of Open Access Journals (Sweden)

    Hani Albasoos

    2016-10-01

    Full Text Available Abstract: For more than a decade, China has a policy of managing its currency exchange rate (RMB to limit its appreciation against other currencies like U.S dollar. This policy has been subjected to many criticisms from United States’ lawmakers as currency manipulation. The U.S. argues that China is gaining an advantage of export and attracting direct foreign investment at the expense of other countries including the United State. The claim also has included that China’s manipulation causes U.S. trade deficit as well as high rate of unemployment. Meanwhile, China’s policy makers argue that its policy of exchange rate is a mechanism tool to enhance the development of the country and attaining market growth to make China rich and powerful. This research paper underlines the root of this argument and how china’s currency policy has affected both economics of U.S. and China. Many economists have emphasized on the appreciation of RMB as an important factor to attain the trade balance. However, this research argues that the appreciation is not going to matter. Pressure has been put on Obama’s Administration to push China to appreciate its currency and to designate China as a "currency manipulator". Several Bills have been introduced to discuss this issue. From a legal perspective, two entities could tackle this issue. They are the World Trade Organization (WTO and the International Monetary Fund (IMF. However, IMF lack legitimacy and leverage and WTO has no jurisdiction over the exchange rate. So, none of these entities could handle the currency issue. Therefore, this paper analyzes some possible solutions such as Omnibus Act, tariffs, import quotas and forming new legislation. Where, it concludes that the best solution could be via forming a new international agency.

  17. Exchange rate arrangements: From extreme to "normal"

    Directory of Open Access Journals (Sweden)

    Beker Emilija

    2006-01-01

    Full Text Available The paper studies theoretical and empirical location dispersion of exchange rate arrangements - rigid-intermediate-flexible regimes, in the context of extreme arrangements of a currency board, dollarization and monetary union moderate characteristics of intermediate arrangements (adjustable pegs crawling pegs and target zones and imperative-process "normalization" in the form of a managed or clean floating system. It is established that de iure and de facto classifications generate "fear of floating" and "fear of pegging". The "impossible trinity" under the conditions of capital liberalization and globalization creates a bipolar view or hypothesis of vanishing intermediate exchange rate regimes.

  18. Smuggling, non-fundamental uncertainty, and parallel market exchange rate volatility

    OpenAIRE

    Richard Clay Barnett

    2003-01-01

    We explore a model where smuggling and a parallel currency market arise, owing to government restrictions that prevent agents from legally holding foreign exchange. Despite such restrictions, agents are able to diversify their savings, holding both domestic and parallel foreign cash, basing their portfolio allocation on current and prospective parallel exchange rates. We attribute movements in parallel rates to non-fundamental uncertainty. The model generates equilibria with both positive and...

  19. THE IMPACT OF POLITICAL AND ECONOMIC NEWS ON THE EURO/RON EXCHANGE RATE: A GARCH APPROACH

    Directory of Open Access Journals (Sweden)

    Mihai Niţoi

    2012-12-01

    Full Text Available Within this study we try to capture the impact of political news and economic news from euro area on the exchange rate between Romanian currency and euro. In order to do this we used a GARCH model. As we observed, both variables influence the exchange rate, this fact implying national currency depreciation and a volatility growth. The political news and the economic news positively affect the euro/ron exchange rate volatility. The two factors conjugation, as it has happened in the recent period is to be avoided because it can have financial and economic consequences with a very high cost for Romania.

  20. The impact of exchange rate EUR/USD on the rate of return of bond investments denominated in US dollar from the point of view of euro investor

    Directory of Open Access Journals (Sweden)

    Oldřich Šoba

    2009-01-01

    Full Text Available Investment opportunities into foreign curruncies financial assets are rising because of financial markets globalization, financial markets integration and evolution of modern information technologies. The currency risk relates to these cases when investor converts cash from and into domestic currency. The currency risk is determined by unexcepeted change of exchange rate (currency of financial asset denomination / investor’s domestic currency during duration of the investment.Objective of the paper is quantification and analysis of exchange rate EUR/USD impact on the rate of return of bond investments denominated in US dollar from the point of view of a euro investor for investment horizons of different length.The analysis is realized for following investment horizons: 1 year, 2 years, 3 years, 5 years, 7 years, 10 year and 12 year. Complementary investment horizons are: month and 15 year. Bond investments denominated just US dollar are represented by investments into ING bond unit trust in period December 1989–December 2007. The unit trust invests into bonds with high rating (for example governmants bonds etc.. These bonds are denominated in USD only. Methodology of the analysis is based on quantification of proportion of exchange rate EUR/USD impact on the rate of return of bond investment denominated in USD. The share is based on basic piece of knowledge of the uncovered interest rate parity.

  1. Essays on the common currency, real financial market exchange rates and capital flows

    OpenAIRE

    Ozimkovska, Valenetyna

    2016-01-01

    Chapter 1 of this thesis studies the impact of the introduction of the euro on the volatility of industrial production growth and the characteristics of the optimal currency in the EU-12 countries (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain).Chapter 2 investigates the relationship between cross-border equity flows and relative international asset prices expressed in the same currency which can be considered as the Real F...

  2. Currency strategy of constructivism in Kazakhstan

    Directory of Open Access Journals (Sweden)

    Zoryana Lutsyshyn

    2014-08-01

    Full Text Available The strategy of constructivism is one of the most efficient ones for the countries which stand at the intersection of interests of large players in the global economy. The modern currency reformation and principles of positioning of Kazakhstan could be a bright example of how the internal policy should be implemented to ensure the interests of a socially oriented state, including definitions of the currency mechanism. All measures and actions of the central bank and the government have always been weighted, consistent and foreseeable: the logic and economic substantiation have always been adhered to in the exchange rate policy at simultaneous liberalization of the foreign exchange market

  3. Parameter motivated mutual correlation analysis: Application to the study of currency exchange rates based on intermittency parameter and Hurst exponent

    Science.gov (United States)

    Cristescu, Constantin P.; Stan, Cristina; Scarlat, Eugen I.; Minea, Teofil; Cristescu, Cristina M.

    2012-04-01

    We present a novel method for the parameter oriented analysis of mutual correlation between independent time series or between equivalent structures such as ordered data sets. The proposed method is based on the sliding window technique, defines a new type of correlation measure and can be applied to time series from all domains of science and technology, experimental or simulated. A specific parameter that can characterize the time series is computed for each window and a cross correlation analysis is carried out on the set of values obtained for the time series under investigation. We apply this method to the study of some currency daily exchange rates from the point of view of the Hurst exponent and the intermittency parameter. Interesting correlation relationships are revealed and a tentative crisis prediction is presented.

  4. Are the Intraday Effects of Central Bank Intervention on Exchange Rate Spreads Asymmetric and State Dependent?

    DEFF Research Database (Denmark)

    Fatum, Rasmus; Pedersen, Jesper; Sørensen, Peter Norman

    This paper investigates the intraday effects of unannounced foreign exchange intervention on bid-ask exchange rate spreads using official intraday intervention data provided by the Danish central bank. Our starting point is a simple theoretical model of the bid-ask spread which we use to formulate...... exert a significant influence on the exchange rate spread, but in opposite directions: intervention purchases of the smaller currency, on average, reduce the spread while intervention sales, on average, increase the spread. We also show that intervention only affects the exchange rate spread when...... the state of the market is not abnormally volatile. Our results are consistent with the notion that illiquidity arises when traders fear speculative pressure against the smaller currency and confirms the asymmetry hypothesis of our theoretical model....

  5. International Asset Pricing, Currency Risk and Integration of Markets

    Directory of Open Access Journals (Sweden)

    Sema BAYRAKTAR

    2014-11-01

    Full Text Available This study attempts to test the conditional version of the international asset-pricing model proposed in Bayraktar (2000, 2009 by using a parsimonious multivariate GARCH process. The theoretical model, contrary to previous empirical studies that have used random selection of currency risks, determines which currencies should be included in an empirical test, thus avoids this kind of random selection bias. The results from both full and sub-samples regressions provide some weak evidence for the existence of exchange rate risks, thus partially support the theory. However, exchange rate risks' premia are found considerably smaller than that of market risk.

  6. Predictability of Exchange Rates in Sri Lanka: A Test of the Efficient Market Hypothesis

    OpenAIRE

    Guneratne B Wickremasinghe

    2007-01-01

    This study examined the validity of the weak and semi-strong forms of the efficient market hypothesis (EMH) for the foreign exchange market of Sri Lanka. Monthly exchange rates for four currencies during the floating exchange rate regime were used in the empirical tests. Using a battery of tests, empirical results indicate that the current values of the four exchange rates can be predicted from their past values. Further, the tests of semi-strong form efficiency indicate that exchange rate pa...

  7. International business of banking: the pricing example of retail currency spreads

    Directory of Open Access Journals (Sweden)

    Enn Listra

    2013-05-01

    Full Text Available In this paper the pricing of a specific service of currency exchange based on the retail exchange rate spreads is studied on the example of four international banking groups. The aim of this study is to explore pricing of currency exchange services based on bid-ask differences in some commercial banks and possible price discrimination in this segment of market comparing the behaviour of Western mothers and Eastern daughters in European international banking groups. The retail currency rate spreads in different bank groups and countries are compared with each other. The main results of the study are that statistically significant differences exist in the spreads set by banking groups in different countries. All banking groups in the pilot sample offer more favourable rates in Western countries indicating that the pricing policy of bank groups may be discriminatory. The volatility of spreads over different currencies suggests that different decision making mechanisms may be present in the groups depending on the location of banking unit. The results of this pilot study suggest that further research is needed to understand the extent and the mechanism of findings.

  8. Covered Interest Parity, Uncovered Interest Parity, and Exchange Rate Dynamics

    OpenAIRE

    Eaton, Jonathan; Turnovsky, Stephen J.

    1981-01-01

    A number of macroeconomic models of open economies under flexible exchange rate assume a strong version of perfect capital mobility which implies that currency speculation commands no risk premium. If this assumption is dropped a number of important results no longer obtain. First, the exchange rate and interest rate cannot be in steady state unless both the government deficit and current account equal zero, not simply their sum, as would otherwise be the case. Second, even in steady state th...

  9. Exchange Rate Regimes – A periodical overview and a critical analysis of exchange rate regimes in Kosovo

    Directory of Open Access Journals (Sweden)

    Flamur Bunjaku

    2015-03-01

    Full Text Available Exchange rate regimes and the monetary policy are the key instruments governments use to achieve their economic and financial objectives. Moreover, due to global financial crisis the latter instruments get more importance. Empirical evidences show that exchange rate regimes in Kosovo and its monetary policy throughout their development were mainly influenced by different political and historical developments. In regard of Euroisation of monetary system in Kosovo it was found that this action generated macro - financial stability in terms of inflation and price fluctuation. However, in terms of microeconomic aspects, the unilateral adaptation of Euro as the official currency of Kosovo failed to provide microeconomic advantages such as to export stimulation, and so forth. The main exchange rate regime systems were discussed focusing in their advantages and disadvantages, and it was concluded that there is no commonly accepted theory regarding the optimality of exchange rate regimes. In addition, the global financial crisis impact in the financial system of Kosovo is also discussed and it was found that negative impacts of global financial crisis were moderate and indirect.

  10. 31 CFR 100.8 - Packaging of mutilated currency.

    Science.gov (United States)

    2010-07-01

    ... 31 Money and Finance: Treasury 1 2010-07-01 2010-07-01 false Packaging of mutilated currency. 100.8 Section 100.8 Money and Finance: Treasury Regulations Relating to Money and Finance EXCHANGE OF PAPER CURRENCY AND COIN Exchange of Mutilated Paper Currency § 100.8 Packaging of mutilated currency...

  11. Causes of the Recent Currency Crises in Developing Economies

    Directory of Open Access Journals (Sweden)

    Haesik Park

    1997-12-01

    Full Text Available This thesis analyzed the reasons of foreign currency crisis which happened in Mid-South America and South East Asia based on the economical structure of developing countries. First, it is illustrated theoretically. Since the developing countries, which maintain the export-oriented economic growth, allocates the sources in the trade area, equilibrium real exchange rate of these countries get relatively higher evaluation. Capital inflows with future exports as its necessary conditions make the foreign exchange market participants expect that the real future exchange rate will be much lower than the current equilibrium exchange rate (so called "devaluation", giving rise to foreign exchange crisis. Negative debts result in the information asymmetry between creditor and debtor, and between adverse selection and moral relaxation, and that cause crisis for foreign currency and reduces their attractiveness, proposed by Mishkin. In fact developing countries in Southeast Asia and Central and South America that has the recent outbreak of a foreign exchange crisis, also have unhealthy banks. When we apply analysis mentioned above to South Korea, we can not find evidence of relatively high evaluation level on the real equilibrium exchange rate and evidence of poor management in the banking sector.

  12. Exchange Rate – Relative Price Nonlinear Cointegration Relationship in Malaysia

    OpenAIRE

    Venus Khim-Sen Liew; Chee-Keong Choong; Evan Lau; Kian-Ping Lim

    2005-01-01

    The finding of exchange rate–relative price nonlinear cointegration relationship in Malaysia, among others, suggests that nonlinear Purchasing Power Parity (PPP) equilibrium may be regarded as reference point in judging the short run misalignment of the Ringgit currency and thereby deducing effective policy actions. Moreover, economists who wish to extend the simple PPP exchange rate model into the more complicated monetary exchange models may do so comfortably, at least in the text of Malays...

  13. Modeling and estimating the jump risk of exchange rates: Applications to RMB

    Science.gov (United States)

    Wang, Yiming; Tong, Hanfei

    2008-11-01

    In this paper we propose a new type of continuous-time stochastic volatility model, SVDJ, for the spot exchange rate of RMB, and other foreign currencies. In the model, we assume that the change of exchange rate can be decomposed into two components. One is the normally small-cope innovation driven by the diffusion motion; the other is a large drop or rise engendered by the Poisson counting process. Furthermore, we develop a MCMC method to estimate our model. Empirical results indicate the significant existence of jumps in the exchange rate. Jump components explain a large proportion of the exchange rate change.

  14. MACROECONOMIC POLICY OF CURRENCY WAR: METHODS OF INVESTIGATION

    Directory of Open Access Journals (Sweden)

    Bekareva S. V.

    2015-12-01

    Full Text Available The article is devoted to the methods of investigation of a modern international monetary and finance field for some countries which would participate in currency war. Usually currency wars are used in order to achieve some competitive advantages in international trade relations. Real effective exchange rate index was used as the key instrument in our analysis. It reflects a nominal exchange rate and the main trade partners’ structure as well. Moreover, some macroeconomic and finance indices were used. The methods of investigation are cluster and panel data analyses. The period of investigation is 1990-2012. The result of analysis is connected with showing differences in countries’ possibility of implementing monetary policy instruments to improve their competitiveness.

  15. Impact of exchange rates on the world uranium market

    International Nuclear Information System (INIS)

    Fulton, M.E.; Combs, G.F. Jr.

    1986-01-01

    A preliminary analysis of the relationship between exchange rates and US uranium prices and product ion is presented. This analysis supplements the discussions on the broader topic of fuel prices, exchange rates and other international economic phenomena scheduled during the 1985 EPRI Fuel Supply Seminar. By varying exchange rate assumptions in the recently developed Uranium Market Model, estimates of the magnitude and timing of price and production effects were obtained. These effects do indeed appear to be large and have implications in procurement, fuel planning and commodity policy. While analysts may differ on details, the inescapable conclusion is that exchange rates matter a great deal in the uranium market. The case described is for a scenario of exchange rates with other currencies returning to their 1980 levels. A second case, an across the board weakening of the dollar by 25%, the results of which are somewhat less dramatic is also examined

  16. THE IMPLICATIONS OF VARYING EXCHANGE RATES FOR THE INTERNATIONAL TRADE

    Directory of Open Access Journals (Sweden)

    Sandu Carmen

    2011-07-01

    Full Text Available The benefit of international trade is a more efficient employment of the productive forces of the world. (John Stuart Mill The exchange rate is a primary factor that influences economy. This instrument is used by some countries in order to improve the lack of balance caused as a result of the financial crisis felt in many countries considered by then infallible. The negative effects of the financial crisis can also be found in the decreased volume of commodities involved in international trade exchanges, as a consequence of modified prices and decreased offer. The globalizing trend leads to a constant expansion of exchanges between countries and to the consolidation of international cooperation. Except that economic interdependence generates an increased risk under the influence of economic, financial, monetary or political factors. The currency risk can generate either a gain or loss during foreign trade operations. The long period of RON depreciation made possible the entry of Romanian products on the international markets due to their prices. Sheltered by the gain generated by the evolution of the exchange rate, most of the exporters were not concerned by the increase of product competitiveness or by avoiding the currency risk. The fact that, for many years, the evolution of the exchange rate generated substantial losses for the exporters shows that risk coverage in Romania is, in most cases, a purely theoretical concept.

  17. 26 CFR 301.6316-5 - Manner of paying tax by foreign currency.

    Science.gov (United States)

    2010-04-01

    ... currency to be deposited shall be that amount which, when converted at the rate of exchange used on the... 26 Internal Revenue 18 2010-04-01 2010-04-01 false Manner of paying tax by foreign currency. 301....6316-5 Manner of paying tax by foreign currency. (a) Time and place to pay. The unpaid tax required to...

  18. Extreme-value dependence: An application to exchange rate markets

    Science.gov (United States)

    Fernandez, Viviana

    2007-04-01

    Extreme value theory (EVT) focuses on modeling the tail behavior of a loss distribution using only extreme values rather than the whole data set. For a sample of 10 countries with dirty/free float regimes, we investigate whether paired currencies exhibit a pattern of asymptotic dependence. That is, whether an extremely large appreciation or depreciation in the nominal exchange rate of one country might transmit to another. In general, after controlling for volatility clustering and inertia in returns, we do not find evidence of extreme-value dependence between paired exchange rates. However, for asymptotic-independent paired returns, we find that tail dependency of exchange rates is stronger under large appreciations than under large depreciations.

  19. Exchange Rate – Relative Price Nonlinear Cointegration Relationship in Malaysia

    OpenAIRE

    Venus Khim-Sen Liew; Chee-Keong Choong; Evan Lau; Kian-Ping Lim

    2005-01-01

    The finding of exchange rate–relative price nonlinear cointegration relationship in Malaysia, among others, suggests that nonlinear Purchasing Power Parity (PPP) equilibrium may be regarded as reference point in judging the short run misalignment of the Ringgit currency and thereby deducing effective policy actions. Moreover, economists who wish to extend the simple PPP exchange rate model into the more complicated monetary exchange models may do so comfortably, at least in the text of Mala...

  20. Value-at-Risk Analysis for the Tunisian Currency Market: A comparative study

    Directory of Open Access Journals (Sweden)

    Aymen Ben Rejeb

    2012-01-01

    Full Text Available The main purpose of this paper is to compare empirically four Value-at-Risk simulation methods, namely, the Variance-Covariance, the Historical Simulation, the Bootstrapping and the Monte Carlo. We tried to estimate the VaR associated to three currencies and four currency portfolios in the Tunisian exchange market. Data covers the period between 01-01-1999 and 31-12-2007. Independently of the used technique, the Japanese Yen seems to be the most risky currency. Moreover, the portfolio diversification reduces the exchange rate risk. Lastly, the number of violations, when they exist, does not generally differ between the simulation methods. Recent evaluation tests were applied to select the most appropriate technique predicting precisely the exchange rate risk. Results based on these tests suggest that the traditional Variance-Covariance is the most appropriate method.

  1. Political Risk and Foreign Exchange Rates: an Efficient-Market Approach

    OpenAIRE

    Jean-Claude Cosset; Bruno Doutriaux de la Rianderie

    1985-01-01

    This paper examines the reaction of the foreign exchange market to the announcement of changes in the business environment of a country. Our results suggest that sampled political risk news conveys important information about a country's investment climate and causes its currency's exchange rate to vary. It appears, however, that the reaction of the foreign exchange market is more dramatic for unfavorable events than for favorable events. The evidence presented is also consisted with the hypo...

  2. Are EUR and GBP different words for the same currency?

    Science.gov (United States)

    Ivanova, K.; Ausloos, M.

    2002-05-01

    The British Pound (GBP) is not part of the Euro (EUR) monetary system. In order to find out arguments on whether GBP should join the EUR or not correlations are calculated between GBP exchange rates with respect to various currencies: USD, JPY, CHF, DKK, the currencies forming EUR and a reconstructed EUR for the time interval from 1993 till June 30, 2000. The distribution of fluctuations of the exchange rates is Gaussian for the central part of the distribution, but has fat tails for the large size fluctuations. Within the Detrended Fluctuation Analysis (DFA) statistical method the power law behavior describing the root-mean-square deviation from a linear trend of the exchange rate fluctuations is obtained as a function of time for the time interval of interest. The time-dependent exponent evolution of the exchange rate fluctuations is given. Statistical considerations imply that the GBP is already behaving as a true EUR.

  3. Exchange Rate Fluctuation and the Nigeria Economic Growth

    Directory of Open Access Journals (Sweden)

    Lawal Adedoyin Isola

    2016-11-01

    Full Text Available The aim of this study is to investigate the impact of exchange rate fluctuation on economic growth in Nigeria within the context of four profound theories: purchasing power parity; monetary model of exchange rates; the portfolio balance approach; and the optimal currency area theory. Data was collected from the CBN statistical bulletin in Nigeria from 2003– 2013and the Autoregressive Distributed Lag (ARDL model was employed to estimate the model. In the model, real GDP (RGDP was used as the proxy for economic growth while Inflation rate (IF, Exchange rate (EXC, Interest rate (INT and Money Supply(M2 as proxies for other macroeconomic variables. The empirical results show that exchange rate fluctuation has no effect on economic growth in the long run though a short run relationship exist between the two. Based on these findings, this paper recommends that the Central bank for policy purposes should ensure that stern foreign exchange control policies are put in place in order to help in appropriate determination of the value of the exchange rate. This will in the long run help to strengthen the value of the Naira.

  4. The Third Currency War as an Effect of Post-Crisis Changes in the International Currency System. The Risk Aspect - the Case Analyses of Brazil

    Directory of Open Access Journals (Sweden)

    Jacek Pera

    2018-03-01

    Full Text Available Aim/purpose - The objectives of the paper include: identification of factors that influence the directions of fluctuations of foreign exchange rates seen as manifestations of currency wars; description of the most important forms of currency wars conducted in the contemporary global economy (including in particular the currently observed third currency war; analysis of risks to contemporary financial markets and national economies posed by the third currency war. Design/methodology/approach - The paper uses the method of critical analysis of the literature on the subject, as well as US-China and Brazil case analyses. The Propensity Score Matching method was used in the study. Findings - The research findings confirmed the following hypotheses: contemporary fluctuations of foreign exchange rates in the largest economies of the world confirm that the third currency war is ongoing; the risk of consequences of the currency war destabilises the international and local financial markets and trade transactions among them. Research implications/limitations - The limited scope of the research performed is due to the fact that emerging economies have no control of devaluation or revaluation processes in their respective countries. However, large economies, such as China or Japan, are able to create the value of their respective currencies, thus artificially controlling the competitiveness of their products and services. These differences between small and large economies limit and distort the scope of the research done. Originality/value/contribution - Identification, analysis and results of the risks to contemporary financial markets and national economies posed by the third currency war(original abstract

  5. Properties of Foreign Exchange Risk Premiums

    DEFF Research Database (Denmark)

    Sarno, Lucio; Schneider, Paul; Wagner, Christian

    2012-01-01

    We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure of ...... and are closely related to global risk aversion, the business cycle, and traditional exchange rate fundamentals.......We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure...... of interest rates and exchange rates. Estimating affine (multi-currency) term structure models reveals a noticeable tradeoff between matching depreciation rates and accuracy in pricing bonds. Risk premiums implied by our global affine model generate unbiased predictions for currency excess returns...

  6. Measuring real exchange rate misalignment in Croatia: cointegration approach

    Directory of Open Access Journals (Sweden)

    Irena Palić

    2014-12-01

    Full Text Available The purpose of the paper is to analyze misalignment of the real exchange rate in Croatia. The misalignment analysis is conducted using the permanent equilibrium exchange rate approach. The equilibrium real exchange rate is computed using the cointegration approach whereby the real exchange rate and its fundamentals, namely terms of trade, net foreign assets and the ratio of prices of tradables to non-tradables are included in cointegration analysis. The Hodrick and Prescott filter is used to obtain permanent values of the equilibrium real exchange rate. The real exchange rate misalignment is computed as the deviation of the RER from its permanent equilibrium level. Four overvaluation periods and three undervaluation periods are recorded in Croatia in the observed period. Overvaluation periods are more often and of longer duration than undervaluation periods. However, the real exchange rate does not deviate largely from its estimated equilibrium value in the observed period, and it is neither overvalued nor undervalued constantly, but the periods alternate. Considering the results of the analysis, together with the empirical characteristics of Croatian economy, namely the high foreign currency indebtedness, highly euroized economy and underdeveloped export oriented sector, the depreciation of the real exchange rate is not recommended to economic policy makers and the current Croatian exchange rate policy is appropriate.

  7. 3ON PAK RUPEE EXCHANGE RATES: WHETHER STOCK OR FLOW MATTERS?

    Directory of Open Access Journals (Sweden)

    Razzaque H Bhatti

    2011-01-01

    Full Text Available This paper examines whether the monetary model or the flow model of exchange rate explains the long-run movements in Pak rupee exchange rates vis-à-vis the four major currencies – the US dollar, British pound, Swiss franc and Japanese yen – over the period 1983q1-2009q4. Results obtained by employing the Johansen and Juselius (1990 technique of cointegration are supportive of the monetary model in two Pak rupee exchange rates vis-à-vis the US dollar and the Swiss franc when both short- and long-run interest rates are used and of the flow model in three exchange rates vis-à-vis the British pound, Swiss franc and Japanese yen when the short-run interest rate is used. These results show that both stock equilibrium in capital markets and flow equilibrium in foreign exchange markets determine Pak rupee exchange rates.

  8. THREATS AND BENEFITS OF EXCHANGE RATE REGIMES FOR UKRAINE IN TERMS OF EUROPEAN INTEGRATION

    OpenAIRE

    Svitlana Glushchenko; Svitlana Tkalenko

    2016-01-01

    The purpose of the paper is to determine threats and benefits of exchange rate regimes in terms of the integration of Ukraine into the European community. Emphasizing features of the manifestation of currency exchange rate in Ukrainian practice is a precondition for choosing the optimal exchange rate regime for Ukraine, which, in its turn, will provide an opportunity to reduce inflation and implement effective tools of monetary and fiscal policies to promote further economic growth and compet...

  9. PURCHASING POWER PARITY INFLUENCE ON REAL EXCHANGE RATE BEHAVIOR IN ROMANIA

    Directory of Open Access Journals (Sweden)

    Nicolae Ghiba

    2011-12-01

    Full Text Available Purchasing Power Parity (PPP represents a fundamental concept in exchange rate modeling. The main idea is given by equality between prices in two different countries when expressing in the same currency.This paper aims to analyze the behavior of real exchange rate between EURO and Romanian new leu (RON under PPP paradigm. We use the Augmented Dickey-Fuller and Phillips-Perron stationarity tests in order to check real exchange deviations from PPP. Also, we investigate the existence of a connection between long-term between nominal exchange rate and industrial producer price indices from Romania and euro area. The main conclusions of this research highlight that PPP doesn’t holds; real exchange rate stationarity tests doest not confirm the stationarity, thus between the aforementioned three variables it doesn’t exists any equilibrium relation.

  10. A PDE Pricing Framework for Cross-Currency Interest Rate Derivatives with Target Redemption Features

    Science.gov (United States)

    Christara, Christina C.; Minh Dang, Duy; Jackson, Kenneth R.; Lakhany, Asif

    2010-09-01

    We propose a general framework for efficient pricing via a partial differential equation (PDE) approach for exotic cross-currency interest rate (IR) derivatives, with strong emphasis on long-dated foreign exchange (FX) IR hybrids, namely Power Reverse Dual Currency (PRDC) swaps with a FX Target Redemption (FX-TARN) provision. The FX-TARN provision provides a cap on the FX-linked PRDC coupon amounts, and once the accumulated coupon amount reaches this cap, the underlying PRDC swap terminates. Our PDE pricing framework is based on an auxiliary state variable to keep track of the total accumulated PRDC coupon amount. Finite differences on uniform grids and the Alternating Direction Implicit (ADI) method are used for the spatial and time discretizations, respectively, of the model-dependent PDE corresponding to each discretized value of the auxiliary variable. Numerical examples illustrating the convergence properties of the numerical methods are provided.

  11. Cross-sample entropy of foreign exchange time series

    Science.gov (United States)

    Liu, Li-Zhi; Qian, Xi-Yuan; Lu, Heng-Yao

    2010-11-01

    The correlation of foreign exchange rates in currency markets is investigated based on the empirical data of DKK/USD, NOK/USD, CAD/USD, JPY/USD, KRW/USD, SGD/USD, THB/USD and TWD/USD for a period from 1995 to 2002. Cross-SampEn (cross-sample entropy) method is used to compare the returns of every two exchange rate time series to assess their degree of asynchrony. The calculation method of confidence interval of SampEn is extended and applied to cross-SampEn. The cross-SampEn and its confidence interval for every two of the exchange rate time series in periods 1995-1998 (before the Asian currency crisis) and 1999-2002 (after the Asian currency crisis) are calculated. The results show that the cross-SampEn of every two of these exchange rates becomes higher after the Asian currency crisis, indicating a higher asynchrony between the exchange rates. Especially for Singapore, Thailand and Taiwan, the cross-SampEn values after the Asian currency crisis are significantly higher than those before the Asian currency crisis. Comparison with the correlation coefficient shows that cross-SampEn is superior to describe the correlation between time series.

  12. A free-floating currency regime during economic crisis: advantage or disadvantage?

    OpenAIRE

    Lubor Lacina; Petr Toman

    2011-01-01

    The paper deals with the identification of potential disadvantages associated with the existence of national currencies with the floating exchange rate regime during the current financial and economic crisis in countries postponing their entry into the eurozone. The hypothesis is that the advantages of a floating exchange rate may be outweighed by their disadvantages (high volatility of exchange rates). First part of the paper provides evidence about the development of Czech crown exchange ra...

  13. 26 CFR 301.6316-8 - Refunds and credits in foreign currency.

    Science.gov (United States)

    2010-04-01

    ... refund check, at the rate of exchange then used for his official disbursements by the disbursing officer... 26 Internal Revenue 18 2010-04-01 2010-04-01 false Refunds and credits in foreign currency. 301....6316-8 Refunds and credits in foreign currency. (a) Refunds. The refund of any overpayment of tax which...

  14. MEANING OF THE BITCOIN CRYPTOGRAPHIC CURRENCY AS A MEDIUM OF EXCHANGE

    Directory of Open Access Journals (Sweden)

    Łukasz Dopierała

    2014-06-01

    Full Text Available This article presents one of the new elements of virtual reality, which is the Bitcoin cryptocurrency. This thesis focuses on the condition and perspectives on development of the trading function of this instrument. The authors discuss the legal aspects of functioning of the Bitcoin, conduct a SWOT analysis of this cryptocurrency as a medium of exchange, and examin the scale of use of Bitcoin in transaction purposes. As of March 1, 2014 the trading system gradually develops and the strengths of this cryptographic currency outweigh its weaknesses, but the future of Bitcoin as a medium of exchange is difficult to determine.

  15. Volatility Analysis of Exchange Rate of Emerging Economies: A ...

    African Journals Online (AJOL)

    The aim of this study is to analyze the volatility of exchange rates of the currencies of the five East African Community (EAC) countries. Time series modeling is applied to the data of these countries. Various models were fitted and compared using Maximum Likelihood approach in order to select the best fitting model for each ...

  16. EXCHANGE RATE DIFFERENCES-THE ACCOUNTING TREATMENT AND ITS INFLUENCE ON THE FINANCIAL PERFORMANCE OF AN ECONOMIC ENTITY

    Directory of Open Access Journals (Sweden)

    Nicoleta Cristina MATEI

    2016-06-01

    Full Text Available Currency rate differences arise when there are certain debt rights or obligations in foreign currency of an economic entity which are collected, i.e. paid for at a different course from the one displayed by the Romanian National Bank on the date of their establishment. Such differences, according to the situation, generate expenditure or revenue which affects a company's financial result and, consequently, the accountant result as well. The results registered by an economic entity presented in the Profit and Loss Account provide information about its financial performance. This performance can be influenced by the favorable or unfavorable exchange rate differences existing when an economic entity carries out transactions or has incurred foreign currency loans having a significant share in the total amount of transactions or in capitals. The present paper shows the accounting treatment of the exchange rate differences and its impact on the financial performance.

  17. Currency Manipulation versus Current Account Manipulation

    OpenAIRE

    Junning Cai

    2005-01-01

    It is said that a country’s currency peg can become currency manipulation representing protracted government intervention in the foreign exchange market that gives it unfair competitive advantage in international trade yet prevents effective balance of payments in its trade partners. Regarding this widespread fallacy, this paper explains why currency peg is not currency manipulation even when it keeps a country’s currency undervalued. We clarify that 1) government is inherently a major player...

  18. Exchange Rate Volatility and Trade among the Asia Pacific Countries

    Directory of Open Access Journals (Sweden)

    Saang Joon Baak

    2004-06-01

    Full Text Available The purpose of this paper is to investigate the impact of exchange rate volatility on exports among 14 Asia Pacific countries, where various measures to raise the intra-region trade are being implemented. Specifically, this paper estimates a gravity model, in which the dependent variable is the product of the exports of two trading countries. In addition, it also estimates a unilateral exports model, in which the dependent variable is not the product of the exports of two trading countries but the exports from one country to another. By doing this, the depreciation rate of the exporting country's currency value can be included as one of the explanatory variables affecting the volume of exports. As the explanatory variables of the export volume, the gravity model adopts the product of the GDPs of two trading counties, their bilateral exchange rate volatility, their distance, a time trend and dummies for the share of the border line, the use of the same language, and the APEC membership. In the case of the unilateral exports model, the product of the GDPs is replaced by the GDP of the importing country, and the depreciation rate of the exporting country's currency value is dded. In addition, considering that the export volume will also depend on various onditions of the exporting country, dummies for exporting countries are also included as an explanatory variable. The empirical tests, using annual data for the period from 1980 to 2002, detect a significant negative impact of exchange rate volatility on the volume of exports. In addition, various tests using the data for sub-sample periods indicate that the negative impact had been weakened since 1989, when APEC had launched, and surged again from 1997, when the Asian financial crisis broke out. This finding implies that the impact of exchange rate volatility is time-dependent and that it is significantlynegative at least in the present time. This phenomenon is noticed regardless which estimation

  19. OPTIMIZATION OF EXPORT PORTFOLIO CURRENCY STRUCTURE OF INDUSTRIAL ENTERPRISES IN REPUBLIC OF BELARUS

    Directory of Open Access Journals (Sweden)

    K. A. Коrоbiyna

    2009-01-01

    Full Text Available Optimization of currency portfolio structure of export industrial enterprises in the Republic of Belarus, by which we shall understand a currency structure of export contracts of an international enterprise, is considered as one of the most important problems in the financial management of an enterprise. Statement and analysis of industrial enterprise alternative costs and simultaneous investigation of tendencies pertaining to changes in the exchange rates give the possibility (under other equal status to reduce non-systematic risks in foreign trade. Diversification of industrial enterprise currency portfolios with the purpose to decrease financial risks and with due account of exchange rate correlation can lead to an increase of payments in Russian currency and Eurocurrency under enterprise export contracts. The given changes decrease currency risks in the foreign trade however they entail possible increase of the export share of products to the Russian Federation in total export volume of the Republic of Belarus that increases dependence of the Republic of Belarus on the Russian Federation as the main foreign trade partner.

  20. Exchange rate regimes and shocks asymmetry: the case of the accession countries

    Czech Academy of Sciences Publication Activity Database

    Babetskii, Ian; Boone, J.; Maurel, M.

    2004-01-01

    Roč. 32, č. 2 (2004), s. 212-229 ISSN 0147-5967 Institutional research plan: CEZ:AV0Z7085904 Keywords : EU enlargement * exchange rate regimes * optimal currency area criteria Subject RIV: AH - Economics Impact factor: 0.836, year: 2004

  1. Do Exchange Rates Really Help Forecasting Commodity Prices?

    DEFF Research Database (Denmark)

    Bork, Lasse; Kaltwasser, Pablo Rovira; Sercu, Piet

    Chen et al. (2010) report that for ‘commodity currencies’, the exchange rate predicts the country’s commodity index but not vice versa. The commodity currency hypothesis is consistent with the Engle and West (2005) exchange rate model if the fundamental is chosen to be the country’s key export...... expectations, one should mostly observe contemporaneous correlations, not one-directional cross-predictability from one variable toward the other. Using three different data sets and various econometric techniques, we do find the contemporaneous correlations as predicted by the financial asset view......-averaged prices in the commodity index data that they use (price averaging induces spurious autocorrelation and predictability) and to features in their test procedures....

  2. Effect of exchange rate policy on GDP and GDP components: The Kyrgyz Republic Case

    OpenAIRE

    Fuat SEKMEN; Nurbek MADMAROV

    2018-01-01

    The choice of exchange rate regimes in the countries to take advantage of stabilization policies was quite difficult. After the breakdown of the USSR, the KR among the former member countries in the Central Asia was the first to introduce its national currency on 10th of May 1993. After that time, it has done several adjustments in the exchange rate policy to preserve the value of the som from external shocks. In the study, the effectiveness of the exchange rate policy on GDP a...

  3. Economic Integration, Currency Areas, and Macroeconomic Policy

    OpenAIRE

    Douglas D. Purvis

    1992-01-01

    In this essay I explore the implications of regional economic integration for the currency arrangements appropriate within and between regions. This topic is motivated by the recent rekindling of interest in fixed exchange rates which, in turn, has been due in part to disappointment in the performance of the flexible exchange rate system that has evolved over the past two decades, and in part to the increased regional economic integration that the world economy has witnessed in the past decad...

  4. Actual factors to determine cross-currency basis swaps: An empirical study on US dollar/Japanese yen basis swap rates from the late 1990s

    OpenAIRE

    Shinada, Naoki

    2005-01-01

    Cross-currency basis swap rates that exchange US-dollar (USD) and Japanese-yen (JPY) LIBORs have fluctuated since the late 1990s. It is increasingly important for market participants to figure out such swap rates, but there have not been many empirical studies about actual markets. This study addresses factors of USD/JPY swap rates from the late 1990s to the present, and demonstrates that differences in credit risk premiums, forward exchange rates and assets swaps of foreign investors from JP...

  5. The analysis of return on speculative trading with futures contracts of agriculture commodities in the context of the currency risk

    Directory of Open Access Journals (Sweden)

    Oldřich Šoba

    2007-01-01

    Full Text Available The paper is focused on analysis of return on speculative operations with futures contracts from the view of participators not undertaking and undertaking the currency risk. The currency risk is determined by unexpected change of relevant exchange rate (currency denomination of futures contracts / domestic currency of participator. The paper analyses the basic factors influencing the profitability of these operations such as relative change of futures contract value, leverage incidence and relative change of relevant exchange rate. The paper is focused on futures contracts of the world most important agricultural commodities. The conclusion of the paper for participators not undertaking the currency risk is following: The relative change of futures contract is main factor for the calculation of return on speculative operation. This change is multiplied by leverage incidence finally. The conclusion of the paper for participators undertaking the currency risk is following: The relative change of relevant exchange rate is not usually relevant for the calculation of return on speculative operation. Main factor is the relative change of futures contract because this change is multiplied by leverage incidence finally but the relative change of relevant exchange rate isn’t.Neverthless the conclusions of this paper are not valid only for futures contracts of agricultural commodities but generally also for other commodity futures contracts and futures contracts where underlying assets are not commodities but for example financial assets.

  6. The Dynamics of Foreign Exchange Rate Risk Management in Different Enterprises

    OpenAIRE

    Khaldoun M. Al-Qaisi

    2012-01-01

    Foreign currency exchange management is very crucial in firms with foreign deals. The objective of this research was to study the management practices in Jordanian firms of foreign exchange management and its risk on these firms. A questionnaire was used to collect data using a stratified random sample. The results show that the firms interested with foreign currency exchange management as it forms more that 50% of its deals. Most of firms indicated that they have a policy for foreign exchang...

  7. Relative Effects of the Dollar and Yen on East Asian Currency Values: Focusing on the Post-Crisis Period

    Directory of Open Access Journals (Sweden)

    Bonghan Kim

    2007-06-01

    Full Text Available This paper empirically analyzes the relative effects of the dollar and yen on the value of East Asian currencies. We focus especially on countries that have chosen to adopt floating regimes in the post-financial crisis period, such as South Korea, Taiwan, Indonesia, the Philippines and Thailand. First, we calculate a exchange rate flexibility index and carry out a regression using Frankel and Wei's (1994 methodology. The results confirm an increase in the coupling of East Asian currencies vis-a-vis the yen since the 1997 financial crisis. In addition to coupling, we calculate using a non-linear unit root test the exchange rates for four currencies vis-a-vis the yen, excluding the Philippine peso, which has a band-reverting tendency. As a second step, we examine the band-reverting tendency in more detail using the Markov-regime switching model and a three-regime threshold vector error correction model. As the results indicate, band-reverting tendencies are verifiable for all currencies, except for the Philippine peso. In particular, symmetrical band-reverting tendencies are observed whether exchange rates are beyond the upper boundary or below the lower boundary of the band. In the case of the Korean won and Taiwanese dollar, when these two currency exchange rates (measured against the yen deviate from a certain band, an adjustment process takes place in order to return toward the band.

  8. Methods of currency risk management in foreign trade

    Directory of Open Access Journals (Sweden)

    V.V. Ksendzuk

    2016-03-01

    Full Text Available Development of the country’s market national economy is closely connected with international economic relations. Therefore national business entities are actively involved in foreign trade, and their positive results influence not only on the status and income of owners, but form the economic potential of the country. The survey describes the main indicators of foreign trade and the impact of export and import transactions on economic development of Ukraine, particularly on the gross domestic income of the country. Taking into account also the negative trends in foreign currency exchange rates, the article considers the types of currency risks that accompany international transactions and identifies the limits of the usefulness of currency risk management methods. The methods of currency risk management are also systematized, the benefits of their use for the enterprise are considered and the status and readiness of Ukraine’s financial market to ensure appropriate conditions for the functioning of the currency risk management in domestic enterprises are analyzed.

  9. What Drives Bank Lending in Domestic and Foreign Currency Loans in a Small Open Transition Economy with Fixed Exchange Rate? The Case of Macedonia

    OpenAIRE

    Jane Bogoev

    2011-01-01

    This paper investigates two different bank loan supply functions and their determinants according to the currency of bank loans in the Republic of Macedonia. There is robust statistical evidence in favour of the existence of a bank lending channel through foreign currency loans and the foreign reference interest rate. This suggests that the impact of domestic monetary policy over the bank lending channel is limited. The most significant bank-specific characteristic for the foreign currency lo...

  10. 17 CFR 1.1 - Fraud in or in connection with transactions in foreign currency subject to the Commodity Exchange...

    Science.gov (United States)

    2010-04-01

    ... 17 Commodity and Securities Exchanges 1 2010-04-01 2010-04-01 false Fraud in or in connection with... Securities Exchanges COMMODITY FUTURES TRADING COMMISSION GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT Definitions § 1.1 Fraud in or in connection with transactions in foreign currency subject to the...

  11. Trade rules and exchange rate misalignments: in search for a WTO solution

    Directory of Open Access Journals (Sweden)

    Vera Thorstensen

    2014-09-01

    Full Text Available The debate on the link between trade rules and rules on exchange rates is raising the attention of experts on international trade law and economics. The main purpose of this paper is to analyze the impacts of exchange rate misalignments on tariffs as applied by the WTO - World Trade Organization. It is divided into five sections: the first one explains the methodology used to determine exchange rate misalignments and also presents its results for Brazil, U.S. and China; the second summarizes the methodology applied to calculate the impacts of exchange rate misalignments on the level of tariff protection through an exercise of "misalignment tariffication"; the third examines the effects of exchange rate variations on tariffs and their consequences for the multilateral trading system; the fourth one creates a methodology to estimate exchange rates against a currency of the World and a proposal to deal with persistent and significant misalignments related to trade rules. The conclusions are present in the last section.

  12. Market Pressure on Currencies in Crises. Shadow Exchange Rate Experience of Argentina and Switzerland 2011-2015

    Directory of Open Access Journals (Sweden)

    Marcin Gruszczyński

    2017-10-01

    Full Text Available Aim/purpose - The aim of this article is to present two cases of exchange rate controls in Switzerland and Argentina. The paper also examines the problem of presence and evaluation of shadow exchange rate in both countries. Design/methodology/approach - The shadow exchange rates are estimated using speculative pressure index concept that emphasizes the importance of not only exchange rate movements but also changes in foreign exchange reserves as well as interest rate differentials. The research sample covers Switzerland 2001-2016 and Argentina 2006-2016 (for shadow exchange rate simulation: 2011-2014 and 2011-2015, respectively. Findings - The conclusions drawn from international experience and conducted empirical analysis are positive. In both cases, shadow exchange rates were close to market rates after the removal of controls. During the restrictions periods shadow rates followed the intuition given by speculative pressure index concept (and by monetary approach, simultaneously. Research implications/limitations - The research suggests that market forces in both countries were still able to restore exchange rates to market values after the period of control. However, it is obvious that it is very difficult to prove that shadow rates were always determined by economical forces and close to their long-term equilibrium values. Originality/value/contribution - The original approach combines two important economic concepts - the idea of shadow exchange rate and the methodology of index of speculative pressure. Combined together they can help to analyze two interesting and relatively new cases of foreign exchange controls in Switzerland and Argentina. The results can be valuable for economists, researchers and politicians who support or reject the idea of controlling macroeconomic parameters in modern, open economy.

  13. Choice Of Exchange Rate Regimes For Developing Countries: Better Be Fixed Or Floating?

    OpenAIRE

    Elif O. Kan

    2011-01-01

    The following paper is a summary article about the choice of exchange rate regime for a developing country considering the importance of currency mismatches, debt intolerance, and fear of floating, financial globalization, institutions and sudden stops. In this paper, I first summarize recent researches and papers on this specific issue. In a recent work of theirs, Calvo and Mishkin(2003) argue that much of the debate on choosing an exchange rate regime misses the boat and concludes that choi...

  14. Public debt improves the stability of exchange rates in developing countries? The specific case of news European members (2004 and 2007

    Directory of Open Access Journals (Sweden)

    Thibault Cuénoud

    2011-06-01

    Full Text Available The aim of this paper is to speak about the current situation in Central and Eastern European countries (CEEC. The majority of them have been entering in European Union in 2004 and 2007. This step has been increasing their international attractiveness and improves their economic growth. However, they must stabilize exchange rate to sustain their foreign direct investment attraction. Two strategies are adopting about the regulation of exchange rate. Bulgarian, Estonia, Latvia, Lithuania Slovenia and Slovakia are entering in Exchange Rate Mechanism 2 (ERM2 to adopt quickly euro currency (it is now the case for Slovenia in 2007, Slovakia in 2009 and Estonia in 2011. Hungary, Poland, Czech Republic and Romania prefer only to stabilize their currency for the moment. Despite the strong economic dynamic of these countries before the Subprime crisis, the impact reveals the incapacity for several of them to improve currencies stabilities. The theoretical approach about Mundell-Fleming trilemma informs the necessity to scarify monetary policy in a context of free financial market and fixed exchange rate. In a reality, the capacity to use fiscal policy appears supplementary indeed more efficient.

  15. The performance of exchange rate regimes in three SADC countries: An overview

    Directory of Open Access Journals (Sweden)

    Bernard N. Iyke

    2014-08-01

    Full Text Available This paper provides an overview of the real exchange rate and economic growth dynamics in three low-income Southern African countries, namely: the Democratic Republic of Congo (DRC, Malawi and Mozambique. Specifically, the paper investigates the nature of exchange rate regimes and the impact that they have on economic growth, as well as the movement of real exchange rates and real GDP from 1970—2010 in these countries. The paper identifies the following trends: Fixed exchange regimes were pursued from the 1960s until the late 1980s and early 1990s in these countries, which were growth-repressing; the countries pursued floating and managed-floating regimes from the 1990s to date, resulting in moderate-to-rapid economic growth. We conclude that liberalised exchange rates, which lead to undervalued currencies in these Southern African countries, were growth-enhancing.

  16. THE EVOLUTION OF CURRENCY RELATIONS IN THE LIGHT OF MAJOR EXCHANGE RATE ADJUSTMENT THEORIES

    Directory of Open Access Journals (Sweden)

    Sergiy TKACH

    2014-07-01

    Full Text Available This paper examines the impact of major exchange rate adjustment theories on the global monetary system. The reasons of the previous organization forms of monetary relations collapse at the global level are defined. The main achievements and failures of major exchange rate theories are described.

  17. Ist der Euro gefährdet? Is the European currency euro put at risk?

    Directory of Open Access Journals (Sweden)

    Armin Rohde

    2012-01-01

    Full Text Available Due to high national debt in several member states of the Euro-Currency-Area which led to huge relief programmes the single European currency Euro seems to be at risk. Bur neither inflation rates nor exchange rate movements of the Euro since 1999 up to 2011 give reasons to believe that an up to now success story of the Euro will come to a sudden end in shortness. On the other hand it often had been argued that increasing national debt will inevitably lead to higher inflation rates and will endanger a currency by permanent devaluation. But the institutional and legal framework of the European monetary policy, if used correctly, will give sufficient protection against inflation pressure due to increasing national debt. The most danger for the European currency or for the European-Currency-Area can be seen in drifting apart of national competiveness between the member states of the Euro- Area, especially due to an existing lack of coordination in wage policy. Different wage policies in the member states of the Euro-Area in the past had led to different national inflation rates and had caused calculated real exchange rate movements which had lasting influence on national competiveness, which hamper international trade in the case of real appreciation or which promote international trade in the case of real depreciation..

  18. Characterization of exchange rate regimes based on scaling and correlation properties of volatility for ASEAN-5 countries

    Science.gov (United States)

    Muniandy, Sithi V.; Uning, Rosemary

    2006-11-01

    Foreign currency exchange rate policies of ASEAN member countries have undergone tremendous changes following the 1997 Asian financial crisis. In this paper, we study the fractal and long-memory characteristics in the volatility of five ASEAN founding members’ exchange rates with respect to US dollar. The impact of exchange rate policies implemented by the ASEAN-5 countries on the currency fluctuations during pre-, mid- and post-crisis are briefly discussed. The time series considered are daily price returns, absolute returns and aggregated absolute returns, each partitioned into three segments based on the crisis regimes. These time series are then modeled using fractional Gaussian noise, fractionally integrated ARFIMA (0,d,0) and generalized Cauchy process. The first two stationary models provide the description of long-range dependence through Hurst and fractional differencing parameter, respectively. Meanwhile, the generalized Cauchy process offers independent estimation of fractal dimension and long memory exponent. In comparison, among the three models we found that the generalized Cauchy process showed greater sensitivity to transition of exchange rate regimes that were implemented by ASEAN-5 countries.

  19. The adverse effect of real effective exchange rate change on trade balance in European transition countries

    Directory of Open Access Journals (Sweden)

    Selena Begović

    2017-12-01

    Full Text Available Most European transition countries have fixed or highly managed flexible exchange rate regimes. This exchange rate rigidity is sometimes argued to worsen the trade balance by keeping the currency overvalued. However, there is no unambiguous evidence that currency depreciation/devaluation positively affects trade balance and leads towards the adjustment, even in the short-run. Therefore, we examine the effect of real effective exchange rate (hereafter REER on trade balance in European transition economies over the period 2000-2015. By using fixed effect model for static and generalised method of moments for dynamic estimation, we find that there is an adverse effect of the REER on trade balance in European transition countries over the period 2000-2015. Namely, depreciation of REER deteriorates trade balance in European transition countries, which could be explained by high import dependence and low export capacity. This implies that policymakers in European transition countries should not use exchange rate policy to improve trade balance. This is important in the light of their accession towards European economic and monetary integration, implying that these countries should focus more on using fiscal, rather than monetary (and exchange rate, policy to adjust trade balance, which is one of the required real convergence towards the EU standards.

  20. The Digital Agenda of Virtual Currencies. Can BitCoin Become a Global Currency?

    OpenAIRE

    KANCS D'ARTIS; CIAIAN PAVEL; MIROSLAVA RAJCANIOVA

    2015-01-01

    This paper identifies and analyzes BitCoin features which may facilitate Bitcoin to become a global currency, as well as characteristics which may impede the use of BitCoin as a medium of exchange, a unit of account and a store of value, and compares BitCoin with standard currencies with respect to the main functions of money. Among all analyzed BitCoin features, the extreme price volatility stands out most clearly compared to standard currencies. In order to understand the reasons for such e...

  1. The digital agenda of virtual currencies: Can BitCoin become a global currency?

    OpenAIRE

    CIAIAN PAVEL; RAJCANIOVA MIROSLAVA; KANCS D'ARTIS

    2015-01-01

    This paper identifies and analyzes BitCoin features which may facilitate BitCoin to become a global currency, as well as characteristics which may impede the use of BitCoin as a medium of exchange, a unit of account and a store of value, and compares BitCoin with standard currencies with respect to the main functions of money. Among all analyzed BitCoin features, the extreme price volatility stands out most clearly compared to standard currencies. In order to understand the reasons for such e...

  2. Trade balance instability and the optimal exchange rate regime: The case of OPEC countries

    Energy Technology Data Exchange (ETDEWEB)

    Aljerrah, M.A.

    1993-01-01

    The OPEC members have experienced wide fluctuations in their trade balances. This can be attributed to several factors: (1) heavy dependence of national income and export earnings on a single primary export-oil; (2) instability of price and world demand for oil; and (3) the exchange rate regime practiced in recent years. An exchange rate policy can be used to minimize the fluctuations in trade balance, given the changes in exchange rates of major international currencies. The purpose of this study is two fold; first, examine the effects of fluctuations in trade balance on the OPEC economies, and second, propose appropriate exchange rate regime for selected OPEC members. The study is divided into two parts. The first part demonstrates the impact of trade balance changes on national income and other macroeconomic variables using a Keynesian framework. The second part involves using conventional trade models to search for the appropriate exchange rate regime to minimize the fluctuations in trade balance of each selective country. The study's findings are: first, fluctuations in trade balances had negative effects on the economics of Algeria, Kuwait, Libya, Saudi Arabia, and the United Arab Emirates. Second, the current exchange rate regime of no sample country is optimal in minimizing trade balance fluctuations. Third, in contrast to expectations, U.S. dollar peg did not stabilize the trade balance of any OPEC member. Finally, the results show that the sample OPEC economies could have enjoyed faster - though with different degree - economic growth if they had pegged their currencies to the derived optimal exchange rate regime. These optimal exchange rate regimes are: the SDR for Algeria and the United Arab Emirates, the purchasing power parity for Libya and Saudi Arabia, and the real Yen for Kuwait.

  3. Exchange rates and individual good's price misalignment: Some preliminary evidence of long-horizon predictability

    OpenAIRE

    Dong, Wei; Nam, Deokwoo

    2011-01-01

    When prices are sticky, movements in the nominal exchange rate have a direct impact on international relative prices. A relative price misalignment would trigger an adjustment in consumption and employment, and may help to predict future movements in the exchange rate. Although purchasing-power-parity fundamentals, in general, have only weak predictability, currency misalignment may be indicated by price differentials for some goods, which could then have predictive power for subsequent re-ev...

  4. Is the South African exchange rate volatile? Application of the arch framework.

    Directory of Open Access Journals (Sweden)

    Thato Julius Mokoma

    2015-04-01

    Full Text Available This study applies the autoregressive conditional heteroscedasticity (ARCH model to forecast exchange rate volatility in South Africa for the period 1990Q1 to 2014Q2. The ARCH (1 and ARCH (2 models were constructed using four variables; namely, exchange rate, gross domestic product, inflation and interest rates. Upon addressing the issue of stationarity, the models were fitted and the ARCH (1 model was found to be fit. This model revealed a high volatility of exchange rate compared to the ARCH (2 model. Prior to forecasting, the selected model was subjected to a battery of diagnostics tests and was found to be stable and well specified. The forecasts from the ARCH (1 model proved that in the near future, exchange rate will not be highly volatile though SA will experience depreciation in its currency.

  5. Soft currencies, cash economies, new monies: past and present.

    Science.gov (United States)

    Guyer, Jane I

    2012-02-14

    Current variation in the forms of money challenges economic anthropologists and historians to review theory and comparative findings on multiple currency systems. There are four main sections to the paper devoted to (i) the present continuum of hard to soft currencies as an instance of multiplicity, including discussion of different combinations of the classic four functions of money, especially the relationship between store of value and medium of exchange; (ii) the logic of anthropological inquiry into multiple currency economies; (iii) the case of the monies of Atlantic Africa, applying the analytics of exchange rates as conversions to African transactions; and (iv) the return to economic life in a present day Nigerian economy lived in soft currency and cash. The paper identifies five findings that suggest foci for future research. (i) The widespread occurrence of conversions, which bring together ranking principles within transactions. (ii) Several types of positional ranking ranging from simple stepwise ordinal scales to iconic ordinality that creates a parabolic curve of value. (iii) Fictional units of account that serve to mediate both the memorization of nonreductive transactions and their nature as conversions. (iv) The importance of the temporal reach of what constitutes wealth: over the short run, the life span, intergenerational succession, and in (legal) perpetuity (as for corporate and sovereign debts and specified assets). (v) The social niches in which these qualities are brought together in transactional regimes. In conclusion, the paper returns to the exchange function of cash, soft currencies, and new money forms.

  6. Exchange market pressure

    NARCIS (Netherlands)

    Jager, H.; Klaassen, F.; Durlauf, S.N.; Blume, L.E.

    2010-01-01

    Currencies can be under severe pressure in the foreign exchange market, but in a fixed (or managed) exchange rate regime that is not fully visible via the change in the exchange rate. Exchange market pressure (EMP) is a concept developed to nevertheless measure the pressure in such cases. This

  7. Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy

    OpenAIRE

    Paula Hernandez-Verme; Wen-Yao Wang

    2009-01-01

    We model a typical Asian-crisis-economy using dynamic general equilibrium tech-niques. Exchange rates obtain from nontrivial fiat-currencies demands. Sudden stops/bank-panics are possible, and key for evaluating the merits of alternative ex-change rate regimes. Strategic complementarities contribute to the severe indetermi-nacy of the continuum of equilibria. The scope for existence and indeterminacy of equilibria and dynamic properties are associated with the underlying policy regime. Bindin...

  8. ON CAUSES AND CONSEQUENCES OF UNPRECEDENTED RUBLE EXCHANGE GROWTH

    Directory of Open Access Journals (Sweden)

    Polyakov Egor Nikolaevich

    2013-03-01

    Full Text Available We provide an analysis of real effective exchange rate dynamics in Russia throughout the last decade. Authors analysed the causes and consequences of real effective exchange growth and assessed how Russian ruble real effective exchange rate comply with its equilibrium level. Authors present results of empiric analysis of relationship between real effective exchange rate and labour productivity in industry of 20 european, asian countries and Russia. The result of this writing was the formulation of key copyright conclusions, namely: 1. The price level in the country (and the level of the real exchange rate of the national currency is a key factor of competitiveness. Accordingly, the real exchange rate of the national currency - is one of the most important policy tools. 2. The ruble today seriously overvalued. Overvaluation of the national currency relative to the equilibrium level is extremely harmful to the economy. Less recognized, but also widespread YaV it possible to the idea that an undervalued currency is a prerequisite for rapid economic growth. 3. A direct consequence of the growth of the real exchange rate in the past 12 years has been the growth of the external debt of the private sector. 4. Restraining the growth rate of the national currency - is also a common practice for countries who are concerned about the level of competitiveness. But Russia is this day-the only country of the G-20, which is impossible to control the REER.

  9. Exporters’ exposures to currencies: Beyond the loglinear model

    NARCIS (Netherlands)

    Boudt, K.M.R.; Liu, F.; Sercu, P.

    2016-01-01

    We extend the constant-elasticity regression that is the default choice when equities' exposure to currencies is estimated. In a proper real-option-style model for the exporters' equity exposure to the foreign exchange rate, we argue, the convexity of the relationship implies that the elasticity

  10. GENERAL ASPECTS RELATED TO THE SALE AND PURCHASE OF FOREIGN CURRENCY IN THE FOREX MARKET IN MOLDOVA

    Directory of Open Access Journals (Sweden)

    Tatiana ŞEVCIUC

    2015-04-01

    Full Text Available The buying-selling currency activity is a specific kind of trade within which currency is considered to be a good. The result of this trade is a price (currency rate of exchange that depends on the demand-supply conditions existing on the market; this price may be limited from legal point of view. The purpose of this article is to define various transactions on the currency market including that of the Republic of Moldova and to single out currency transactions within foreign currency accounts of the residents and non-residents.

  11. Rethinking ASGISA and the rand exchange rate

    Directory of Open Access Journals (Sweden)

    Willem H Boshoff

    2012-05-01

    Full Text Available Abstract: The ASGISA policy document identifies the exchange rate as one of the factors constraining accelerated growth in South Africa. This note argues that currency developments do not translate into business cycle movements in the aggregate economy, and that a weaker exchange rate is less likely to boost either foreign investment or export performance in the face of regulatory uncertainty. The South African government has recently launched the Accelerated and Shared Growth Initiative (ASGISA aimed at raising the long-term growth path of the economy. The plan identifies several so-called “binding constraints” that are considered to be inhibiting the economy from rising to more elevated levels of economic growth. One such “constraint”, according to the ASGISA policy document, is the “volatility and level of the currency” (Republic of South Africa, 2006. By including this issue, policymakers have signalled that fluctuations in the Rand are considered significant to broader economic fluctuations in South Africa. This research note questions such a conviction by offering evidence that currency fluctuations are not mirrored in the South African business cycle. Nonetheless, proponents may argue that a weaker Rand will stimulate particular sectors, mostly those that are export-oriented, while it will boost Foreign Direct Investment (FDI. However, this note argues further that a weaker Rand is less likely to generate sustainable improvement in either export-oriented industries or FDI in the absence of other reforms. The following sections consider these two issues in sequence.

  12. The Nonlinear Dynamic Relationship of Exchange Rates: Parametric and Nonparametric Causality testing

    NARCIS (Netherlands)

    Bekiros, S.D.; Diks, C.

    2007-01-01

    The present study investigates the long-term linear and nonlinear causal linkages among six currencies, namely EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD. The prime motivation for choosing these exchange rates comes from the fact that they are the most liquid and widely traded, covering

  13. Currency risk management of non-financial public limited companies listed on WIG30 index

    Directory of Open Access Journals (Sweden)

    Alicja Mikołajewicz-Woźniak

    2013-12-01

    Full Text Available The objects of the study are selected aspects of currency risk management of nonfinancial public limited companies listed on WIG30 index. The estimation of net profit sensitivity to currencies exchange rates was used to determine importance of currency risk management for functioning of analyzed entities. The indication of the methods and tools used in currency risk management process became the basis for evaluation of taken actions. The determination of the relationship between hedging accounting and risk management results enabled the verification to what extent Polish companies exploit existing opportunities.

  14. The Omitted Factor in Risk Management: Corporate Foreign Debt as an Alternative to Currency Derivatives

    DEFF Research Database (Denmark)

    Aabo, Tom

    Empirical surveys on exchange rate risk management in non-financial companies focus on the use of currency derivatives while omitting the use of corporate debt denominated in foreign currency ("foreign debt") even though the latter in risk management terms is identical to one or a series of forward...

  15. Is There a ‘Mystery of Currency Exposure’? An Empirical Study of A-Share Listed Companies

    OpenAIRE

    Feixiang Chen; Li Ju

    2011-01-01

    Given companies’ dynamic responses to expected exchange rate changes, this article improves on current methods of measuring exposure to foreign exchange rate changes by breaking down the spot exchange rate changes into expected changes and unexpected changes. The currency risk exposure coefficients resulting from an empirical analysis of Shanghai Stock Exchange A share listed companies on whose reported performance foreign exchange changes have a direct impact have a high significance level, ...

  16. Four currencies outside the eurozone

    Directory of Open Access Journals (Sweden)

    Imre Vámos

    2015-12-01

    Full Text Available Purpose - In the European Union only a few countries have remained outside the eurozone. Among these countries with independent monetary policies few pursue a floating exchange rate regime: the Czech Republic, Hungary, Poland and Romania (IMF, 2013. The purpose of the paper is to examine whether there is a cointegrating relationship between the same underlying economic fundamentals and the real and nominal exchange rate of these countries against the euro. Design/methodology/approach – The quarterly data used for analysis for the period between 2000 and 2014 were provided by the Eurostat and European economy databases. After testing for unit root in the logarithmised data series Engel-Granger and Johansen tests are applied to discover the existence of longrun equilibrium relationships between the exchange rates and fundamentals explaining balance of payments equilibrium. Findings –Based on a uniform behavioural exchange rate model cointegration can only be revealed in the case of the Polish nominal exchange rate data, though simple OLS estimations indicate a strong relationship between fundamentals and exchange rates in the case of all the four countries. Research limitations/implications – The paper points out that it is difficult to prove the existence of any such relationship: making forecasts of the paths of equilibrium exchange rates is hampered by the lack of an adequate model, the short time series and the strong volatility of these currencies, especially the Hungarian forint and the Romanian leu. Another reason for the low explanatory value of various models can be frequent central bank intervention. Originality/value – As Dick et al. (2015 reveals good exchange rate estimates rely on the forecasters ability to understand the relation between fundamentals and the exchange rates mostly in times when exchange rate more strongly deviate from their PPP value. Therefore, applying more approaches for exchange rate analysis helps us

  17. THE IMPACT OF THE EXCHANGE RATE ON THE COMMERCIALS FLOWS

    Directory of Open Access Journals (Sweden)

    Mihaela IAVORSCHI

    2015-04-01

    Full Text Available The liberalization of capital movements between states and of the trade of goods and services, are one of the most important phenomena in the current world economy. The purpose of the present study, in the case of Romania, is to answer the question whether the interventions by means of the exchange rate of the national currency contributes to the fluidization and improvement of the commercial trades. The study demonstrates that the leu devaluation does not lead to a substantial increase of the exports. As a mechanism of influence of the commercials flows, the exchange rate has a short-term influence and the economy requires structural reforms, meant to stimulate the growth of the economic competitiveness.

  18. ON CAUSES AND CONSEQUENCES OF UNPRECEDENTED RUBLE EXCHANGE GROWTH

    Directory of Open Access Journals (Sweden)

    Егор Николаевич Поляков

    2013-04-01

    Full Text Available We provide an analysis of real effective exchange rate dynamics in Russia throughout the last decade. Authors analysed the causes and consequences of real effective exchange growth and assessed how Russian ruble real effective exchange rate comply with its equilibrium level. Authors present results of empiric analysis of relationship between real effective exchange rate and labour productivity in industry of 20 european, asian countries and Russia.The result of this writing was the formulation of key copyright conclusions, namely:1. The price level in the country (and the level of the real exchange rate of the national currency is a key factor of competitiveness. Accordingly, the real exchange rate of the national currency - is one of the most important policy tools.2. The ruble today seriously overvalued. Overvaluation of the national currency relative to the equilibrium level is extremely harmful to the economy. Less recognized, but also widespread YaV it possible to the idea that an undervalued currency is a prerequisite for rapid economic growth.3. A direct consequence of the growth of the real exchange rate in the past 12 years has been the growth of the external debt of the private sector.4. Restraining the growth rate of the national currency - is also a common practice for countries who are concerned about the level of competitiveness. But Russia is this day-the only country of the G-20, which is impossible to control the REER.DOI: http://dx.doi.org/10.12731/2218-7405-2013-3-4

  19. The National Bank of Ukraine Communication Strategy Optimization within the Framework of Impact on Exchange Rate Expectations of Economic Agents

    Directory of Open Access Journals (Sweden)

    Roksolana Holub

    2017-09-01

    Full Text Available An important challenge in terms of smoothing excessive exchange rate volatility under the conditions of flexible exchange rate arrangement is optimization of the communication strategy of the country’s monetary regulator. Over the past two decades, communication (information support has become an increasingly important aspect of monetary policy. Communication enables influence of the volatility of financial markets, improvement of the predictability of monetary policy, and helps to achieve macroeconomic objectives. Nevertheless, as of today, consensus on the issue into what the optimal strategy of the central bank communication is has not been reached, either in Ukraine, nor in developed countries yet. Considering the abovementioned, the methodical approaches to improve the central bank’s communication strategies, based on the use of its verbal interventions in the context of smoothing out excessive cyclical volatility of exchange rates of the national currency, are determined in this article. It is suggested to consider the growth of the factor “information signal/information noise” as a criterion of the central bank’s optimal communication strategy. It is proved that the monetary regulator’s main task should be the continual provision of information concerning a fundamentally justified level of the exchange rate and the level of deviation of the actual rate of the national currency from its fundamental-equilibrium level, as of a given time, to the national foreign exchange market participants. The methodological approach to the improvement of information support of forecasting fundamentally specified value of the national currency is outlined.

  20. Speculazione sulle valute e fluttuazzioni del dollaro. (Currency speculation and dollar fluctuations

    Directory of Open Access Journals (Sweden)

    S. SCHULMEISTER

    2013-12-01

    Full Text Available In questo studio i motivi dietro le ampie fluttuazioni del tasso di cambio del dollaro a seguito del crollo del sistema di Bretton Woods, per la maggior parte non spiegata dalle teorie prevalenti del tasso di cambio, sono esplorate. L'autore indaga il tasso di cambio tra le due valute più scambiate, il dollaro e il marco tedesco, dal 1973 al 1988. Nella prima parte, il modello dei movimenti dei tassi di cambio quotidiani viene esaminato per dimostrare che una sequenza di rialzo o al ribasso interrotto da movimenti non direzionali è tipico della dinamica dei tassi di cambio nel breve periodo. Questo modello è sistematicamente sfruttata attraverso speculazione monetaria, in particolare attraverso l'uso di "analisi tecnica". Nella seconda parte, l'autore si concentra sul medio termine, sostenendo che le fluttuazioni possono essere spiegati come il risultato di interagire squilibri dei beni e mercati delle attività. Anche se valuta la speculazione è stata sistematicamente redditizio per la maggior parte delle valute, deve essere considerata destabilizzante in quanto la sequenza delle corse dei prezzi ha causato notevoli e persistenti deviazioni dei tassi di cambio dai loro valori di equilibrio (PIL.In this study the reasons behind the wide fluctuations of the dollar exchange rate following the breakdown of the Bretton Woods system, for the most part unexplained by the prevailing exchange rate theories, are explored. The author investigates the exchange rate between the two most traded currencies, the dollar and the deutschemark, from 1973 to 1988. In the first part, the pattern of the daily exchange rate movements is examined to show that a sequence of upward and downward trends interrupted by non-directional movements is typical of exchange rate dynamics in the short run. This pattern is systemically exploited through currency speculation, particularly through the use of “technical analysis”. In the second part, the author focuses on the

  1. East Asia’s Foreign Exchange Rate Policies

    Science.gov (United States)

    2009-07-16

    At the other extreme, Japan, the Philippines, and South Korea have usually allowed their currencies to float freely in foreign exchange ( forex ...China, Indonesia, Malaysia, Singapore, Taiwan, Thailand, and Vietnam allow their currency to adjust in value in forex markets so long as the...There were also reports that Korea sold more dollars for won in early April 2008.7 At the time, some forex analysts claimed that the new South Korean

  2. Exchange Rate Policy of Bangladesh: Not Floating Does Not Mean Sinking

    OpenAIRE

    Dr Mirza Azizul Islam

    2003-01-01

    The paper analyses the current exchange rate policy of Bangladesh under various criteria and then assesses the feasibility of a floating rate regime under these various criteria. It looks at factors such as the involvement with international capital markets, share of trade with the country/countries with which the currency is pegged, and nature of shocks facing the economy, the willingness and feasibility of giving up control of its monetary policy and the level of international foreign curre...

  3. Demystifying Bitcoin: Sleight of Hand or Major GlobalCurrency Alternative?

    Directory of Open Access Journals (Sweden)

    Marko Malović

    2014-12-01

    Full Text Available Bitcoin, a peculiar crypto-currency has been the loudest buzzword in global finance over the last year or so, both for its spectacular and seemingly robust appreciation trend as well as for more recent equally ostentatious demise. After reviewing the history of bitcoin and specificities of its cyber-construct, this paper adds to the critical analysis of bitcoin as an international currency alternative. Lately, its volatility has been so excessive that it arguably cannot serve as a store of value. In addition, notwithstanding bitcoin's rising if bumpy credibility as a medium of exchange, since it has been immediately converted (by chief vendors in either of the leading world currencies upon payment due to its extraordinary exchange rate volatility, bitcoin's unit of account potential appears to be dubious too. Moreover, bitcoin's next to none correlation with other major currencies' movements renders it unsuitable for managing FX risk or hedging purposes. Finally, having in mind that it lacks formal reserves or deposit-insurance scheme to back it up yet it's also prone to hacking, bitcoin resembles and behaves more like a pyramidal investment vehicle than a global currency alternative. Nevertheless, technology that made it be may still spawn an evolution in the way we posses things, transfer ownership and pay for goods and services in the near IT-ridden future.

  4. Currencies, National Images and National Identities: Public Relations for and against Currencies – Historical Experiences from Germany, the Case of the Euro and the Role of Rating Agencies

    Directory of Open Access Journals (Sweden)

    Michael Kunczik

    2013-06-01

    Full Text Available My thesis is that, in the “age of markets” in Europe the Euro is of central importance for creating (or destroying already established structures of European identity (at least in parts of Europe – with Great Britain taking a very remote position. I emphasize the theoretical aspects (Aftalion´s Psychological Theory of Exchange Rates; Simmel: Philosophie des Geldes to emphasize the importance of PR. I concentrate on historical cases – mainly German experiences – e.g. the campaign against the Rubel; the ideas of Ivy Lee; the PR-campaigns of the Nazi-government to fight inflation. The introduction of the German Mark (“die Deutsche Mark”, which became a central aspect of German national identity, and the campaign to give up this currency (“harte Währung” in order to introduce the “weak” Euro. In this context I discuss campaigns against the Euro (“only idiots want the Euro”. In the final remarks I refer to the role of rating agencies and trust in currencies and countries. It is my thesis that the analysts of the rating agencies live in a “world of literary images” and are acting in a completely irresponsible way (but even more incompetent are the politicians accepting the ratings without knowing anything about the problem of commensuration.

  5. Exchange rate prediction with multilayer perceptron neural network using gold price as external factor

    Directory of Open Access Journals (Sweden)

    Mohammad Fathian

    2012-04-01

    Full Text Available In this paper, the problem of predicting the exchange rate time series in the foreign exchange rate market is going to be solved using a time-delayed multilayer perceptron neural network with gold price as external factor. The input for the learning phase of the artificial neural network are the exchange rate data of the last five days plus the gold price in two different currencies of the exchange rate as the external factor for helping the artificial neural network improving its forecast accuracy. The five-day delay has been chosen because of the weekly cyclic behavior of the exchange rate time series with the consideration of two holidays in a week. The result of forecasts are then compared with using the multilayer peceptron neural network without gold price external factor by two most important evaluation techniques in the literature of exchange rate prediction. For the experimental analysis phase, the data of three important exchange rates of EUR/USD, GBP/USD, and USD/JPY are used.

  6. Cracks in the crystal ball : What happens to firms’ foreign exchange rate exposure when forecasters don’t agree about the future

    NARCIS (Netherlands)

    A. Muller (Aline); J. Poncelet (Julien); W.F.C. Verschoor (Willem); R.C.J. Zwinkels (Remco)

    2013-01-01

    textabstractThe central issue of this paper is whether stock prices are exposed to total exchange rate movements – as traditionally measured – or to revisions in expected future exchange rate movements and unanticipated currency shocks, and by how much of each. Based on a sample of 1675 U.S. firms

  7. Who Pulls the Trigger? Evidence on Corporate Currency Speculation

    DEFF Research Database (Denmark)

    Aabo, Tom; Hansen, Marianna Andryeyeva; Pantzalis, Christos

    This empirical study of non-financial firms is based on a survey of 186 medium-sized, non-financial Danish firms with operating revenues and/or costs in foreign currency. We find that the involvement of non-finance departments in the management of exchange rate risks has a positive impact...

  8. An Optimal Commitment Model of Exchange Rate Stabilization

    OpenAIRE

    Kyung-Soo Kim

    2006-01-01

    Recently East Asian countries that have amassed large US dollar reserves face a growing threat of big losses from a sudden decline in the dollar. This threat evokes an issue of the optimal commitment of exchange rate stabilization once raised by Isard (1995) who interpreted the cost of breaking the parity as the capital gain awarded to speculators, in the event the domestic currency is devalued. The only difference in this paper is revaluation. This paper models the central bank��s optima...

  9. Equilibrium exchange rate assessment in Serbia using the IMF external sustainability approach

    Directory of Open Access Journals (Sweden)

    Pažun Brankica

    2014-01-01

    Full Text Available The exchange rate has always been a topical issue, particularly in the last two decades, at the time of strong world economy globalisation, as well as liberalization of international flows of goods, services and factors of production, which has resulted in stronger trade and financial integration. There has been a rise in the share of trade in world GDP. Growing developing countries contribute significantly to this growth, which is evident from the data that show increase of their share in world trade , as well as their importance in international capital flows. One of the most important concepts in open macroeconomics is the equilibrium real exchange rate - ERER. Deviations of the real exchange rate are considered to be the cause of the loss of competitiveness and economic slowdown, as well as possible currency crisis (overvaluation and undervaluation. Disadvantages of traditional concepts in exchange rate assessment which are very often reflected in unsuccessful empirical results, motivate experts to seek alternative models to assist in equilibrium exchange rate analysis. This paper aims to present one of three complementary methodologies used by the International Monetary Fund, for the equilibrium real exchange rate assessment in Serbia, as well as the deviation of the real exchange rate from its (estimated equilibrium, that is external sustainability approach.

  10. Döviz Kuru Riski Yönetimi: Türkiye Tütün Endüstrisi Örneği (Exchange Rate Risk Management: The Case Of Turkish Tobacco Industry

    Directory of Open Access Journals (Sweden)

    Murat DOĞANAY

    2016-03-01

    Full Text Available The exchange rate movements, along with globalization, have become more important not only for financial institutions but also for real sector companies. Also exchange rate risk is important for non-financial companies regards to both assets and liabilities. Management of this exchange rate risk exposure has an impact on competitiveness of these companies. This paper reviews the impact level of exchange rate movements, determination of the structure of exchange rate risk position on the basis of currency and also determination of the approaches to exchange rate risk management in the tobacco industry which has very high concentration level. It’s found that the firms want to hedge against the exchange rate risk particularly in the export transactions. A significant number of firms don’t use exchange rate risk management systematically. The firms prefer operational hedging much more than financial hedging. The primarily reasons of not using financial tools in the exchange rate risk management are the presence of import transactions and the expectation of exchange rate increase. Finally, it’s concluded that the firms use foreign currency loans as a tool for exchange rate risk management in order to balance their exchange rate risk position.

  11. Currency risk and prices of oil and petroleum products: a simulation with a quantitative model

    International Nuclear Information System (INIS)

    Aniasi, L.; Ottavi, D.; Rubino, E.; Saracino, A.

    1992-01-01

    This paper analyzes the relationship between the exchange rates of the US Dollar against the four major European currencies and the prices of oil and its main products in those countries. In fact, the sensitivity of the prices to the exchange rate movements is of fundamental importance for the refining and distribution industries of importing countries. The result of the analysis shows that in neither free market conditions, as those present in Great Britain, France and Germany, nor in regulated markets, i.e. the italian one, do the variations of petroleum product prices fully absorb the variation of the exchange rates. In order to assess the above relationship, we first tested the order of co-integration of the time series of exchange rates of EMS currencies with those of international prices of oil and its derivative products; then we used a transfer-function model to reproduce the quantitative relationships between those variables. Using these results, we then reproduced domestic price functions with partial adjustment mechanisms. Finally, we used the above model to run a simulation of the deviation from the steady-state pattern caused by exchange-rate exogenous shocks. 21 refs., 5 figs., 3 tabs

  12. VaR: Exchange Rate Risk and Jump Risk

    Directory of Open Access Journals (Sweden)

    Fen-Ying Chen

    2010-01-01

    Full Text Available Incorporating the Poisson jumps and exchange rate risk, this paper provides an analytical VaR to manage market risk of international portfolios over the subprime mortgage crisis. There are some properties in the model. First, different from past studies in portfolios valued only in one currency, this model considers portfolios not only with jumps but also with exchange rate risk, that is vital for investors in highly integrated global financial markets. Second, in general, the analytical VaR solution is more accurate than historical simulations in terms of backtesting and Christoffersen's independence test (1998 for small portfolios and large portfolios. In other words, the proposed model is reliable not only for a portfolio on specific stocks but also for a large portfolio. Third, the model can be regarded as the extension of that of Kupiec (1999 and Chen and Liao (2009.

  13. Customs unions, currency crises, and monetary policy coordination: The case of the Eurasian Economic Union

    Directory of Open Access Journals (Sweden)

    Evgeny Vinokurov

    2017-09-01

    Full Text Available After achieving substantial progress in establishing a common customs territory and regulations, customs unions face potential disruptions due to a lack of monetary policy coordination. These disruptions might appear in the form of currency shocks and the ensuing trade conflicts. We approach this issue by looking at the case of the Eurasian Economic Union (EAEU. The volatility of national currencies in 2014–2015 resulted in sizable shifts in competitiveness, culminating in a currency crisis in some member states. This raises the questions of how to gradually achieve a more coordinated monetary policy, what monetary policy options are available, and what would be their relative impact on macroeconomic stability. Using a set of modeling tools and econometric models, we review three monetary regimes, which represent moves from fully independent exchange rate policy through increased policy coordination to joint exchange rate setting.

  14. Quantitative analysis of potential currency crisis in the Republic of Serbia

    Directory of Open Access Journals (Sweden)

    Rađenović Žarko

    2015-01-01

    Full Text Available The subject of this paper is theoretical and empirical analysis of potential currency crisis in the Republic of Serbia. The main aim of the paper is quantitative analysis of a set of key indicators (index of exchange market pressure, signal-to-noise ratio, misery index, a measure of openness and the monetary measure of openness of the country that indicate the possibility of a currency crisis. The cyclic character of currency and financial crisis is forcing policymakers to conduct thoughtful exchange rate policy. The aim of this is to prevent the scenario with which the countries of Latin America faced in the late 20th century. Although there is no a significant correlation in terms of international trade transactions between Serbia and the countries of Latin America, we should certainly learn from the experience of these countries. It is necessary to continuously monitor the value of indicators which point to possible distortion. In the paper we use some econometric and statistical tools, such as correlation and regression analysis, to point to the values of indicators which can contribute to early detection of a currency crisis.

  15. The Convergence Criteria and the SAARC Common Currency

    Directory of Open Access Journals (Sweden)

    Farooq Rasheed

    2007-10-01

    Full Text Available These included cross-country standard deviations of call money rates, consumer price indices, real exchange rates, growth rates of foreign exchange reserves, growth rates of real volume of trade, growth rate of real relative volume of trade and the growth rates of real per capita GDP. None of the selected variables show signs for convergence of over the whole period of 1990s through 2000s. However, for the period of 2000s most of the economic indicators show signs of convergence. This suggests emerging signs for the prospects of common currency in SAARC region. The study, however, concludes that non-economic factors must also be considered seriously before making a serious move towards monetary union in the region.

  16. Gold, currencies and market efficiency

    Science.gov (United States)

    Kristoufek, Ladislav; Vosvrda, Miloslav

    2016-05-01

    Gold and currency markets form a unique pair with specific interactions and dynamics. We focus on the efficiency ranking of gold markets with respect to the currency of purchase. By utilizing the Efficiency Index (EI) based on fractal dimension, approximate entropy and long-term memory on a wide portfolio of 142 gold price series for different currencies, we construct the efficiency ranking based on the extended EI methodology we provide. Rather unexpected results are uncovered as the gold prices in major currencies lay among the least efficient ones whereas very minor currencies are among the most efficient ones. We argue that such counterintuitive results can be partly attributed to a unique period of examination (2011-2014) characteristic by quantitative easing and rather unorthodox monetary policies together with the investigated illegal collusion of major foreign exchange market participants, as well as some other factors discussed in some detail.

  17. Long-term dependence in exchange rates

    Directory of Open Access Journals (Sweden)

    A. Karytinos

    2000-01-01

    Full Text Available The extent to which exchange rates of four major currencies against the Greek Drachma exhibit long-term dependence is investigated using a R/S analysis testing framework. We show that both classic R/S analysis and the modified R/S statistic if enhanced by bootstrapping techniques can be proven very reliable tools to this end. Our findings support persistence and long-term dependence with non-periodic cycles for the Deutsche Mark and the French Franc series. In addition a noisy chaos explanation is favored over fractional Brownian motion. On the contrary, the US Dollar and British Pound were found to exhibit a much more random behavior and lack of any long-term structure.

  18. Usage of Option Contracts for Foreign Exchange Risk Management

    Directory of Open Access Journals (Sweden)

    Daniel Armeanu

    2007-06-01

    Full Text Available Today in Romania, in the context of the liberalization of the capital account and under a floating exchange rate (official is a managed floating currency regime established by National Bank of Romania the foreign exchange rate is very volatile. In consequence the financial institutions, corporations and, especially, the importers and exporters have to deal with a big exposition of currency risk related with their activities. Financial institutions and corporations today must adopt new roles in order to compete successfully in the explosively evolving foreign exchange markets. The methods, instruments and techniques used to manage foreign exchange risk are more complex than ever before. The objective of our paper is to provide the techniques and insights needed to pinpoint opportunities and control risks. We will present the most modern practical methods for managing the currency risk: option strategies (spread, strangle, straddle, etc. Also we will present the advantage, the disadvantage and our opinions related with the use of currency derivatives instruments (especially currency strategies options, making a comparative analysis.

  19. 19 CFR 159.36 - Multiple certified rates.

    Science.gov (United States)

    2010-04-01

    ... multiple rates have been certified for a foreign currency, the rate to be used for Customs purposes shall... TREASURY (CONTINUED) LIQUIDATION OF DUTIES Conversion of Foreign Currency § 159.36 Multiple certified rates... rates of exchange (e.g., official and free) for a foreign currency: (a) Rates to be published. When the...

  20. The theory of an ‘optimum currency area’

    Directory of Open Access Journals (Sweden)

    Jarosław Kundera

    2012-12-01

    Full Text Available The main goal of this paper is to analyse and distinguish the main components of the theory of an ‘Optimum Currency Area’. The theory of an optimum currency area indicates some essential elements as preconditions for the successful introduction of a common currency: high mobility of labour, openness of the economy defined as a high proportion of tradable to non-tradable goods, and high diversification of domestic production before joining the union. The article’s analysis helps to better understanding the reasons of the current crisis in the euro zone. The main problem with a common currency area is the adjustment to imbalances, which cannot take place through exchange rates in conditions of a common currency. The missing elements of the theory are the role of the mobility of capital to correct interregional balance of payments disequilibria and lack of a common budget with sufficient own resources during the occurrence of debt crises in member countries. The theory of an optimum currency area has noticed the importance of coordination between fiscal and monetary policy and the necessity of redistribution of resources among partners. However, it does not say much about the methods applied, how to deal with debt crises and what the cost of a potential breaking up of monetary union would be.

  1. THE EFFECT OF EXCHANGE RATE ON THE CONSTRUCTION PROJECTS AND PROTECTION METHODS

    Directory of Open Access Journals (Sweden)

    Handan AKSUYEK,

    2017-02-01

    Full Text Available As with all sectors, recent extreme changes occurred in the exchange rates have substantially affected the construction operations. While the rise in foreign exchange rates leads to harmful effects in the negative direction at the operations having foreign exchange – based debt or it provides also advantageous effect in the positive direction at the construction companies having foreign exchange – indexed investments. In this context, this sudden change in foreign exchange rates which cannot be predicted beforehand and emerges as a result of speculative events. As with all operations carrying out foreign exchange – based tasks, these fluctuations in the foreign exchange rate head first among the factors which affect the achievement or failure of the cost or profit targets previously determined by the construction companies as well. Therefore, the companies whose costs and profits consist of different units of currency in their construction agreements should apply to the hedging methods in order to be protected against the exchange rate. As for the main tools of protection method are the derivative products such as forward, futures, swap and optional contracts. In this study, the effect of exchange rate fluctuations on the completion costs of construction projects is scrutinized. Moreover, the tools which may be employed by the construction companies in order to get rid of exchange rate which adversely influence the building companies in both directions have been comparatively evaluated.

  2. Asymmetric cointegration between exchange rate and trade balance in Nigeria

    Directory of Open Access Journals (Sweden)

    Alhaji Jibrilla Aliyu

    2015-12-01

    Full Text Available This paper empirically examines the long-run pass through of the official exchange rates into trade balance in Nigeria by means of threshold cointegration and asymmetric error correction modeling. The study provides evidence for non-linear cointegration between our variables of interest. The estimated asymmetric error correction models provide new evidence for slower transmission of exchange rate depreciations into the country’s trade balance, which in turn appears to offer partial support for the Dutch disease hypothesis. This finding suggests that policy-makers cannot hope to use currency devaluation to improve the trade balance. It is recommended that policy-makers focus attention on diversification of the economy away from dependence on crude oil exports into productive manufacturing and non-oil exports, which will be vital in making the economy more competitive.

  3. Coexistence of several currencies in presence of increasing returns to adoption

    Science.gov (United States)

    Lamarche-Perrin, Alex; Orléan, André; Jensen, Pablo

    2018-04-01

    We present a simplistic model of the competition between different currencies. Each individual is free to choose the currency that minimizes his transaction costs, which arise whenever his exchanging relations have chosen a different currency. We show that competition between currencies does not necessarily converge to the emergence of a single currency. For large systems, we prove that two distinct communities using different currencies in the initial state will remain forever in this fractionalized state.

  4. Polish Toxic Currency Options

    Directory of Open Access Journals (Sweden)

    Waldemar Gontarski

    2009-06-01

    Full Text Available Toxic currency options are defined on the basis of the opposition to the nature (essence of an option contract, which is justified in terms of norms founded on the general law clause of characteristics (nature of a relation (which represents an independent premise for imposing restrictions on the freedom of contracts. So-understood toxic currency options are unlawful. Indeed they contravene iuris cogentis regulations. These include for instance option contracts, which are concluded with a bank, if the bank has not informed about option risk before concluding the contract; or the barrier options, which focus only on the protection of bank’s interests. Therefore, such options may appear to be invalid. Therefore, performing contracts for toxic currency options may be qualified as a criminal mismanagement. For the sake of security, the manager should then take into consideration filing a claim for stating invalidity (which can be made in a court verdict. At the same time, if the supervisory board member in a commercial company, who can also be a subject to mismanagement offences, commits an omission involving lack of reaction (for example, if he/she fails to notify of the suspected offence committed by the management board members acting to the company’s detriment when the management board makes the company conclude option contracts which are charged with absolute invalidity the supervisory board member so acting may be considered to act to the company’s detriment. In the most recent Polish jurisprudence and judicature the standard of a “good host” is treated to be the last resort for determining whether the manager’s powers resulting from criminal regulations were performed. The manager of the exporter should not, as a rule, issue any options. Issuing options always means assuming an obligation. In the case of currency put options it is an absolute obligation to purchase a given amount in euro at exchange rate set in advance. On the

  5. The Technical Analysis of the Impact of Circuit of Financial Capital on the Currency Stability in Ukraine

    Directory of Open Access Journals (Sweden)

    Iaroshevska Oksana V.

    2018-01-01

    Full Text Available The relevance of the article’s topic is determined by the aggravation of the monetary and financial crisis in Ukraine and the need to overcome imbalances arising from the complications of circuit of financial capital and its involvement by economic entities. The article is aimed at researching on the basis of technical analysis the influence of exchange rate factor on the formation of capital in the country. The general and distinctive features of technical and fundamental analysis of currency markets are defined. It is shown that despite the difference of views, technical analysis is an integral stage of forecasting the exchange rate. The main scientific result of the article is substantiating the temporary lags of fractals, which explain the change in the dynamics of the exchange rate and their impact on the circuit of financial capital. It has been proved that the systemic crisis in the currency market of Ukraine arose during 2012–2014, with its peak at the end of the specified period. To stop devaluation processes and to provide measures on regulation of the foreign exchange market it has been proposed to soften the conditions of doing business, to improve the methodology of quantitative and qualitative forecasting of the NBU exchange rates, to form system of foreign exchange risk insurance instruments, to increase international reserves to a secure level, etc. Prospect for further research is determining the impact of currency fluctuations on the financial performance of the use of capital of Ukrainian economic entities.

  6. Bacterial Contamination of Iranian Paper Currency and Their Antibiotic Resistance Patterns

    Directory of Open Access Journals (Sweden)

    Farzaneh Firoozeh

    2017-11-01

    Full Text Available Background: Paper currency is used in exchange for services, and thisis why the circulation of paper currency from person to person expandsmicroorganisms. Objectives:: Paper banknotes would be a vector for transmission of pathogenic microorganisms through handling. This study aimed to determine bacterial contamination of Iranian paper currencies in circulation and their antibiotic resistance patterns. Materials and Methods: In this study, 337 currency notes of different value were collected from markets, shops, restaurants, bus stations and banks in Kashan, Iran during April 2015 to March 2016. The currency notes transferred to microbiology laboratory and were tested for bacterial contamination using standard microbiological methods. Antibiotic resistance patterns of isolated bacteria were determined by disk diffusion method according to CLSI standards. The results and data were analyzed using descriptive statistics. Results: Of 337 currency notes, 262 (77.7% were identified with bacterial contamination. Bacteria isolated from currency notes were as follows: Bacillus spp 113 (43.1%, coagulase-negative Staphylococci 99 (37.7%, Escherichia coli 20 (7.6%, Enterococci species 14 (5.3%, Staphylococcus aureus 8 (3.1%, Klebsiella spp 4 (1.5%, Shigella species 2 (0.8%, Pseudomonas species 2 (0.8%. The most and least contaminated currency notes were 50000 and 500 Rials, respectively. The most resistance rates in gram negative rods were against nalidixicacid, and ampicillin. Also most resistance rates in Staphylococcus aureus, coagulase-negative Staphylococci and Enterococci species were against ampicillin, erythromycin and tetracycline. Conclusion: Our study revealed that the bacterial contamination among Iranian paper currency in circulation especially those obtained from certain sources including shops and bus stations is high and in most cases these bacterial isolates are antibiotic resistant strains.

  7. Foreign currency-related translation complexities in cross-border healthcare applications.

    Science.gov (United States)

    Kumar, Anand; Rodrigues, Jean M

    2009-01-01

    International cross-border private hospital chains need to apply the standards for foreign currency translation in order to consolidate the balance sheet and income statements. This not only exposes such chains to exchange rate fluctuations in different ways, but also creates added requirements for enterprise-level IT systems especially when they produce parameters which are used to measure the financial and operational performance of the foreign subsidiary or the parent hospital. Such systems would need to come to terms with the complexities involved in such currency-related translations in order to provide the correct data for performance benchmarking.

  8. Currency crises and the interest rate defence

    NARCIS (Netherlands)

    Daniëls, T.

    2008-01-01

    While virtually all modern models of exchange rate crises recognise that the decision to abandon an exchange rate peg depends on how harshly policy makers are willing to defend the regime, they virtually never model how the exchange rate is defended. We argue that incorporating both the mechanics of

  9. Foreign currency rate forecasting using neural networks

    Science.gov (United States)

    Pandya, Abhijit S.; Kondo, Tadashi; Talati, Amit; Jayadevappa, Suryaprasad

    2000-03-01

    Neural networks are increasingly being used as a forecasting tool in many forecasting problems. This paper discusses the application of neural networks in predicting daily foreign exchange rates between the USD, GBP as well as DEM. We approach the problem from a time-series analysis framework - where future exchange rates are forecasted solely using past exchange rates. This relies on the belief that the past prices and future prices are very close related, and interdependent. We present the result of training a neural network with historical USD-GBP data. The methodology used in explained, as well as the training process. We discuss the selection of inputs to the network, and present a comparison of using the actual exchange rates and the exchange rate differences as inputs. Price and rate differences are the preferred way of training neural network in financial applications. Results of both approaches are present together for comparison. We show that the network is able to learn the trends in the exchange rate movements correctly, and present the results of the prediction over several periods of time.

  10. Effects of Current Forward Market Intervention in the Korean Currency Crisis

    Directory of Open Access Journals (Sweden)

    Woosik Moon

    2001-06-01

    Full Text Available This paper investigates the effect of the exchange market interventions of the Bank of Korea on the exchange rate of Korean won vis-a-vis US dollar during the 1997 currency crisis. In particular, this paper tests the effects of spot and forward market interventions, using daily intervention data of the Bank of Korea. During the 1997 period, Korea faced two series of crisis in January-March and September-November. It turns out that the spot market intervention was effective in stabilizing the spot market exchange rate at least during the first crisis period. In contrast, there seemed no effect of the forward market intervention. Forward market intervention was rather destabilizing through forward exchange rate during the second crisis period. This implies that even though the forward and sterilized spot market interventions are equivalent in their effect on exchange rate, these two instruments can widely diverge from each other under the circumstances of exchange rate volatility and speculation.

  11. Definition-consistent measurement of exchange market pressure

    NARCIS (Netherlands)

    Klaassen, F.; Jager, H.

    2011-01-01

    Currencies can be under severe pressure, but in a managed exchange rate regime that is not fully visible via the change in the exchange rate. The literature has proposed a way to measure such exchange market pressure (EMP) indirectly, by adding interest rate changes and forex interventions to the

  12. Currency crises with the threat of an interest rate defence

    NARCIS (Netherlands)

    Daniels, T.R.; Jager, H.; Klaassen, F.

    2011-01-01

    While virtually all currency crisis models recognise that the decision to abandon a peg depends on how tenaciously policy makers defend it, this is seldom modelled explicitly. We add the threat of an interest rate defence to the global game model of Morris and Shin (American Economic Review 88,

  13. From the currency rate quotations onto strings and brane world scenarios

    Science.gov (United States)

    Horváth, D.; Pincak, R.

    2012-11-01

    In the paper, we study the projections of the real exchange rate dynamics onto the string-like topology. Our approach is inspired by the contemporary movements in the string theory. The string map of data is defined here by the boundary conditions, characteristic length, real valued and the method of redistribution of information. As a practical matter, this map represents the detrending and data standardization procedure. We introduced maps onto 1-end-point and 2-end-point open strings that satisfy the Dirichlet and Neumann boundary conditions. The questions of the choice of extra-dimensions, symmetries, duality and ways to the partial compactification are discussed. Subsequently, we pass to higher dimensional and more complex objects. The 2D-Brane was suggested which incorporated bid-ask spreads. Polarization by the spread was considered which admitted analyzing arbitrage opportunities on the market where transaction costs are taken into account. The model of the rotating string which naturally yields calculation of angular momentum is suitable for tracking of several currency pairs. The systematic way which allows one suggest more structured maps suitable for a simultaneous study of several currency pairs was analyzed by means of the Gâteaux generalized differential calculus. The effect of the string and brane maps on test data was studied by comparing their mean statistical characteristics. The study revealed notable differences between topologies. We review the dependence on the characteristic string length, mean fluctuations and properties of the intra-string statistics. The study explores the coupling of the string amplitude and volatility. The possible utilizations of the string theory approach in financial markets are slight.

  14. Currency Risk and Imperfect Knowledge: Volatility and Long Swings around Benchmark Values

    OpenAIRE

    Josh Stillwagon

    2013-01-01

    This study tests several models of the currency risk premium, but does so using survey data on traders' forecasts to directly measure the expected excess return. Among those tested are UIP, CAPM, and the Imperfect Knowledge Economics (IKE) gap model, which respectively imply that the premium is zero, related to the variance of the exchange rate, and related to the deviation between the exchange rate and its benchmark value of Purchasing Power Parity (PPP). The main result is that the p-value ...

  15. Forecasting of Currency Crises in East Asia

    Directory of Open Access Journals (Sweden)

    Chi-Young Song

    2005-06-01

    Full Text Available In this paper, we have developed a forecasting system for currency crisis in East Asia based on a signaling approach. Our system uses 15 monthly indicators of five East Asian countries including Indonesia, Korea, Malaysia, the Philippines and Thailand that were severely hit by the currency crisis in 1997. We investigate the performance of the system through deploying out-of-sample forecasting for the periods both before and after the 1997 East Asian currency crisis. Unlike the existing research based on the signaling approach, our out-of-sample forecasting does not fix the in-sample period. The out-of-sample forecasting between July 1995 and June 1997 shows that prior to breakout of the crisis, several indicators including real exchange rates and exports sent frequent warnings to all crisis-hit East Asian countries except the Philippines. This may indicate that a signaling-based early warning system for currency crisis could have been an useful method of forecasting the East Asian crisis. On the other hand, we also find that our forecasting system often generates warning signals during the out-of-sample period between July 1999 and June 2001. Since we have not observed any currency crisis in this region after 1998, these are all false alarms, indicating that our system may be seriously exposed to the type II error. We can, however, mitigate this problem if we adjust the optimal critical values of indicators depending on the preferences of forecasting system manager.

  16. The Economic Value of Fundamental and Technical Information in Emerging Currency Markets

    NARCIS (Netherlands)

    G.J. de Zwart (Gerben); T.D. Markwat (Thijs); L.A.P. Swinkels (Laurens); D.J.C. van Dijk (Dick)

    2007-01-01

    textabstractWe measure the economic value of information derived from macroeconomic variables and from technical trading rules for emerging markets currency investments. Our analysis is based on a sample of 21 emerging markets with a floating exchange rate regime over the period 1997-2007 and

  17. Do populismo às bandas cambiais: a evolução da política cambial no Chile de 1970 a 1999 From populism to exchange rate bands: the evolution of exchange rate policy in Chile from 1970 to 1999

    Directory of Open Access Journals (Sweden)

    Patrícia Helena F. Cunha

    2009-09-01

    Full Text Available We discuss in this paper the evolution of exchange rate policy in Chile since the seventies, with special attention to overvaluation and undervaluation cycles. Following a recent literature that argues in favor of competitive currencies as part of a development strategy, we argue that the Chilean exchange rate policy in the years that go from 1984 until 1999 were very important to its growth results. Chile even managed to go through the nineties without a major external crisis, especially when compared to its Latin American neighbors. We argue here that the exchange rate crawling band adopted in the middle eighties and nineties was important for its growth strategy.

  18. PARTICULARITIES REGARDING THE REFLECTION OF FOREIGN CURRENCY TRANSACTIONS IN FINANCIAL STATEMENTS

    Directory of Open Access Journals (Sweden)

    Ionela Cristina Breahna Pravat

    2014-07-01

    Full Text Available The structure and the constituent parts of financial statements are regulated at a national level, mainly by Accounting regulations compliant with European Directives ̶ O.M.P.F. no. 3055/2009, but also by Accounting regulations compliant with International Financial Reporting Standards applied by the trading companies whose securities are rated on a regulated capital market ̶ O.M.P.F. no. 1286/2012. From this latter point of view, an important role is played by IAS 1 “Presentation of Financial Statements”, respectively IAS 21 “The Effects of Changes in Foreign Exchange Rates”. Therefore, this study aims to describe a series of theoretical and practical aspects regarding the particularities of presenting elements generated by foreign currency transactions in financial statements, which are prepared in compliance with the Romanian accounting regulations ̶ balance sheet, profit and loss account, cash flow statement, statement of changes in equity, explanatory notes. The paper also approaches the effect of changes in foreign exchange rates, respectively the accounting recognition of exchange differences, which are specific to different foreign currency operations, according to national regulations (and implicitly, to European Directives, but also according to international regulations (IFRS.

  19. Exchange rates, market efficiency and purchasing power parity: Long-run tests for the Latin American currencies

    OpenAIRE

    Edgar Ortiz; Alejandra Cabello; Raúl de Jesús; Robert Johnson

    2005-01-01

    In efficient markets current prices reflect all available information. Past prices do not contain any useful information for predicting future prices or for realizing extraordinary gains. This principle, known as the weak hypothesis of informational market efficiency, has been incorporated into Purchasing Power Parity (PPP) theory to overcome its limitations in the intertemporal analysis of exchange rate adjustments to inflationary trends. Overall, recent studies dealing with exchange rates f...

  20. Negative Nominal Interest Rates: Three ways to overcome the zero lower bound

    OpenAIRE

    Willem H. Buiter

    2009-01-01

    The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying negative interest on currency by taxing currency; and (3) decoupling the numéraire from the currency/medium of exchange/means of payment and introducing an exchange rate between the numéraire and the curr...

  1. Importance of the Debt-Adjusted Real Exchange Rate in the Eurozone and V4

    Directory of Open Access Journals (Sweden)

    Patrik Abrahámek

    2017-01-01

    Full Text Available The purpose of this paper is to determine a potential overvaluation and undervaluation of currencies of selected eurozone countries and of the Visegrád Four. The DARER (Debt-Adjusted Real Exchange Rate model was used for an empirical analysis of the period between 2010–2014 in individual quarters. The advantage of this model is that it explicitly takes into consideration the development of the current account and the debt of the country in connection with the theory of purchasing power parity. The DARER model appears to be a suitable tool for the empirical analysis because, currently, there are many countries in the eurozone with a high debt. In the analysis, data on the current account, debt service payments, GDP, HICP USA and individual researched countries, the exchange rates EUR/USD and CZK/USD, PLN/USD, HUF/USD were used. According to the average overvaluation and undervaluation of currency in all observed states in the Eurozone, in total the overvaluation of the euro against the US dollar was 19.3 %. The overvaluation in individual countries varied from 6.3 % to 33.38 %. These differences in the overvaluation of states’ currency against the US dollar were caused mainly by different development of the balance of payments of the country and the country’s debt. This can indicate various levels of external imbalances among the states within the monetary union. According to the result of this research, the DARER model was able to identify varying overvaluation and undervaluation of currencies in individual eurozone states and the Visegrád Group, so it can be used by policy makers as one of the indicators of these external imbalances of individual countries in the monetary union.

  2. The impact of black market exchange rate on the demand for money Case of Algeria during 1980-2010 : Econometric study

    Directory of Open Access Journals (Sweden)

    Ali BENDOB

    2014-06-01

    Full Text Available The main objective of this study is to analyze the relationship between the exchange rate and the parallel circulation of money (M1 in Algeria during the period 1980-2010. For this purpose, we use the proposed especially by Pesaran et al ARDL model. (2001. the results confirm the convergence of long-term determinants of the demand for money (income, consumption price index, interest rate deposits, the parallel exchange rate. In addition, the CUSUM test and CUSUMSQ clearly show the stability of the long-term relationship during the estimation period between the parallel exchange rate and demand for the currency in Algeria. Instead, the relationship becomes unstable once we use the official exchange rate.

  3. Assessing Drawdown-at-Risk in Brazilian Real Foreign Exchange Rates

    Directory of Open Access Journals (Sweden)

    Vinicius Ratton Brandi

    2004-12-01

    Full Text Available The investigation of the stochastic behavior of financial series has become widespread over the literature. There is empirical and theoretical evidence that the total stock price change over a long period is usually concentrated in the a few hectic runs of trading days. The drawdown is a random variable which provides information on alternative characteristics of market behavior during these periods. In this work, we use distributions from extreme value theory to model the severity of drawdowns and drawups. We illustrate using nine currency exchange rates and gold.

  4. What shakes the FX tree? Understanding currency dominance, dependence, and dynamics (Keynote Address)

    Science.gov (United States)

    Johnson, Neil F.; McDonald, Mark; Suleman, Omer; Williams, Stacy; Howison, Sam

    2005-05-01

    There is intense interest in understanding the stochastic and dynamical properties of the global Foreign Exchange (FX) market, whose daily transactions exceed one trillion US dollars. This is a formidable task since the FX market is characterized by a web of fluctuating exchange rates, with subtle inter-dependencies which may change in time. In practice, traders talk of particular currencies being 'in play' during a particular period of time -- yet there is no established machinery for detecting such important information. Here we apply the construction of Minimum Spanning Trees (MSTs) to the FX market, and show that the MST can capture important features of the global FX dynamics. Moreover, we show that the MST can help identify momentarily dominant and dependent currencies.

  5. What currency do bumble bees maximize?

    Directory of Open Access Journals (Sweden)

    Nicholas L Charlton

    2010-08-01

    Full Text Available In modelling bumble bee foraging, net rate of energetic intake has been suggested as the appropriate currency. The foraging behaviour of honey bees is better predicted by using efficiency, the ratio of energetic gain to expenditure, as the currency. We re-analyse several studies of bumble bee foraging and show that efficiency is as good a currency as net rate in terms of predicting behaviour. We suggest that future studies of the foraging of bumble bees should be designed to distinguish between net rate and efficiency maximizing behaviour in an attempt to discover which is the more appropriate currency.

  6. Exchange rate policy, growth, and foreign trade in China

    Directory of Open Access Journals (Sweden)

    Gligorić Mirjana

    2011-01-01

    Full Text Available This paper analyzes a hot topic: the influence of an undervalued currency on macroeconomic variables - primarily on the economic growth and trade balance of a country, but also on employment, foreign exchange reserves, competition, and living standards. It also reviews and explains the consequences of yuan undervaluation, points out the need for its appreciation, and states the negative effects that stem from this measure. Special attention is given to the problematic bilateral relations between China and the USA and the reasons why Americans are worried about the exchange rate policy that China implements. Although yuan appreciation would decrease the American foreign trade deficit, it also raises the question of further financing of the American deficit. There are also other problems that the possible appreciation would cause for the American economy, due to the effect of J-curve, passthrough, larger costs of input imported from China, etc. Therefore, Chinese foreign exchange policy is an important subject, but it is not the solution to the problems of the global economy - which have deeper roots than that. However, there is no excuse for China implementing unfair exchange rate policies, or replacing such policies with controversial protectionist policies (as some authors have suggested.

  7. CORRECTION OF FORECASTS OF INTERRELATED CURRENCY PAIRS IN TERMS OF SYSTEMS OF BALANCE RATIOS

    OpenAIRE

    Gertsekovich D. A.

    2015-01-01

    In this paper the problem of exchange rates forecast is logically considered a) traditionally as a task of forecast on the base of «stand-alone» equations of autoregression for each currency pair and b) as a result of forecast correction of autoregression equations system on the base of boundary conditions of balance ratios systems. As a criterion for quality of forecast constructed with empirical models we take the sum of deficiency quadrates of forecasts estimated for deductive currency pai...

  8. The Impossible Trinity on Steroids: Inflation Targeting and Exchange Rate Management in Emerging Countries

    OpenAIRE

    Kaltenbrunner, A; Painceira, JP

    2017-01-01

    This paper contributes to the debate on macroeconomic management and capital account regulations in developing and emerging countries (DECs). It argues that the recommendation by neoclassical economists and international financial institutions (IFIs) to combine an inflation targeting regime with exchange rate management, whilst maintaining open capital accounts, is both impossible and potentially counterproductive. This, it shows with extensive semi-structured interviews with currency traders...

  9. Forecasting Exchange Rates and Relative Prices with the Hamburger Standard: Is What You Want What You Get With McParity?

    OpenAIRE

    Robert E. Cumby

    1996-01-01

    A decade ago the Economist began an annual survey of Big Mac prices as a guide to whether currencies are trading at the right exchange rates. This paper asks how well the hamburger standard has performed. Although average deviations from absolute Big Mac parity are large for several currencies, once estimates of these average deviations are removed from the data, the evidence suggests that convergence to relative Big Mac parity is quite rapid. The half-life of deviations from Big Mac parity a...

  10. Founding Digital Currency on Imprecise Commodity

    OpenAIRE

    Yuan, Zimu; Xu, Zhiwei

    2015-01-01

    Current digital currency schemes provide instantaneous exchange on precise commodity, in which "precise" means a buyer can possibly verify the function of the commodity without error. However, imprecise commodities, e.g. statistical data, with error existing are abundant in digital world. Existing digital currency schemes do not offer a mechanism to help the buyer for payment decision on precision of commodity, which may lead the buyer to a dilemma between having to buy and being unconfident....

  11. Foreign Exchange Risk in International Transactions

    Directory of Open Access Journals (Sweden)

    Florentina-Olivia Balu

    2007-03-01

    Full Text Available Every international business is affected by the ever-changing value of the currencies implied in contracts. While many of us consider this unpredictability a nuisance, the volatility of currencies around the world can mean the difference between success and failure for many exporters/importers. Exchange rates between one currency and another can change dramatically in a short period of time, leaving the unprepared business exposed to potentially crippling losses. The efficient management of this risk is essential for the survival of a company and any business that is exposed to such a risk should ensure that it is fully prepared to manage it. Old standbys and recent breakthroughs in the area of financial risk management can remove much of the risk from currency rate movements. The range of such products is huge, with increasingly sophisticated techniques constantly being added. Among the most modern methods for managing exchange risk there are four major classes of derivative products like: forwards, futures, options, and swaps. Beyond the four main types of risk management instruments, there are a number of other products including "swaptions" (options on swaps; avenging options; yield curve swaps; futures on spreads; and options on portfolios. Sophisticated mathematical tools and high-speed computers are needed to calculate the price of these instruments and to determine their overall effect on the company. In this article we will focus on forward and futures contracts for managing foreign exchange risk. A forward is a contract to buy or sell currency at an agreed upon exchange rate at a specific date in the future. Futures are similar to forwards except that they're traded on exchanges which specify settlement dates. Also we make some recommendations related to the foreign exchange risk-management practices that are useful for companies involved in international trade and for financial institutions interested in providing hedging products to

  12. 12 CFR Appendix C to Part 567 - Risk-Based Capital Requirements-Internal-Ratings-Based and Advanced Measurement Approaches

    Science.gov (United States)

    2010-01-01

    .... Exchange rate derivative contract means a cross-currency interest rate swap, forward foreign-exchange contract, currency option purchased, or any other instrument linked to exchange rates that gives rise to...) Equity securities that are publicly traded; (vi) Convertible bonds that are publicly traded; (vii) Money...

  13. A comparative examination of currency risk pricing and market integration in the stock markets of Nigeria and South Africa

    Directory of Open Access Journals (Sweden)

    Odongo Kodongo

    2012-07-01

    Full Text Available We examine the pricing of currency risk and market integration in the equity markets of Nigeria and South Africa. Using the Generalized Method of Moments with a multi-beta asset pricing model and firm-level data, we find that currency risk is partly unconditionally priced in South Africa's stock market, with this market being largely integrated with the world equity markets. Conversely, currency risk is not priced in Nigeria's equity market, which also shows no evidence of integration with the world equity markets. Interestingly, a portfolio analysis of firms reveals a size based return sensitivity to both world equity markets and exchange rate volatility across the two countries. Therefore, while general results suggest that Nigeria, rather than South Africa, would provide greater diversification benefits to international investors with little or no worry about hedging unconditional exchange rate risk, that view must be nuanced when considering large size firms which are consistently sensitive to the two factors across both countries.

  14. Ritual use of currency in Laimbwe history, Cameroon | Kah | Lwati: A ...

    African Journals Online (AJOL)

    Ritual use of currency in Laimbwe history, Cameroon. ... exchange and a measurement of value to replace other indigenous currencies, had an impact ... social classes and the re-enforcement of the socio-political order of the Laimbwe people.

  15. Effects of Intervention in the Spot Currency Market on the BRL/USD Exchange Rate from 1999 to 2008: an Event Study

    Directory of Open Access Journals (Sweden)

    Roberto Meurer

    2010-07-01

    Full Text Available This study analyses interventions in the Brazilian spot foreign exchange market from 1999 to 2008 and their effects on the R$/US$ exchange rate, using an event study approach. It aims to verify if the foreign exchange interventions have any significant impact on the exchange rate behavior. The period was divided according to a MS-VAR model and analyzed with different criterions. The results indicate that prolonged foreign exchange intervention have a greater effect on the exchange rate behavior, in comparison to short time intervention episodes. The results also point to the existence of quickly dissipating effects on the rate behavior. The creation of a new criterion, based on the analysis of exchange-rate acceleration, shows that the exchange rate is mainly prone to accelerate on leaning with the wind purchase intervention episodes.

  16. On Value at Risk for Foreign Exchange Rates --- the Copula Approach

    Science.gov (United States)

    Jaworski, P.

    2006-11-01

    The aim of this paper is to determine the Value at Risk (VaR) of the portfolio consisting of long positions in foreign currencies on an emerging market. Basing on empirical data we restrict ourselves to the case when the tail parts of distributions of logarithmic returns of these assets follow the power laws and the lower tail of associated copula C follows the power law of degree 1. We will illustrate the practical usefulness of this approach by the analysis of the exchange rates of EUR and CHF at the Polish forex market.

  17. Is Numerairology the Future of Monetary Economics? Unbundling numeraire and medium of exchange through a virtual currency and a shadow exchange rate

    OpenAIRE

    Willem H. Buiter

    2007-01-01

    The paper discusses some fundamental problems in monetary economics associated with the determination and role of the numeraire. The issues are introduced by formalising a proposal, attributed to Eisler, to remove the zero lower bound on nominal interest rates by unbundling the numeraire and medium of exchange/means of payment functions of money. The monetary authorities manage the exchange rate between the numeraire ('sterling') and the means of payment ('drachma'). The short nominal interes...

  18. Foreign Currency Borrowing by Small Firms

    OpenAIRE

    Martin Brown; Steven Ongena; Pinar Yesin

    2009-01-01

    We examine the firm- and country-level determinants of the currency denomination of small business loans. We first model the choice of loan currency in a framework which features a trade-off between lower cost of debt and the risk of firm-level distress costs, and also incorporates the impact of information asymmetry between banks and firms. When foreign currency funds come at a lower interest rate, all foreign currency earners as well as those local currency earners with high revenues and lo...

  19. A study on the effects of exchange rate and foreign policies on Iranians dates export

    Directory of Open Access Journals (Sweden)

    Leila Khalighi

    2017-04-01

    Full Text Available The main purpose of this research was studying the impact of exchange rate on date export as one of the most important and greatest foreign currency income earned horticultural products in agriculture sector in Iran. Selected time period in this study was chosen between 1991 and 2011. For this purpose, ordinary least squares (OLS method has used to estimate the relationships between the value of date export and the variables taken from stationary tests. Library research method has used for the analysis. In this regard, required data have collected from various scientific and research resources. The results indicated that, exchange rate is a crucial factor for dates export and also for exporters. In addition, other factors specially government policies have been placed in export model. In this field, short-term outsourcing foreign policy has decreased the export value. Results also showed that, applying exchange rate unification policy without an appropriate exchange rate to encourage exporters has negative impact on dates export. Therefore, by applying exchange rate stabilization policy, according to inflation in the country, the potential exporters’ income has reduced and production costs have increased alternately.

  20. ANALYSIS AND FORECASTING THE VOLATILITY OF EURO – DOLLAR EXCHANGE RATE

    Directory of Open Access Journals (Sweden)

    Václava Pánková

    2010-12-01

    Full Text Available The study on volatility and asymmetry of the exchange rate is applied to the Euro/USD relation. Starting in U.S.A., the financial and economic crisis influenced European Union with a certain delay. On the other hand, this years´ problems in Eurozone are paralleled by rising American economy. That is why we can expect both currencies to develop in different ways. In general, the depreciation deviation of exchange rate can lead to a higher volatility than the appreciation deviation, what implicates asymmetric effects. The uncertainty of exchange rate has a tendency to be inconstant in the time-varying cases, so it has a feature of conditional heteroscedasticity. That is why the models from the ARCH family are employed to study whether the asymmetry is present in the data in question; source: ECB. The Engle – Ng tests for asymmetry in volatility are used to determine whether an asymmetric model is required as adequate. A forecast will be given including an ex post comparison as well as an ex ante prognosis. Financial support from the GA CR project 402/09/0273 and the Research Plan MSM 6138439909 is appreciated.

  1. Currency Crisis and Contagion; Evidence From Exchange Rates and Sectoral Stock Indices of the Philippines and Thailand

    OpenAIRE

    Jun Nagayasu

    2000-01-01

    This paper analyzes empirically the recent Asian financial crisis using high frequency data of exchange rates and stock indices of the Philippines and Thailand. Utilizing standard time-series techniques, this study confirms that there is evidence that developments in some sectoral indices—including those of banking and financial sectors—seem to have caused upward pressure on exchange rates. A correlation between some of these variables is also found to be strong across countries in the crisis...

  2. The Fiscal Framework in a Currency Union

    DEFF Research Database (Denmark)

    Hallett, Andrew Hughes; Hougaard Jensen, Svend E.

    2016-01-01

    This paper draws out lessons from the euro area (EA) that are transferable to the Eastern Caribbean Currency Union (ECCU) and other Caribbean economies with fixed exchange rates. Based on observations from both the EA and the ECCU, we present a new policy framework which is capable of imposing...... fiscal discipline, with the aim of avoiding the risk of unsustainable fiscal policies reappearing and of preventing monetary policy from being undermined by undisciplined national governments. In the ECCU case, we find that fiscal deficits are more a result of financial and trade imbalances than fiscal...

  3. Interest in Currency Trading Learning – Preferred Methods and Motivational Factors

    Directory of Open Access Journals (Sweden)

    Pintar Rok

    2016-02-01

    Full Text Available Background and purpose: This paper analyzes the interest of potential users for learning in the field of currency trading or foreign exchange (forex, FX. The purpose of our article is a to present currency trading, b to present different options, methods and learning approaches to educating in forex, c to present the research results discovering the interest of potential users for learning in the field of currency trading.

  4. The impact of the financial crisis on the currency and the monetary system

    Directory of Open Access Journals (Sweden)

    Petre DEACONU

    2010-09-01

    Full Text Available The present-day economic and financial crisis (depression appears unprecedented in the last half century. The international financial crisis has been extended to the Romanian economy. However, in terms of direct impact, the Romanian banking system was less affected by not being exposed to toxic assets, and because of prudential and administrative measures taken by the NBR. Indirectly, however, the international financial crisis and especially its obvious consequence – the recession in developed countries - has expanded to the Romanian economy, on several channels. The shopping channel slowed export growth and even reduced them. The financial channel has limited the access to external financing, and thus restricted the lending volume, generating private external debt service difficulties. On the exchange rate channel, the reduction in external financing reflected in national currency depreciation. On the confidence channel, there was a withdrawal of investors from Eastern Europe countries. Among the measures adopted by the central bank, the most notable were targeting inflation and currency interventions. By adopting inflation targeting, the central bank opted to make more room in establishing foreign exchange market, and after the onset of the current international financial crisis, including the 2009-2010, adopted a controlled floating exchange rate. This does not mean intervention in the forex market on a discretionary basis. NBR policy on foreign exchange intervention has been guided by the philosophy that high exchange rate volatility is harmful for both the inflation target and the financial health of the real and financial sector.

  5. Inference of financial networks using the normalised mutual information rate

    Science.gov (United States)

    2018-01-01

    In this paper, we study data from financial markets, using the normalised Mutual Information Rate. We show how to use it to infer the underlying network structure of interrelations in the foreign currency exchange rates and stock indices of 15 currency areas. We first present the mathematical method and discuss its computational aspects, and apply it to artificial data from chaotic dynamics and to correlated normal-variates data. We then apply the method to infer the structure of the financial system from the time-series of currency exchange rates and stock indices. In particular, we study and reveal the interrelations among the various foreign currency exchange rates and stock indices in two separate networks, of which we also study their structural properties. Our results show that both inferred networks are small-world networks, sharing similar properties and having differences in terms of assortativity. Importantly, our work shows that global economies tend to connect with other economies world-wide, rather than creating small groups of local economies. Finally, the consistent interrelations depicted among the 15 currency areas are further supported by a discussion from the viewpoint of economics. PMID:29420644

  6. Inference of financial networks using the normalised mutual information rate.

    Science.gov (United States)

    Goh, Yong Kheng; Hasim, Haslifah M; Antonopoulos, Chris G

    2018-01-01

    In this paper, we study data from financial markets, using the normalised Mutual Information Rate. We show how to use it to infer the underlying network structure of interrelations in the foreign currency exchange rates and stock indices of 15 currency areas. We first present the mathematical method and discuss its computational aspects, and apply it to artificial data from chaotic dynamics and to correlated normal-variates data. We then apply the method to infer the structure of the financial system from the time-series of currency exchange rates and stock indices. In particular, we study and reveal the interrelations among the various foreign currency exchange rates and stock indices in two separate networks, of which we also study their structural properties. Our results show that both inferred networks are small-world networks, sharing similar properties and having differences in terms of assortativity. Importantly, our work shows that global economies tend to connect with other economies world-wide, rather than creating small groups of local economies. Finally, the consistent interrelations depicted among the 15 currency areas are further supported by a discussion from the viewpoint of economics.

  7. The empirical role of the exchange rate on the crude-oil price formation

    International Nuclear Information System (INIS)

    Yousefi, A.; Wirjanto, T.S.; University of Waterloo, Ont.

    2004-01-01

    This paper adopts a novel empirical approach to the crude-oil price formation for the purpose of understanding the price reactions of OPEC member countries to changes in the exchange rate of the US dollar against other major currencies and prices of other members. The results are broadly consistent with the view of the absence of a unified OPEC determined price in the international crude market literature. In addition, the results also highlight a cross regional dimension of the crude oil market. (author)

  8. Autocorrelation as a source of truncated Lévy flights in foreign exchange rates

    Science.gov (United States)

    Figueiredo, Annibal; Gleria, Iram; Matsushita, Raul; Da Silva, Sergio

    2003-05-01

    We suggest that the ultraslow speed of convergence associated with truncated Lévy flights (Phys. Rev. Lett. 73 (1994) 2946) may well be explained by autocorrelations in data. We show how a particular type of autocorrelation generates power laws consistent with a truncated Lévy flight. Stock exchanges have been suggested to be modeled by a truncated Lévy flight (Nature 376 (1995) 46; Physica A 297 (2001) 509; Econom. Bull. 7 (2002) 1). Here foreign exchange rate data are taken instead. Scaling power laws in the “probability of return to the origin” are shown to emerge for most currencies. A novel approach to measure how distant a process is from a Gaussian regime is presented.

  9. Forward, Forward Option and No Hedging Which One is the Best for Managing Currency Risk?

    Directory of Open Access Journals (Sweden)

    Riko Hendrawan

    2017-07-01

    Full Text Available Bank Indonesia Regulation No.18/18/PBI/2016 concerning foreign exchange transactions against rupiah between banks and domestic parties, indicates that the importance of hedging for business actors in Indonesia. Based on the data of the rupiah exchange rate movement against the dollar from January 2006 to December 2016 shows that the fluctuation of the rupiah against the US dollar tends to weaken, although at some point the observation shows the strengthening of the rupiah against the US dollar. The purpose of this research is to assess impact of Forward, Forward Option and No Hedging Strategy for managing currency exposure between IDR to USD. Using data from January 2006–December 2016 taken from website of Bank Indonesia and Federal Reserve. Total 396 simulations,consists of 132 using Forward simulations, 132 using Forward Option simulations and 132 using No Hedging simulations. Findings from this research show that Forward Option was has no positive contribution in managing currency exposure, No Hedging Strategy has 36,36 percent positive contribution and forward contract has 72,73 percent positive contribution in managing currency exposure. Its means Forward Contract was better than Forward Option and No Hedging Strategies in managing currency exposure.

  10. Integrated Strategic Planning of Global Production Networks and Financial Hedging under Uncertain Demands and Exchange Rates

    Directory of Open Access Journals (Sweden)

    Achim Koberstein

    2013-11-01

    Full Text Available In this paper, we present a multi-stage stochastic programming model that integrates financial hedging decisions into the planning of strategic production networks under uncertain exchange rates and product demands. This model considers the expenses of production plants and the revenues of markets in different currency areas. Financial portfolio planning decisions for two types of financial instruments, forward contracts and options, are represented explicitly by multi-period decision variables and a multi-stage scenario tree. Using an illustrative example, we analyze the impact of exchange-rate and demand volatility, the level of investment expenses and interest rate spreads on capacity location and dimensioning decisions. In particular, we show that, in the illustrative example, the exchange-rate uncertainty cannot be completely eliminated by financial hedging in the presence of demand uncertainty. In this situation, we find that the integrated model can result in better strategic planning decisions for a risk-averse decision maker compared to traditional modeling approaches.

  11. Relative Effects of the Dollar and Yen on East Asian Currency Values: Focusing on the Post-Crisis Period

    OpenAIRE

    Bonghan Kim; Seeun Jeong

    2007-01-01

    This paper empirically analyzes the relative effects of the dollar and yen on the value of East Asian currencies. We focus especially on countries that have chosen to adopt floating regimes in the post-financial crisis period, such as South Korea, Taiwan, Indonesia, the Philippines and Thailand. First, we calculate a exchange rate flexibility index and carry out a regression using Frankel and Wei's (1994) methodology. The results confirm an increase in the coupling of East Asian currencies vi...

  12. 19 CFR 159.31 - Rates to be used.

    Science.gov (United States)

    2010-04-01

    ... (CONTINUED) LIQUIDATION OF DUTIES Conversion of Foreign Currency § 159.31 Rates to be used. Except as otherwise specified in this subpart, no rate or rates of exchange shall be used to convert foreign currency... 19 Customs Duties 2 2010-04-01 2010-04-01 false Rates to be used. 159.31 Section 159.31 Customs...

  13. Exchange Market Pressure on the Croatian Kuna

    Directory of Open Access Journals (Sweden)

    Srđan Tatomir

    2009-06-01

    Full Text Available Currency crises exert strong pressure on currencies often causing costly economic adjustment. A measure of exchange market pressure (EMP gauges the severity of such tensions. Measuring EMP is important for monetary authorities that manage exchange rates. It is also relevant in academic research that studies currency crises. A precise EMP measure is therefore important and this paper reexamines the measurement of EMP on the Croatian kuna. It improves it by considering intervention data and thresholds that account for the EMP distribution. It also tests the robustness of weights. A discussion of the results demonstrates a modest improvement over the previous measure and concludes that the new EMP on the Croatian kuna should be used in future research.

  14. Exchange rate and trade balance: J-curve effect

    Directory of Open Access Journals (Sweden)

    Petrović Pavle

    2010-01-01

    Full Text Available This paper shows that exchange rate depreciation in Serbia improves trade balance in the long run, while giving rise to a J-curve effect in the short run. These results add to the already existent empirical evidence for a diverse set of other economies. Both Johansen's and autoregressive distributed lag approach are respectively used giving similar long-run estimates showing that real depreciation improves trade balance. Corresponding errorcorrection models as well as impulse response functions indicate that, following currency depreciation, trade balance first deteriorates before it later improves, i.e. exhibiting the J-curve pattern. These results are relevant for policy making both in Serbia and in a number of other emerging Europe countries as they face major current account adjustments after BoP crises of 2009.

  15. THE POLICY OF THE EXCHANGE RATE PROMOTED BY NATIONAL BANK OF ROMANIA AND ITS IMPLICATIONS UPON THE FINANCIAL STABILITY

    Directory of Open Access Journals (Sweden)

    Chifane Cristina

    2010-12-01

    Full Text Available The more profound world economic crisis has strongly marked the evolution of the Romanian financial system. The size of current account deficit, the relatively high external financing needs and the dependence of the banks on it, the high ratio between loans in foreign currency and deposits in foreign currency made of the Romanian economy, a risky destination for investors. In these conditions, since the end of 2008 and throughout 2009, the government's economic program was focused on reducing the external deficit in both public and private sector, on minimizing the effects of recession, on avoiding a crisis of the exchange rate and on cooling the inflationary pressures.

  16. Efficiency of Foreign Exchange Markets and Measures of Turbulence

    OpenAIRE

    Jacob A. Frenkel; Michael L. Mussa

    1980-01-01

    Since the move to generalized floating in1973, exchange rates between major currencies have displayed large fluctuations. This turbulence of foreign exchange rates is an important concern of government policy and its explanation is a challenge for theories of foreign exchange market behavior. In Section I of this paper, we document the extent of turbulence in foreign exchange markets by examining (i) the magnitude of short-run variations in exchange rates relative to other measures of economi...

  17. General and specific statistical properties of foreign exchange markets during a financial crash

    Science.gov (United States)

    Li, Wei-Shen; Tsai, Yun-Jie; Shen, Yu-Hsien; Liaw, Sy-Sang

    2016-06-01

    We investigate minute-by-minute foreign exchange rate (FX) data of 14 currencies with different exchange-rate regimes during a financial crash, and divide these data into several stages according to their respective tendencies: depreciation stage (stage 1), fluctuating stage (stage 2), and appreciation stage (stage 3). The tail distribution of FX rate returns satisfies a power-law structure for different types of currencies. We find the absolute value of the power-law exponent is smaller in emerging markets than in developed markets, especially during the stage 1, and is greatest in pegged currencies. We also find that the correlation properties of the FX rate return series have quite disparate results among the various types of currencies. Currencies in developed markets respectively have weak persistence and anti-persistence in short and long timescales; whereas the pegged currencies and currencies in emerging markets show different degrees of anti-persistence in various timescales. Further analyses on the data in divided stages indicate that emerging markets and pegged currencies have more prominent dual fractal structures after the depreciation stage, while the developed markets do not. Hurst exponent analyses on the sign series yield similar results to that on the original return series for most currencies. The magnitude series of the returns provide some unique results during a crash. The developed market currencies have strong persistence and exhibit a weaker correlation in the depreciation and appreciation stages. In contrast, the currencies of emerging markets as well as pegged currencies fail to show such a transformation, but rather show a constant-correlation behavior in the corresponding stages of a crash. These results indicate that external shocks exert different degrees of influence during different stages of the crash in various markets.

  18. The Effects of Workers’ Remittances on Exchange Rate Volatility and Exports Dynamics -New Evidence from Pakistan

    Directory of Open Access Journals (Sweden)

    Adnan Khurshid

    2017-03-01

    Full Text Available This study examines the impact of remittances on the exchange rate and exports in Pakistan, using the system GMM aproach on annual data series. We carry out a full sample Granger causality test along with the sub-sample rolling window approach using monthly data series to find the causal relationship between remittances (REM and the exchange rate (EXR. The System GMM results reveal that remittances depreciate the exchange rate and have a positive influence on export competitiveness. In addition to this, the remittance inflow appreciates the exchange rate only if it is used for savings and negatively affects competitiveness if it is channeled towards consumption. The change in exchange rate regime from multiple to flexible depreciated the exchange rate while, the global financial crises uplifted the currency rate and negatively affect the exports. The results show the bidirectional causal relationship between remittances and the exchange rate. The outcomes further reveal that the parameters in the VAR model are unstable, which is a clear indication of the presence of structural changes. The rolling window estimation approach with time-varying characteristics finds bi-directional causality between REM and the EXR in the different sub-samples. The results of this study fall in line with the portfolio model proposed by Mussa (1984 which states that the flow of remittances causes appreciation. The sub-sample causality is related to significant economic events, which means the results are not a statistical artifact.

  19. A Simple Model of Monetary Policy and Currency Crises

    OpenAIRE

    Philippe AGHION; Philippe BACCHETTA; Abhijit BANERJEE

    1999-01-01

    This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more difficult to borrow and may decrease the foreign currency debt burden. In some cases it is actually best to decrease the interest rate. We also show how these issues are related to development of the financia...

  20. A Simple Model of Monetary Pollicy and Currency Crises

    OpenAIRE

    Aghion, Philippe; Bacchetta, Philippe; Banerjee, Abhijit

    1999-01-01

    This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more difficult to borrow and may decrease the foreign currency debt burden. In some cases it is actually best to decrase the interest rate. We also show how these issues are related to the development of the finan...

  1. Proposed currency composite approach to pricing OPEC oil: problems and possibilities

    Energy Technology Data Exchange (ETDEWEB)

    Shaaf, M.B.

    1982-01-01

    The primary purpose of this dissertation was to explore the nature, purposes, benefits, and barriers of establishing a currency basket for OPEC as an alternative to the use the dollar for international trade in oil. The study included the construction and evaluation of three alternative currency baskets and the evaluation of two other baskets for the protection of the real price of OPEC oil from foreign-exchange fluctuations between 1971 and 1980. A secondary objective was to assess the inflationary impact on the real price of oil. Finally, the purpose was to evaluate the changes of the terms of trade of OPEC during the same period. The findings of the research are as follows: During 1971-1980, inflation and the relative weakness of the dollar have reduced the real price of oil to OPEC. In spite of this, the terms of trade of OPEC have substantially improved. This was because OPEC increased its oil prices much more than sufficient to compensate for inflation and the fluctuation of foreign-exchange rates.

  2. Identifying the weights in exchange market pressure

    NARCIS (Netherlands)

    Klaassen, F.

    2011-01-01

    Exchange market pressure (EMP) measures the pressure on a currency to depreciate. It adds to the actual depreciation a weighted combination of policy instruments used to ward off depreciation, such as interest rates and foreign exchange interventions, where the weights are their effectiveness. The

  3. The Effect of Depreciation of the Exchange Rate on the Trade Balance of Albania

    Directory of Open Access Journals (Sweden)

    Kurtović Safet

    2017-06-01

    Full Text Available Almost all countries face the problems of trade balance, although they are more inherent in developing countries and economies in transition. A majority of economists adheres to a common opinion real depreciation may lead to an improvement of the trade balance. That said, countries encountering trade balance issues use real exchange rate depreciation in order to improve the trade balance situation. Albania belongs to the group of transition countries that has been facing negative trade balance over last two decades. National currency devaluations of the lek (ALL have been used by Albania to improve its trade balance. Therefore, this paper intends to investigate the effect of the real effective exchange rate depreciation of the ALL on the trade balance of Albania using quarterly data from 1994 to 2015. Bounds testing cointegration approach, vector error correction model (VECM and impulse response were used for empirical analysis. The results of the study show that there exists a long-term cointegration between the real effective exchange rate depreciation and the trade balance. Specifically, real effective exchange rate depreciation positively affects the trade balance of Albania in both the long-run and short-run indicating the weak presence of the J-curve effect. Important recommendations were derived from the results.

  4. The Long-Run Value of Currencies: A Big Mac Perspective

    OpenAIRE

    Yihui Lan

    2001-01-01

    Purchasing Power Parity (PPP), the link between exchange rates and prices, is a fundamental building block of international finance, one which has been attracting increasing research interest during the past three decades. The Big Mac Index (BMI), invented by 'The Economist' magazine in 1986, has played a major role in popularising PPP and bringing its practical implications to the attention of financial markets. The aim of this paper is to derive long-run equilibrium values of currencies usi...

  5. Advancing the design of a dynamic petro-dollar currency basket

    International Nuclear Information System (INIS)

    Elbeck, Matt

    2010-01-01

    This study offers Organization of Petroleum Exporting Countries (OPEC) member nations a crude oil pricing currency basket based on currency liquidity, in contrast with prior emphasis on OPEC trading patterns. Motivating the search for an alternative US dollar pricing of crude oil is the significant and inverse relationship (r=-0.82, p<0.01) between the US dollar major currencies index and crude oil price over the period January 1999-March 2009. A dynamically weighted petro-dollar currency basket is proposed based on the five currency claims (US dollar, Euro, British pound, Japanese yen and Swiss franc) and their varying proportions of foreign exchange reserves held by central banks. The major currencies US dollar index is compared against the proposed petro-dollar index to reveal an average US$8.1 billion annual gain in favor of the petro-dollar currency basket, offering OPEC members a revenue stream of diversified and highly liquid currencies to transition away from complete dependence on the US dollar crude oil pricing. The proposed petro-dollar crude oil pricing schema offers OPEC a crude oil price dynamically denominated in currencies reflecting the global use and importance of crude oil. This paper concludes with implementation issues facing a move toward the dynamically weighted petro-dollar crude oil pricing schema. (author)

  6. Dissimilar Effects of World News Announcements on Euro/Dollar/Yen Exchange Rates: An Econophysics Approach

    Directory of Open Access Journals (Sweden)

    David Matesanz

    2015-01-01

    Full Text Available This paper revisits the issue of the influence of macro-economic announcements over the exchange rates volatility, but from a different perspective as it is the usual in the econometric literature. By quantifying the impact of world-wide macroeconomic information published in the economic calendar in several recent years we were able to construct long events’ time series with the objective to test whether they influence exchange rate volatilities in several currencies. In order to do that, Granger causality test was employed by using a computational approach. Our results show that announcements from U.S.A are, by far, the most important influence over the three spot forex quotes, Euro/Dollar, Euro/Yen and Dollar/Yen. The method proposed here opens the door to address several open questions until now.

  7. Structure and Evolution of the Foreign Exchange Networks

    Science.gov (United States)

    Kwapień, J.; Gworek, S.; Drożdż, S.

    2009-01-01

    We investigate topology and temporal evolution of the foreign currency exchange market viewed from a weighted network perspective. Based on exchange rates for a set of 46 currencies (including precious metals), we construct different representations of the FX network depending on a choice of the base currency. Our results show that the network structure is not stable in time, but there are main clusters of currencies, which persist for a long period of time despite the fact that their size and content are variable. We find a long-term trend in the network's evolution which affects the USD and EUR nodes. In all the network representations, the USD node gradually loses its centrality, while, on contrary, the EUR node has become slightly more central than it used to be in its early years. Despite this directional trend, the overall evolution of the network is noisy.

  8. Single European currency and Monetary Union. Macroeconomic implications for pharmaceutical spending.

    Science.gov (United States)

    Kanavos, P

    1998-01-01

    This article examines the potential implications of introducing a single currency among the Member States of the European Union for national pharmaceutical prices and spending. In doing so, it provides a brief account of the direct effects of introducing a single currency on pharmaceutical business. These are static in nature and include the elimination of exchange rate volatility and transaction costs, increased price transparency and limited potential for parallel trade. It subsequently analyses the potential medium and long term macroeconomic policy choices facing the Member States and their impact on pharmaceutical spending following the introduction of a single currency. These include policy directions in order to meet the Maastricht convergence criteria in the run-up to forming an Economic and Monetary Union (EMU) and the implications of EMU on national macroeconomic policy thereafter. This article argues that the necessity for tight fiscal policies across the EU and, in particular, in those Member States facing high budget deficits and overall debt levels, will continue to exert considerable downward pressure on pharmaceutical spending.

  9. Exchange rate misalignment, capital accumulation and income distribution: Theory and evidence from the case of Brazil

    Directory of Open Access Journals (Sweden)

    Oreiro José Luis

    2013-01-01

    Full Text Available This article analyzes the relationship between economic growth, income distribution and real exchange rate within the neo-Kaleckian literature, through the construction of a nonlinear macrodynamic model for an open economy in which investment in fixed capital is assumed to be a quadratic function of the real exchange rate. The model demonstrates that the prevailing regime of accumulation in a given economy depends on the type of currency misalignment, so if the real exchange rate is overvalued, then the regime of accumulation will be profit-led, but if the exchange rate is undervalued, then the accumulation regime is wage-led. Subsequently, the adherence of the theoretical model to data is tested for Brazil in the period 1994/Q3-2008/Q4. The econometric results are consistent with the theoretical non-linear specification of the investment function used in the model, so that we can define the existence of a real exchange rate that maximizes the rate of capital accumulation for the Brazilian economy. From the estimate of this optimal rate we show that the real exchange rate is overvalued in 1994/Q3- 2001/Q1 and 2005/Q4-2008/Q4 and undervalued in the period 2001/Q2-2005/Q3. As a direct corollary of this result, it follows that the prevailing regime of accumulation in the Brazilian economy after the last quarter of 2005 is profit-led.

  10. Currencies of Science: discussing disciplinary “exchange rates” for citations and Mendeley readership

    Energy Technology Data Exchange (ETDEWEB)

    Costas, R.; Perianes-Rodriguez, A.; Ruiz-Castillo, J.

    2016-07-01

    In 1998 Garfield stated that “[t]he Mertonian description of normal science describes citations as the currency of science. Scientists make payments, in the form of citations, to their preceptors”. The idea of citations as a currency of science was also discussed by Wouters (1999) who suggested that the “role of the citation might also be compared with that of money, especially if the evaluative use of scientometrics is taken into account. Whenever the value of an article is expressed in its citation frequency, the citation is probably the most important unit of a ‘currency of science’”. Thus, citations have been seen as currency able to reward scientists for their work and scientific merit, being an integral part, together with authorship and acknowledgements, of the so-called “reward triangle” (Cronin & Weaver, 1995)2. This role of citations as main currency in evaluative scientometrics has gone unchallenged until recently. The emergence of new ways of measuring the reception of scientific publications by different audiences in the form of the so-called “altmetrics” (Haustein, et al. 2015a; Priem, et al. 2010) probably represents the most important attempt of expanding the system of currencies of science. However, research on altmetrics suggest that there are critical differences with citations: in coverage (Thelwall, et al. 2013), main characteristics (Haustein, et al., 2015), correlations (Costas, et al. 2015b; Haustein, et al. 2014), and interpretation (Haustein et al., 2016). These results essentially highlight the limited potential of most of these metrics as realistic alternatives to citations. (Author)

  11. Fake currency detection using image processing

    Science.gov (United States)

    Agasti, Tushar; Burand, Gajanan; Wade, Pratik; Chitra, P.

    2017-11-01

    The advancement of color printing technology has increased the rate of fake currency note printing and duplicating the notes on a very large scale. Few years back, the printing could be done in a print house, but now anyone can print a currency note with maximum accuracy using a simple laser printer. As a result the issue of fake notes instead of the genuine ones has been increased very largely. India has been unfortunately cursed with the problems like corruption and black money. And counterfeit of currency notes is also a big problem to it. This leads to design of a system that detects the fake currency note in a less time and in a more efficient manner. The proposed system gives an approach to verify the Indian currency notes. Verification of currency note is done by the concepts of image processing. This article describes extraction of various features of Indian currency notes. MATLAB software is used to extract the features of the note. The proposed system has got advantages like simplicity and high performance speed. The result will predict whether the currency note is fake or not.

  12. Information Asymmetry and Foreign Currency Borrowing by Small Firms

    NARCIS (Netherlands)

    Brown, M.; Ongena, S.; Yesin, P.

    2011-01-01

    We model the choice of loan currency in a framework which features a trade-off between lower cost of debt and the risk of firm-level distress costs. Under perfect information foreign currency funds come at a lower interest rate, all foreign currency earners as well as those local currency earners

  13. The Bank of Canada's Management of Foreign Currency Reserves

    OpenAIRE

    Jacobo De León

    2001-01-01

    This article describes the Bank's management of the liquid foreign currency portion of the government's official reserves. It broadly outlines the operations of the Exchange Fund Account (EFA), the main account in which Canada's reserves are held. It then briefly reviews the evolution of the objectives and management of the EFA over the past 25 years, particularly in light of the changing level of reserves and developments in financial markets. The EFA is funded by Canada's foreign currency b...

  14. Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling

    Directory of Open Access Journals (Sweden)

    M Aziakpono

    2004-04-01

    Full Text Available The study set out to test the McKinnon-Shaw proposition that financial liberalization will significantly increase savings mobilization. The results partly supported the financial liberalization proposition. Variables that capture the effects of currency substitution such as the interest rate differential, a proxy for underground economy, the inflation differential (as a measure of macroeconomic instability and a dummy for political instability were significant in their adverse impacts on the saving mobilization process in Nigeria. We, therefore, advocate for an active monetary policy that will help manage the delicate balance between domestic and foreign interest rates. This should be combined with macroeconomic policies that create a stable economic environment along with appropriate financial and exchange rate policies, in order to discourage economic agents from preferring foreign denominated assets to those held in the domestic currency.

  15. Modelli di crisi valutarie e misure di politica economica (Exchange Rate Crises Models and Economic Policy Measures

    Directory of Open Access Journals (Sweden)

    Pompeo Della Posta

    2012-04-01

    Full Text Available  Some recent articles explain the Asian crisis almost exclusively in terms of "fundamentals". The role played by private sector's expectations, however, should also be considered. In my view, then, "escape clause" models exhibiting multiple equilibria within a grey area, especially when integrated with the possibility that expectations may change exogenously so as to modify the grey area itself, allow a better understanding of exchange rate crises. When considering the role played by expectations, the economic policy measures to be adopted in order to assure the stability of financial and currency markets differ from the remedies emerging when those aspects are ignored.        JEL Codes: F31, F32Keywords: Crisis, Exchange Rates

  16. Value at risk using financial copulas: Application to the Mexican exchange rate (2002-2011

    Directory of Open Access Journals (Sweden)

    Tania Nadiezhda Plascencia Cuevas

    2012-12-01

    Full Text Available Nowadays, the volatility of exchange rate is a crucial and a transcendental issue for all transactions, negotiations and operations taking place in foreign currency, being an objective and an accurate prediction the cornerstone. Therefore, the main objective of this research is to analyze whether the Mexican exchange rate market, risk assessment using traditional VaR and VaR with copulas methodologies are more accurate when the estimates are made for a wide historical time-series or two periods for certain, helping it to predict the maximum losses that may be, with the main motivation to have a efficient hedging strategy. The principal conclusion is that assessing risk with these methodologies, the series does not necessarily have to include more than five years, considering that the use of copulas as a dependent measure make that the prediction fits better to the movements of the real returns.

  17. Testing the Efficiency of the Foreign Exchange Spot Market in Iran

    OpenAIRE

    Borhan-Azad, Lida

    2006-01-01

    This dissertation aimed at testing the efficiency of the foreign exchange market of Iran in the weak and semi-strong form using data on the black market spot exchange rates between Iranian currency (i.e., Rial) and four major foreign currencies including US Dollar, German Mark/Euro, UK Pound and Japanese Yen. The weak form efficiency is examined by unit root tests including Augmented Dickey-Fuller (1979, 1981) (ADF) test and Phillips-Perron (1988) (PP) test. The results of these tests are con...

  18. Currency Exchange Results - What If Member States Subjected Taxpayers to Unlimited Income Taxation Whilst Granting Double Tax Relief under a Netherlands-Style Tax Exemption?

    OpenAIRE

    Wilde, Maarten

    2011-01-01

    textabstractThe author, in this article, examines, through examples, the effects of Member States subjecting taxpayers to unlimited income taxation whilst granting double tax relief under a Netherlands-style tax exemption with regard to how such an approach would affect the cross-border taxation of currency exchange results.

  19. Using Engel curves to estimate purchasing power parity : a case study of the computation of the exchange rate between the Norwegian krone and the U.S. dollar

    OpenAIRE

    Larsen, Erling Røed

    2009-01-01

    Standard practice of estimating purchasing power parities (PPP) involves using prices, in domestic currencies, of a common basket of goods and services, then calculating the price-equalizing exchange rate. In this article, I substitute observed consumer behavior for price data. On the assumption that an Engel curve for food reflects material standard of living, I estimate Engel curves for food for the United States and Norway. This allows us to calculate the exchange rate required for re-alig...

  20. Interest Rate Rules, Exchange Market Pressure, and Successful Exchange Rate Management

    NARCIS (Netherlands)

    Klaassen, F.; Mavromatis, K.

    2016-01-01

    Central banks with an exchange rate objective set the interest rate in response to what they call ''pressure.'' Instead, existing interest rate rules rely on the exchange rate minus its target. To stay closer to actual policy, we introduce a rule that uses exchange market pressure (EMP), the

  1. Invoice currency: Puzzling evidence and new questions from Brazil

    Directory of Open Access Journals (Sweden)

    Daniel Gersten Reiss

    2015-05-01

    Full Text Available This article for the first time uses Brazilian trade data to draw conclusions about the invoice currency choice — both in general and as it pertains to the Brazilian real (BRL. We find that the Brazil-Argentina policy of providing payment orders associated to an exchange transaction between their currencies has had a significant impact on the currency chosen for invoicing, establishing a link between the availability of financial instruments and the invoice currency choice. Moreover, the evidence does not confirm some previous international results. We identify that in Brazil there is no coincidence regarding the use of BRL for invoicing and its use for making payments. Yet we find that the main exports denominated in BRL are homogenous goods — sugar and tobacco — suggesting that some bargaining power might remain even if goods are traded in international markets. From the BRL-specific perspective, we categorically move away from the idea that the BRL is not used in Brazilian international trade. Although it is used at a limited absolute volume, an exceptional ninefold growth between 2007 and 2011 is observed. New intriguing questions about Brazilian currency usage can therefore be proposed.

  2. CORRECTION OF FORECASTS OF INTERRELATED CURRENCY PAIRS IN TERMS OF SYSTEMS OF BALANCE RATIOS

    Directory of Open Access Journals (Sweden)

    Gertsekovich D. A.

    2015-03-01

    Full Text Available In this paper the problem of exchange rates forecast is logically considered a traditionally as a task of forecast on the base of «stand-alone» equations of autoregression for each currency pair and b as a result of forecast correction of autoregression equations system on the base of boundary conditions of balance ratios systems. As a criterion for quality of forecast constructed with empirical models we take the sum of deficiency quadrates of forecasts estimated for deductive currency pairs. Practical approval confirmed that deductive models meet common requirements, provide accepted precision, show resistance to initial data and are free from series of deficiency of one index. However, extreme forecast errors tell that practical application of the approach offered needs further improvement.

  3. Using Survey Data to Resolve the Exchange Risk Exposure Puzzle: Evidence from U.S. Multinational Firms

    NARCIS (Netherlands)

    W.F.C. Verschoor (Willem); R. Jongen (Ron); A. Muller (Aline)

    2012-01-01

    textabstractWhile in previous literature foreign currency exposure is estimated to be surprisingly small and insignificant, we question in this paper the rationality assumption and show that the traditional use of realized exchange rate changes to approximate unexpected currency shocks leads to a

  4. Dollar as the world's reserve currency: Challenges and prospects

    Directory of Open Access Journals (Sweden)

    Kovačević Radovan

    2014-01-01

    Full Text Available The US dollar gained the status of the world's reserve currency in the Bretton Woods system and has preserved it until the present day. Such position in international finance entails both advantages and disadvantages to the USA as the issuer of this currency, and to the rest of the world using it in trading, as store of value, and for the purpose of various financial operations and transactions. After the collapse of the Bretton Woods system, the regime of fixed FX rates was replaced by floating FX rates. Yet, regardless of this change, the dollar kept its role of the world's reserve currency. Numerous banking and currency crises following the transfer to the floating FX rates regime, along with the shifts in international capital flows, forced the developing countries and countries in transition to increase their FX reserves. In the tendency to store their value, central banks usually invest them into US Treasury securities, as liquid and reliable assets. However, due to the risk incurred by the reliance on a single national currency in the role of the world's reserve currency, there have been many proposals to reform the international monetary system. According to the current global tendencies, the most serious candidates for acquiring the status of the world's reserve currency in the future are the dollar, the euro, and the Chinese yuan.

  5. Measurement of Foreign Exchange Exposure on the Turkish Private Banks’ Stock Prices

    OpenAIRE

    Serpil Canbas; Murat Doganlar; Yildirim B.Onal

    2002-01-01

    All performance criteria of the banks are affected by the exchange rate fluctuations through foreign currency transactions and operations. However, exchange rate fluctuations -even without such activities can influence the banks through their affect on foreign competition, foreign loan demand and other banking conditions. Exchange rate exposure is classified as operation, transaction, and accounting exposures. Most of the studies, which measure these exposures, focused on the affect of the ex...

  6. Which currency exchange regime for emerging markets?: Corner solutions under question

    Directory of Open Access Journals (Sweden)

    Allegret Jean-Pierre

    2007-01-01

    Full Text Available During the 90s, recurrent exchange rate crises in emerging markets have shown the extreme fragility of soft pegs, the so-called intermediate exchange rate regimes. As a result, numerous academic economists but also International institutions have promoted a new consensus: domestic authorities have to choose their exchange rate regime between only two solutions called corner solutions or extreme regimes: hard pegs or independent floating. This paper questions de relevance of this consensus. We stress the main advantages and costs of each corner solution. We conclude by stressing that intermediate regimes associated to an inflation targeting framework seem a better solution for emerging countries than corner solutions.

  7. ANALISIS PERBANDINGAN PENGGUNAAN HEDGINGANTARA FORWARD CONTRACT DENGAN CURRENCY SWAP UNTUK MEMINIMASI RISIKO FOREIGN EXCHANGE

    Directory of Open Access Journals (Sweden)

    Ni Wayan Eka Mitariani

    2013-07-01

    Full Text Available This study aims is to identifying the differences between using forward contract hedging or currencyswap hedging. Paired Sample T-Test were used to answer the problems and to test the hypothesis. The findings showthat without paying attention to the time value of money, currency swap hedging generated higher income value than forward contract hedging, whereas by paying attention to the time value of money, forwardcontracthedging generated higher income value than currency swap hedging. Significant differences were foundas far as the use of forward contract hedging and currency swap hedging are concerned, both by paying or noattention to the time value of money.

  8. Liquidity in the foreign exchange market : Measurement, commonality, and risk premiums

    NARCIS (Netherlands)

    Mancini, Loriano; Ranaldo, Angelo; Wrampelmeyer, Jan

    2013-01-01

    We provide the first systematic study of liquidity in the foreign exchange market. We find significant variation in liquidity across exchange rates, substantial illiquidity costs, and strong commonality in liquidity across currencies and with equity and bond markets. Analyzing the impact of

  9. Defusing the Energy Trap: The Potential of Energy-Denominated Currencies to Facilitate a Sustainable Energy Transition

    International Nuclear Information System (INIS)

    Sgouridis, Sgouris

    2014-01-01

    The universal adoption of fiat currencies and of the fractional reserve banking system coincided with access to and ability to utilize energy-dense fossil fuels leading to unprecedented rates of economic expansion. The depletion of economically recoverable fossil fuels though sets the stage for systemic crises as it is not adequately priced in the current market system. An energy-based system of exchange can be adopted in parallel to or in place of fiat currencies in order to facilitate a sustainable energy transition (SET) and mitigate the impacts of such crises. Energy-backed and energy-referenced currencies are discussed as two possible variants for their ability to realign the economic system to the thermodynamic limits of the physical world. The primary advantage of an energy-referenced currency over the current mechanisms for SET (like feed-in-tariffs or carbon taxes) is realized with the decoupling of the monetary and credit functions, especially when debt is tied to future energy availability. While energy-backed (credit) systems can be easier to adopt on a regional scale, the full transition to an energy-reference currency system requires significant reform of the financial and monetary system although it would not radically disrupt the current economic valuations given the high degree of correlation between value and embodied energy.

  10. Defusing the Energy Trap: The Potential of Energy-Denominated Currencies to Facilitate a Sustainable Energy Transition

    Energy Technology Data Exchange (ETDEWEB)

    Sgouridis, Sgouris, E-mail: ssgouridis@alum.mit.edu [Masdar Institute of Science and Technology, Abu Dhabi (United Arab Emirates)

    2014-02-26

    The universal adoption of fiat currencies and of the fractional reserve banking system coincided with access to and ability to utilize energy-dense fossil fuels leading to unprecedented rates of economic expansion. The depletion of economically recoverable fossil fuels though sets the stage for systemic crises as it is not adequately priced in the current market system. An energy-based system of exchange can be adopted in parallel to or in place of fiat currencies in order to facilitate a sustainable energy transition (SET) and mitigate the impacts of such crises. Energy-backed and energy-referenced currencies are discussed as two possible variants for their ability to realign the economic system to the thermodynamic limits of the physical world. The primary advantage of an energy-referenced currency over the current mechanisms for SET (like feed-in-tariffs or carbon taxes) is realized with the decoupling of the monetary and credit functions, especially when debt is tied to future energy availability. While energy-backed (credit) systems can be easier to adopt on a regional scale, the full transition to an energy-reference currency system requires significant reform of the financial and monetary system although it would not radically disrupt the current economic valuations given the high degree of correlation between value and embodied energy.

  11. ANALYSIS OF TIME SERIES FOR THE CURRENCY PAIR CROATIAN KUNA / EURO

    Directory of Open Access Journals (Sweden)

    Marko Martinović

    2017-01-01

    Full Text Available The domestic currency Croatian kuna (HRK was introduced in May 1995. To date, the Croatian National Bank (HNB, as a regulator and formulator of monetary policy in Croatia has operated a policy of stable exchange rate, typically referenced to the formal currency of the European Union euro (EUR. From the date of introduction of the euro 01/01/1999 until 01/01/2016 the value of the currency pair HRK / EUR changed in value by only 4.25% (HNB. Although the value of the Croatian kuna is relatively stable, there are some fluctuations on an annual level (e.g. in ­­­the last few years because of the global crisis as well as  on periodic levels within a year. The aim of this paper is to show the movement of the value of the currency pair since the beginning of 2002 to the present day (the time curve, analyze the correctness, trends and periodicity (seasonal behavior, if any exist.The research will be done using the method of Time Series Analysis, assuming that the external (global economy and internal factors (economic policy remain similar or the same. According to the results, further assessment of price developments in the period followed will be made by using the obtained predicative models. In the event that the curve contains the component of periodicity, the observed patterns will be studied further.

  12. High-frequency data and the effectiveness of the spot exchange rate EUR/USD

    Directory of Open Access Journals (Sweden)

    Petr Zeman

    2013-01-01

    Full Text Available The boom of information technology in recent years significantly influenced the development of the financial markets. Financial markets have become accessible to the public, and increased demand for financial instruments is inevitably reflected in the advanced menu of securities dealers who currently offer a wide variety of investment in the underlying assets and through financial leverage allows investors to profit from tiny price changes of the underlying asset. Shortening of trading period and increasing the frequency of the trades clearly contributes to the growth of profits of securities dealers. The question remains whether this trading method offers the advantage to the investor himself, and whether the investor is able to take advantage of potential market inefficiencies to achieve above-average profits in the short term period. Therefore, this paper analyzes the behaviour of the spot exchange rate EUR/USD within a day, and through statistical tests examining the validity of the random walk hypothesis for the 5-minute, hourly, 4-hourly and daily changes in the spot exchange rate of the currency pair EUR/USD.

  13. Modeling emotional dynamics : currency versus field.

    Energy Technology Data Exchange (ETDEWEB)

    Sallach, D .L.; Decision and Information Sciences; Univ. of Chicago

    2008-08-01

    Randall Collins has introduced a simplified model of emotional dynamics in which emotional energy, heightened and focused by interaction rituals, serves as a common denominator for social exchange: a generic form of currency, except that it is active in a far broader range of social transactions. While the scope of this theory is attractive, the specifics of the model remain unconvincing. After a critical assessment of the currency theory of emotion, a field model of emotion is introduced that adds expressiveness by locating emotional valence within its cognitive context, thereby creating an integrated orientation field. The result is a model which claims less in the way of motivational specificity, but is more satisfactory in modeling the dynamic interaction between cognitive and emotional orientations at both individual and social levels.

  14. Can abnormal returns be earned on bandwidth-bounded currencies? Evidence from a genetic algorithm

    OpenAIRE

    Pedro Godinho

    2012-01-01

    Most of the studies about the Foreign Exchange market (Forex) analyse the behaviour of currencies that are allowed to float freely (or almost freely), but some currencies are still bounded by bandwidths (either disclosed or undisclosed). In this paper, I try to find out whether two bandwidth-bounded currencies, the Hong Kong dollar (HKD) and the Singapore dollar (SGD), present opportunities for abnormal returns. I consider a set of trading rules, and I use a genetic algorithm to optimise both...

  15. Oil market structure, network effects and the choice of currency for oil invoicing

    International Nuclear Information System (INIS)

    Mileva, Elitza; Siegfried, Nikolaus

    2012-01-01

    Crude oil is a homogeneous good traded on specialised exchanges and quoted and invoiced predominantly in US dollars. Despite the strong case for the use of the US dollar as a vehicle currency in the oil trade, we provide an alternative view. We develop a simple network effects model to identify the conditions under which either a complete switch in the oil invoicing currency or parallel invoicing in different currencies is possible and economically sensible. We calibrate the model using low actual values for the transaction costs of using euro and/or US dollars, as well as a proxy for information costs, which decline with the increase in the use of the new currency. The results show that there will be a switch to parallel invoicing in both currencies when two conditions are met: first, oil exporters expect that a certain minimum number of other oil exporters will also start using the new currency; and second, the information costs associated with quoting oil contracts in two currencies are low. - Highlights: ► The US dollar as the dominant currency in the international trade of crude oil. ► We develop a model that treats currencies as network goods. ► The model predicts multiple equilibria with one or two vehicle currencies. ► Calibration shows that a switch to parallel invoicing in two currencies is possible.

  16. Assessing the Efficacy of Adjustable Moving Averages Using ASEAN-5 Currencies.

    Directory of Open Access Journals (Sweden)

    Jacinta Chan Phooi M'ng

    Full Text Available The objective of this research is to examine the trends in the exchange rate markets of the ASEAN-5 countries (Indonesia (IDR, Malaysia (MYR, the Philippines (PHP, Singapore (SGD, and Thailand (THB through the application of dynamic moving average trading systems. This research offers evidence of the usefulness of the time-varying volatility technical analysis indicator, Adjustable Moving Average (AMA' in deciphering trends in these ASEAN-5 exchange rate markets. This time-varying volatility factor, referred to as the Efficacy Ratio in this paper, is embedded in AMA'. The Efficacy Ratio adjusts the AMA' to the prevailing market conditions by avoiding whipsaws (losses due, in part, to acting on wrong trading signals, which generally occur when there is no general direction in the market in range trading and by entering early into new trends in trend trading. The efficacy of AMA' is assessed against other popular moving-average rules. Based on the January 2005 to December 2014 dataset, our findings show that the moving averages and AMA' are superior to the passive buy-and-hold strategy. Specifically, AMA' outperforms the other models for the United States Dollar against PHP (USD/PHP and USD/THB currency pairs. The results show that different length moving averages perform better in different periods for the five currencies. This is consistent with our hypothesis that a dynamic adjustable technical indicator is needed to cater for different periods in different markets.

  17. Assessing the Efficacy of Adjustable Moving Averages Using ASEAN-5 Currencies.

    Science.gov (United States)

    Chan Phooi M'ng, Jacinta; Zainudin, Rozaimah

    2016-01-01

    The objective of this research is to examine the trends in the exchange rate markets of the ASEAN-5 countries (Indonesia (IDR), Malaysia (MYR), the Philippines (PHP), Singapore (SGD), and Thailand (THB)) through the application of dynamic moving average trading systems. This research offers evidence of the usefulness of the time-varying volatility technical analysis indicator, Adjustable Moving Average (AMA') in deciphering trends in these ASEAN-5 exchange rate markets. This time-varying volatility factor, referred to as the Efficacy Ratio in this paper, is embedded in AMA'. The Efficacy Ratio adjusts the AMA' to the prevailing market conditions by avoiding whipsaws (losses due, in part, to acting on wrong trading signals, which generally occur when there is no general direction in the market) in range trading and by entering early into new trends in trend trading. The efficacy of AMA' is assessed against other popular moving-average rules. Based on the January 2005 to December 2014 dataset, our findings show that the moving averages and AMA' are superior to the passive buy-and-hold strategy. Specifically, AMA' outperforms the other models for the United States Dollar against PHP (USD/PHP) and USD/THB currency pairs. The results show that different length moving averages perform better in different periods for the five currencies. This is consistent with our hypothesis that a dynamic adjustable technical indicator is needed to cater for different periods in different markets.

  18. Bacterial contamination of Saudi Arabian paper currency: A report from Al-Kharj

    Directory of Open Access Journals (Sweden)

    Mohammad Muqtader Ahmed

    2017-02-01

    Full Text Available Background: Currency is a public support tool for exchange of commodity and services. It’s prevalent practice for acquiring bread to broast and bath to bed has connected all human being together irrespective of race and occupation. Currency notes along with their denomination values also carry pathogens if contaminated and will act as an agent for infection transference. Therefore the objective of this cross-sectional study was to assess the load microbial pathogens of paper currency collected in selected public places of Al-Kharj, Saudi Arabia. Methods: Currency notes under study were assessed through microbiological culture, microscopic and biochemical visualization techniques. Results: The results from this cross-sectional study suggested that lower the currency denominations higher was the microbial contaminations, frequency percentage was lower with higher isolations. Small eateries were the biggest source of contaminated currency from the ten selected centres. Percentage microorganism occurrence for Bacillus spp, Staphylococcus spp, Klebsiella spp and E. coli was 56.84%, 25.03%, 13.40% and 04.71% respectively in all currency notes under study. Conclusions: The outcomes of this study revealed that currency notes can be a source for microbe transmission causing infectious diseases represent public health hazards to the community and individuals.

  19. Is numérairology the future of monetary economics?: unbundling numéraire and medium of exchange through a virtual currency and a shadow exchange rate

    OpenAIRE

    Willem H. Buiter

    2007-01-01

    The paper discusses some fundamental problems in monetary economics associated with the determination and role of the numéraire. The issues are introduced by formalising a proposal, attributed to Eisler, to remove the zero lower bound on nominal interest rates by unbundling the numéraire and medium of exchange/means of payment functions of money. The monetary authorities manage the exchange rate between the numéraire ('sterling') and the means of payment ('drachma'). The short nominal interes...

  20. Cross-currency transmission of money market tensions

    OpenAIRE

    Kei Imakubo; Takeshi Kimura; Teppei Nagano

    2008-01-01

    Funding conditions in global money markets have tightened since August 2007. In various currency-denominated money markets, term funding rates have come under upward pressure because of heightened concerns about counterparty credit and liquidity risks. Although the magnitude of upward pressure on interbank rates has differed across markets, the direction of its movements has followed a similar pattern. In this Review, using a vector autoregression model, we analyze the cross-currency transmis...

  1. Risk-premia, Carry-trade Dynamics, and Economic Value of Currency Speculation

    DEFF Research Database (Denmark)

    Wagner, Christian

    2012-01-01

    In this paper, we derive the dynamics and assess the economic value of currency speculation by formalizing the concept of a trader inaction range. We show that exchange rate returns comprise a time-varying risk-premium and that uncovered interest parity (UIP) holds in a speculative sense. The often......-cited ‘forward bias puzzle’ originates from the omission of the risk-premium in standard UIP tests. Consistent with its popularity among market professionals, the carry-trade strategy can be rationalized as it systematically collects risk-premia, however, the economic value generated by bilateral carry-trades...

  2. Using financial derivatives to hedge against currency risk : British large and medium-sized firms

    OpenAIRE

    Nguyen, My

    2012-01-01

    Nowadays, as a growing number of firms strive to conduct their business at international market place, currency risk has increasingly raised concern among financial mangers due to its substantial impact on companies’ financial results. Financial derivative instruments (Forward, Futures, Options, Swaps) are utilized as efficient hedging mechanisms against such an exchange rate exposure. The main objective of this study is to examine whether derivatives play a primary role in mitigating an adve...

  3. Foreign Exchange Risk in International Transactions

    Directory of Open Access Journals (Sweden)

    Florentina-Olivia Balu

    2007-03-01

    In this article we will focus on forward and futures contracts for managing foreign exchange risk. A forward is a contract to buy or sell currency at an agreed upon exchange rate at a specific date in the future. Futures are similar to forwards except that they’re traded on exchanges which specify settlement dates. Also we make some recommendations related to the foreign exchange risk-management practices that are useful for companies involved in international trade and for financial institutions interested in providing hedging products to these companies.

  4. 12 CFR Appendix C to Part 3 - Capital Adequacy Guidelines for Banks: Internal-Ratings-Based and Advanced Measurement Approaches

    Science.gov (United States)

    2010-01-01

    ... THE CURRENCY, DEPARTMENT OF THE TREASURY MINIMUM CAPITAL RATIOS; ISSUANCE OF DIRECTIVES Pt. 3, App. C... means a cross-currency interest rate swap, forward foreign-exchange contract, currency option purchased... investment grade; (v) Equity securities that are publicly traded; (vi) Convertible bonds that are publicly...

  5. Exchange rate rebounds after foreign exchange market interventions

    Science.gov (United States)

    Hoshikawa, Takeshi

    2017-03-01

    This study examined the rebounds in the exchange rate after foreign exchange intervention. When intervention is strongly effective, the exchange rate rebounds at next day. The effect of intervention is reduced slightly by the rebound after the intervention. The exchange rate might have been 67.12-77.47 yen to a US dollar without yen-selling/dollar-purchasing intervention of 74,691,100 million yen implemented by the Japanese government since 1991, in comparison to the actual exchange rate was 103.19 yen to the US dollar at the end of March 2014.

  6. STATISTICS OF EXCHANGE RATE REGIMES IN NIGERIA

    African Journals Online (AJOL)

    DJFLEX

    2009-02-11

    Feb 11, 2009 ... one of two ways: as units of domestic currency per unit of foreign currency; or ... the domestic currency and maintenance of healthy balance of payment. ..... Volatility and Nigeria's Agricultural Trade flows: A dynamic Analysis.

  7. Foreign exchange risk in terms of global financial crisis

    Directory of Open Access Journals (Sweden)

    Michał Buszko

    2009-12-01

    Full Text Available Fx risk is one of the most important types of risk of financial activity. In practice, this risk comprises several risk aspects related to currencies exchanging, however most often it is identified with unexpected changes of their prices. In terms of the global financial crisis of 2007–2009, the fx risk has raised significantly, revealing a high daily volatility, increased spreads and the reversal of long-term exchange rate trends. Such increased risk especially influenced emerging markets economies, including Poland. Its consequence was quick strengthening of Polish currency at the beginning of the global crisis followed by a very sudden fall of its value. This event led to a substantial increase of banking risk, investment funds and corporate operations. It changed the structure of GDP sources as well as generated huge losses for exporting companies, using currency options hedging strategies.

  8. 78 FR 62901 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and...

    Science.gov (United States)

    2013-10-22

    ... per contract from its prior rate of $0.05 per contract. See Securities Exchange Act Release No. 69768... similar products.\\13\\ \\13\\ At least one other exchange currently trades foreign currency options. While... SECURITIES AND EXCHANGE COMMISSION [Release No. 34-70647; File No. SR-ISE-2013-50] Self-Regulatory...

  9. Alternative international currencies

    Directory of Open Access Journals (Sweden)

    Rozhentsova Vladimirovna Elena

    2012-01-01

    Full Text Available The modern international monetary system has a number of flaws and therefore needs cardinal change. Hence, economists from all over the world are suggesting alternative international currencies that would make the international monetary system more efficient. However, it is essential when approaching the creation of a new international currency to analyze and take into account the experience of all the past international currencies. Therefore this paper begins with an exploration of the drawbacks of each of the past and present international currencies. Drawing on this analysis a justification will be made for the necessity of introducing a new international currency, pointing to the requirements it should meet. Further on, this paper proposes an alternative theoretically possible variant of the international currency, with a fixed value relative to a commodity basket. An abstract example is used to demonstrate its composition and circulation mechanism.

  10. Bretton Woods Fixed Exchange Rate System versus Floating Exchange Rate System

    OpenAIRE

    Geza, Paula; Giurca Vasilescu, Laura

    2011-01-01

    One of the most important issues of monetary policy is to find out whether the state should intervene among the exchange rates, taking into account the fact that changes in the exchange rates represent a significant transmission channel of the effects generated by the monetary policy. Taking into consideration the failure of fixed exchange rate regimes and the recent improvement of financial markets, the return in the near future to such a regime – as for example the Bretton Woods system –...

  11. Automated exchange transfusion and exchange rate.

    Science.gov (United States)

    Funato, M; Shimada, S; Tamai, H; Taki, H; Yoshioka, Y

    1989-10-01

    An automated blood exchange transfusion (BET) with a two-site technique has been devised by Goldmann et al and by us, using an infusion pump. With this method, we successfully performed exchange transfusions 189 times in the past four years on 110 infants with birth weights ranging from 530 g to 4,000 g. The exchange rate by the automated method was compared with the rate by Diamond's method. Serum bilirubin (SB) levels before and after BET and the maximal SB rebound within 24 hours after BET were: 21.6 +/- 2.4, 11.5 +/- 2.2, and 15.0 +/- 1.5 mg/dl in the automated method, and 22.0 +/- 2.9, 11.2 +/- 2.5, and 17.7 +/- 3.2 mg/dl in Diamond's method, respectively. The result showed that the maximal rebound of the SB level within 24 hours after BET was significantly lower in the automated method than in Diamond's method (p less than 0.01), though SB levels before and after BET were not significantly different between the two methods. The exchange rate was also measured by means of staining the fetal red cells (F cells) both in the automated method and in Diamond's method, and comparing them. The exchange rate of F cells in Diamond's method went down along the theoretical exchange curve proposed by Diamond, while the rate in the automated method was significantly better than in Diamond's, especially in the early stage of BET (p less than 0.01). We believe that the use of this automated method may give better results than Diamond's method in the rate of exchange, because this method is performed with a two-site technique using a peripheral artery and vein.

  12. Defusing the Energy Trap: The Potential of Energy-Denominated Currencies to facilitate a Sustainable Energy Transition

    Directory of Open Access Journals (Sweden)

    Sgouris eSgouridis

    2014-02-01

    Full Text Available The universal adoption of fiat currencies and of the fractional reserve banking system coincided with access to and ability to utilize energy-dense fossil fuels leading to unprecedented rates of economic expansion. The depletion of economically recoverable fossil fuels though sets the stage for systemic crises as it is not adequately priced in the current market system. An energy-based system of exchange can be adopted in parallel to or in place of fiat currencies in order to facilitate a sustainable energy transition (SET and mitigate the impacts of such crises. Energy-backed and energy-referenced currencies are discussed as two possible variants for their ability to realign the economic system to the thermodynamic limits of the physical world. The primary advantage of an energy-referenced currency over the current mechanisms for SET (like feed-in tariffs or carbon taxes is realized with the decoupling of the monetary and credit functions, especially when debt is tied to future energy availability. While energy-backed (credit systems can be easier to adopt on a regional scale, the full transition to an energy-reference currency system requires significant reform of the financial and monetary system although it would not radically disrupt the current economic valuations given the high degree of correlation between value and embodied energy.

  13. Currency wars?

    OpenAIRE

    Gros, Daniel

    2010-01-01

    Treball final de Grau en Finances i Comptabilitat. Codi: FC1049. Curs academic 2015-2016 A currency war (also known as the competitive depreciation or a policy of impoverish the neighbor) occurs when a country wants to obtain a competitive advantage which improve its trade balancethrough a series of changes in its currency. With these currency movements exports become cheaper for foreigners while imports become more expensive for residents in the own nation. These advantages produce strong...

  14. RITUAL USE OF CURRENCY IN LAIMBWE HISTORY, CAMEROON

    Directory of Open Access Journals (Sweden)

    Henry Kam Kah

    2018-02-01

    Full Text Available The advent of Europeans in Cameroon in the 15th century and the introduction of a western currency as a standard of exchange and a measurement of value to replace other indigenous currencies had an impact on initiation into regulatory and entertainment societies in Cameroonian communities including the Laimbwe of the North West Region. Male and female institutions eventually began using these currencies during initiation rites. These included nwerong, ngiri, ngumba, takembeng, ndofoumgbui, kwifoyn (also kwifo’o, kwifeu, kuiifuai kefa’a, tschong, libah and ikuum in the grasslands and Liengu, male, ahon, muankum, nganya, monekim, ekpe and obasinjom in the forest region of Cameroon. Prior to the introduction of standard money, some local currencies like cowrie shells were used together with the provision of material things like goats, pigs, fowls and bush meat. Money is effectively a measure of value, status and a store of wealth within the Laimbwe traditional milieu. This paper examines how and why the introduction of money in initiation and other ritual activities led to the emergence of new social classes and the re-enforcement of the socio-political order of the Laimbwe people. The study essentially relies on discussions with members of societies, observation and written material.

  15. Currency Market Reactions to Good and Bad News During the Asian Crisis

    OpenAIRE

    Gab-Je Jo; Thomas D. Willett

    2000-01-01

    There is considerable disagreement among analysts about the extent to which the spread of the Asian crisis was based on reasonable changes in expectations about fundamentals versus pure contagion effects resulting from imperfections in the behavior of currency and financial markets. In this paper we focus specifically on the behavior of the foreign exchange market for the five Asian countries. We find little support for the hypothesis that the Asian currency crisis was dominated by panic in t...

  16. Is a more stable exchange rate associated with reduced exchange rate pass-through?

    OpenAIRE

    Mark J. Holmes

    2007-01-01

    Pass-through from the nominal effective exchange rate to import prices is modelled within a regime-switching environment. Evidence suggests that exchange rate pass through can be characterised as regime-specific where the probability of switching between regimes is influenced by the extent of exchange rate volatility.

  17. Cross currency swap valuation

    OpenAIRE

    Boenkost, Wolfram; Schmidt, Wolfgang M.

    2004-01-01

    Cross currency swaps are powerful instruments to transfer assets or liabilities from one currency into another. The market charges for this a liquidity premium, the cross currency basis spread, which should be taken into account by the valuation methodology. We describe and compare two valuation methods for cross currency swaps which are based upon using two different discounting curves. The first method is very popular in practice but inconsistent with single currency swap valuation methods....

  18. Is the Return to the Virtual US Dollar Pegging of East Asian Currencies Correct? : The Impacts of the Yen-Dollar Exchange Rate on the East Asian Currencies in the Post Crisis Period

    OpenAIRE

    金, 炳宣; Byung Sun, Kim; 経済学研究科

    2004-01-01

    This paper studies the evolution of the exchange rate regime on East Asian economies between pre- and post-crisis periods, especially with a focus on the impacts of change in yen-dollar rate, using a regression model based on the work by Frankel and Wei (1994). As a result of the study, the following points are understood. Firstly, a greater diversity in exchange rate regime is seen for the post-crisis period than the pre-crisis period. At one extreme, Hong Kong under a stable dollar peg thro...

  19. Multifractal analysis of managed and independent float exchange rates

    Science.gov (United States)

    Stošić, Darko; Stošić, Dusan; Stošić, Tatijana; Stanley, H. Eugene

    2015-06-01

    We investigate multifractal properties of daily price changes in currency rates using the multifractal detrended fluctuation analysis (MF-DFA). We analyze managed and independent floating currency rates in eight countries, and determine the changes in multifractal spectrum when transitioning between the two regimes. We find that after the transition from managed to independent float regime the changes in multifractal spectrum (position of maximum and width) indicate an increase in market efficiency. The observed changes are more pronounced for developed countries that have a well established trading market. After shuffling the series, we find that the multifractality is due to both probability density function and long term correlations for managed float regime, while for independent float regime multifractality is in most cases caused by broad probability density function.

  20. A Proposed Solution for the Chicken-Egg Dilemma in Pricing Currency Options

    Directory of Open Access Journals (Sweden)

    Ariful Hoque

    2013-06-01

    Full Text Available The implied volatility (IV estimation process suffers from an obvious chicken-egg dilemma: obtaining an unbiased IV requires the options to be priced correctly and calculating an accurate option price (OP requires an unbiased IV. We address this critical issue in two steps. First, the Granger causality test is employed, whichconfirms the chicken-and-egg problem in the IV computing process. Secondly, the concept of “moneyness volatility (MV” is introduced as an alternative to IV. MV is modelled based on an option’s moneyness (OM during the life of the option’s contract. The F-test, Granger-Newbold test and Diebold-Mariano test results consistently show that MV outperforms IV in estimating the exchange rate volatility for pricing options. Further, these series of tests across six major currency options substantiate the validity as well as the reliability of the results. We posit that MV offers a unique solution for pricing currency options accurately.

  1. The Effect of Inflation on The Currency Exchange Rate Seen in The Islamic Finance

    Directory of Open Access Journals (Sweden)

    Agus Purnomo

    2017-06-01

    circulating money in community is too much, then inflation may happen. Inflation is the increasing of goods price continuously. This does not mean that the prices of various goods increase at the same percentage. The increase which happened only once is not called inflation, although rising prices reach considerable percentage. The aim of the research is to determine the effect of inflation on the value of rupiah in Indonesia in the Islamic finance. This research used quantitative and qualitative methods. In quantitative method, the writer used data analysis of Indonesia monetary policy. The data was taken from Bank of Indonesia, meanwhile for qualitative method, the writer collected the data through interview with employee of Bank of Indonesia. From inflation data analysis in 2013, it is known that inflation was 5.31% in February, 6.7% in June 2014, 7.26% in 2015, and 3.60% in 2016. The result of this research showed that the influence of inflation toward currency exchange rate in the perspective of Islamic finance occured because of export decline, the slow growth of economy global, the decline of world crude oil prices, coal price, palm oil price, and rubber price. As a result, those factors caused inflation to the value of the rupiah against US dollar. Nilai tukar didefinisikan sebagai mata uang yang dapat ditukarkan sebagai satu unit mata uang lain, atau merupakan harga dari suatu mata uang dengan mata uang lain. Peredaran uang di masyarakat apabila terlalu banyak akan menyebabkan inflasi. Inflasi adalah proses kenaikan harga-harga umum barang-barang secara terus menerus. Ini tidak berarti bahwa harga-harga berbagai macam barang itu naik dengan persentase yang sama. Kenaikan yang terjadi hanya sekali saja bukanlah merupakan inflasi, meskipun kenaikan harga tersebut terjadi dengan persentase yang cukup besar. Tujuan dari penelitian ini untuk mengetahui pengaruh inflasi terhadap nilai tukar mata uang rupiah di Indonesia dalam perspektif

  2. Governance and sustainability of the Argentine Complementary Currency Systems

    NARCIS (Netherlands)

    G.M. Gómez (Georgina)

    2012-01-01

    textabstractThe Redes de Trueque (RT) thrived during the economic crisis of 2001 – 2002 in Argentina and still stand out as one of the largest Complementary Currency System in the world. These local exchange networks reach a large scale during times of severe economic distress, but as large

  3. A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates

    Science.gov (United States)

    Chen, Yanhua; Mantegna, Rosario N.; Zuev, Konstantin M.

    2018-01-01

    In this study, we assess the dynamic evolution of short-term correlation, long-term cointegration and Error Correction Model (hereafter referred to as ECM)-based long-term Granger causality between each pair of US, UK, and Eurozone stock markets from 1980 to 2015 using the rolling-window technique. A comparative analysis of pairwise dynamic integration and causality of stock markets, measured in common and domestic currency terms, is conducted to evaluate comprehensively how exchange rate fluctuations affect the time-varying integration among the S&P 500, FTSE 100 and EURO STOXX 50 indices. The results obtained show that the dynamic correlation, cointegration and ECM-based long-run Granger causality vary significantly over the whole sample period. The degree of dynamic correlation and cointegration between pairs of stock markets rises in periods of high volatility and uncertainty, especially under the influence of economic, financial and political shocks. Meanwhile, we observe the weaker and decreasing correlation and cointegration among the three developed stock markets during the recovery periods. Interestingly, the most persistent and significant cointegration among the three developed stock markets exists during the 2007–09 global financial crisis. Finally, the exchange rate fluctuations, also influence the dynamic integration and causality between all pairs of stock indices, with that influence increasing under the local currency terms. Our results suggest that the potential for diversifying risk by investing in the US, UK and Eurozone stock markets is limited during the periods of economic, financial and political shocks. PMID:29529092

  4. A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates.

    Science.gov (United States)

    Chen, Yanhua; Mantegna, Rosario N; Pantelous, Athanasios A; Zuev, Konstantin M

    2018-01-01

    In this study, we assess the dynamic evolution of short-term correlation, long-term cointegration and Error Correction Model (hereafter referred to as ECM)-based long-term Granger causality between each pair of US, UK, and Eurozone stock markets from 1980 to 2015 using the rolling-window technique. A comparative analysis of pairwise dynamic integration and causality of stock markets, measured in common and domestic currency terms, is conducted to evaluate comprehensively how exchange rate fluctuations affect the time-varying integration among the S&P 500, FTSE 100 and EURO STOXX 50 indices. The results obtained show that the dynamic correlation, cointegration and ECM-based long-run Granger causality vary significantly over the whole sample period. The degree of dynamic correlation and cointegration between pairs of stock markets rises in periods of high volatility and uncertainty, especially under the influence of economic, financial and political shocks. Meanwhile, we observe the weaker and decreasing correlation and cointegration among the three developed stock markets during the recovery periods. Interestingly, the most persistent and significant cointegration among the three developed stock markets exists during the 2007-09 global financial crisis. Finally, the exchange rate fluctuations, also influence the dynamic integration and causality between all pairs of stock indices, with that influence increasing under the local currency terms. Our results suggest that the potential for diversifying risk by investing in the US, UK and Eurozone stock markets is limited during the periods of economic, financial and political shocks.

  5. China currency dispute: is a rise in the yuan inevitable, necessary or desirable?

    OpenAIRE

    Tatom, John

    2007-01-01

    China-bashing has become a popular media and political sport. This is largely due to the U.S. trade imbalance and the belief, by some, that China is responsible for it because it manipulates its currency to hold down the dollar prices of its goods, unfairly creating a trade advantage that has contributed to the loss of U.S. businesses and jobs. This paper reviews the problem of the large trade imbalance that the United States has with China and its relationship to Chinese exchange rate poli...

  6. China Currency Dispute: Is a Rise in the Yuan Necessary, Inevitable or Desirable?

    OpenAIRE

    John A. Tatom

    2007-01-01

    China-bashing has become a popular media and political sport. This is largely due to the U.S. trade imbalance and the belief, by some, that China is responsible for it because it manipulates its currency to hold down the dollar prices of its goods, unfairly creating a trade advantage that has contributed to the loss of U.S. businesses and jobs. This paper reviews the problem of the large trade imbalance that the United States has with China and its relationship to Chinese exchange rate policy...

  7. International Energy Prices(Exchange Rate and PPP)

    Energy Technology Data Exchange (ETDEWEB)

    Jo, Sung Han; Yoo, Dong Heon [Korea Energy Economics Institute, Euiwang (Korea)

    2000-11-01

    Energy is to be specially important to the Korean economy. In the past the major purpose of Korea's energy policies was to ensure that the energy was supplied at the low cost to encourage and sustain economic development and growth. Therefore, energy prices are distorted by government intervention. And this was the cause of inefficiency in usage of energy. In order to improve the energy efficiency and reduce the environmental impact of energy consumption, new energy pricing should be needed to the energy industry and the Korean economy. It is necessary to compare the domestic energy prices with other countries to improve the energy pricing system including tax, the relative structure of energy price, etc. In order to compare the domestic energy prices to those of other countries, the exchange rate, purchasing power parity and Big Mac index are used for calculation of common currency. We select 12 countries, which are Belgium, France, Germany, Greece, Ireland, Italy, Portugal, Spain, Switzerland, Taiwan, Mexico and England. The oil products(gasoline, diesel, heavy fuel oil and light fuel oil), natural gas and electricity are selected to compare the price. (author). 12 refs., 13 tabs.

  8. 26 CFR 1.988-6 - Nonfunctional currency contingent payment debt instruments.

    Science.gov (United States)

    2010-04-01

    ... accrued but unpaid interest is translated into functional currency at the same rate used, in each of the... 26 Internal Revenue 10 2010-04-01 2010-04-01 false Nonfunctional currency contingent payment debt... (CONTINUED) INCOME TAX (CONTINUED) INCOME TAXES Export Trade Corporations § 1.988-6 Nonfunctional currency...

  9. Choice of exchange rate regimes for African countries: Fixed or Flexible Exchange rate regimes?

    OpenAIRE

    Simwaka, Kisu

    2010-01-01

    The choice of an appropriate exchange rate regime has been a subject of ongoing debate in international economics. The majority of African countries are small open economies and thus where the choice of the exchange rate regime is an important policy issue. Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country’s relative level of economic health. For this reason, exchange rates are among the most watched analyzed and ...

  10. The Determinants of Banking Crises and Currency Crises

    Directory of Open Access Journals (Sweden)

    Young Mok Bae

    2005-06-01

    Full Text Available This paper studies the factors associated with the emergence of banking crises and currency crises and the interrelationship between the two crises in 21 American, European and Asian countries in 1973~2000 using a multivariate logit econometric model. And this analysis attempts to introduce the lag model to solve the causality problems in banking crises and currency crises. In case of the simple binary models without lag, banking crises were associated with economic recession, inflation, depreciation, the rise of real interest rate, lending boom. But in case of lag models, banking crises were caused by economic recession, inflation, the rise of real interest rate, lending boom, the rise of reserve ratio, the liberalization of capital account. Currency crises were associated with economic recession, the larger deficit of current account relative to import in case of the simple binary models without lag, But in case of lag models, currency crises were caused by economic recession, the rapid decrease of net foreign assets of banks, and the larger deficit of current account relative to import. And this analysis shows that currency crises can be a cause of banking crises, not vice versa. Nevertheless the two types of crises have positive correlation with each other.

  11. Democracy and Markets: The Case of Exchange Rates

    OpenAIRE

    John R. Freeman; Jude C. Hays; Helmut Stix

    1999-01-01

    The relationships between the workings of democratic institutions and currency markets are studied. Several competing propositions about how political (re)equilibration affects currency markets are derived and tested. The results support the view that democratic politics affects currency markets. Expectations and uncertainty about electoral outcomes and government survival affect the probability of switching between currency market equilibria. Additionally, opinion polls about chief executive...

  12. Tangible and fungible energy: Hybrid energy market and currency system for total energy management. A Masdar City case study

    International Nuclear Information System (INIS)

    Sgouridis, Sgouris; Kennedy, Scott

    2010-01-01

    We propose the introduction of an energy-based parallel currency as a means to ease the transition to energy-conscious living. Abundant fossil energy resources mask the internal and external energy costs for casual energy consumers. This situation is challenging communities that draw a significant fraction of their primary energy consumption from renewable energy sources. The Masdar Energy Credit (MEC) system is a way of translating the fundamental aspects behind energy generation and usage into a tangible reality for all users with built-in fungibility to incentivize collectively sustainable behavior. The energy credit currency (ergo) corresponds with a chosen unit of energy so that the total amount of ergos issued equals the energy supply of the community. Ergos are distributed to users (residents, commercial entities, employees, and visitors) on a subscription basis and can be surrendered in exchange for the energy content of a service. A spot market pricing mechanism is introduced to relate ergos to 'fiat' currency using a continuously variable exchange rate to prevent depletion of the sustainable energy resource. The MEC system is intended to: (i) meet the sustainable energy balance targets of a community (ii) support peak shaving or load shifting goals, and (iii) raise energy awareness.

  13. An Empirical Investigation into Exchange Rate Regime Choice and Exchange Rate Volatility

    OpenAIRE

    Helge Berger; Jan-Egbert Sturm; Jakob de Haan

    2000-01-01

    We test a simple model of exchange rate regime choice with data for 65 non-OECD countries covering the period 1980-94. We find that the variance of output at home and in potential target c ountries as well as the correlation between home and foreign real activity are powerful and robust predictors of exchange rate regime choice. Surprisingly, a more volatile foreign economy can be an argument in favor of a fixed exchange rate regime once similarities in the business cycle are taken into accou...

  14. Can yen be the currency for international settlement and foreign reserves; En no kokusaika (kessai junbi tsuka toshite no en no kanosei)

    Energy Technology Data Exchange (ETDEWEB)

    Hiraki, S. [Niigata University, Niigata (Japan). Faculty of Engineering

    1995-11-20

    Taking as the first on the list the fall in the status of the U.S. dollar as seen in aiding the Mexican currency liquidity crisis, this paper traces the course of weakening of the U.S. dollar and changes in foreign exchange rates, and explains the internationalization and expectation on the yen as a supplementary key currency. Since the American trade balance had turned into deficit in 1970, the value of the U.S. dollar has declined against that of the Japanese yen and German mark. It is clear from change in the IMF assignment amount that the two latter currencies are taking the role for international settlement and as reserve currencies. The import contracts denominated in yen in Asia during 1991 have stayed as low as at 21.6% based on the prediction of the appreciating trend of yen, while those for the export contracts have exceeded 50%. Although the amount of yen reserved in every country as the reserve currency is still small, it is anticipated that yen will be playing more important role as one of the key currencies in the future. However, it is also a fact that there are several problems for yen to be capable of being used for the international settlement and as the reserve currency. 1 fig., 4 tabs.

  15. An Incomplete Optimal Currency Area

    DEFF Research Database (Denmark)

    Dreyer, Johannes Kabderian; Graversen, Mads Byskov

    2014-01-01

    The main objective of this study is to test if the Eurozone a decade after its launch can be considered an optimal currency area (OCA) as defined by Mundell (1961). In an OCA, asymmetric shocks – as the ones experienced by the Eurozone following the recent financial crisis – may be dampened by tw...... on migration rates. We use panel regressions to test these relationships and find out that migration between member states is very low after the Euro’s first decade. Combined with the lack of significant fiscal transfers we conclude that the currency union is still not an OCA.......The main objective of this study is to test if the Eurozone a decade after its launch can be considered an optimal currency area (OCA) as defined by Mundell (1961). In an OCA, asymmetric shocks – as the ones experienced by the Eurozone following the recent financial crisis – may be dampened by two...... instruments: fiscal transfers from one country to another, or migration. As fiscal transfers in the Eurozone are low, we study the economic significance of migration flows as automatic stabilizers of the currency area. We assume that there is a strong relationship between unemployment and relative wealth...

  16. Currency Crisis in Sudan in 2012: An Econometric Analysis

    Directory of Open Access Journals (Sweden)

    Alamedin Bannaga, Dr.

    2015-06-01

    Full Text Available The Sudan currency crisis in 2012 occurred when the Sudanese pound lost 66 percent of its value against the US dollar. In this article we adopt statistical methods such as the signal approach and econometric methods such as the Probit Model for identifying and evaluating the currency crisis. We utilize some economic indicators that have the ability to predict the crisis. We examined the capability of these indicators in generating an early warning system for Sudan currency crisis. The study confirms that the incidence of currency crisis in Sudan increases by increase in inflation rate, increase in import percentage of GDP, rise in claims against the central government, reduction in external reserves and existence of political crisis. Moreover, the study finds that the most important predictor of currency crisis in Sudan is decline in external reserves.

  17. Momentum in stock market returns: Implications for risk premia on foreign currencies

    OpenAIRE

    Thomas Nitschka

    2010-01-01

    Momentum in foreign stock market returns is exploitable as signal of currency excess returns. Past stock market winner currencies offer higher returns than past stock market loser currencies. This finding is unrelated to interest rate differentials. Funding liquidity risk explains the time series variation in foreign stock market momentum sorted currency portfolio returns. Their cross-sectional dispersion is hardly rationalized by systematic risk factors in contrast to forward discount and cu...

  18. The value relevance of the foreign currency translation differences : a study of multinational oil and gas companies in Australia

    OpenAIRE

    Svetalna Vlady

    2008-01-01

    This paper investigates the relationship between foreign currency translation differences and changes in firm’s market equity value of the Australian multinational firms in the oil and gas industry. The paper empirically examines this relationship under the former Australian accounting standard AASB 1012 “Foreign Currency Translation”. The paper thereby supports the new accounting standard AASB 121 “The Effects of Changes in Foreign Exchange Rates” that adopted a functional currency approach....

  19. 'Carbon-Money Exchange' to contain global warming and deforestation

    International Nuclear Information System (INIS)

    Nagase, Kozo

    2005-01-01

    This paper builds a basic theory of 'Carbon-Money Exchange' in which carbon as currency in nature's household (ecosystems) and money as currency in humankind's household (economy) are exchanged just like in a foreign exchange. The simple chemical equation below makes it possible (CO 2 →C+O 2 =C+O 2 →CO 2 ). The left-hand side represents the work of plants to remove atmospheric CO 2 . The right-hand side represents the work of humans as fossil fuel consumers to produce it. The exchange of the two currencies is possible by copying the fossil fuel market. The paper concludes that this new exchange can automatically contain global warming and deforestation, replacing onerous emissions trading. Moreover, it could revolutionize the conventional economy, creating counter-capitalism, or 'carbonism'

  20. Exchange rate regulation, the behavior of exchange rates, and macroeconomic stability in Brazil

    Directory of Open Access Journals (Sweden)

    Francisco Eduardo Pires de Souza

    2011-12-01

    Full Text Available In the last two decades an entirely new set of rules governing the foreign exchange transactions was established in Brazil, substituting for the framework inherited from the 1930s. Foreign exchange controls were dismantled and a floating exchange rate regime replaced different forms of peg. In this paper we argue that although successful by comparison to previous experiences, the current arrangement has important flaws that should be addressed. We discuss how it first led to high volatility and extremely high interest rates, which, when overcome, gave way to a long lasting appreciation of the real exchange rate with adverse consequences to industry.

  1. The methodology of comparative evaluation of ruble and foreign currency loans in the pre-crisis period

    Directory of Open Access Journals (Sweden)

    Chamov Aleksey Nikolaevich

    2016-04-01

    Full Text Available In the article the author considers a problem of an optimal way of borrowing during the pre-crisis period (deciding between ruble and foreign currency borrowings. It is obvious that during the period of stable economic growth, when currency pair rate (for example, ruble - USA dollar doesn't change significntly, the lower interest rate of foreign currency loans makes them a cheaper way of borrowing. But during a crisis an abrupt growth of currency pair rate can make foreign currency loan a more expensive way of borrowing (as compared to ruble loan. The author suggests a scenario-based method of decision making about an optimal way of borrowing during a pre-crisis period, which affords to calculate a threshold meaning of currency pair rate, after which a foreign currency loan becomes more expensive. Application of the method is illustrated on the example of a situation in a telecommunication sector in Russian Federation during currency crisis of 2014. A detailed analysis if the situation in the sector in the last pre-crisis year (2013 is provided. Structures of debt burdens of the leading companies (Vimpelcom, MTS and Megafon are considered. Percent shares of currency loans, shares of borrowing types and according interest rates are provided. In the conclusion of the article some specific aspects of application of suggested method and potential ways of its improvement are considered.

  2. Corporate financing strategies employed by Zimbabwean listed firms in the multiple currency era

    Directory of Open Access Journals (Sweden)

    Farai Kwenda

    2015-09-01

    Full Text Available The aim of this study is to review the corporate financing strategies employed by Zimbabwean listed firms since the adoption of the multiple currency system which set the country on a recovery path after the decade-long political, social and economic crises. The adoption of the multiple currency system necessitated recapitalization and retooling because most firms’ balance sheets were wiped away during the hyperinflation era. The study is based on secondary data of 80 firms listed on the Zimbabwe Stock Exchange. The study found that rights issues and high retention ratios were the main strategies used by firms to recapitalize their operations. The recapitalization efforts have been by liquidity challenges that have characterised the multiple currency era.

  3. Currency union entries and trade

    OpenAIRE

    Nitsch, Volker

    2005-01-01

    Recent research suggests that adopting a common currency increases bilateral trade. In this paper, I explore experiences of currency union entry in the post-war period and find no effect on trade. Previous results derived from a large panel data set (covering more than 200 countries from 1948 through 1997) appear to depend crucially on the assumption of symmetry between currency union exits and entries: While countries leaving a currency union experience significant declines in trade, currenc...

  4. Efficiency of the Foreign Exchange Market of Papua New Guinea During the Recent Float

    OpenAIRE

    Guneratne Banda Wickremasinghe

    2004-01-01

    This paper examines the validity of the efficient market hypothesis (EMH) for the foreign exchange market of Papua New Guinea (PNG) using data on spot exchange rates for four major foreign currencies during the recent float. The unit root test results indicate that all the four exchange rates are random walks supporting the weak-form of the EMH. However, the Johansen multivariate cointegration test, the Granger causality test and variance decomposition analysis provide evidence that there are...

  5. Il contributo dell'ECU alla stabilità dei cambi: una replica. (The contribution of the ECU to exchange-rate stability. A comment

    Directory of Open Access Journals (Sweden)

    M. SARCINELLI

    2013-12-01

    Full Text Available L'articolo è una breve nota critica alcuni elementi essenziali di Jager e De Jong del potenziale impatto del dell'ECU privato sulla stabilità dei tassi di cambio mondiale ed europeo ( 1988 . L'autore fornisce tre punti di critica che minano l'analisi di quel articolo. In primo luogo , l'ECU deve essere considerata in tutte le sue funzioni di una valuta di riserva internazionale e non solo come valuta di investimento . In secondo luogo, la restrittività delle assunzioni sottostanti l'approccio di portafoglio fanno esito degli autori inutile nella pratica . In terzo luogo, il risultato dei loro calcoli favorisce l'ipotesi che la centralina crea stabilità dei cambi The article is a brief note criticising some essential elements of Jager and De Jong’s The private ECU’s potential impact on Global and European exchange-rate stability (1988. The author provides three points of criticism which undermine that article’s analysis. Firstly, the ECU ought to be considered in all its functions of an international reserve currency and not only as an investment currency. Secondly, the restrictiveness of the assumptions underlying the portfolio approach make the authors’ outcome useless in practice. Thirdly, the outcome of their calculations favours the hypothesis that the ECU creates exchange-rate stability.JEL: F33, F36

  6. Effective Exchange Rate Classifications and Growth

    OpenAIRE

    Justin M. Dubas; Byung-Joo Lee; Nelson C. Mark

    2005-01-01

    We propose an econometric procedure for obtaining de facto exchange rate regime classifications which we apply to study the relationship between exchange rate regimes and economic growth. Our classification method models the de jure regimes as outcomes of a multinomial logit choice problem conditional on the volatility of a country's effective exchange rate, a bilateral exchange rate and international reserves. An `effective' de facto exchange rate regime classification is then obtained by as...

  7. The euro: an international currency

    International Nuclear Information System (INIS)

    Riley, D.

    2000-01-01

    A number of studies and reports are now readily available on how to come grips the Euro - its calendar, conversion factors, legal, financial and accounting aspects, and so forth. Typically, they point to a fixed-for-ever rate of exchange between participating countries, which of course may have strategic consequences for the location of many types of business. This survey does not seek to be exhaustive, nor to cover what is well documented elsewhere. Rather, it attempts to examine areas where uncertainty, or controversy continue to exist, as well as focus on aspects that are pertinent to the oil and gas industries. Two questions stand out. The first is a general one, concerning how the Euro is likely to fare in international currency markets, notably relative to the US Dollar. The second is closely linked to the first, but is specific to the hydrocarbons business: will European oil and gas prices be quoted in euros and, if so, over what time frame? Finally, this review looks briefly at a selection of other impacts relevant to the energy business

  8. Foreign exchange transaction exposure of enterprises in Serbia

    Directory of Open Access Journals (Sweden)

    Bogićević Jasmina

    2016-01-01

    Full Text Available Enterprises involved in international business face transaction exposure to foreign exchange risk. This type of exposure occurs when an enterprise trades, borrows, or lеnds in foreign currency. Transaction exposure has a direct effect on an enterprise’s financial position and profitability. It is one of the three forms of exposure to exchange rate fluctuations, the other two being translation exposure and operating exposure. The aim of this paper is to assess the transaction exposure of enterprises in Serbia operating internationally. In addition to identifying and measuring transaction exposure, this paper explores the practical importance that enterprises in Serbia attach to management of this type of foreign exchange risk. We do not find significant differences between domestic and foreign enterprises in their choice of the type of foreign exchange risk exposure to manage. Although transaction exposure is the most managed type of foreign exchange risk, research has shown that, compared to foreign businesses, Serbian enterprises do not use sufficient protective measures to minimize the negative impact of this type of exposure on their cash flows and profitability. We expected that there would be a statistically significant dependence between the volume of enterprises’ foreign currency transactions and the level of applied transaction exposure management practices. However, the results of our research, based on a sample of enterprises in Serbia operating internationally, show that transaction exposure management practices can be influenced by factors other than the level of an enterprise’s foreign currency transactions, such as the enterprise’s country of origin.

  9. Exchange rate smoothing in Hungary

    OpenAIRE

    Karádi, Péter

    2005-01-01

    The paper proposes a structural empirical model capable of examining exchange rate smoothing in the small, open economy of Hungary. The framework assumes the existence of an unobserved and changing implicit exchange rate target. The central bank is assumed to use interest rate policy to obtain this preferred rate in the medium term, while market participants are assumed to form rational expectations about this target and influence exchange rates accordingly. The paper applies unobserved varia...

  10. THE CARD - CURRENCY WITH AND WITHOUT CASH

    Directory of Open Access Journals (Sweden)

    Nicoara Mihaela

    2012-12-01

    Full Text Available Use by individuals and businesses resulting in reduced cash cards in circulation, the corresponding increase in transfer payments and payments accounts also limit exchange risks and make effective use of currency. As a result, we have the effect of reducing cash in circulation. These advantages are also available for businesses and for banks and leads to favorable effects on import-export business. Following this, banks can diversify our products, so to meet customers' new products.

  11. 78 FR 13717 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of...

    Science.gov (United States)

    2013-02-28

    ... Index than if traditional trading increments are used because options on the individual foreign currency... trading on the Exchange of options on a foreign currency index, the Dow Jones FXCM Dollar Index. The... the Dow Jones FXCM Dollar Index will be settled in the same manner as the Exchange's foreign currency...

  12. 75 FR 44995 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and...

    Science.gov (United States)

    2010-07-30

    ... options on the following FX option currencies traded on the Exchange: New Zealand dollar, Mexican peso.../dealer and is not a Priority Customer. For all other FX option currencies traded on the Exchange, this... Rule Change Relating to Foreign Currency Options Orders Fee Discount for Market Makers and Non-ISE...

  13. Forecasting Foreign Currency Exchange Rates for Air Force Budgeting

    Science.gov (United States)

    2015-03-26

    recommends using the settlement price of the average option contract in October to decrease the median APE by 3.475% and avoiding a $36 million opportunity...29  Table 8 OECD Long Term Interest Rates, Percent Per Annum Example ........................ 30  Table 9 Global Insight 1 Year, 2...Budget Process The federal government receives tariffs, taxes , fees, and other collections throughout the fiscal year (1 October – 30 September). The

  14. Tassi di cambio fluttuanti, deprezzamento valutario e domanda effettiva: un commento (Floating exchange rates, currency depreciation and effective demand: a review

    Directory of Open Access Journals (Sweden)

    Mario Sarcinelli

    2012-04-01

    Full Text Available Concordo certamente con gli autori sul punto principale, cioè che i tassi di cambio flessibili non danno luogo a un aggiustamento automatico che riporta all’equilibrio di piena occupazione. Ciò che vorrei sostenere è che i cambi flessibili, nondimeno, possono essere più vantaggiosi di quelli fissi e che la gestione del tasso di cambio per il conseguimento di obiettivi di politica economica interni, sebbene utile in alcune circostanze, non dovrebbe diventare la regola in un mondo in cui eventi finanziari influiscono di frequente sulle variabili reali.A mio avviso, l’intervento sul mercato dei cambi da parte della banca centrale dovrebbe avere una scarsa frequenza ed essere usato come segnale per bloccare una tendenza all’ingiù o all’insù, il che ovviamente richiede cooperazione e sostegno da parte di altre banche centrali. Quanto alle misure compatibili col mercato relative ai movimenti di capitale, il ricorso a esse dovrebbe essere ancora più cauto. Comunque, una gestione per (rara eccezione del tasso di cambio è certamente possibile.   I certainly agree with the authors on the main point, which is that flexible exchange rates do not result in an automatic adjustment that brings equilibrium with full employment. What I would argue is that flexible exchange rates, however, may be more advantageous than those fixed and that the management of the exchange rate to achieve domestic policy objectives, although useful in some circumstances, it should become the norm in a world in which financial events affect frequently on real variables.In my view, the intervention on the foreign exchange market by the central bank should have a low frequency and used as a signal to prevent upward or downward trend, which of course requires the cooperation and support from other banks central. With regard to the measures compatible with the market on the movement of capital, the use of them should be even more cautious. However, a management for (rare

  15. Exchange Rate Policy in Philippine Development

    OpenAIRE

    Bautista, Romeo M.

    2003-01-01

    This paper examines the conduct of exchange rate policy in the Philippines since the early 1980s, paying particular attention to the influence of exchange rate adjustments on relative production incentives. While primary interest is in the exchange rate regime and its incentive effects, the role of trade policy has to be simultaneously analyzed in view of its influence on the conduct of exchange rate policy as well as its direct effect on the real exchange rate. Moreover, there are analytical...

  16. Capital flows, real exchange rates, and capital controls: What is the scope of liberalization for Tunisia?

    Directory of Open Access Journals (Sweden)

    Marrakchi Charfi Fatma

    2013-01-01

    Full Text Available This paper deals with an important aspect of Tunisian economic and political decisions related to the opportunity for currency convertibility. Tunisia has established its current currency convertibility and has taken steps to achieve full convertibility of the dinar by gradually removing capital flow obstacles. Theoretical and empirical literature suggests that capital account liberalization generally leads to capital inflow in developing countries, generating an appreciation in the real exchange rate (RER and thus a loss in competitiveness. However, preserving competitiveness is a key challenge for monetary authorities, who have to conciliate these two apparently conflicting purposes. To guide their decisions with respect to the prescribed procedure for capital liberalization, we need to evaluate the impact of each capital component flow on the RER. The question is addressed by analyzing impulse response functions (IRF resulting from a VAR model, covering 1970 to 2010 and gathering the RER, its fundamental determinants, monetary variables and an estimated capital control (CC variable. Results show that a relaxation of CC overappreciates the RER to its long-term level, and liberalizing portfolio investment is the most compromising for competitiveness.

  17. EFFICIENCY OF CURRENCY ASSET CLASSES

    Directory of Open Access Journals (Sweden)

    Mohammad R. Safarzadeh

    2013-04-01

    Full Text Available Analyzing the risk and return for the S&P Currency Index Arbitrage and the Merk Absolute Return Currency Fund, this study intends to find whether currency asset classes are worthwhile investments. To determine where the efficient currency portfolios lie in the risk and return spectrum, this paper compares the two portfolios to fixed income and equity asset portfolios. The results lead to a baffling conclusion that, in general, the returns to low-risk currency asset portfolios are higher than the equity asset portfolios of same risk level.

  18. The Effects of Capital Outflows from Neighboring Countries on a Home Country’s Terms of Trade and Real Exchange Rate: The Case of East Asia

    Directory of Open Access Journals (Sweden)

    Sammo Kang

    2005-06-01

    Full Text Available While there is an extensive body of empirical analyses showing that currency crises tend to be regionally concentrated to specific areas and contagious to countries with high levels of trade, there has been insufficient research on the mechanisms underlying such tendencies. Using a two¡ⓒcountry model, we investigate the possibility of deterioration in the terms of trade and a rise in the real exchange rate of a home country in the case of capital outflows from its trade partner. In addition, an empirical analysis of East Asian countries conclusively shows that some countries conform to the model. Generally, neighboring countries trade extensively with one another for reasons like low logistics costs. This paper finds that such patterns of trade can be one reason for a currency crisis being regional.

  19. An empirical analysis of Singapore’s monetary and exchange rate policies in the 1990s

    Directory of Open Access Journals (Sweden)

    R.C. MAYSAMI

    1998-03-01

    Full Text Available The economy of Singapore has remained relatively unscathed from the Asian currency crisis of 1997 and 1998 which has severely crippled the markets of Hong Kong, Indonesia, and Malaysia. The Monetary Authority of Singapore, which has overseen the country's financial development since the 1960s, has maintained sound monetary policy which has saved the economy from ruin. The government, unlike those of other countries, has also regulated real estate loans and land development and has strengthened its basic services of telecommunications and transport. The present work seeks to re-examine the conflict between monetary stability and exchange rate objectives. The authors seek to find out which policy goal the Monetary Authority of Singapore has been and should be more interested in.

  20. Community Currency in Korea : How do we envision Community Currency?

    NARCIS (Netherlands)

    J. Kang (Joonmo); B.E. Hong (Baeg)

    2015-01-01

    textabstractCommunity currency schemes were first introduced in Korea in 1998. Since then, there have been many efforts to use them but no report or academic research on the topic in Korea. Thus, we conducted a field investigation to identify the scope of community currency schemes in Korea and as

  1. The Evaluation of the Equilibrum Exchange Rate based on the Purchase Power, for Romania’s Case

    Directory of Open Access Journals (Sweden)

    Lucian Claudiu ANGHEL

    2014-11-01

    Full Text Available The current paper aims to analyse one of the many models of evaluation for the equilibrum rate in an economy. It also briefly presents the main models and methods used in the specialized literature for the evaluation of the equilibrum exchange rate. The utilization of as many methods allows the deciders of monetary and economic policy to accurately ground the moment of one country adhesion to the euro zone. Also, an analysis can be made, whether the respective countru is ready and how fast the process of convergence to the Euro zone can evolve. In general, it is recommendable a country not to force de adhesion to the euro zone because the negative effects may occur for a long period of time, leading to a development for the respective economy under its potential. The estimated model in Romania based on data will be afterwards used for estimating the equilibrum rate and for issuing scenarios concerning its future evolution. Usually, the parity at which the national currency should be converted for an unlimited period of time, will also be around the level of the equilibrum rate. From that moment on, after attending the Exchange Rate Mechanism II (ERM II, the respective country’s economy loses an equilibrum buffer – the exchange rate. Starting from that moment, the country’s economy is supposed to be so performant that it absorbs the internal and external negative shocks, only relaying on the fiscal and budget policies. Hence, the particular importance of a correct evaluation for the equilibrum rate by using several models and methods, so that to be as close as possible to the equilibrum level on mid term.

  2. An investigation on the effect of central bank money injection on creating currency crisis

    Directory of Open Access Journals (Sweden)

    Nazi Mohamadzadeh Asl

    2014-04-01

    Full Text Available This paper investigates the effects of different factors influencing on supplement of currency in Iran and the likelihood of currency crises. The study implements two methods of Logit and Probit to determine the likelihood of currency crises based on the historical data over the period 1989-2012. In this study, currency crisis is defined in terms of three variables of currency change on market, interest rate and central bank foreign deposits. The results of the study indicate that the ratio of government (non-government liabilities to central bank/Growth domestic product (GDP has positive (negative relationship with currency crises.

  3. Testing EMA Indicator for the Currency Pair EUR / USD

    Directory of Open Access Journals (Sweden)

    Kolková Andrea

    2017-06-01

    Full Text Available The aim of this paper is to verify the effectiveness of EMA indicator according to selected time intervals. The underlying assumption is that, on longer timescales EMA is profitable and provides more relevant signals. The second objective of this paper is to test the signals of indicators in different months. It is believed that in September and January the number of trading signals on this indicator will increase. Testing will be done on the five-minute time frame. The test will be subjected to 65,000 rate values of the EUR / USD currency pair. Effectiveness of the analysis will be evaluated on the basis of digital (binary option. Business strategy is based on EMA crossover indicator of current exchange rate. By the contribution there were confirmed hypotheses about more profitable signals when selecting a greater timeframe breadth of moving average. There was also confirmed an increased amount of signals in September, but not in January.

  4. Price Discovery from Cross-Currency and FX Swaps: A Structural Analysis

    OpenAIRE

    Yasuaki Amatatsu; Naohiko Baba

    2007-01-01

    This paper investigates the relative role of price discovery between two long-term swap contracts that exchange between the U.S. dollar and the Japanese yen: cross-currency basis swap and FX (foreign exchange) swap. First, we show that these two swaps should be in a no-arbitrage relationship by allowing for differential risk premiums. Second, we empirically investigate the relative role of price discovery using the structural-form approach based on the state space models. Main finding are as ...

  5. 12 CFR 1750.2 - Definitions.

    Science.gov (United States)

    2010-01-01

    ... Mortgage Corporation and any affiliate thereof. Foreign exchange rate contracts— (1) Means cross-currency interest rate swaps, forward foreign exchange contracts, currency options purchased (including currency... less and foreign exchange rate contracts traded on exchanges that require daily payment of variation...

  6. In lands of foreign currency credit, bank lending channels run through?

    OpenAIRE

    Ongena, Steven; Schindele, Ibolya; Vonnák, Dzsamila

    2014-01-01

    We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for time-varying firm-specific heterogeneity in loan demand, we find that a lower domestic interest rate expands the supply of credit in the domestic but not in the foreign currency. A lower foreign interest rat...

  7. EXCHANGE CONTROL AS A FORM STATE FINANCIAL CONTROL

    Directory of Open Access Journals (Sweden)

    O. Shevchuk

    2015-10-01

    Full Text Available The article investigates ways to improve the effectiveness of exchange control as an indispensable element of creating systems of financial control. S definition proposed exchange control, interpretation of its functional purpose, the isolation of areas and currency control. Proved that only the presence of effective interconnected and interdependent budget, tax, customs and currency control ensure formation of an effective integrated system of financial control.

  8. INTERNATIONAL FINANCIAL INSTITUTIONS SYSTEM AS A FACTOR OF TRANSFORMATION OF NATIONAL CURRENCY SYSTEM

    Directory of Open Access Journals (Sweden)

    Andrii Oliinyk

    2016-11-01

    Full Text Available The purpose of the paper is to analyze theoretical and practical aspects of the features of the IFI influence on transformation of national currency systems of such organizations’ member states. Defining features of interaction policy among national economies and IFI in the monetary sphere, considering countries’ socio-economic parameters of development, will allow monetary authorities to achieve the optimum level of development of its economy. Methodology. Theoretical base of the study are the provisions of general scientific theory of knowledge studied phenomena and processes, in particular: methods of induction and deduction (in determining classification criteria of IFIs impact on national currency system, analysis and synthesis (in determining the features and priorities of national currency system, comparisons, associations and analogies (the justification of characteristics of advantages and disadvantages of IFI. The information base for scientific research is scientific papers and publications of domestic and foreign scientists-economists, materials of scientific-practical conferences, legislative and normative documents, the IMF, World Bank and Asian Infrastructure Investment Bank materials. Results. Theoretical approaches to the definition of the national currency system and international financial organizations, including its classification, are proposed. It is proved that the IMF makes active impact on national currency policy formation through regulation and supervision, while the World Bank and AIIB are related in a passive way. The IFI regulation trends are to implement floating exchange regime, liberal currency transactions, cancel currency restrictions in member countries. Although it refers to all countries, some of them with large population, trading, underdeveloped institutions of democracy could avoid some IFI pressure. Practical implications. The study accents attention on the specifics of the IFI activity in terms of

  9. Stochastic Skew in Currency Options

    OpenAIRE

    Peter Carr; Liuren Wu

    2004-01-01

    We document the behavior of over-the-counter currency option prices across moneyness, maturity, and calendar time on two of the most actively traded currency pairs over the past eight years. We find that the risk-neutral distribution of currency returns is relatively symmetric on average. However, on any given date, the conditional currency return distribution can show strong asymmetry. This asymmetry varies greatly over time and often switch directions. We design and estimate a class of mode...

  10. 12 CFR Appendix D to Part 325 - Capital Adequacy Guidelines for Banks: Internal-Ratings-Based and Advanced Measurement Approaches

    Science.gov (United States)

    2010-01-01

    ... means a cross-currency interest rate swap, forward foreign-exchange contract, currency option purchased... investment grade; (v) Equity securities that are publicly traded; (vi) Convertible bonds that are publicly traded; (vii) Money market mutual fund shares and other mutual fund shares if a price for the shares is...

  11. 12 CFR Appendix F to Part 208 - Capital Adequacy Guidelines for Banks: Internal-Ratings-Based and Advanced Measurement Approaches

    Science.gov (United States)

    2010-01-01

    ... means a cross-currency interest rate swap, forward foreign-exchange contract, currency option purchased... investment grade; (v) Equity securities that are publicly traded; (vi) Convertible bonds that are publicly traded; (vii) Money market mutual fund shares and other mutual fund shares if a price for the shares is...

  12. 12 CFR Appendix G to Part 225 - Capital Adequacy Guidelines for Bank Holding Companies: Internal-Ratings-Based and Advanced...

    Science.gov (United States)

    2010-01-01

    ... means a cross-currency interest rate swap, forward foreign-exchange contract, currency option purchased... investment grade; (v) Equity securities that are publicly traded; (vi) Convertible bonds that are publicly traded; (vii) Money market mutual fund shares and other mutual fund shares if a price for the shares is...

  13. Complexity Characteristics of Currency Networks

    Science.gov (United States)

    Gorski, A. Z.; Drozdz, S.; Kwapien, J.; Oswiecimka, P.

    2006-11-01

    A large set of daily FOREX time series is analyzed. The corresponding correlation matrices (CM) are constructed for USD, EUR and PLN used as the base currencies. The triangle rule is interpreted as constraints reducing the number of independent returns. The CM spectrum is computed and compared with the cases of shuffled currencies and a fictitious random currency taken as a base currency. The Minimal Spanning Tree (MST) graphs are calculated and the clustering effects for strong currencies are found. It is shown that for MSTs the node rank has power like, scale free behavior. Finally, the scaling exponents are evaluated and found in the range analogous to those identified recently for various complex networks.

  14. Accounting treatment of currency options

    Directory of Open Access Journals (Sweden)

    Prošić Danica

    2016-01-01

    Full Text Available Currency options are often used to mitigate currency risk resulting from corporate activities. Their implementation can be complex, and there could be problems if the essential elements and principles are not fully understood. Although they are not the simplest financial products, currency options are interesting and useful to those who are trying to make a step forward in the area of currency risk management. This paper aims to present the general principles and specifics of accounting records and valuation of currency options used for hedging against risk. It is a complex process which, in addition to numerous conditions, also involves the implementation of accounting rules that deviate from the generally accepted accounting principles.

  15. THE IMPACT OF FX (FOREIGN CURRENCY EXCHANGE) ON THE BOTTOM LINE OF TEXTILE/SHOES INDUSTRIES LISTED IN INDONESIA STOCK EXCHANGE 2006-2008

    OpenAIRE

    Subekti, Hendro

    2015-01-01

    During 2006-2008, Indonesia has been experiencing depreciation of IDR against world currency US$. The situation was triggered by global crisis October 2008, and IDR currency plunged. Furthermore, 17 textile/shoes industries publicly listed in ISX have been severely hit by depreciation of IDR The “Huge Loss of Bottom Line” in 2008 was recorded (IDR 617 billions) more than half of trillion IDR. To be curious the most of industry are manufacturer-exporter.Year 2007, national textile industry ove...

  16. Influencing Factors of Currency Risk of Deposit Banks in Turkey by Using Probit Method

    Directory of Open Access Journals (Sweden)

    Serhat Yüksel

    2016-12-01

    Full Text Available In this paper, we aimed to analyze the factors that affect currency risk of the banks. Within this scope, annual data of 23 deposit banks for the periods between 2005 and 2015 was evaluated. In addition to this situation, panel probit model was used in order to achieve this objective. Regarding the subject of the currency risk, this model was firstly used in this study. According to the results of the analysis, it was determined that 3 independent variables affect the currency risk of deposit banks in Turkey. Firstly, it was identified that there is a positive relationship between total assets and currency risk. This situation explains that when the size of the banks increases, they tend to take more currency risk. In addition to this variable, it was also defined that there is a direct relationship between economic growth and currency risk of the banks. This result refers that in case of an increment in the market stability; banks think that the market is safer and they increase their currency risk. Moreover, it was also concluded that there is a negative relationship between interest rate and currency risk of the banks. This aspect shows that when interest rate decreases, it will lower uncertainty in the market. Thus, banks would take higher currency risk in such markets.

  17. Can Exchange Rates Be Predicted?

    OpenAIRE

    Siriwutiset, Trin

    2007-01-01

    Foreign exchange rates produce significant impacts on both the macroeconomic and microeconomic scale. Countries� government and multinational companies have been seeking ways to stabilize the exchange rates for a few decades. However, there is no perfect consensus on methods to control and stabilize the exchange rates. In fact, there are several occasions in history where turbulence movements caused crisis in the economies. There are several factors that are identified by economis...

  18. Virtual currencies : Real opportunities?

    OpenAIRE

    Selldahl, Sara

    2013-01-01

    AbstractThe European Central Bank defines virtual currencies as ”unregulated, digital money, which is issued and usuallycontrolled by its developers, and used and accepted among the members of a specific virtual community.”(European Central Bank, 2012, p. 5) The interest in virtual currencies has increased immensely over the last fewyears as they become increasingly prevalent in our society across many different industries. Up until now, the field ofvirtual currencies has been mainly uncharte...

  19. Exchange Rate Determinants in Russia; 1992-1993

    OpenAIRE

    Vincent Koen; Eric Meyermans

    1994-01-01

    This paper examines the evolution of the exchange rate of the ruble vis-à-vis the U.S. dollar from exchange rate unification, in July 1992, to the end of 1993. The expected and actual paths of the exchange rate are related to the exchange and trade regime and to the stance of financial and exchange rate policies. An econometric analysis based on weekly data is offered, which suggests that monetary factors have a significant impact on the short run behavior of the exchange rate.

  20. Vliv fiskální politiky na vývoj devizového kurzu v posledním desetiletí (na příkladu Velké Británie a ČR)

    OpenAIRE

    Vašková, Kateřina

    2010-01-01

    Diploma thesis deals with problem whether fiscal policy has an impact on development of currency exchange rate. The first aim of the thesis is to describe some theoretical models which consider possibilities of relationship between fiscal policy and currency exchange rate and to give a notice where can be differences. The thesis introduces a function of fiscal policy, a creation of currency exchange rate and describes an environment of exchange market. Currency exchange rate is stable on its ...

  1. Considerations Regarding the Possibility of Emphasising the Virtual Currency Transactions in Accounting

    Directory of Open Access Journals (Sweden)

    Riana Iren RADU

    2017-04-01

    Full Text Available The phenomenon of virtual currency, and especially the virtual currency Bitcoin, have managed to draw attention of the population, organizations and governments, from the moment of its appearance, proliferating pro and against attitudes against their use in the day-to-day transactions. The study is a detailed analysis of the virtual currency phenomenon and an attempt to outline a possible status from the accounting point of view of the virtual worlds, starting from the position adopted by the regulating authorities in the countries where the virtual currencies register the highest rate of use.

  2. Exchange Rate Pass-Through in Turkey

    OpenAIRE

    Marco Rossi; Daniel Leigh

    2002-01-01

    In light of the strong correlation between exchange rate movements and domestic prices in Turkey, it is important to assess the impact of the exchange rate on domestic prices, in particular as Turkey moves to an inflation targeting regime. This paper uses a recursive vector autoregression model to investigate the impact of exchange rate movements on prices in Turkey. We find that (i) the impact of the exchange rate on prices is over after about a year, but is mostly felt in the first four mon...

  3. Virtual currencies- Real opportunities?

    OpenAIRE

    Selldahl, Sara

    2013-01-01

    The European Central Bank defines virtual currencies as ”unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community.” (European Central Bank, 2012, p. 5) The interest in virtual currencies has increased immensely over the last few years as they become increasingly prevalent in our society across many different industries. Up until now, the field of virtual currencies has been mainly uncharted ...

  4. 'Carbon-Money Exchange' to contain global warming and deforestation

    Energy Technology Data Exchange (ETDEWEB)

    Nagase, Kozo E-mail: nagase@de.mbn.or.jp

    2005-07-01

    This paper builds a basic theory of 'Carbon-Money Exchange' in which carbon as currency in nature's household (ecosystems) and money as currency in humankind's household (economy) are exchanged just like in a foreign exchange. The simple chemical equation below makes it possible (CO{sub 2}{yields}C+O{sub 2}=C+O{sub 2}{yields}CO{sub 2}). The left-hand side represents the work of plants to remove atmospheric CO{sub 2}. The right-hand side represents the work of humans as fossil fuel consumers to produce it. The exchange of the two currencies is possible by copying the fossil fuel market. The paper concludes that this new exchange can automatically contain global warming and deforestation, replacing onerous emissions trading. Moreover, it could revolutionize the conventional economy, creating counter-capitalism, or 'carbonism'.

  5. Report on investigational research on business activities under fluctuating exchange rates and the trend of energy-conservation related investments in fiscal 1995; 1995 nendo hendosuru kawase rate no motode kigyo katsudo oyobi shoene kanren toshi doko nado ni kansuru chosa kenkyu hokokusho

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    1996-03-01

    A study was made on effects of fluctuation of the exchange rate on business activities in the iron/steel industry. Fluctuation of the exchange rate is an uncertain element in working out a plan for future business activities, and hinders research development and equipment investment to be positively made. In the iron/steel industry in Japan, the rate of yen basis in trade settlement currency is especially lower than in other industries, and has a constitution which is easily influenced by yen appreciation. However, the iron/steel industry is an industry exporting products, and at the same time, is an industry depending on import for most of the main raw materials. Accordingly, the yen appreciation not only has negative effects, but has different effects, depending on the rate of shifting the amount of exchange rate fluctuation to local price, and on conditions of the rate of realizing price lowering which means that the exchange rate fluctuation reflects the lowering of imported raw material prices. If only these conditions are fulfilled, the yen appreciation even produces rather favorable effects in the iron/steel industry. In the circle, the conversion of the structure is being expedited for converting effects of yen appreciation to beneficial ones. Financially, exchange risk management is also necessary. 41 figs., 35 tabs.

  6. The foreign exchange rate rate exposure of nations

    OpenAIRE

    Entorf, Horst; Moebert, Jochen; Sonderhof, Katja

    2007-01-01

    Following the well-known approach by Adler and Dumas (1984) we evaluate the foreign exchange rate exposure of nations. Results based on data from 27 countries show that national foreign exchange rate exposures are significantly related to the current trade balance variables of corresponding economies.

  7. Phase correlation of foreign exchange time series

    Science.gov (United States)

    Wu, Ming-Chya

    2007-03-01

    Correlation of foreign exchange rates in currency markets is investigated based on the empirical data of USD/DEM and USD/JPY exchange rates for a period from February 1 1986 to December 31 1996. The return of exchange time series is first decomposed into a number of intrinsic mode functions (IMFs) by the empirical mode decomposition method. The instantaneous phases of the resultant IMFs calculated by the Hilbert transform are then used to characterize the behaviors of pricing transmissions, and the correlation is probed by measuring the phase differences between two IMFs in the same order. From the distribution of phase differences, our results show explicitly that the correlations are stronger in daily time scale than in longer time scales. The demonstration for the correlations in periods of 1986-1989 and 1990-1993 indicates two exchange rates in the former period were more correlated than in the latter period. The result is consistent with the observations from the cross-correlation calculation.

  8. Timing Foreign Exchange Markets

    Directory of Open Access Journals (Sweden)

    Samuel W. Malone

    2016-03-01

    Full Text Available To improve short-horizon exchange rate forecasts, we employ foreign exchange market risk factors as fundamentals, and Bayesian treed Gaussian process (BTGP models to handle non-linear, time-varying relationships between these fundamentals and exchange rates. Forecasts from the BTGP model conditional on the carry and dollar factors dominate random walk forecasts on accuracy and economic criteria in the Meese-Rogoff setting. Superior market timing ability for large moves, more than directional accuracy, drives the BTGP’s success. We explain how, through a model averaging Monte Carlo scheme, the BTGP is able to simultaneously exploit smoothness and rough breaks in between-variable dynamics. Either feature in isolation is unable to consistently outperform benchmarks throughout the full span of time in our forecasting exercises. Trading strategies based on ex ante BTGP forecasts deliver the highest out-of-sample risk-adjusted returns for the median currency, as well as for both predictable, traded risk factors.

  9. Real exchange rate misalignments

    OpenAIRE

    Terra, Maria Cristina T.; Valladares, Frederico Estrella Carneiro

    2003-01-01

    This paper characterizes episodes of real appreciations and depreciations for a sample of 85 countries, approximately from 1960 to 1998. First, the equilibrium real exchange rate series are constructed for each country using Goldfajn and Valdes (1999) methodology (cointegration with fundamentals). Then, departures from equilibrium real exchange rate (misalignments) are obtained, and a Markov Switching Model is used to characterize the misalignments series as stochastic autor...

  10. Taxation of virtual currency

    OpenAIRE

    Bal, Aleksandra Marta

    2014-01-01

    The Information Age has created a new concept of money – virtual currencies existing solely in the cyberspace in the form of intangible computer code. The most prominent virtual currency scheme, Bitcoin, grabbed the public attention as its value skyrocketed at the beginning of 2012. Whereas Bitcoin has many proper ties that could make it an ideal currency for mainstream consumers and merchants, its main drawback is lack of clarity regarding its legal status and tax treatment. The European Cen...

  11. Exchange-rate forecasts and asymmetric loss: empirical evidence for the yen/dollar exchange rate

    DEFF Research Database (Denmark)

    Stadtmann, Georg; Pierdzioch; Rülke

    2012-01-01

    We used the yen/dollar exchange-rate forecasts of the Wall Street Journal (WSJ) poll to analyse whether exchange-rate forecasters have an asymmetric loss function. To this end, we applied an approach recently developed by Elliott et al. (2005). We found that only few forecasters seem to form...

  12. Topology of foreign exchange markets using hierarchical structure methods

    Science.gov (United States)

    Naylor, Michael J.; Rose, Lawrence C.; Moyle, Brendan J.

    2007-08-01

    This paper uses two physics derived hierarchical techniques, a minimal spanning tree and an ultrametric hierarchical tree, to extract a topological influence map for major currencies from the ultrametric distance matrix for 1995-2001. We find that these two techniques generate a defined and robust scale free network with meaningful taxonomy. The topology is shown to be robust with respect to method, to time horizon and is stable during market crises. This topology, appropriately used, gives a useful guide to determining the underlying economic or regional causal relationships for individual currencies and to understanding the dynamics of exchange rate price determination as part of a complex network.

  13. Deviation from Covered Interest Rate Parity in Korea

    Directory of Open Access Journals (Sweden)

    Seungho Lee

    2003-06-01

    Full Text Available This paper tested the factors which cause deviation from covered interest rate parity (CIRP in Korea, using regression and VAR models. The empirical evidence indicates that the difference between the swap rate and interest rate differential exists and is greatly affected by variables which represent the currency liquidity situation of foreign exchange banks. In other words, the deviation from CIRP can easily occur due to the lack of foreign exchange liquidity of banks in a thin market, despite few capital constraints, small transaction costs, and trivial default risk in Korea.

  14. Multi-currency Influence Diagrams

    DEFF Research Database (Denmark)

    Nielsen, Søren Holbech; Nielsen, Thomas Dyhre; Jensen, Finn Verner

    2004-01-01

    Solution of decision problems, which involve utilities of several currencies, have traditionally required the problems to be converted into decision problems involving utilities of only one currency. This conversion are carried out using a tacit transformation, under the assumption...... that the converted problem is equivalent to the original one. In this paper we present an extension of the Influence Diagram framework, which allows for these decision problems to be modelled in their original form. We present an algorithm that, given a conversion function between the currencies, discovers...

  15. Linkage between Ringgit exchange rate and U.S Dollar | Idalisa ...

    African Journals Online (AJOL)

    Malaysia, the movement of its currency rate i.e. Ringgit as against to US dollar are unpredictable and unregulated. Therefore, this causes some difficulty to appreciate the movement of macroeconomic analysis and market surveillance purposes. In 1965, Chaos theory was introduced, and it focused on behaviour and ...

  16. Interest Rates and Exchange Rate Relationship in BRIC-T Countries

    OpenAIRE

    Selim KAYHAN; Tayfur BAYAT; Ahmet UGUR

    2013-01-01

    This study examines the dynamic relationships between the real exchange rate and the real interest rate in the BRIC-T (Brazil, Russia, India, China and Turkey) countries by employing monthly data from the beginning of flexible exchange rate regime to July 2011. For this aim, non-linear causality test and frequency domain causality test approaches are used. According to frequency domain causality test results, interest rate affects exchange rate in only China and this effect exist only in the ...

  17. In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? The Effects of Monetary Policy at Home and Abroad on the Currency Denomination of the Supply of Credit

    OpenAIRE

    Steven Ongena; Ibolya Schindele; Dzsamila Vonnak

    2014-01-01

    We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for time-varying firm-specific heterogeneity in loan demand, we find that a lower domestic interest rate expands the supply of credit in the domestic but not in the foreign currency. A lower foreign interest rat...

  18. Analysis of Colonial Currency

    Science.gov (United States)

    Kurkowski, Michael; Cangany, Catherine; Jordan, Louis; Manukyan, Khachatur; Schultz, Zachary; Wiescher, Michael

    2017-09-01

    This project entailed studying the cellulose in paper, the ink, colorants, and other materials used to produce American colonial currency. The technique primarily used in this project was X-Ray Fluorescence Spectroscopy (XRF). XRF mapping was used to provide both elemental analysis of large-scale objects as well as microscopic examination of individual pigment particles in ink, in addition to the inorganic additives used to prepare paper. The combination of elemental mapping with Fourier Transform Infrared (FTIR) and Raman Spectroscopies permits an efficient analysis of the currency. These spectroscopic methods help identify the molecular composition of the pigments. This combination of atomic and molecular analytical techniques provided an in-depth characterization of the paper currency on the macro, micro, and molecular levels. We have identified several of pigments that were used in the preparation of inks and colorants. Also, different inorganic crystals, such as alumina-silicates, have been detected in different papers. The FTIR spectroscopy allowed us to determine the type of cellulose fiber used in the production of paper currency. Our future research will be directed toward revealing important historical relationships between currencies printed throughout the colonies. ISLA Da Vinci Grant.

  19. Dating currency crises with ad hoc and extreme value-based thresholds : East Asia 1970-2002 [dating currency crises

    NARCIS (Netherlands)

    Lestano, L; Jacobs, Jan P. A. M.

    2007-01-01

    Generally a currency crisis is defined to occur if an index of currency pressure exceeds a threshold. This paper compares currency crisis dating methods. For two definitions of currency pressure we contrast ad hoc and extreme value-based thresholds. We illustrate the methods with data of six East

  20. 26 CFR 1.988-2 - Recognition and computation of exchange gain or loss.

    Science.gov (United States)

    2010-04-01

    ... computation of exchange gain or loss. (a) Disposition of nonfunctional currency—(1) Recognition of exchange... currency shall be governed by the recognition provisions of the Internal Revenue Code which apply to the... 1092). The disposition of nonfunctional currency in settlement of a forward contract, futures contract...

  1. Analisis Perilaku Kurs Rupiah (Idr) terhadap Dollar Amerika (Usd) pada Sistem Kurs Mengambang Bebas di Indonesia Periode 1997.3 – 2011.4 (Aplikasi Pendekatan Keynesian Sticky Price Model)

    OpenAIRE

    Pratiwi, Tara Eka; Santosa, H. Purbayu Budi Santosa

    2012-01-01

    Currency stability is an important issue to boost economic activity and create economic growth of a country. Trade between countries resulting in currency exchange rates between countries are reflected in the exchange rate. The importance of the role of exchange rates for both developed and developing countries, encourage efforts to keep the exchange rate of a country is in a relatively stable state. The stability of the currency exchange rate is also affected by the exchange rate system adop...

  2. A Theoretical Overview of Currency Crises

    OpenAIRE

    Hongxia, Guo

    2005-01-01

    In the 1980s and 1990s, currency crises occurred frequently in various parts of the world. This paper provides an overview of the currency crises theories, which investigate the cause of these currency crises, the determinant factors of their depth, and the mechanism of their effects on actual economy. Based on the three-generation classification, this paper surveys currency crises theories with focus on the differences among them.

  3. Exchange rate regimes and monetary arrangements

    Directory of Open Access Journals (Sweden)

    Ivan Ribnikar

    2005-06-01

    Full Text Available There is a close relationship between a country’s exchange rate regime and monetary arrangement and if we are to examine monetary arrangements then exchange rate regimes must first be analysed. Within the conventional and most widely used classification of exchange rate regimes into rigid and flexible or into polar regimes (hard peg and float on one side, and intermediate regimes on the other there, is a much greater variety among intermediate regimes. A more precise and, as will be seen, more useful classification of exchange rate regimes is the first topic of the paper. The second topic is how exchange rate regimes influence or determine monetary arrangements and monetary policy or monetary policy regimes: monetary autonomy versus monetary nonautonomy and discretion in monetary policy versus commitment in monetary policy. Both topics are important for countries on their path to the EU and the euro area

  4. French Complementary Currency Systems : Exploring Contributions to Promote Social Currency in Argentina

    NARCIS (Netherlands)

    R. Orzi (Ricardo)

    2015-01-01

    textabstractSince 2010 there has been an increasing proliferation of complementary currency systems (CCS) in France and other countries of Europe facing the Euro crisis. These CCS are shaped by the interest in a civic reclaim of the currency and the aspiration for a full-citizenship in which two

  5. On the World and Regional Currencies

    Directory of Open Access Journals (Sweden)

    Rohach Fedir I.

    2016-05-01

    Full Text Available The problem of pegging currencies of developing countries to the US dollar is that its dynamics determines the economic instability of most of such countries and the world economy as a whole. In this regard there is a need to find alternative variants of the global monetary anchor to ensure the global financial stability. It is proposed to choose an anchor based on the basket of floating national currencies, which will be balanced by counter fluctuations of the basket currencies and be stable with respect to the national currency, as one of the variants. Such basket anchor can potentially perform the function of money and be used as the world and regional currency. The article presents the example of calculating the quotation of national currencies against the baskets based on the data on G-20 and EAEU countries.

  6. The effects of real exchange rate misalignment and real exchange volatility on exports

    OpenAIRE

    Diallo, Ibrahima Amadou

    2011-01-01

    This paper uses panel data cointegration techniques to study the impacts of real exchange rate misalignment and real exchange rate volatility on total exports for a panel of 42 developing countries from 1975 to 2004. The results show that both real exchange rate misalignment and real exchange rate volatility affect negatively exports. The results also illustrate that real exchange rate volatility is more harmful to exports than misalignment. These outcomes are corroborated by estimations on s...

  7. A Case for Intermediate Exchange-Rate Regimes

    OpenAIRE

    Agnès Bénassy-Quéré; Véronique Salins

    2010-01-01

    Despite increasing capital mobility and the subsequent difficulty in controlling exchange rates, intermediate exchange-rate regimes have remained widespread, especially in emerging and developing economies. This piece of evidence hardly fits the "impossible Trinity" theory arguing that it becomes difficult to control the exchange rate without a "hard" device when capital flows are freed. Calvo and Reinhart (2000) have suggested several explanations for such "fear of floating": exchange rate p...

  8. Adaptation of Basel Agreements to the Currency Risks Management in Ukraine and Russia

    Directory of Open Access Journals (Sweden)

    Ekaterina Tikhonovna Sveshnikova

    2015-12-01

    Full Text Available The article reveals the problem of adapting the Basel standards for managing the market and, in particular, foreign exchange risks to the conditions of the national economies of Ukraine and Russia. Internationality, fictitiousness and speculating of the currency transactions necessitated the transition of national banking systems of Ukraine and Russia to the international standards of Basel Committee. The article describes the history and shows the gradual process of implementation of these standards in the banking law and practice. We have studied the nature of the categories of “market risk” and “foreign exchange risk”. The place of the foreign exchange risk is updated in the classification of banking risks by analyzing the different views, and the mechanism of its effect is identified on the activities of commercial banks. The proposals on copyright issues are presented in particular: the necessity of combining the stock, interest rate and foreign exchange risks in the market risk group, as well as fixing the common regulatory definition of foreign exchange risk in the legislation. In the article the author’s category definition interpretation of “foreign exchange risk management system” is given in the light of its absence in the legal and the economic literature. The author also gives the recommendations to banks on developing the individual models for risk management in accordance with their own needs and current circumstances.

  9. The Economics of Private Digital Currency

    OpenAIRE

    Dwyer, Gerald P

    2014-01-01

    Recent innovations have made it feasible to transfer private digital currency without the intervention of an institution. A digital currency must prevent users from spending their balances more than once, which is easier said than done with purely digital currencies. Current digital currencies such as Bitcoin use peer-to-peer networks and open-source software to stop double spending and create finality of transactions. This paper explains how the use of these technologies and limitation of th...

  10. 75 FR 41247 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and...

    Science.gov (United States)

    2010-07-15

    ...-19). Under current Rule 502(h), only Exchange-Traded Fund Shares, or ETFs, that are traded on a...) represent interests in a trust that holds a specified non-U.S. currency or currencies deposited with the... owner to receive the specified non-U.S. currency or currencies and pays the beneficial owner interest...

  11. 75 FR 23314 - Self-Regulatory Organizations; International Securities Exchange, LLC; Order Granting Approval of...

    Science.gov (United States)

    2010-05-03

    ... Rule 502(h), only Exchange-Traded Fund Shares, or ETFs, that are traded on a national securities... that holds a specified non-U.S. currency or currencies deposited with the trust when aggregated in some... non-U.S. currency or currencies and pays the beneficial owner interest and other distributions on the...

  12. Currency Wars: Myth and Reality

    Directory of Open Access Journals (Sweden)

    Nataliya Bartashuk

    2013-01-01

    Full Text Available This article considers the term "currency war", its meaning and the present situation in the world economy. It also contains research and analysis of HSBC's operations in different countries in the devaluation race grouping them according to the participation in currency wars. Along with the benefits of the devaluation of its own currency the actual disadvantages that may reveal afterwards have been identified. This article highlights the different versions of events put forward by the experts in the global economy and analysts. The authors mention the possible problems of ordinary citizens in case of their country's aggressive policy to reduce their national currency. The behavior of the Russian ruble was also discussed in detail according to which the recommendations were given to depositors of banks about their future action in the circumstances. Devaluation race in any case cannot be completed safely but it is possible to avoid excessive losses if the countries achieve international agreement by establishing a new currency regime.

  13. 78 FR 75439 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and...

    Science.gov (United States)

    2013-12-11

    ... current Rule 402, only Exchange-Traded Fund Shares (``ETFs'') that (1) represent interests in registered... or similar entity that holds a specified non-U.S. currency or currencies deposited with the trust... by the beneficial owner to receive the specified non-U.S. currency or currencies and pays the...

  14. Inflation Targeting and Exchange Rate Management in Korea

    Directory of Open Access Journals (Sweden)

    Won-Am Park

    2008-06-01

    Full Text Available This paper investigates the experience of inflation targeting in Korea with an emphasis on exchange rate management. The Korean call rate responded to not only expected inflation, but also to output gap and changes in the real effective exchange rate of the Korean won, when we estimated the call rate reaction function over the period of 1999-2007. It was found that the call rate responded to changes in real effective exchange rate more than it did to expected inflation. We also examined whether Korean inflation targeting was actually centered on the exchange rate by estimating the Singaporean style of exchange rate reaction function. It was found that Korean monetary policy was not exchange-rate- centered, since the nominal effective exchange rate of the Korean won responded modestly to inflation and output gap, far less than did the Singaporean dollar.

  15. Taxation of virtual currency

    NARCIS (Netherlands)

    Bal, Aleksandra Marta

    2014-01-01

    The Information Age has created a new concept of money – virtual currencies existing solely in the cyberspace in the form of intangible computer code. The most prominent virtual currency scheme, Bitcoin, grabbed the public attention as its value skyrocketed at the beginning of 2012. Whereas Bitcoin

  16. THE CURRENCY CRISIS TRIGGER OF THE ROMANIAN FINANCIAL CRISIS OF 2008

    Directory of Open Access Journals (Sweden)

    Radu SOVIANI

    2014-07-01

    Full Text Available This paper analyses the ways the financial crisis started to manifest into the Romanian Financial System, through the exchange rate channel. The focus of this Paper is on how the Romanian decision makers contributed in triggering the financial crisis (that would have been triggered anyway. The paper will determine the trigger (the first obvious event for the Romanian Financial Crisis (the debut and it will prove that the consequences of this trigger could have been anticipated - it is in line with similar triggers for the debut in other currency crises. Therefore, one of the main conclusions of this paper is that while a global crisis starts to manifest the local economy should limit the exuberance of the decision makers in order to smooth the effects of the crisis.

  17. Bitcoin – the World-Wide Currency

    OpenAIRE

    Shuba Olena А.; Honcharova Yuliia Yu.; Bulygina Anastasia V.

    2017-01-01

    The article is aimed at researching bitcoin, the digital currency. It has been found that Bitcoin is a cryptocurrency, that is, the virtual money, which has no material equivalent. The history of creation and development of cryptocurrency was reviewed. There is a reduction in volatility, which guarantees the security of currency, as well as the increase in currency volume and the inability to estimate the profitability of bitcoins. The dynamics of the value of digital currency in US dollars o...

  18. European Banking with a Single Currency

    OpenAIRE

    Jean Dermine

    1996-01-01

    At the Madrid summit in December 1995, the EU heads of state or government endorsed a three-phase plan for the introduction of the single currency. The purpose of the paper is to identify how, besides an obvious fall in revenue from intra-European currencies trading, a single currency will alter fundamentally and permanently European banking markets. A common currency will likely change the sources of competitive advantage in various markets such as those of government bonds and their fast gr...

  19. International hedging under concurrent risks of input/output prices and exchange rate : The case of Korean oil refinery

    Energy Technology Data Exchange (ETDEWEB)

    Yun, W C; Kim, S D [Korea Energy Economics Institute, Euiwang (Korea, Republic of)

    1997-11-01

    This study develops an international hedging model which accounts for the multiple risks of input and output prices and exchange rates. Considering a fixed production technology, we formulize simultaneous minimum variance hedge ratios, which reflects inter correlations among prices. To utilize the dynamic nature of prices, time-varying conditional procedures are specified to estimate the relevant variance and covariance matrix. The time-varying representations of the variance and covariance matrix are statistically appropriate, in general. The separate hedge ratios are similar to the simultaneous hedge ratios for alternative procedures. The ex post hedging effectiveness indicate that there are substantial reduction in the variance of returns for all the procedures. The contribution of foreign currency futures is minimal due to the low correlation between commodities and exchange rates. Based on the traditional definition of hedging effectiveness, the time-varying conditional procedure provide little gain to the hedgers over a constant procedure in terms of the mean and the variance reduction. However, the performance of conditional procedures could be improved by accounting for the potential problems: mis specification problem, inappropriate definition of hedging effectiveness, and conflicts between theoretical derivation and estimation of hedge ratios. (author). 39 refs., 6 tabs.

  20. NEGATIVE CURRENCY-RISK-EXPOSURE FOR TURKISH EQUITIES

    Directory of Open Access Journals (Sweden)

    Salvatore J. Terregrossa

    2016-04-01

    Full Text Available Currency-risk-exposure is an issue for Turkish equities, from two different angles: internationaltrade and foreign-portfolio-investment. The likely effect is positive for the former, and negative for the latter aspect. Consequently, the overall or net effect on equity value depends on which of these aspects of currency-risk-exposure has the greater impact. The present empirical analysis estimates currency risk of Turkish equities within a multi-factor regression setting, utilizing the framework of the Security Market Plane (SMP model. The SMP model embodies a conditional relation among three variables: beta, realized excess market-return, and expected excess portfolio-return. The SMP empirical framework is extended to include a currency-risk-factor in the present analysis. The currency-risk-factor is specified as the excess return to holding foreign currency (€; $, relative to holding domestic currency (Turkish Lira. The SMP-related factor is the cross-product term of beta and realized excess market-return (β it rMt . A regression of realized excess portfolio-returns against the corresponding currency-risk-factor and cross product-term (β it rMt finds that the Turkish stocks represented in the analysis generally have overall negative currency-risk-exposure; suggesting that unexpected currency depreciation generally leads to lower values for Turkish stocks (and portfolios of Turkish stocks. Thus, after accounting for the SMP-related interaction-effect between beta and realized excess marketreturn, currency risk is found to command a premium for the Turkish stocks represented in the analysis.

  1. Stores, Prices, and Currency Substitution

    OpenAIRE

    Gabriele, Camera; Winkler, Johannes

    1999-01-01

    We study endogenous currency substitution in a decentralized trade environment. Sellers maximize profits from sales of imperfectly substitutable goods by posting prices in either one of two currencies. A unique symmetric equilibrium exists where goods are priced only in the local currency. This occurs if foreign trade is sporadic, there is sufficient but not excessive liquidity, and discounting is low. Excess or scarcity of liquidity, however, induces sellers to extract all surplus from bu...

  2. Understanding Platform-Based Digital Currencies

    OpenAIRE

    Ben Fung; Hanna Halaburda

    2014-01-01

    Given technological advances and the widespread use of the Internet, various digital currencies have emerged. In most cases, Internet platforms such as Facebook and Amazon restrict the functionality of their digital currencies to enhance the business model and maximize their profits. While platform-based digital currencies could increase the efficiency of retail payments, they could also raise some important policy issues if they were to become widely used outside of the platform. Thus, it is...

  3. Empirical Studies of Exchange Rates: Price Behavior, Rate Determinationand Market Efficiency

    OpenAIRE

    Richard M. Levich

    1983-01-01

    Theoretical and empirical research completed over the last decade has dramatically increased our understanding of exchange rate behavior. The major insight to come from this decade of research is that foreign exchange is a financial asset. In an asset pricing framework, current exchange rates reflect the expected values of future exogenous variables. The purpose of this paper is to survay the empirical evidence on exchange rate behavior, market efficiency and related topics. Section 2 present...

  4. Search for a new exchange-rate regime.

    Science.gov (United States)

    Williamson, J

    1987-07-31

    The regime of unmanaged floating exchange rates was implicitly judged a failure when, with the Plaza Agreement, attempts at cooperative exchange-rate management were reintroduced primarily because of concern at the size of misalignments. Any satisfactory successor regime will need to limit misalignments while retaining the genuine social benefits of exchange-rate flexibility. It is argued that a system of target zones for exchange rates, ideally embedded in a more comprehensive set of guidelines for international economic policy coordination, could best reconcile these needs.

  5. On equilibrium real exchange rates in euro area: Special focus on behavioral equilibrium exchange rates in Ireland and Greece

    Directory of Open Access Journals (Sweden)

    Klára Plecitá

    2012-01-01

    Full Text Available This paper focuses on the intra-euro-area imbalances. Therefore the first aim of this paper is to identify euro-area countries exhibiting macroeconomic imbalances. The subsequent aim is to estimate equilibrium real exchange rates for these countries and to compute their degrees of real exchange rate misalignment. The intra-area balance is assessed using the Cluster Analysis and the Principle Component Analysis; on this basis Greece and Ireland are selected as the two euro-area countries with largest imbalances in 2010. Further the medium-run equilibrium exchange rates for Greece and Ireland are estimated applying the Behavioral Equilibrium Exchange Rate (BEER approach popularised by Clark and MacDonald (1998. In addition, the long-run equilibrium exchange rates are estimated using the Permanent Equilibrium Exchange Rate (PEER model. Employing the BEER and PEER approaches on quarterly time series of real effective exchange rates (REER from 1997: Q1 to 2010: Q4 we identify an undervaluation of the Greek and Irish REER around their entrance to the euro area. For the rest of the period analysed their REER is broadly in line with estimated BEER and PEER levels.

  6. An Econometric Diffusion Model of Exchange Rate Movements within a Band - Implications for Interest Rate Differential and Credibility of Exchange Rate Policy

    OpenAIRE

    Rantala, Olavi

    1992-01-01

    The paper presents a model ofexchange rate movements within a specified exchange rate band enforced by central bank interventions. The model is based on the empirical observation that the exchange rate has usually been strictly inside the band, at least in Finland. In this model the distribution of the exchange rate is truncated lognormal from the edges towards the center of the band and hence quite different from the bimodal distribution of the standard target zone model. The model is estima...

  7. 77 FR 31411 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and...

    Science.gov (United States)

    2012-05-25

    ... program related to an incentive plan for certain Foreign Currency (``FX'') options traded on the Exchange... Rule Change to Terminate a Pilot Program Related to an Incentive Plan for Certain Foreign Currency Options Traded on the Exchange and To Make a Technical Change to the Schedule of Fees May 21, 2012...

  8. Taxa de câmbio, poupança e produtividade: impactos de curto e longo prazo Exchange rates, savings and productivity: short and long-term impacts

    Directory of Open Access Journals (Sweden)

    Paulo Gala

    2011-08-01

    Full Text Available O trabalho tem por objetivo analisar, sob o ponto de vista teórico, a relação entre nível da taxa de câmbio e desenvolvimento econômico. A hipótese principal segue a literatura de "doença holandesa" e baseia-se na ideia de que câmbios competitivos contribuem para a formação e manutenção do setor manufatureiro da economia. A existência de retornos crescentes nesse setor influencia fortemente o aumento da produtividade no longo prazo. Discute-se, também, como a manutenção de uma taxa de câmbio competitiva poderá estimular a formação de poupança doméstica ao evitar aumentos artificiais do salário real pela via da sobrevalorização cambial.The objective of this paper is to analyze, from a theoretical point of view, the relation between real exchange rates and economic development. The main hypothesis is very much in line with the Dutch disease literature and states that competitive currencies contribute to the existence and maintenance of the manufacturing sector in the economy. This, in turn, brings about higher growth rates in the long run, given the existence of increasing returns in the industrial sector and its importance in generating technological change and increasing productivity in the overall economy. We also show from a theoretical perspective how a competitive exchange rate can stimulate domestic savings by avoiding consumption booms based on currency overvaluation.

  9. 75 FR 14646 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of...

    Science.gov (United States)

    2010-03-26

    ... 6753 (February 10, 2010) (SR-ISE-2009-106). Under current Rule 502(h), only Exchange-Traded Fund Shares, or ETFs, that are traded on a national securities exchange and are defined as an ``NMS'' stock under... specified non-U.S. currency or currencies deposited with the trust when aggregated in some specified minimum...

  10. Currency Valuation and Purchasing Power Parity

    OpenAIRE

    Jamal Ibrahim Haidar

    2011-01-01

    This paper aims to highlight key limitations of The Economist magazine’s Big Mac Index (BMI). The Economist markets the BMI as a tool to determine valuation of currencies. This paper shows that the BMI is a misleading measure of currency valuation for economies whose markets are structurally different from the benchmark currency countries.

  11. Management of exchange rate regimes in emerging Asia

    Directory of Open Access Journals (Sweden)

    Ramkishen S. Rajan

    2012-04-01

    Full Text Available This paper revisits the issue of exchange rate regimes in emerging Asia over the decade 1999–2009. It finds that while Asia is home to a wide array of exchange rate regimes, there are signs of gradual movement toward somewhat greater exchange rate flexibility in many of the regional countries. There appears to be evidence of an apparent “fear of appreciation” which is manifested in asymmetric exchange rate intervention—i.e., a willingness to allow depreciations but reluctance to allow appreciations. This policy of effective exchange rate undervaluation is rather unorthodox from a neoclassical sense, but is consistent with a development policy centered on suppressing the price of non-tradable goods relative to tradables (i.e., real exchange rate undervaluation.

  12. 76 FR 8946 - Security Ratings

    Science.gov (United States)

    2011-02-16

    ... grade securities (such as foreign currency or other cash settled derivative securities). See... investment grade securities (such as foreign currency or other cash settled derivative securities). See... SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 200, 229, 230, 232, 239, 240, and 249 [Release No...

  13. Local Currency Financing--The Next Frontier for MDBs?

    OpenAIRE

    Hoschka, Tobias C.

    2005-01-01

    This paper surveys the issues involved in local currency financing by multilateral development banks (MDBs). While MDBs have traditionally provided financing in foreign currency to their borrowers, greater sensitivity by borrowers to potential currency mismatches, political decentralization, and the development of local capital markets have recently led MDBs to consider providing financing in local currency. While still small in comparison to MDBs' foreign currency financing, this paper argue...

  14. Modeling Real Exchange Rate Persistence in Chile

    Directory of Open Access Journals (Sweden)

    Leonardo Salazar

    2017-07-01

    Full Text Available The long and persistent swings in the real exchange rate have for a long time puzzled economists. Recent models built on imperfect knowledge economics seem to provide a theoretical explanation for this persistence. Empirical results, based on a cointegrated vector autoregressive (CVAR model, provide evidence of error-increasing behavior in prices and interest rates, which is consistent with the persistence observed in the data. The movements in the real exchange rate are compensated by movements in the interest rate spread, which restores the equilibrium in the product market when the real exchange rate moves away from its long-run benchmark value. Fluctuations in the copper price also explain the deviations of the real exchange rate from its long-run equilibrium value.

  15. An attempt to categorize Hungarian community currencies

    Directory of Open Access Journals (Sweden)

    Eszter Szemerédi

    2018-04-01

    Full Text Available Since the emergence of complementary currencies in the 1980s there have been numerous attempts to classify them, despite that the terms local currency, community currency and many others describing place-based monetary tools are not considered similarly by scholars. The local currencies take many forms, and local governments play different roles in their emergence and development. In Hungary there has been an increasing attention and discussion around the idea of implementing these alternative monetary tools. There is a growing number of working complementary currencies in Hungary, but academic research focuses mostly on whether these can contribute to the local development and what kind of effects they have. The aim of this paper is to present a possible categorization of Hungarian complementary currencies based on the role local governments played in their implementation. I evaluate whether these community currencies are effective at first, and attempt to categorize them based on their purpose, association form and their relationships with local governments, with the purpose of increasing awareness for these initiatives in the process of policy-making.

  16. The foreign exchange market: return distributions, multifractality, anomalous multifractality and the Epps effect

    Science.gov (United States)

    Drożdż, Stanisław; Kwapień, Jarosław; Oświȩcimka, Paweł; Rak, Rafał

    2010-10-01

    We present a systematic study of various statistical characteristics of high-frequency returns from the foreign exchange market. This study is based on six exchange rates forming two triangles: EUR-GBP-USD and GBP-CHF-JPY. It is shown that the exchange rate return fluctuations for all of the pairs considered are well described by the non-extensive statistics in terms of q-Gaussians. There exist some small quantitative variations in the non-extensivity q-parameter values for different exchange rates (which depend also on the time scales studied), and this can be related to the importance of a given exchange rate in the world's currency trade. Temporal correlations organize the series of returns such that they develop the multifractal characteristics for all of the exchange rates, with a varying degree of symmetry of the singularity spectrum f(α), however. The most symmetric spectrum is identified for the GBP/USD. We also form time series of triangular residual returns and find that the distributions of their fluctuations develop disproportionately heavier tails as compared to small fluctuations, which excludes description in terms of q-Gaussians. The multifractal characteristics of these residual returns reveal such anomalous properties as negative singularity exponents and even negative singularity spectra. Such anomalous multifractal measures have so far been considered in the literature in connection with diffusion-limited aggregation and with turbulence. Studying the cross-correlations among different exchange rates, we found that market inefficiency on short time scales leads to the occurrence of the Epps effect on much longer time scales, but comparable to the ones for the stock market. Although the currency market is much more liquid than the stock markets and has a much greater transaction frequency, the building up of correlations takes up to several hours—a duration that does not differ much from what is observed in the stock markets. This may suggest

  17. Bitcoin – the World-Wide Currency

    Directory of Open Access Journals (Sweden)

    Shuba Olena А.

    2017-11-01

    Full Text Available The article is aimed at researching bitcoin, the digital currency. It has been found that Bitcoin is a cryptocurrency, that is, the virtual money, which has no material equivalent. The history of creation and development of cryptocurrency was reviewed. There is a reduction in volatility, which guarantees the security of currency, as well as the increase in currency volume and the inability to estimate the profitability of bitcoins. The dynamics of the value of digital currency in US dollars over recent years has been analyzed. Improvement of attitude of many countries to the considered cryptocurrency, in particular the USA, Germany, Spain, Canada, Australia, Israel and Scandinavian countries has been identified. The reasons of Ukraine’s interest in Bitcoin have been considered. Possibilities of creation of cryptocurrency on the territory of Ukraine have been analyzed, i.e. cost of electricity for mining, the legal status of mining firms, and the attitude of the National Bank of Ukraine to the digital currency. It has been concluded that the recognition of Bitcoin by the world countries in the future will allow it to be granted the status of world-wide currency.

  18. On exchange rate misalignments in the Eurozone's peripheral countries

    Science.gov (United States)

    Grochová, Ladislava; Plecitá, Klára

    2013-10-01

    In this paper we model equilibrium exchange rates for the Eurozone's countries on the basis of the Behavioural Equilibrium Exchange Rate approach, which assumes, that equilibrium exchange rates are in the long run affected by economic fundamentals. To assess the degree of exchange rate misalignment for the Eurozone's peripheral countries - Portugal, Ireland, Greece and Spain - the gap between the actual and the modelled equilibrium exchange rate value is calculated. Our results show that Spain, Portugal and Ireland had their real exchange rates in equilibrium when they joined the Eurozone; however their real exchange rates have been persistently overvalued since the beginning of the 2000s. Greece, on the other hand, has experienced diminishing undervaluation at the beginning of its membership in the Eurozone and since 2009 has exhibited an overvalued real exchange rate.

  19. Currency substitution in Eastern Europe

    NARCIS (Netherlands)

    van Aarle, B.; Budina, N.

    1995-01-01

    Monetary instability during the transition process from a command economy to a market economy has induced a considerable increase in currency substitution in Eastern Europe. Currency substitution itself affects monetary stability since it reduces the stability of velocity. This paper investigates

  20. A new assessment of floating exchange rates

    OpenAIRE

    Waimann, D. R.

    1981-01-01

    The switch to floating exchange rates during the 1970s has given economists the first comprehensive opportunity to assess the arguments for and against floating. Much new work has been done on various aspects of floating exchange rate behaviour. This article attempts a limited survey of the evidence concerning two important issues—whether floating exchange rates are inherently unstable and whether they harm international trade.