How did China's foreign exchange reform affect the efficiency of foreign exchange market?

Science.gov (United States)

Ning, Ye; Wang, Yiming; Su, Chi-wei

2017-10-01

This study compares the market efficiency of China's onshore and offshore foreign exchange markets before and after the foreign exchange reform on August 11, 2015. We use the multifractal detrended fluctuation analysis of the onshore and offshore RMB/USD spot exchange rate series as basis. We then find that the onshore foreign exchange market before the reform has the lowest market efficiency, which increased after the reform. The offshore foreign exchange market before the reform has the highest market efficiency, which dropped after the reform. This finding implies the increased efficiency of the onshore foreign exchange market and the loss of efficiency in the offshore foreign exchange market. We also find that the offshore foreign exchange market is more efficient than the onshore market and that the gap shrank after the reform. Changes in intervention of the People's Bank of China since the reform is a possible explanation for the changes in the efficiency of the foreign exchange market.

Differences between foreign exchange rate regimes: the view from the tails

NARCIS (Netherlands)

C.G. Koedijk (Kees); Ph.A. Stork (Philip); C.G. de Vries (Casper)

1992-01-01

textabstractIn the literature on the empirical unconditional distribution of foreign exchange rate returns there is indication that the type of distribution function is related to the form of exchange rate regime. The analysis has been hampered by the nonnestedness of alternative distribution

Foreign exchange rate entropy evolution during financial crises

Science.gov (United States)

Stosic, Darko; Stosic, Dusan; Ludermir, Teresa; de Oliveira, Wilson; Stosic, Tatijana

2016-05-01

This paper examines the effects of financial crises on foreign exchange (FX) markets, where entropy evolution is measured for different exchange rates, using the time-dependent block entropy method. Empirical results suggest that financial crises are associated with significant increase of exchange rate entropy, reflecting instability in FX market dynamics. In accordance with phenomenological expectations, it is found that FX markets with large liquidity and large trading volume are more inert - they recover quicker from a crisis than markets with small liquidity and small trading volume. Moreover, our numerical analysis shows that periods of economic uncertainty are preceded by periods of low entropy values, which may serve as a tool for anticipating the onset of financial crises.

Diffusion equations and the time evolution of foreign exchange rates

Energy Technology Data Exchange (ETDEWEB)

Figueiredo, Annibal; Castro, Marcio T. de [Institute of Physics, Universidade de Brasília, Brasília DF 70910-900 (Brazil); Fonseca, Regina C.B. da [Department of Mathematics, Instituto Federal de Goiás, Goiânia GO 74055-110 (Brazil); Gleria, Iram, E-mail: iram@fis.ufal.br [Institute of Physics, Federal University of Alagoas, Brazil, Maceió AL 57072-900 (Brazil)

2013-10-01

We investigate which type of diffusion equation is most appropriate to describe the time evolution of foreign exchange rates. We modify the geometric diffusion model assuming a non-exponential time evolution and the stochastic term is the sum of a Wiener noise and a jump process. We find the resulting diffusion equation to obey the Kramers–Moyal equation. Analytical solutions are obtained using the characteristic function formalism and compared with empirical data. The analysis focus on the first four central moments considering the returns of foreign exchange rate. It is shown that the proposed model offers a good improvement over the classical geometric diffusion model.

Diffusion equations and the time evolution of foreign exchange rates

Science.gov (United States)

Figueiredo, Annibal; de Castro, Marcio T.; da Fonseca, Regina C. B.; Gleria, Iram

2013-10-01

We investigate which type of diffusion equation is most appropriate to describe the time evolution of foreign exchange rates. We modify the geometric diffusion model assuming a non-exponential time evolution and the stochastic term is the sum of a Wiener noise and a jump process. We find the resulting diffusion equation to obey the Kramers-Moyal equation. Analytical solutions are obtained using the characteristic function formalism and compared with empirical data. The analysis focus on the first four central moments considering the returns of foreign exchange rate. It is shown that the proposed model offers a good improvement over the classical geometric diffusion model.

Diffusion equations and the time evolution of foreign exchange rates

International Nuclear Information System (INIS)

Figueiredo, Annibal; Castro, Marcio T. de; Fonseca, Regina C.B. da; Gleria, Iram

2013-01-01

We investigate which type of diffusion equation is most appropriate to describe the time evolution of foreign exchange rates. We modify the geometric diffusion model assuming a non-exponential time evolution and the stochastic term is the sum of a Wiener noise and a jump process. We find the resulting diffusion equation to obey the Kramers–Moyal equation. Analytical solutions are obtained using the characteristic function formalism and compared with empirical data. The analysis focus on the first four central moments considering the returns of foreign exchange rate. It is shown that the proposed model offers a good improvement over the classical geometric diffusion model.

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.

Moment generating function approach to pricing interest rate and foreign exchange rate claims

NARCIS (Netherlands)

Dijkstra, T.K.; Yao, Y.

2002-01-01

This paper uses moment generating functions to provide a general framework to model international term structures and to price interest rate and foreign exchange rate claims. When moment generating functions of state variables have a closed-form formula, closed-form formulas for bond prices are

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.

Time-series analysis of multiple foreign exchange rates using time-dependent pattern entropy

Science.gov (United States)

Ishizaki, Ryuji; Inoue, Masayoshi

2018-01-01

Time-dependent pattern entropy is a method that reduces variations to binary symbolic dynamics and considers the pattern of symbols in a sliding temporal window. We use this method to analyze the instability of daily variations in multiple foreign exchange rates. The time-dependent pattern entropy of 7 foreign exchange rates (AUD/USD, CAD/USD, CHF/USD, EUR/USD, GBP/USD, JPY/USD, and NZD/USD) was found to be high in the long period after the Lehman shock, and be low in the long period after Mar 2012. We compared the correlation matrix between exchange rates in periods of high and low of the time-dependent pattern entropy.

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

Exchange Rate Movement and Foreign Direct Investment in Asean Economies

OpenAIRE

Lily, Jaratin; Kogid, Mori; Mulok, Dullah; Thien Sang, Lim; Asid, Rozilee

2014-01-01

The inflows of foreign direct investment (FDI) are important for a country's economic development, but the world market for FDI has become more competitive. This paper empirically analyses the exchange rate movements and foreign direct investment (FDI) relationship using annual data on ASEAN economies, that is, Malaysia, the Philippines, Thailand, and Singapore. By employing ARDL bounds test approach, the empirical results show the existence of significant long-run cointegration between excha...

Integrated Foreign Exchange Risk Management

DEFF Research Database (Denmark)

Aabo, Tom; Høg, Esben; Kuhn, Jochen

Empirical research has focused on export as a proxy for the exchange rate exposure and the use of foreign exchange derivatives as the instrument to deal with this exposure. This empirical study applies an integrated foreign exchange risk management approach with a particular focus on the role...

Foreign Exchange Markets in Russia: Understanding the Reforms

OpenAIRE

Linda S. Goldberg

1993-01-01

This paper analyzes and interprets the changes that took place in Russia's exchange rate system during 1992. The multiple exchange rate regime that existed in Russia prior to July 3, 1992, created strong incentives for exporters to refrain from repatriating foreign exchange earnings, induced both importers and exporters to participate in unofficial markets for foreign exchange, and encouraged international barter transactions. Efforts to manage the exchange rate through heavy foreign exchange...

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...

Latin American foreign exchange intervention - Updated

OpenAIRE

Da Silva, Sergio; Nunes, Mauricio

2007-01-01

We examine Latin American foreign exchange intervention in a framework where the exchange rate regime is endogenous and there exists an inefficient, equilibrium foreign exchange intervention bias. The model suggests that greater central bank independence is associated with lesser intervention in the foreign exchange market, and also with leaning-against-the-wind intervention. Both results are confirmed by data from 13 Latin American countries.

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...

Foreign Exchange Exposures of Korean Firms

Directory of Open Access Journals (Sweden)

Sungbin Cho

2011-03-01

Full Text Available We measure foreign exchange exposures as sensitivity of firm's value to FX premium in the CAPM plus FX premium model, and try to find determinants of the exposures; using data of non-financial companies listed in the Korea Exchange from the year 2007 to 2008. Main findings are as follows. If Korean won depreciates, only a small number of firms is benefitted while majority of firms are harmed to the contrary of common knowledge. As a firm's export increases, the foreign exchange exposure increases up to a certain level and after that it declines. And, smaller firms of negative foreign exchange exposures are more sensitive to foreign exchange changes. These suggest heterogeneous effects of foreign exchange rates on industries and firms.

The nuclear power corporation's foreign exchange risk management research

International Nuclear Information System (INIS)

Zhang Yi

2012-01-01

To manage and control foreign exchange rate risk under the floating exchange rate system, historical simulation method of VaR model has been utilized to evaluate the nuclear power corporation's foreign exchange risk and the risk causation has been analyzed. Finally, the measure of enhancing the nuclear power corporation's foreign exchange rate risk management level has been exposed for sharing. (author)

Correlation analysis of the Korean stock market: Revisited to consider the influence of foreign exchange rate

Science.gov (United States)

Jo, Sang Kyun; Kim, Min Jae; Lim, Kyuseong; Kim, Soo Yong

2018-02-01

We investigated the effect of foreign exchange rate in a correlation analysis of the Korean stock market using both random matrix theory and minimum spanning tree. We collected data sets which were divided into two types of stock price, the original stock price in Korean Won and the price converted into US dollars at contemporary foreign exchange rates. Comparing the random matrix theory based on the two different prices, a few particular sectors exhibited substantial differences while other sectors changed little. The particular sectors were closely related to economic circumstances and the influence of foreign financial markets during that period. The method introduced in this paper offers a way to pinpoint the effect of exchange rate on an emerging stock market.

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...

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.

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.

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...

Quantitative Comparisons on the Intrinsic Features of Foreign Exchange Rates Between the 1920s and the 2010s: Case of the USD-GBP Exchange Rate

Directory of Open Access Journals (Sweden)

Young Wook Han

2016-09-01

Full Text Available This paper quantitatively compares the intrinsic features of the daily USD-GBP exchange rates in two different periods, the 1920s and the 2010s, under the same freely floating exchange rate system. Even though the foreign exchange markets in the 1920s seem to be much less organized and developed than in the 2010s, this paper finds that both the long memory volatility property and the structural break appear to be the common intrigue features of the exchange rates in the two periods by using the FIGARCH model. In particular, the long memory volatility properties in the two periods are found to be upward biased and overstated because of the structural breaks in the exchange markets. Thus this paper applies the Adaptive-FIGARCH model to consider the long memory volatility property and the structural breaks jointly. The main finding is that the structural breaks in the exchange markets affect the long memory volatility property significantly in the two periods but the degree of the long memory volatility property in the 1920s is reduced more remarkably than in the 2010s after the structural breaks are accounted for; thus implying that the structural breaks in the foreign exchange markets in the 1920s seem to be more significant.

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...

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...

On the time-homogeneous Ornstein–Uhlenbeck process in the foreign exchange rates

Energy Technology Data Exchange (ETDEWEB)

Fonseca, Regina C.B. da, E-mail: regina@quimica-industrial.com [Department of Mathematics, Instituto Federal de Goiás, Goiânia, Goiás 74055-110 (Brazil); International Center for Condensed Matter Physics, Instituto de Física, Universidade de Brasília, Caixa Postal 04455, 70919-970, Brasília, Distrito Federal (Brazil); Matsushita, Raul Y. [Department of Statistics, Universidade de Brasília, 70919-970, Brasília, Distrito Federal (Brazil); Castro, Márcio T. de; Figueiredo, Annibal [International Center for Condensed Matter Physics, Instituto de Física, Universidade de Brasília, Caixa Postal 04455, 70919-970, Brasília, Distrito Federal (Brazil)

2015-10-02

Since Gaussianity and stationarity assumptions cannot be fulfilled by financial data, the time-homogeneous Ornstein–Uhlenbeck (THOU) process was introduced as a candidate model to describe time series of financial returns [1]. It is an Ornstein–Uhlenbeck (OU) process in which these assumptions are replaced by linearity and time-homogeneity. We employ the OU and THOU processes to analyze daily foreign exchange rates against the US dollar. We confirm that the OU process does not fit the data, while in most cases the first four cumulants patterns from data can be described by the THOU process. However, there are some exceptions in which the data do not follow linearity or time-homogeneity assumptions. - Highlights: • Gaussianity and stationarity assumptions replaced by linearity and time-homogeneity. • We revisit the time-homogeneous Ornstein–Uhlenbeck (THOU) process. • We employ the THOU process to analyze foreign exchange rates against the US dollar. • The first four cumulants patterns from data can be described by the THOU process.

On the time-homogeneous Ornstein–Uhlenbeck process in the foreign exchange rates

International Nuclear Information System (INIS)

Fonseca, Regina C.B. da; Matsushita, Raul Y.; Castro, Márcio T. de; Figueiredo, Annibal

2015-01-01

Since Gaussianity and stationarity assumptions cannot be fulfilled by financial data, the time-homogeneous Ornstein–Uhlenbeck (THOU) process was introduced as a candidate model to describe time series of financial returns [1]. It is an Ornstein–Uhlenbeck (OU) process in which these assumptions are replaced by linearity and time-homogeneity. We employ the OU and THOU processes to analyze daily foreign exchange rates against the US dollar. We confirm that the OU process does not fit the data, while in most cases the first four cumulants patterns from data can be described by the THOU process. However, there are some exceptions in which the data do not follow linearity or time-homogeneity assumptions. - Highlights: • Gaussianity and stationarity assumptions replaced by linearity and time-homogeneity. • We revisit the time-homogeneous Ornstein–Uhlenbeck (THOU) process. • We employ the THOU process to analyze foreign exchange rates against the US dollar. • The first four cumulants patterns from data can be described by the THOU process

Corporate foreign exchange speculation and integrated risk management

DEFF Research Database (Denmark)

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

2012-01-01

Purpose – The purpose of this paper is to investigate how non-finance departmental involvement in the management of exchange rate risks impacts the extent of foreign exchange speculation in non-financial firms. Design/methodology/approach – We survey non-financial firms in a small open economy...... (Denmark) to investigate the extent of foreign exchange speculation and how it is related to the degree of non-finance departmental involvement in the management of exchange rate risks. We employ binary and ordered probit regression analysis. Findings – We find a positive link between 1) the extent...... to which other departments than the finance department is involved in the management of exchange rate risks and 2) the extent to which the firm is likely to speculate – whether in the form of selective hedging or active speculation – on the foreign exchange market. Practical implications – Our findings...

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.

Efficiency Tests in Foreign Exchange Market

Directory of Open Access Journals (Sweden)

Yi Hsien Lee

2012-01-01

Full Text Available The main purpose of the paper is applying filter rules to examine the efficiency of foreign exchange. This paper uses three strategies of filter rules (buy long, sell short, buy long and sell short strategies to test the performance of the transaction for EUR, JPY, GBP. The findings show that people will obtain more return by taking buy long/ sell short strategies of filter rules without considering transaction cost. However, the transaction of these three foreign exchange rate (EUR, JPY, GBP will be more efficient by considering transaction cost. The results imply the foreign exchange market is efficient for the EUR, JPY and GBP.

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.

The Research of Foreign Exchange Exposures in Taiwan

OpenAIRE

Chen, Yi Chen

2006-01-01

The research will be mainly focused on the relationship between the stock returns and the fluctuation of foreign exchange rate exposure in Taiwan listed corporations. Due to the environmental limitations and in sufficient resources, if Taiwan inclines to develop international trade, the exchange market plays an important role in the advances of Taiwan's economy. Therefore, the fluctuations of foreign exchange rate must have a substantially impact on the profitability of industries in Taiwan.

Estimating Foreign Exchange Reserve Adequacy

Directory of Open Access Journals (Sweden)

Abdul Hakim

2013-04-01

Full Text Available Accumulating foreign exchange reserves, despite their cost and their impacts on other macroeconomics variables, provides some benefits. This paper models such foreign exchange reserves. To measure the adequacy of foreign exchange reserves for import, it uses total reserves-to-import ratio (TRM. The chosen independent variables are gross domestic product growth, exchange rates, opportunity cost, and a dummy variable separating the pre and post 1997 Asian financial crisis. To estimate the risky TRM value, this paper uses conditional Value-at-Risk (VaR, with the help of Glosten-Jagannathan-Runkle (GJR model to estimate the conditional volatility. The results suggest that all independent variables significantly influence TRM. They also suggest that the short and long run volatilities are evident, with the additional evidence of asymmetric effects of negative and positive past shocks. The VaR, which are calculated assuming both normal and t distributions, provide similar results, namely violations in 2005 and 2008.

Causal Nexus between Stock Price, Demand for Money, Interest Rate, Foreign Institutional Investment, and Exchange Rates in India: A Post Subprime Crisis Analysis

Directory of Open Access Journals (Sweden)

Iti Vyas

2014-08-01

Full Text Available This  paper  makes  an  attempt  to  empirically  examine  the  causal  nexus  between  stock price, demand for money, interest rates, foreign institutional investment and exchange rates in India in the post subprime mortgage crisis period. The study employed Granger causality test, Vector Auto Regression and Johansen Maximum Likelihood procedure to examine the short  run  and  long  run  dynamic  interaction  among  the  above  mentioned  variables  for  the period January 1993 to May 2009. The major indings of the study are: stock return affects exchange rate return, net foreign institutional investment and growth of demand for money. Growth  of  demand  for  money,  in  turn,  affects  interest  rate.  Interest  rate  is  more  affected by exchange rate return. Foreign institutional investment also affects interest rate. The co-integration  test  conirms  that  there  does  not  exist  any  long  run  equilibrium  relationship between stock return and exchange rate return ";} // -->activate javascript

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.

The Story of Foreign Trade and Exchange.

Science.gov (United States)

Fan, Cedric

This comic-style booklet is one of a series of educational booklets published by the Federal Reserve Bank of New York. The booklet uses everyday language and lively illustrations to explain the benefits of international trade; the effects of tariffs and quotas; the significance of foreign exchange rates; how the foreign exchange market facilities…

MULTIFRACTAL STRUCTURE OF CENTRAL AND EASTERN EUROPEAN FOREIGN EXCHANGE MARKETS

Directory of Open Access Journals (Sweden)

Cn#259;pun#351;an Rn#259;zvan

2012-07-01

Full Text Available It is well known that empirical data coming from financial markets, like stock market indices, commodities, interest rates, traded volumes and foreign exchange rates have a multifractal structure. Multifractals were introduced in the field of economics to surpass the shortcomings of classical models like the fractional Brownian motion or GARCH processes. In this paper we investigate the multifractal behavior of Central and Eastern European foreign exchange rates, namely the Czech koruna, Croatian kuna, Hungarian forint, Polish zlot, Romanian leu and Russian rouble with respect to euro from January 13, 2000 to February 29, 2012. The dynamics of exchange rates is of interest for investors and traders, monetary and fiscal authorities, economic agents or policy makers. The exchange rate movements affect the international balance of payments, trade flows, and allocation of the resources in national and international economy. The empirical results from the multifractal detrending fluctuation analysis algorithm show that the six exchange rate series analysed display significant multifractality. Moreover, generating shuffled and surrogate time series, we analyze the sources of multifractality, long-range correlations and heavy-tailed distributions, and we find that this multifractal behavior can be mainly attributed to the latter. Finally, we propose a foreign exchange market inefficiency ranking by considering the multifractality degree as a measure of inefficiency. The regulators, through policy instruments, aim to improve the informational inefficiency of the markets, to reduce the associated risks and to ensure economic stabilization. Evaluation of the degree of information efficiency of foreign exchange markets, for Central and Eastern Europe countries, is important to assess to what extent these countries are prepared for the transition towards fully monetary integration. The weak form efficiency implies that the past exchange rates cannot help to

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...

Foreign Exchange Reserves: Bangladesh Perspective

Directory of Open Access Journals (Sweden)

Md Zahangir Alam

2013-10-01

Full Text Available This study is about foreign exchangereserves of Bangladesh. The mainpurpose of this study is to the influence of exchange rates on foreign exchangereserves to the Bangladesh context.  Both the primary and secondary data has been used inthis study. The primary data has been collected through a structuredquestionnaire from 50 respondents. The secondary data, namely Bangladeshforeign exchange reserves (FER, Bangladesh current account balance (CAB,Bangladesh capital andfinancial account balance (CFAB, and BDT/USD exchange rates (ER.  This study covers yearly data from July 01,1996 to June 30, 2005 and quarterly data from July 01, 2005 to June 30, 2012. Findingsof this study shows that out of the selected 16 factors affecting foreignexchange reserves, exchange rates occupy the first position, weighted averagescore (WAS being 4.56. Foreign exchange reserves (FER and current accountbalance (CAB have increased by 502.9087% and 1451.218%,whereas capital and financial account (CFAB has decreased by -649.024% on June30, 2012 compared to June 30, 1997. The influence of other factors heldconstant, as ER changes by 285.6894 units due to one unit change in FER, onaverage in the same direction which represents that ER has positive effect on theFER and this relationship is statistically significant.  62.1526 percentof the variation in FER is explained by ER. The outcomes of Breusch-Godfrey test (LM test, ARCHtest, and the Normality test are that there is a serial correlation among residuals, the variance of residuals is notconstant, and the residuals are not normally distributed.

KRW/USD Exchange Rate Volatility and Efficient Risk Management

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Sang-Yong Joo

1999-03-01

Full Text Available This thesis analyzes the relationship between the exchange rate of Korean Won and US dollar and the amount of foreign exchange, and studies the direction of the amendment of the risk control of foreign exchange. The GARCH (Generalized Auto Regressive Conditional Heteroscedasticity model which visually embodies the auto-regress of the wave of exchange rate shows that the amount of trade will enhance the fluidity of the exchange rate, that is, the various expects of the participators of the market affect the amount of trade and the fluidity, so in the process of trading, the trader who is in the dry tree of information bears more trading expenditure. It is predicted that the liberalization of foreign exchange rate and fluctuated exchange rate system will jointly bring the enhancement of the fluidity of the exchange rate and the amount of exchange trade. The change of this system will bring the rise of participators in foreign exchange market; meanwhile, it will also initiate superfluous fluidity of foreign exchange market. In order to overcome this problem, the government needs to implement the development strategy of the understructure of the foreign exchange market and the enterprises need to carry through systemic exchange rate risk control.

A Model for Trading the Foreign Exchange Market

African Journals Online (AJOL)

PROF. OLIVER OSUAGWA

inflation rates, etc. have significant impacts on the exchange rate fluctuation. Existing foreign exchange ... Keywords: FOREX, marcov chain, model, neural network, trading robot. Introduction .... Support Vector Machine (SVM). Regression ...

Time-series analysis of foreign exchange rates using time-dependent pattern entropy

Science.gov (United States)

Ishizaki, Ryuji; Inoue, Masayoshi

2013-08-01

Time-dependent pattern entropy is a method that reduces variations to binary symbolic dynamics and considers the pattern of symbols in a sliding temporal window. We use this method to analyze the instability of daily variations in foreign exchange rates, in particular, the dollar-yen rate. The time-dependent pattern entropy of the dollar-yen rate was found to be high in the following periods: before and after the turning points of the yen from strong to weak or from weak to strong, and the period after the Lehman shock.

The Foreign Exchange Exposure of Japanese Multinational ...

African Journals Online (AJOL)

The Foreign Exchange Exposure of Japanese Multinational Corporations. ... African Journal of Finance and Management ... We also find that keiretsu multinationals are more exposed to exchange rate risk that non-keiretsu firms.

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...

EFFICIENCY OF FOREIGN EXCHANGE MARKETS: A DEVELOPING COUNTRY PERSPECTIVE

OpenAIRE

Guneratne Banda Wickremasinghe

2004-01-01

This study tests weak and semi-strong form efficiency of the foreign exchange market in Sri Lanka using six bilateral foreign exchange rates during the recent float. Weak-form efficiency is examined using unit root tests while semi-strong form efficiency is tested using co- integration and Granger causality tests and variance decomposition analysis. Results indicate that the Sri Lankan foreign exchange market is consistent with the weak -form of the Efficient Market Hypothesis. However, the r...

Cointegration and Causality Test Among Export, Import, and Foreign Exchange

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Haryono Subiyakto

2016-06-01

Full Text Available The rupiah exchange rate, import, and export are the important indicators in economy, including the Indonesia economy. The debate regarding the relationship among the exchange rate, import, and export has been persisting for several decades. Some researchers found that there is a relationship among those three and others explained that there is no correlation among them. The aim of this research is to obtain the empirical evidence of the causal relationship among the export, import, and foreign exchange rate by using the monthly data from January 2010 to April 2014. The export and import data are the export and import values in US dollar. The exchange rate data is the median exchange rates of the Indonesian Bank. The Johansen Cointegration Test and the Granger Causality Test are used to analyze the data. The research result shows that export and import have no causal relationship at five percent. Next, the foreign exchange rate influences the export and import at 10 percent level. The result indicates that the foreign exchange rate has small effects on the export and import. Based on the results, the government should control the balance of trade and should not make any policy that is based on the exchange rate values. Finally, it can be said that the exchange rate policy is not effective in increasing the exports and reducing the imports.

EFFICIENCY OF FOREIGN EXCHANGE MARKETS: A DEVELOPING COUNTRY PERSPECTIVE

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Guneratne B Wickremasinghe

2005-01-01

Full Text Available This study tests weak and semi-strong form efficiency of the foreign exchange market in Sri Lanka during the recent float using six bilateral exchange rates. Weak-form efficiency is examined using unit root tests while semi-strong form efficiency is tested using co-integration, Granger causality tests and variance decomposition analysis. Results indicate that the Sri Lankan foreign exchange market is consistent with the weak-form of the efficient market hypothesis (EMH. However, the results provide evidence against the semi-strong version of the EMH. These results have important implications for government policy makers and participants in the foreign exchange market of Sri Lanka.

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.

Statistical inference, the bootstrap, and neural-network modeling with application to foreign exchange rates.

Science.gov (United States)

White, H; Racine, J

2001-01-01

We propose tests for individual and joint irrelevance of network inputs. Such tests can be used to determine whether an input or group of inputs "belong" in a particular model, thus permitting valid statistical inference based on estimated feedforward neural-network models. The approaches employ well-known statistical resampling techniques. We conduct a small Monte Carlo experiment showing that our tests have reasonable level and power behavior, and we apply our methods to examine whether there are predictable regularities in foreign exchange rates. We find that exchange rates do appear to contain information that is exploitable for enhanced point prediction, but the nature of the predictive relations evolves through time.

The determinants of exchange rate in Croatia

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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.

Foreign exchange transaction exposure of enterprises in Serbia

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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.

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

Financial Security and Optimal Scale of Foreign Exchange Reserve in China

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Guangyou Zhou

2018-05-01

Full Text Available The study of how foreign exchange reserves maintain financial security is of vital significance. This paper provides simulations and estimations of the optimal scale of foreign exchange reserves under the background of possible shocks to China’s economy due to the further opening of China’s financial market and the sudden stop of capital inflows. Focused on the perspective of financial security, this article tentatively constructs an optimal scale analysis framework that is based on a utility maximization of the foreign exchange reserve, and selects relevant data to simulate the optimal scale of China’s foreign exchange reserves. The results show that: (1 the main reason for the fast growth of the Chinese foreign exchange reserve scale is the structural trouble of its double international payment surplus, which creates long-term appreciation expectations for the exchange rate that make it difficult for international capital inflows and excess foreign exchange reserves to enter the real economic growth mechanism under the model of China’s export-driven economy growth; (2 the average optimal scale of the foreign exchange reserve in case of the sudden stop of capital inflows was calculated through parameter estimation and numerical simulation to be 13.53% of China’s gross domestic product (GDP between 1994 and 2017; (3 with the function of the foreign exchange reserves changing from meeting basic transaction demands to meeting financial security demands, the effect of the foreign exchange reserve maintaining the state’s financial security is becoming more and more obvious. Therefore, the structure of foreign exchange reserve assets should be optimized in China, and we will give full play to the special role of foreign exchange reserve in safeguarding a country’s financial security.

KRW/USD Exchange Rate Volatility and Efficient Risk Management

OpenAIRE

Sang-Yong Joo; Chae-Shick Chung; Young-Woo Lee

1999-01-01

This thesis analyzes the relationship between the exchange rate of Korean Won and US dollar and the amount of foreign exchange, and studies the direction of the amendment of the risk control of foreign exchange. The GARCH (Generalized Auto Regressive Conditional Heteroscedasticity) model which visually embodies the auto-regress of the wave of exchange rate shows that the amount of trade will enhance the fluidity of the exchange rate, that is, the various expects of the participators of the ma...

Semi-strong informational efficiency in the Polish foreign exchange market

OpenAIRE

Luksz Goczek

2015-01-01

During the financial crisis a notion that the Polish exchange rate is not determined effectively was very dominant, because of a contagion effect of the global financial crisis on the Polish economy. In addition, many foreign exchange market analysts explained developments in the Polish exchange market trough a hypothesis that the Polish zloty exchange rate follows other exchange rates. This contradicts market efficiency as this would lead to profitable arbitrage possibility based on past inf...

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.

Timing Foreign Exchange Markets

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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.

EFECT OF FOREIGN EXCHANGE RATE FLUCTUATIONS ON NIGERIAN ECONOMY

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Lawrence Olisaemeka UFOEZE

2018-03-01

Full Text Available This study investigated the effect of exchange rate fluctuations on Nigerian economy. The fixed and floating exchange eras were compared to know the exchange rate system in which the economy has fairly better. The time period covered was 1970 to 2012. The study employed the ordinary least square (OLS multiple regression technique for the analysis. The coefficient of determination (R2, F-test, t-test, beta and Durbin-Watson were used in the interpretation of the results. The resulted revealed that about 85% of the changes in macroeconomic indicators are explained in the fixed exchange era. In the floating exchange era, 99% was explained while the whole periods has 73% explanatory power, hence the floating exchange era (1986 to date is more effective in explaining economic trend in Nigeria. Also, exchange rate has significant positive effect on GDP during the fixed exchange rate era and negative effect the eras floating and all-time; inflation has insignificant negative effect on GDP during the fixed exchange era; significant effect in floating era and significant negative effect in the all-time period; money supply has insignificant negative effect GDP in fixed exchange era; and significant positive effect during the floating and all-time period; and oil revenue has significant positive effect on the GDP in all the exchange rate regimes (floating, fixed and all-time in Nigeria.  The study thus conclude that exchange rate movement is a good indicator for monitoring Nigerian economic growth. So far exchange rate has always been a key economic indicator for Nigeria. The floating exchange period has outperformed the fixed exchange rate in terms of contribution inflation, money supply and oil revenue to economic growth. This indicate that the floating exchange rate has been a better economic regime for sustainable economic growth in Nigeria. From the findings, it is evident that oil revenue has positive effect in Nigeria and has remained the mainstay

Exporter Price Response to Exchange Rate Changes

DEFF Research Database (Denmark)

Fosse, Henrik Barslund

Firms exporting to foreign markets face a particular challenge: to price their exports in a foreign market when the exchange rate changes. This paper takes on pricing- to-market using a unique data set that covers rm level monthly trade at great detail. As opposed to annual trade ows, monthly trade...... theoretical contributions to the litterature on pricing-to-market and exchange rate pass-through....

FOREIGN EXCHANGE MARKET EFFICIENCY. EMPIRICAL RESULTS FOR THE USD/EUR MARKET

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Katarzyna Anna Czech

2012-10-01

Full Text Available The aim of the paper is to verify whether the USD/EUR exchange rate market is efficient. The fundamental parity condition for testing foreign exchange market efficiency is represented by the uncovered interest-rate parity (UIP. Therefore, the UIP hypothesis verification accounts for the crucial part of the paper. The efficiency of the USD/EUR market is tested by applying the conventional UIP regression approach and orthogonality test of the forward rate forecast error. The results show that it is hard to say definitely that USD/EUR foreign exchange market is inefficient. The slope coefficient in UIP regression occurs to be negative, which implies the failure of uncovered interest-rate parity. However, there are no foundations to reject the UIP hypotheses in the time of financial crisis of 21st century. Moreover, the article presents that the forward forecast error is not orthogonal to both its lagged value and the interest rate differential. Thus, the semi-strong foreign exchange market efficiency hypothesis is rejected for the USD/EUR market.

Usage of Option Contracts for Foreign Exchange Risk Management

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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.

The Effect of Exchange Rate and Inflation on Foreign Direct Investment and Its Relationship with Economic Growth in Nigeria

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Alex Ehimare OMANKHANLEN

2011-03-01

Full Text Available This study is on the effect of exchange rate and inflation on foreign direct investment and its relationship with economic growth. Its main objective is to find the effect of inflation and exchange rate and the bidirectional influences between FDI and economic growth in Nigeria. A thirty year period was studied. A linear regression analysis was used on the thirty year data to determine the relationship between inflation, exchange rate, FDI inflows and economic growth. The study reveals that FDI follow economic growth occasioned by trade openness which saw the entry of some major companies especially the telecommunication companies, while Inflation has no effect on FDI. However exchange rate has effect on FDI.

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...

An analysis of the efficiency of the foreign exchange market in Kenya

OpenAIRE

Sifunjo E. Kisaka; Wainaina Gituro; Pokhariyal Ganesh; Ngugi W. Rose

2008-01-01

This study examined the Efficiency Market hypothesis in its weak form using run tests, unit root tests and the Ljung-Box Q-statistics. The motivation was to determine whether foreign exchange rate returns follow a random walk. The data covered the period starting January 1994 to June 2007 for the daily closing spot price of the Kenya shillings per US dollar exchange rate. The main finding of this study is that the foreign exchange rate market is not efficient. The results showed that most of ...

A Continuous-Time Model for Valuing Foreign Exchange Options

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James J. Kung

2013-01-01

Full Text Available This paper makes use of stochastic calculus to develop a continuous-time model for valuing European options on foreign exchange (FX when both domestic and foreign spot rates follow a generalized Wiener process. Using the dollar/euro exchange rate as input for parameter estimation and employing our FX option model as a yardstick, we find that the traditional Garman-Kohlhagen FX option model, which assumes constant spot rates, values incorrectly calls and puts for different values of the ratio of exchange rate to exercise price. Specifically, it undervalues calls when the ratio is between 0.70 and 1.08, and it overvalues calls when the ratio is between 1.18 and 1.30, whereas it overvalues puts when the ratio is between 0.70 and 0.82, and it undervalues puts when the ratio is between 0.86 and 1.30.

THE ACCOUNTING EFFECTS OF EXCHANGE RATE VARIATION ON REMUNERATION OF FOREIGN INVESTMENTS IN BRAZIL.

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Diego Zacarias dos Santos

2012-12-01

Full Text Available This article aims to elucidate the main points of foreign investments, and the accounting administration of the Brazilian Corporate Laws. The remittances of profits and the payment of dividends for foreign investors who invested their financial resources in Brazil have increased in the last few years, and this is due to the stable economic times that the country is experiencing. In part, the favorable economic scenario in Brazil is due to the fact of the increased flow of investments in the country, which it has proved to be properly structured to withstand global financial crises like the one in 2008, which originated in the United States.Considering also that the investor wants to invest in stable economies where there are attractive interest rates, the country became a great place to invest. However, as a basic principle for capital market, it must be taken into consideration that exchange rate variation can be a negative or a positive aspect for it. In the end of this work, among other ideas, we conclude that to maximize the investment value for shareholders, it is necessary an accurate assessment of investment option, and of level of influence of the exchange variation for the investment return.

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

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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.

Martingale Regressions for a Continuous Time Model of Exchange Rates

OpenAIRE

Guo, Zi-Yi

2017-01-01

One of the daunting problems in international finance is the weak explanatory power of existing theories of the nominal exchange rates, the so-called “foreign exchange rate determination puzzle”. We propose a continuous-time model to study the impact of order flow on foreign exchange rates. The model is estimated by a newly developed econometric tool based on a time-change sampling from calendar to volatility time. The estimation results indicate that the effect of order flow on exchange rate...

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.

Central banks should communicate their interventions in the foreign exchange market

OpenAIRE

Menkhoff, Lukas; Stöhr, Tobias

2017-01-01

Central banks frequently intervene in foreign exchange markets. Using recognized criteria this report analyzes the probability of success in a data set of 4,500 intervention episodes in 33 countries. It is important to differentiate among exchange rate regimes because each focuses on a different goal. While flexible exchange rate regimes intervene less frequently and seek to influence trends, other regimes target exchange rate stabilization by establishing a band within which the exchange rat...

The Relationship Between the Foreign Exchange Regime and Macroeconomic Performance in Eastern Africa

OpenAIRE

Janet Gale Stotsky; Manuk Ghazanchyan; Olumuyiwa S Adedeji; Nils Øvind Maehle

2012-01-01

This study examines the relationship between the foreign exchange regime and macroeconomic performance in Eastern Africa. The study focuses on seven countries, five of which decisively liberalized their foreign exchange regimes. The study assesses the relationship between (i) growth and various determinants, including the exchange regime, the real exchange rate, and current account liberalization; and (ii) inflation and various determinants, including lagged inflation, the nominal exchange ra...

Triangular arbitrage in the foreign exchange market

Science.gov (United States)

Aiba, Yukihiro; Hatano, Naomichi

2004-12-01

We first review our previous work, showing what is the triangular arbitrage transaction and how to quantify the triangular arbitrage opportunity. Next we explain that the correlation of the foreign exchange rates can appear without actual triangular arbitrage transaction.

Exchange rate policy and devaluation in Malawi:

OpenAIRE

Pauw, Karl; Dorosh, Paul A.; Mazunda, John

2013-01-01

This study demonstrates why devaluation was ultimately necessary in Malawi and also what its eventual impact might be in terms of prices, income distribution, and domestic production. Our approach is to use a computable general equilibrium (CGE) model to evaluate the economywide impacts of foreign exchange shortages in Malawi under two alternative exchange rate regimes. The foreign exchange shortages are modeled by simulating the effect of actual shocks, including tobacco price declines and r...

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...

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...

Market efficiency in foreign exchange markets

Science.gov (United States)

Oh, Gabjin; Kim, Seunghwan; Eom, Cheoljun

2007-08-01

We investigate the relative market efficiency in financial market data, using the approximate entropy(ApEn) method for a quantification of randomness in time series. We used the global foreign exchange market indices for 17 countries during two periods from 1984 to 1998 and from 1999 to 2004 in order to study the efficiency of various foreign exchange markets around the market crisis. We found that on average, the ApEn values for European and North American foreign exchange markets are larger than those for African and Asian ones except Japan. We also found that the ApEn for Asian markets increased significantly after the Asian currency crisis. Our results suggest that the markets with a larger liquidity such as European and North American foreign exchange markets have a higher market efficiency than those with a smaller liquidity such as the African and Asian markets except Japan.

Integrated Foreign Exchange Risk Management: The Role of Import in Medium-Sized, Manufacturing Firms

DEFF Research Database (Denmark)

Aabo, Tom; Høg, Esben; Kuhn, Jochen

2010-01-01

Empirical research has focused on export as a proxy for exchange rate exposure and the use of foreign exchange derivatives as an instrument to deal with this exposure. This empirical study applies an integrated foreign exchange risk management approach with a particular focus on the role of impor...

The Brazilian experience in managing interest-exchange rate nexus

OpenAIRE

Ricardo Carneiro; Pedro Rossi

2013-01-01

This paper addresses four main questions: firstly, it discusses some theoretical background related to the interest-exchange rate nexus; secondly, it makes an attempt to explain why the interest rate in Brazil is so high, examining briefly the main explanations for it; thirdly, it describes Brazil’s foreign exchange markets, their size and hierarchy; and lastly, it explains the carry trade dynamics considering the institutionalism of the Brazilian foreign exchange market and also the govern...

The tail index of exchange rate returns

NARCIS (Netherlands)

C.G. Koedijk (Kees); M. Schafgans (Marcia); C.G. de Vries (Casper)

1990-01-01

textabstractIn the literature on the empirical distribution of foreign exchange rates there is now consensus that exchange rate yields are fat-tailed. Three problems, however, persist: (1) Which class of distribution functions is most appropriate? (2) Are the parameters of the distribution invariant

Real exchange rate persistence and the excess return puzzle

DEFF Research Database (Denmark)

Juselius, Katarina; Assenmacher, Katrin

2017-01-01

The PPP puzzle refers to the wide swings of nominal exchange rates around their long-run equilibrium values whereas the excess return puzzle represents the persistent deviation of the domestic-foreign interest rate differential from the expected change in the nominal exchange rate. Using the I(2......) cointegrated VAR model, much of the excess return puzzle disappears when an uncertainty premium in the foreign exchange market, proxied by the persistent PPP gap, is introduced. Self-reinforcing feedback mechanisms seem to cause the persistence in the Swiss-US parity conditions. These results support imperfect...

A multifractal analysis of Asian foreign exchange markets

Science.gov (United States)

Oh, G.; Eom, C.; Havlin, S.; Jung, W.-S.; Wang, F.; Stanley, H. E.; Kim, S.

2012-06-01

We analyze the multifractal spectra of daily foreign exchange rates for Japan, Hong-Kong, Korea, and Thailand with respect to the United States in the period from 1991 until 2005. We find that the return time series show multifractal spectrum features for all four cases. To observe the effect of the Asian currency crisis, we also estimate the multifractal spectra of limited series before and after the crisis. We find that the Korean and Thai foreign exchange markets experienced a significant increase in multifractality compared to Hong-Kong and Japan. We also show that the multifractality is stronger related to the presence of high values of returns in the series.

On the time-homogeneous Ornstein-Uhlenbeck process in the foreign exchange rates

Science.gov (United States)

da Fonseca, Regina C. B.; Matsushita, Raul Y.; de Castro, Márcio T.; Figueiredo, Annibal

2015-10-01

Since Gaussianity and stationarity assumptions cannot be fulfilled by financial data, the time-homogeneous Ornstein-Uhlenbeck (THOU) process was introduced as a candidate model to describe time series of financial returns [1]. It is an Ornstein-Uhlenbeck (OU) process in which these assumptions are replaced by linearity and time-homogeneity. We employ the OU and THOU processes to analyze daily foreign exchange rates against the US dollar. We confirm that the OU process does not fit the data, while in most cases the first four cumulants patterns from data can be described by the THOU process. However, there are some exceptions in which the data do not follow linearity or time-homogeneity assumptions.

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

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...

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.

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.

The case for foreign exchange intervention: the government as an active reserve manager

OpenAIRE

Christopher J. Neely

2005-01-01

This paper argues that major governments should actively manage their foreign exchange portfolios to maximize the risk-adjusted return to the taxpayer by exploiting long-term, fundamental based predictability in floating exchange rates. Such transactions—equivalent to foreign exchange intervention—would improve welfare by transferring risk from private agents to the risk-tolerant government. Interventions explicitly designed to profit the reserve management authority would be more likely to b...

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.

The Behavioral Bias of Foreign Debt Usage in Foreign Exchange Risk Management

DEFF Research Database (Denmark)

Aabo, Tom

We investigate the behavioral bias in the use of debt denominated in foreign currency (foreign debt) in managing foreign exchange risks. From a strictly financial (rational) point of view foreign debt and derivates are close substitutes. Whether e.g. a European firm sells forward US dollars against...... foreign exchange risk management in medium-sized, non-financial firms in Denmark and find a behavioral bias in the use of foreign debt. Among the firms that are internationally involved (operating revenues, costs and/or assets in foreign currency), on average a quarter of the financial debt is denominated...... in foreign currency. The use / non-use of foreign debt is positively related to a number of internationality measures but most significantly to the existence of subsidiaries abroad whereas the degree of usage is particularly related to the magnitude of foreign operating assets. The use of foreign debt...

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.

The Effect of Exchange Rate Volatility on Turkey’s Agricultural Foreign Trade

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Güngör Karakaş

2017-07-01

Full Text Available In this study, impact of the real effective exchange rate (REER and its volatility (REERV on Turkey's agricultural foreign trade was investigated. 25importantcountries in agricultural trade of Turkey and 1990-2012 periods were examined, and panel data analysis was used in this research. IGARCH model was applied to obtain for the REERV. Influence of the REER and REERV on Turkey's agricultural trade was analyzed whit FMOLS model both individual country and groups panel. According to the results of FMOLS model; It was determined that Turkey agricultural import (7.61% and export (2.24% were increased when the REER was risen about 1%. The agricultural import was decreased 18.83% in case the REERV was increased 1%. On the other hand, when the REERV was increased around 1%, there was no significantly relationship between agricultural export and REERV. As a result, it can be stated that REER and REERV were caused an imbalance on Turkey's agricultural foreign trade. Agricultural producers and industrialists are often adversely affected by the REERV. For these reasons, it is important to take protective measures for them.

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.

Exchange rate pass-through and the role of international distribution channels

OpenAIRE

Desiraju, Ramarao; Shrikhande, Milind

1996-01-01

Manufacturers selling in foreign markets often do not completely pass on the effects of fluctuations in exchange rates to the prices of their products. Our paper addresses this puzzle and studies the effects of the international distribution channel on exchange rate pass-through. We develop an exchange rate pass-through model that takes into account the role of an intermediary between a domestic manufacturer and its consumers in a foreign market. We find that the magnitude of the pass-through...

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

Implications Of Foreign Direct Investment, Financial Development And Real Exchange Rate For Economic Growth In Cameroon

Directory of Open Access Journals (Sweden)

Victalice Ngimanang Achamoh

2016-05-01

Full Text Available This paper assesses the effects of foreign direct investment (FDI, financial development and real exchange rate (RER on economic growth in Cameroon using Cameroon’s annual time series data spanning the period 1977 - 2010. To address these objectives, residual based Engle-Granger test, the OLS based Autoregressive Distributive Lag (ARDL bound testing and maximum likelihood based Johansen cointegration techniques are employed. Results of Unit roots tests show that all the series possessed unit roots at level or first difference form. The ARDL model and VECM results reveal that the RER has a significant negative effect on economic growth, while FDI and Financial Development relate positively to economic growth. These findings have implications for stimulating economic growth by increasing efficiency of the financial sector in allocating credit to the private sector and preventing real exchange rate appreciation in the shortrun.

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...

Forecasting exchange rates; Kawase yosoku no riron to jissai

Energy Technology Data Exchange (ETDEWEB)

Kiuchi, T. [The Long-Term Credit Bank of Japan, Ltd., Tokyo (Japan)

1995-11-20

This paper explains the theory and practice of foreign exchange rate fluctuation. It also explains various factors that constitute the reasons for the difficulty of forecasting the fluctuation in a short to medium period of time as a practical problem, even though forecasting it over a long period of time may be possible theoretically. Export, of which payment received in dollars cannot be used unless exchanged to yen, forms the yen buying demand. Increase in export and trade surplus turns into pressure for the yen appreciation after all. The amounts of exports and imports depend on such fundamentals as productivity and inflation in the country, as well as the cycle of strong business conditions and recession. Staggering of business conditions in Japan and the U.S. causes trade imbalance and fluctuation in foreign exchange rates. Attempts of grabbing the basic tone of the foreign exchange rates upon equalizing the business conditions in both countries is the purchasing power parity theory, which in fact can explain the long-term fluctuations in the past data. However, in the actual scenes where forecasting over a short to medium period is demanded, the forecasting actions are disturbed by such factors lying complexly as exports and imports of capitals, that is the capital circulation in long and short periods, foreign exchange tradings, and difference in interests inside and outside the country. 3 figs.

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.

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...

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...

An Essay on the Foreign Exchange Rate Expectations in Brazil

Directory of Open Access Journals (Sweden)

Ana Luiza Louzada Pereira

2005-06-01

Full Text Available This article analyses the behavior of the Brazilian exchange rate (Real/US dollar and the corresponding values forecasted by the market agents, from 2001 (November to 2004 (may. We use the data-base of the Brazilian Central Bank, called Sistema de Expectativas de Mercado, which has been created in 1999. We evaluate the rational expectations hypothesis (REH for the exchange rate market, comparing the mean value predicted by some Brazilian financial institutions with the daily exchange rate that has really occurred (PTAX. The particular arrangement of the data-base allows us to make the analysis in two different ways: with fixed-event forecasts. The main result suggests that the Brazilian exchange rate market support the weak form of the REH, for short horizons of forecasting.

The Parallel Market for Foreign Exchange in an Oil Exporting Economy; The Case of Iran, 1978-1990

OpenAIRE

Adnan Mazarei

1995-01-01

This paper provides a model for the determination of the parallel market exchange rate premium in a country where oil export earnings accrue directly to the government, and foreign exchange is centrally allocated for the importation of specific goods. Next, it studies the parallel market for foreign exchange In the Islamic Republic of Iran during the period 1978-90. The paper then examines the various time series properties of parallel market exchange rate in Iran, and the evidence of the rol...

FOREIGN EXCHANGE MARKET EFFICIENCY. EMPIRICAL RESULTS FOR THE USD/EUR MARKET

OpenAIRE

Katarzyna Anna Czech,; Adam Waszkowski

2012-01-01

The aim of the paper is to verify whether the USD/EUR exchange rate market is efficient. The fundamental parity condition for testing foreign exchange market efficiency is represented by the uncovered interest-rate parity (UIP). Therefore, the UIP hypothesis verification accounts for the crucial part of the paper. The efficiency of the USD/EUR market is tested by applying the conventional UIP regression approach and orthogonality test of the forward rate forecast error. The results show that ...

Performance of technical indicators in forecasting high-frequency foreign exchange rates

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Václav Mastný

2004-01-01

Full Text Available This paper deals with technical analysis and its forecasting ability in the intradaily foreign exchange market. The objective of this study is to investigate whether technical indicators are able to provide prediction superior to „buy and hold“ strategy. Each indicator is tested with series of parameters in time series of different frequency (5, 15, 30, 60 min. The profitability of each indicator is examined in simple trading modell.

A re-examination of the exchange rate overshooting hypothesis

African Journals Online (AJOL)

kirstam

Studies on exchange rate overshooting on the Zambian foreign exchange rate market are .... depreciation between 2008 and 2009 during the great recession. Figure 2 shows ...... manufacturing sector in Nigeria', European Journal of Business and Management, 5(22):. 67–73 .... paper. Washington, DC: IMF Working Paper.

Real Exchange Rate Dynamics in a Small, Primary-Exporting Country

OpenAIRE

Mohsin S. Khan; Peter J. Montiel

1987-01-01

Although the nominal exchange rate is often used as a policy instrument in small, primary-commodity-exporting countries, the real exchange rate is an endogenous variable that responds to both exogenous and policyinduced shocks. This paper examines the dynamic effects on the real exchange rate of various shocks, such as devaluation, fiscal and trade policies, and changes in the terms of trade and foreign real interest rates. Because the path of the real exchange rate differs for different type...

Multifractal Analysis of Asian Foreign Exchange Markets and Financial Crisis

Science.gov (United States)

Oh, Gabjin; Kwon, Okyu; Jung, Woo-Sung

2012-02-01

We analyze the multifractal spectra of daily foreign exchange rates for Japan, Hong-Kong, Korea, and Thailand with respect to the United States Dollar from 1991 to 2005. We find that the return time series show multifractal spectrum features for all four cases. To observe the effect of the Asian currency crisis, we also estimate the multifractal spectra of limited series before and after the crisis. We find that the Korean and Thai foreign exchange markets experienced a significant increase in multifractality compared to Hong-Kong and Japan. We also show that the multifractality is stronge related to the presence of high values of returns in the series.

Exchange Rate Exposure Management: "Speculation" in Non-Financial Companies

DEFF Research Database (Denmark)

Aabo, Tom

"Speculation" in non-financial companies in relation to exchange rate exposure management constitutes one of the contributing factors behind corporate (or more widespread) crises. Deviations from benchmark positions constitute speculation. An empirical study of Danish non-financial companies finds...... that the larger the company (ability) and the larger its relative sale on foreign markets (relevance), the more likely the company will be to benchmark its exchange rate exposures. However, at the same time the very same factors (size and foreign sale) lead to more extensive speculation. Financial solvency (value...

Exchange Rate and Inflation Dynamics

OpenAIRE

Eatzaz Ahmad; Saima Ahmed Ali

1999-01-01

This paper studies simultaneous determination of nominal exchange rate and domestic price level in Pakistan. The estimated model contains sufficient built-in dynamics to trace the pattern and speed of adjustment in the two variables in response to temporary or permanent shocks. The two domestic shocks considered in the paper are monetary and real shocks, while the three external shocks considered are import price, export price and foreign exchange reserves shocks. The study finds that the imp...

9Real exchange rate misalignment and economic performance in ...

African Journals Online (AJOL)

the impact of real exchange rate misalignment has not received adequate attention .... investment (FDI) and the commercial exploitation of oil in 1999. Notably, the flow of .... the analysis proceeds in two steps: 1) we measure the exchange rate misalignment, ... non-tradable goods (TAX) and the net foreign income (NFI).

The Banks Rating Analysis The Differences Between The Regional Development Banks And Non-Foreign Exchange Commercial Banks In Indonesia

Directory of Open Access Journals (Sweden)

Dr. Irwan Ch

2017-06-01

Full Text Available This study aimed to analyze the bank rating in terms of differences the financial performance between the Regional Development Banks and Non-Foreign Exchange Commercial Banks. It is consist of capital adequacy asset quality profitability Return On Asset ROA Return on Equity ROE Net Interest Margin NIM and Liquidity Loan to Deposit Ratio. The fulfillment of capital adequacy and asset quality of the bank groups did not differed significantly while in terms of profitability and liquidity there are significant differences. The earning difference is more likely due to the Regional Development Banks sources of funds for the implementation of the Local Government Cash Holder function as the Provincial Government and District City. The difference of liquidity are showed by the performance of Regional Development Banks and the Non-Foreign Exchange Commercial Banks in lendingfinancing whereas the two groups of banks on average are still relatively low in lending.

The foreign exchange market interventions of the European Central Bank

Directory of Open Access Journals (Sweden)

M. Frenkel

2001-09-01

Full Text Available We analyze the effectiveness of the foreign exchange market interventionsconducted by the European Central Bank (ECB in the fall of 2000 to support the external stability of the euro. To this end, we discuss different channels through whichinterventions may influence exchange rate dynamics. We use the insights provided by the theoretical and empirical literature to evaluate the effectiveness of theintervention policy of the ECB. In addition, we present an empirical analysis in which we use intra-daily exchange rate data to examine in detail the effects of theinterventions. We find that the interventions only had a rather short-term impact on the exchange rate path and had no effects beyond the short term. Therefore, our results suggest that the intervention policy of the ECB was not effective.

Alarming of exchange rate crisis: A risk management approach

Directory of Open Access Journals (Sweden)

Da Zhao

2016-05-01

Full Text Available Recently, with increasing volatility of foreign exchange rate, risk management becomes more and more important not only for multinational companies and individuals but also for central governments. This paper attempts to build an econometrics model so as to forecast and manage risks in foreign exchange market, especially during the eve of turbulent periods. By following McNeil and Frey’s (2000 two stage approach called conditional EVT to estimate dynamic VaR commonly used in stock and insurance markets, we extend it by applying a more general asymmetric ARMA-GARCH model to analyze daily foreign exchange dollar-denominated trading data from four countries of different development levels across Asia and Europe for a period of more than 10 years from January 03, 2005 to May 29, 2015, which is certainly representative of global markets. Conventionally, different kinds of backtesting methods are implemented ultimately to evaluate how well the model behaves. Inspiringly, test results show that by taking several specific characteristics (including fat-tails, asymmetry and long-range dependence of the foreign exchange market return data into consideration, the violation ratio of out-of-sample data can be forecasted very well for both fixed and flexible foreign exchange regimes. Moreover, all of the violations are evenly distributed along the whole period which indicates another favorable property of our model. Meanwhile, we find evidence of asymmetry volatility in all of the studied foreign exchange markets even though the magnitudes of the most of them are weak

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.

Forecasting Exchange Rate Volatility in the Presence of Jumps

DEFF Research Database (Denmark)

Busch, Thomas; Christensen, Bent Jesper; Nielsen, Morten Ørregaard

We study measures of foreign exchange rate volatility based on high-frequency (5-minute) $/DM exchange rate returns using recent nonparametric statistical techniquesto compute realized return volatility and its separate continuous sample path and jumpcomponents, and measures based on prices...... of exchange rate futures options, allowingcalculation of option implied volatility. We find that implied volatility is an informationallyefficient but biased forecast of future realized exchange rate volatility. Furthermore,we show that log-normality is an even better distributional approximation...... for impliedvolatility than for realized volatility in this market. Finally, we show that the jump componentof future realized exchange rate volatility is to some extent predictable, and thatoption implied volatility is the dominant forecast of the future jump component....

Effects and Implications for Adoption of Brokerage System in Korea's Foreign Exchange Market

Directory of Open Access Journals (Sweden)

Yunjong Wang

1999-03-01

Full Text Available Since January 1st 1999, the South Korean government has begun to establish the understructure of the foreign exchange market in order to achieve the liberalization of foreign exchange. As one of the plans, the trade of foreign exchange which was under the monopolized mediation of the capital medium of financial settlement center will be in the charge of several commercial brokers. In the developed countries, the foreign exchange & stock system and the liberalization of foreign exchange are both widely used in a flexible way. So it is predicted that the introduction of commercial foreign exchange & stock system will bring positive effect to the enhancement of the market efficiency and the function of price both in South Korean market and overseas market, the foster of competitive power of the domestic broker and the improvement of the understructure of domestic foreign exchange market. But more importantly is that the foreign exchange market must expand the scale of its participator, bring in various relevant foreign exchange products and develop the bond market which has a close relationship with the foreign exchange market for further development.

Modelling world gold prices and USD foreign exchange relationship using multivariate GARCH model

Science.gov (United States)

Ping, Pung Yean; Ahmad, Maizah Hura Binti

2014-12-01

World gold price is a popular investment commodity. The series have often been modeled using univariate models. The objective of this paper is to show that there is a co-movement between gold price and USD foreign exchange rate. Using the effect of the USD foreign exchange rate on the gold price, a model that can be used to forecast future gold prices is developed. For this purpose, the current paper proposes a multivariate GARCH (Bivariate GARCH) model. Using daily prices of both series from 01.01.2000 to 05.05.2014, a causal relation between the two series understudied are found and a bivariate GARCH model is produced.

Brazilian exchange rate complexity: Financial crisis effects

Science.gov (United States)

Piqueira, José Roberto C.; Mortoza, Letícia Pelluci D.

2012-04-01

With the financial market globalization, foreign investments became vital for the economies, mainly in emerging countries. In the last decades, Brazilian exchange rates appeared as a good indicator to measure either investors' confidence or risk aversion. Here, some events of global or national financial crisis are analyzed, trying to understand how they influenced the "dollar-real" rate evolution. The theoretical tool to be used is the López-Mancini-Calbet (LMC) complexity measure that, applied to real exchange rate data, has shown good fitness between critical events and measured patterns.

Optimal Foreign Exchange Rate Intervention in Lévy Markets

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Masimba Aspinas Mutakaya

2014-01-01

Full Text Available This paper considers an exchange rate problem in Lévy markets, where the Central Bank has to intervene. We assume that, in the absence of control, the exchange rate evolves according to Brownian motion with a jump component. The Central Bank is allowed to intervene in order to keep the exchange rate as close as possible to a prespecified target value. The interventions by the Central Bank are associated with costs. We present the situation as an impulse control problem, where the objective of the bank is to minimize the intervention costs. In particular, the paper extends the model by Huang, 2009, to incorporate a jump component. We formulate and prove an optimal verification theorem for the impulse control. We then propose an impulse control and construct a value function and then verify that they solve the quasivariational inequalities. Our results suggest that if the expected number of jumps is high the Central Bank will intervene more frequently and with large intervention amounts hence the intervention costs will be high.

Power-law behaviour evaluation from foreign exchange market data using a wavelet transform method

Science.gov (United States)

Wei, H. L.; Billings, S. A.

2009-09-01

Numerous studies in the literature have shown that the dynamics of many time series including observations in foreign exchange markets exhibit scaling behaviours. A simple new statistical approach, derived from the concept of the continuous wavelet transform correlation function (WTCF), is proposed for the evaluation of power-law properties from observed data. The new method reveals that foreign exchange rates obey power-laws and thus belong to the class of self-similarity processes.

Power-law behaviour evaluation from foreign exchange market data using a wavelet transform method

Energy Technology Data Exchange (ETDEWEB)

Wei, H.L., E-mail: w.hualiang@sheffield.ac.u [Department of Automatic Control and Systems Engineering, the University of Sheffield, Mappin Street, Sheffield, S1 3JD (United Kingdom); Billings, S.A., E-mail: s.billings@sheffield.ac.u [Department of Automatic Control and Systems Engineering, the University of Sheffield, Mappin Street, Sheffield, S1 3JD (United Kingdom)

2009-09-07

Numerous studies in the literature have shown that the dynamics of many time series including observations in foreign exchange markets exhibit scaling behaviours. A simple new statistical approach, derived from the concept of the continuous wavelet transform correlation function (WTCF), is proposed for the evaluation of power-law properties from observed data. The new method reveals that foreign exchange rates obey power-laws and thus belong to the class of self-similarity processes.

Power-law behaviour evaluation from foreign exchange market data using a wavelet transform method

International Nuclear Information System (INIS)

Wei, H.L.; Billings, S.A.

2009-01-01

Numerous studies in the literature have shown that the dynamics of many time series including observations in foreign exchange markets exhibit scaling behaviours. A simple new statistical approach, derived from the concept of the continuous wavelet transform correlation function (WTCF), is proposed for the evaluation of power-law properties from observed data. The new method reveals that foreign exchange rates obey power-laws and thus belong to the class of self-similarity processes.

The Distinctive Role of Foreign Debt in Foreign Exchange Risk Management

DEFF Research Database (Denmark)

Aabo, Tom; Hansen, Marianna Andryeyeva; Muradoglu, Yaz Gulnur

Finance theory suggests that a positive (long) foreign exchange exposure can be offset by debt denominated in foreign currency (“foreign debt”) and empirical studies confirm that foreign debt is used for hedging purposes. We use detailed exposure information on a sample of medium-sized nonfinancial...... firms and show that in its practical hedging application, foreign debt is used distinctively different from derivatives (e.g. forward contracts). While the use of derivatives is associated with flow measures (foreign sales revenue), the use of foreign debt is solely associated with stock measures...... level which makes it possible to go deeper than previous studies in detecting the drivers behind foreign debt usage. The empirical results are important in order to understand the factors driving the use of foreign debt in non-financial firms....

International finance, Lévy distributions, and the econophysics of exchange rates

Science.gov (United States)

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

2005-06-01

This paper surveys the developments in the field of international finance, in particular the research of economists on foreign exchange rates. That might be of interest to physicists working on the econophysics of exchange rates. We show how the econophysics agenda might follow naturally from the economists' research. We also present our own work on the econophysics of exchange rates.

SPECTRAL ANALYSIS OF EXCHANGE RATES

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ALEŠA LOTRIČ DOLINAR

2013-06-01

Full Text Available Using spectral analysis is very common in technical areas but rather unusual in economics and finance, where ARIMA and GARCH modeling are much more in use. To show that spectral analysis can be useful in determining hidden periodic components for high-frequency finance data as well, we use the example of foreign exchange rates

Estimating Exchange Market Pressure and the Degree of Exchange Market Intervention for Finland during the Floating Exchange Rate Regime

OpenAIRE

Pösö, Mika; Spolander, Mikko

1997-01-01

In this paper, we use a fairly simple monetary macro model to calculate the quarterly measures of exchange market pressure and the degree of the Bank of Finland's intervention during the time the markka was floated. Exchange market pressure measures the size of the exchange rate change that would have occurred if the central bank had unexpectedly refrained from intervening in the foreign exchange market. Intervention activity of the central bank is measured as the proportion of exchange marke...

Asymmetric Effects of Global Liquidity Expansion on Foreign Portfolio Inflows, Exchange Rates, and Stock Prices

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Dong-Eun Rhee

2014-06-01

Full Text Available This paper examines the effects of global liquidity expansion on advanced and emerging economies by using panel VAR methodology. The results show that global liquidity expansion tends to boost economy by increasing GDP growth and stock prices. However, we find that the effects are asymmetric. The effects of global liquidity on GDP and stock prices are greater and more persistent in emerging economies than in liquidity recipient advanced economies. Moreover, global liquidity appreciates emerging economies' exchange rates more persistently than those of advanced economies. Lastly, while global liquidity expansion increases foreign portfolio investment inflows to Asian countries and liquidity recipient advanced economies, there is no evidence for Latin American countries.

Application for Determination of the Forward Exchange Rate in Access 2003

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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.

Multiscale Analysis of Foreign Exchange Order Flows and Technical Trading Profitability

OpenAIRE

Nikola Gradojevic; Camillo Lento

2012-01-01

This paper investigates the multiscale (frequency-dependent) relationship between technical trading profitability and feedback trading effects in the Canada/U.S. dollar foreign exchange market. The results suggest weak evidence that technical trading activities of financial and non-financial customers drive frequent violations of the FX market microstructure assumption that exchange rate movements are driven by order flow. After controlling for transaction costs, we find that the contribution...

Estimating the effects of Exchange and Interest Rates on Stock ...

African Journals Online (AJOL)

The monthly closing returns of All-share index, exchange rates and interest rates ... The interest rate also showed a negative relationship but insignificant at the ... is a prerequisite for attracting investments especially foreign direct investment.

Empirical Investigation of the Effects of the Fundamentals on the Exchange Rate

OpenAIRE

Castro, Juan R.

2005-01-01

This paper examines, by using several econometric techniques, the effects of foreign reserves and other fundamental variables on the exchange rate using the target zone theory, This paper uses monthly data for Chile from January 1979 to November 1997 The data used consists of foreign reserves, credit from the Central Bank, domestic reserves, imports, exports, claims on government, GDP, foreign liabilities, domestic and foreign interest rate. We find that the interest differential does not hav...

EXCHANGE-RATES FORECASTING: EXPONENTIAL SMOOTHING TECHNIQUES AND ARIMA MODELS

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Dezsi Eva

2011-07-01

Full Text Available Exchange rates forecasting is, and has been a challenging task in finance. Statistical and econometrical models are widely used in analysis and forecasting of foreign exchange rates. This paper investigates the behavior of daily exchange rates of the Romanian Leu against the Euro, United States Dollar, British Pound, Japanese Yen, Chinese Renminbi and the Russian Ruble. Smoothing techniques are generated and compared with each other. These models include the Simple Exponential Smoothing technique, as the Double Exponential Smoothing technique, the Simple Holt-Winters, the Additive Holt-Winters, namely the Autoregressive Integrated Moving Average model.

Macroeconomic stabilization and intervention policy under an exchange rate band

NARCIS (Netherlands)

Beetsma, R.M.W.J.; van der Ploeg, F.

1998-01-01

Macroeconomic stabilization and foreign exchange market interventions are investigated for a small open economy with a nominal exchange rate band. In a first-best situation, a band is not advisable from a stabilization perspective, even though with money demand shocks no welfare losses are incurred.

Causes and Results of Exchange Rate Intervention Under Inflation Targeting

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Bora Suslu

2012-06-01

Full Text Available Under inflation targeting, central banks exchange rate interventions are discussed frequently in the economic literature recently. Effectiveness of intervention in exchange rate under inflation targeting are examined from three perspectives. These are expectations of the actors and the impact on the variance, reserve accumulation and the cost of sterilization. Since 2003 the Central Bank of Turkey has intervened exchange rate with both direct and indirect methods. The purpose of this study is to examine the results of these three aspects of the CBRT and the foreign exchange interventions. We found that by logit analysis under the inflation targeting of CBRT as a result of the intervention of exchange rate is effect expectations of economic unit and reduce of exchange rate the variance; after thes intervention the variance of exchange rate and cost of sterilization are increased. In this respect, the effectiveness of the intervention of the Central Bank exchange rate market is only reserve accumulation

Macroeconomic sources of foreign exchange risk in new EU members

NARCIS (Netherlands)

Kocenda, Evzen; Poghosyan, Tigran

2009-01-01

We address the issue of foreign exchange risk and its macroeconomic determinants in several new EU members. We derive the observable macroeconomic factors-consumption and inflation-using the Stochastic discount factor (SDF) approach. The joint distribution of excess returns in the foreign exchange

Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets

DEFF Research Database (Denmark)

Andersen, Torben G.; Bollerslev, Tim; Diebold, Francis X.

Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics...... are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most strongly...... to macroeconomic news; in particular, when conditioning on the state of the economy, the equity and foreign exchange markets appear equally responsive. Finally, we also document important contemporaneous links across all markets and countries, even after controlling for the effects of macroeconomic news....

Exchange Rate Fluctuation and the Nigeria Economic Growth

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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.

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

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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.

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

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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.

Foreign Exchange and Library Collections in Nigeria.

Science.gov (United States)

Obiagwu, M. C.

1987-01-01

This discussion of the difficulties involved in acquiring materials for academic libraries in Nigeria uses statistics at one university to demonstrate the drop in foreign exchange based orders. Alternatives to overseas purchasing, including local purchasing, gifts and exchanges, and resource sharing programs, are also discussed. (CLB)

Long-memory exchange rate dynamics in the euro era

International Nuclear Information System (INIS)

Barkoulas, John T.; Barilla, Anthony G.; Wells, William

2016-01-01

We investigate the long-run dynamics of a system of eight major exchange rates in the euro era using both integer and fractional cointegration methodologies. Contrary to the fragile evidence in the pre-euro era, robust evidence of linear cointegratedness is obtained in the foreign exchange market during the euro era. Upon closer examination, deviations from the cointegrating relationship exhibit nonstationary, long-memory dynamic behavior (Joseph effect). We find the long-memory evidence to be temporally stable in the most recent era. Finally, the foreign exchange system dynamics appears to be characterized by less persistence (smaller fractional exponent) in the euro era (as compared to pre-euro time periods), potentially indicating increased policy coordination by central banks in the recent period.

The Influences of the Exchange Rate on the Performance of Romanian Trade

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Gabriela Dobrotă

2016-01-01

Full Text Available The unprecedented development of international trade relations has generated the possibility of obtaining a significant part of the GDP of the participating countries in foreign trade. As a result, the issue of competitiveness in international economy has become a major concern to authorities. In the category of factors which are influencing the competitiveness level is registered the volatility of the exchange rate. In this paper there were analyzed the aspects regarding the evolution of Romania's foreign trade and exchange rate, in the context of monetary policy measures. The conclusion is that the development plan of the national economy is determined by the action of a complex of economic, social and political factors, but measures taken by the monetary authorities in relation to the regime of exchange may generate visible effects at this level and thus to the volume of foreign trade relations.

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

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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.

76 FR 25774 - Determination of Foreign Exchange Swaps and Foreign Exchange Forwards Under the Commodity...

Science.gov (United States)

2011-05-05

..., and facilitate more stable, liquid markets for derivative instruments. In general, the payment... Oversight Unlike the derivatives markets, banks are the key players in the foreign exchange swaps and... rules of a designated contract market or a swap execution facility, or that is cleared by a derivatives...

On the nonlinear influence of Reserve Bank of Australia interventions on exchange rates

OpenAIRE

Reitz, Stefan; Ruelke, Jan C.; Taylor, Mark P.

2010-01-01

This paper applies nonlinear econometric models to empirically investigate the effectiveness of the Reserve Bank of Australia (RBA) exchange rate policy. First, results from a STARTZ model are provided revealing nonlinear mean reversion of the Australian dollar exchange rate in the sense that mean reversion increases with the degree of exchange rate misalignment. Second, a STR-GARCH model suggests that RBA interventions account for this result by strengthening foreign exchange traders' confid...

Selected aspects of modelling of foreign exchange rates with neural networks

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Václav Mastný

2005-01-01

Full Text Available This paper deals with forecasting of the high-frequency foreign exchange market with neural networks. The objective is to investigate some aspects of modelling with neural networks (impact of topology, size of training set and time horizon of the forecast on the performance of the network. The data used for the purpose of this paper contain 15-minute time series of US dollar against other major currencies, Japanese Yen, British Pound and Euro. The results show, that performance of the network in terms of correct directorial change is negatively influenced by increasing number of hidden neurons and decreasing size of training set. The performance of the network is influenced by sampling frequency.

Build to order and entry/exit strategies under exchange rate uncertainty

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Lin Chin-Tsai

2004-01-01

Full Text Available Under uncertainty of exchange rate, we extend the build to order production model of Lin et al. (2002 by considering the export-oriented manufacturer to make decisions to switch production location freely between domestic and foreign ones. The export-oriented manufacturer is risk neutral and has rational expectations. When we transfer the production location from domestic (foreign to foreign (domestic, and the production location transferring cost and the drift of real exchange rate are both equal to zero, then the optimal entry and exit threshold value of Cobb-Douglas production function are equal, no matter whether we use real options or net present value method. Thus export-oriented manufacturer can make decisions at the optimal transfer threshold value for transferable locations wherever the production locations are. It provides the export-oriented manufacturer with another way of thinking.

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

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...

The Equilibrium Real Exchange Rate of the Malagasy Franc; Estimation and Assessment

OpenAIRE

John Cady

2003-01-01

Employing cointegration techniques, the long-run determinants of Madagascar's real exchange rate are examined from a stock-flow perspective. The long-run behavior of the real effective exchange rate is explained by the net foreign asset position and factors affecting trade flows. An index of the long-run equilibrium real exchange rate is developed to assess the degree of misalignment. The general conclusions are that the Malagasy franc has experienced significant misalignment in the past, but...

The Uncovered Interest Parity in the Foreign Exchange (FX Markets

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Silvio Ricardo Micheloto

2004-12-01

Full Text Available This work verifies the uncovered interest rates parity (UIP in the FX (foreign exchange emerging markets by using the panel cointegration technique. The data involves several developing countries that compose the EMBI+ Global Index. We compare the results of several panel estimators: OLS (ordinary list square, DOLS (dynamic OLS and FMOLS (fully modified OLS. This new panel technique can handle problems of either non-stationary series (spurious regression or small problem. This latter problem has being considered one of the main causes for distorting the UIP empirical results. By using this approach, we check the UIP in the FX (foreign exchange emerging markets. These markets are more critical because they have been subjected to changing FX regimes and speculative attacks. Our results do not corroborate the uncovered interest parity for the developing countries in the recent years. Thus, the forward premium puzzle may hold in the FX emergent markets.

Analysis of the Chinese Exchange Rate Stability

Directory of Open Access Journals (Sweden)

Youngrok Cheng

1998-03-01

Full Text Available Asian Financial Crisis now is moving to a relatively stable phase, and at this time, whether Chinese RMB will depreciate is raising the concern of the outside world. If we simply consider economic factors, we will find REER (Real Effective Exchange Rate increased around 10%, where depreciation factors are lurking. However, after Vice Premier Zhu Rongji took the responsibility of economic operation and fixed the fundamental key of developing stably, many foreign departments present good impetus of development. After that, Foreign Exchange Rate Reservation increases and major focus is put on long-term operation for debt structure. On the contrary, If Chinese RMB depreciates dramatically, there will be some uneasiness towards domestic economy and also the burden of paying debt should be increased, people may suffer the loss quite a lot. Especially even we consider the responsibility as the central country in this region and the political & economical factors causing the harmonious atmosphere of Sino-American relationship, it can be predicted that Chinese RMB cannot depreciate dramatically within 1-2 years.

China’s Foreign Trade: The Response to Changing the Exchange Rate

Directory of Open Access Journals (Sweden)

Izotov D. A.

2011-12-01

Full Text Available Based on official data of Chinese and international statistics assessment is given of the impact of the yuan revaluation on the parameters of China’s foreign trade by country (including in terms of crisis tendencies in the global economy. A regression analysis made it possible to obtain quantitative assessments of the responses of China’s foreign trade parameters by country, depending on different yuan revaluation (10% and 50% to the U.S. dollar. It is found that the yuan revaluation leads to reduction in the growth rates of both China’s exports and imports, with the responses by countries being different

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.

Impact of Foreign Direct Investment on the Unemployment Rate in Malaysia

Science.gov (United States)

Muhd Irpan, Hamidah; Mat Saad, Rosfadzimi; Nor, Abu Hassan Shaari Md; Noor, Abd Halim Md; Ibrahim, Noorazilah

2016-04-01

Malaysia as a developing country needs support from other countries for economic growth. This is done by receiving massive foreign direct investment (FDI) which contributes to a higher employment rate. Higher employment leads to a better living among Malaysians while increasing its gross domestic product (GDP). During 2009, Malaysia faced a downward trend on the FDI. In many studies, decreasing FDI affects employment rate significantly. This study focuses on the impact of FDI on employment rate in Malaysia. Other factors such as the number of foreign workers, gross domestic product (GDP) and exchange rate (EXCR) are also included in the study. Data used in the study is annual data spanning from 1980 to 2012. Autoregressive distributed lag (ARDL) model is used to determine the long run relationship between the variables. The study finds that FDI, number of foreign workers, and GDP significantly influence the unemployment rate in Malaysia.

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

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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.

12 CFR 614.4900 - Foreign exchange.

Science.gov (United States)

2010-01-01

... with relationship to the customer's financial capability to bear the financial risks assumed. The bank..., where such transactions or positions normally reduce risks in the conduct and management of..., liabilities, and foreign exchange contracts. (3) Outstanding contracts with individual customers and banks. (4...

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.

Capital Controls and Foreign Investor Subsidies Implicit in South Africa's Dual Exchange Rate System

NARCIS (Netherlands)

Huizinga, H.P.; Schaling, E.; van der Windt, P.C.

2007-01-01

Both in theory and practice, capital controls and dual exchange rate systems can be part of a country's optimal tax policy. We first show how a dual exchange rate system can be interpreted as a tax (or subsidy) on international capital income. We show that a dual exchange rate system, with separate

Multifractal detrended cross-correlation analysis on gold, crude oil and foreign exchange rate time series

Science.gov (United States)

Pal, Mayukha; Madhusudana Rao, P.; Manimaran, P.

2014-12-01

We apply the recently developed multifractal detrended cross-correlation analysis method to investigate the cross-correlation behavior and fractal nature between two non-stationary time series. We analyze the daily return price of gold, West Texas Intermediate and Brent crude oil, foreign exchange rate data, over a period of 18 years. The cross correlation has been measured from the Hurst scaling exponents and the singularity spectrum quantitatively. From the results, the existence of multifractal cross-correlation between all of these time series is found. We also found that the cross correlation between gold and oil prices possess uncorrelated behavior and the remaining bivariate time series possess persistent behavior. It was observed for five bivariate series that the cross-correlation exponents are less than the calculated average generalized Hurst exponents (GHE) for q0 and for one bivariate series the cross-correlation exponent is greater than GHE for all q values.

ANALYSIS OF MACROECONOMIC DETERMINANTS OF EXCHANGE RATE VOLATILITY IN INDIA

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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.

Are The ASEAN-5 Foreign Exchange Market Efficient? Evidence From Indonesia, Thailand, Malaysia, Singapore, and Philippines: Post-Global Economic Crisis 2008

Directory of Open Access Journals (Sweden)

Aditya Andika Putra

2016-07-01

Full Text Available Normal 0 false false false IN X-NONE X-NONE This paper examines market efficiency of foreign exchange markets in South East Asia (Indonesia, Thailand, Malaysia, Singapore, and Philippines after the global crisis period 2008. The time span covered by the samples are from 2009 to 2014, with the total number of observations for spot and forward exchange rate data amounting to 1565 data points. This study uses three different approaches to examine efficiency within countries and across countries. The result of this study shows that foreign exchange markets in the ASEAN-5 countries are efficient within countries, but have not been efficient across countries, especially when the country has a bivariate relationship with Thailand's foreign exchange market. The main implication of this study is that investors in the ASEAN-5 market cannot obtain abnormal returns using technical analysis on within countries foreign exchange market. In addition, there is no significant differences for participants in the foreign exchange market whether they are using hedging or not hedging. Normal 0 false false false IN X-NONE X-NONE

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...

Firm-Specific Foreign Exchange Exposure Identification

DEFF Research Database (Denmark)

Aabo, Tom; Brodin, Danielle

2014-01-01

Previous studies have used the stock market approach to find the aggregate number of (firms with) foreign exchange exposures in a given country, region, or industry. Methodologies have differed in many aspects but two of the most basic differences relate to observation frequency and the choice...

The Determinants of won/dollar Exchange Rate Volatility and Policy Recommendations

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Chae-Shick Chung

1998-09-01

Full Text Available This thesis analyzed the feature and different points of the changing of the exchange rate of Korea won against US dollar, then discussed the direction of the completion of Korea exchange rate system. The prediction result of the model GARCH which vividly shows the phenomenon of the auto-regression of the exchange rate has indicated the level of the exchange rate yesterday could explain the circumstance of the change of exchange rate today. Meanwhile, the policy of the US exchange rate will affect the exchange rate of Korea won against US dollar and the volatility of foreign exchange rate. In the present situation of Korean economy in which the liberalization of capital and the independence of the central bank has been established, the choosing range of the exchange system could only be completely changeable exchange rate system or exchange rate system of multilateral arrangement like Europe. However, in terms of the condition of the world economy, the introduction of the latter system is too early. There is an idea that under the changeable exchange rate system which is the only choice, it is the right time to activate the main body of private economy, the financial derivatives market in which the exchange risk could be trade-off. Government should work on and create a policy that would be able to satisfy the expectations of the market participants.

FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America

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Silvia Dal Bianco

2017-02-01

Full Text Available This paper investigates the impact of price and real exchange rate volatility on Foreign Direct Investment (FDI inflows in a panel of 10 Latin American and Caribbean countries, observed between 1990 and 2012. Both price and exchange rate volatility series are estimated through the Generalized Autoregressive Conditional Heteroscedasticity model (GARCH. Our results obtained, employing the Fixed Effects estimator, confirm the theory of hysteresis and option value, in so far as a statistically significant negative effect of exchange rate volatility on FDI is found. Price volatility, instead, turns out to be positive but insignificant. Moreover, we show that human capital and trade openness are key for attracting foreign capital. From the policy perspective, our analysis suggests the importance of stabilization policies as well as the policy of government credibility in promoting trade openness and human capital formation.

Scaling properties of foreign exchange volatility

NARCIS (Netherlands)

Gençay, R.; Selçuk, F.; Whitcher, B.

2001-01-01

In this paper, we investigate the scaling properties of foreign exchange volatility. Our methodology is based on a wavelet multi-scaling approach which decomposes the variance of a time series and the covariance between two time series on a scale by scale basis through the application of a discrete

Foreign exchange intervention and central bank independence: The Latin American experience

OpenAIRE

Nunes, Mauricio; Da Silva, Sergio

2007-01-01

Employing data from 13 Latin American countries, we find that greater central bank independence is associated with lesser intervention in the foreign exchange market, and also with leaning-against-the-wind intervention. We also find that the structural reforms that occurred in Latin America mostly in the 1990s helped to reduce the need for foreign exchange intervention.

Cables, Sharks and Servers: Technology and the Geography of the Foreign Exchange Market

OpenAIRE

Eichengreen, Barry; Lafarguette, Romain; Mehl, Arnaud

2016-01-01

We analyze the impact of technology on production and trade in services, focusing on the foreign exchange market. We identify exogenous technological changes by the connection of countries to submarine fiber-optic cables used for electronic trading, but which were not laid for purposes related to the foreign exchange market. We estimate the impact of cable connections on the share of offshore foreign exchange transactions. Cable connections between local markets and matching servers in the ma...

Modeling and forecasting foreign exchange daily closing prices with normal inverse Gaussian

Science.gov (United States)

Teneng, Dean

2013-09-01

We fit the normal inverse Gaussian(NIG) distribution to foreign exchange closing prices using the open software package R and select best models by Käärik and Umbleja (2011) proposed strategy. We observe that daily closing prices (12/04/2008 - 07/08/2012) of CHF/JPY, AUD/JPY, GBP/JPY, NZD/USD, QAR/CHF, QAR/EUR, SAR/CHF, SAR/EUR, TND/CHF and TND/EUR are excellent fits while EGP/EUR and EUR/GBP are good fits with a Kolmogorov-Smirnov test p-value of 0.062 and 0.08 respectively. It was impossible to estimate normal inverse Gaussian parameters (by maximum likelihood; computational problem) for JPY/CHF but CHF/JPY was an excellent fit. Thus, while the stochastic properties of an exchange rate can be completely modeled with a probability distribution in one direction, it may be impossible the other way around. We also demonstrate that foreign exchange closing prices can be forecasted with the normal inverse Gaussian (NIG) Lévy process, both in cases where the daily closing prices can and cannot be modeled by NIG distribution.

The impact of exchange rate volatility on capital flows in BRICS economies

OpenAIRE

Bonga-Bonga, Lumengo; Gnagne, Pascal Xavier

2017-01-01

This study intends to analyse the impact of exchange rate risk on equity returns and bond yields as well as the volatility spillover between the foreign exchange, equity and bond markets in the BRICS economies. To reach this objective, a multivariate GARCH-M with BEKK specifications is applied on weekly data obtained from Thomson Reuters DataStream. The findings of the paper show that exchange rate volatility has a positive impact on ten-year bond yields in all BRICS countries except in South...

Stochastic Simulation of the Exchange Rate

Directory of Open Access Journals (Sweden)

Anamaria ALDEA

2007-01-01

Full Text Available The rational expectations paradigm, that dominates macroeconomicsfails to take into account the complexity of the information, which is so vast that the individual brain cannot understand the full of it. The agents are boundedly rational,so they use simple forecasting rules that do not incorporate all available information, but they are willing to learn and will switch to other rules if it turns out that these rules are more profitable than the rule they have been using. Such trial and error learning strategies create the dynamics in the foreign exchange market, with two types of equilibria, a fundamental and a non-fundamental equilibrium to which the exchange rate is attracted.

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.

Foreign Exchange Reserves and the Reserve Bank’s Balance Sheet

OpenAIRE

Christian Vallence

2012-01-01

The Reserve Bank of Australia holds and manages the nation’s foreign exchange reserve assets in order to meet its policy objectives. While Australia’s foreign exchange reserves are relatively modest by international standards, they nonetheless constitute a sizeable portion of the Bank’s balance sheet, and variations in the Australian dollar value of these reserves are usually the most volatile component of the Bank’s profit and loss statement. This article discusses some of the key decisions ...

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.

Exchange Rate and Interest Rate in the Monetary Policy Reaction Function

Directory of Open Access Journals (Sweden)

Krušković Borivoje D.

2017-01-01

Full Text Available In recent years there has been a particular interest in the relation between exchange rates and interest rates both in developed countries and emerging countries. This is understandable given the important role that these variables have in determining the movement of nominal and real economic variables, including the movement of domestic inflation, real output, exports and imports, foreign exchange reserves, etc. To realized the importance of the given instruments selected macroeconomic indicators, data analysis (monthly data relating to Serbia was made on the basis of the Transfer Function Model, a data analysis (annual data relating to emerging countries was done on the basis of the Stepvise Multiple Regression model. In the transfer function model we used the Maximum Likelihood method for assessing unknown coefficients. In the gradual multiple regression model we used the Least Square method for the evaluation of unknown coefficients. All indicator values were used in the original unmodified form, i.e. there was no need for a variety of transformations. Empirical analysis showed that the exchange rate is a more significant transmission mechanism than the interest rate both in emerging markets and Serbia.

On the evolution of U.S. foreign-exchange-market intervention: thesis, theory, and institutions

OpenAIRE

Michael D. Bordo; Owen F. Humpage; Anna J. Schwartz

2011-01-01

Attitudes about foreign-exchange-market intervention in the United States evolved in tandem with views about monetary policy as policy makers grappled with the perennial problem of having more economic objectives than independent instruments with which to achieve them. This paper—the introductory chapter to our history of U.S. foreign exchange market intervention—explains this thesis and summarizes our conclusion: The Federal Reserve abandoned frequent foreign-exchange-market intervention bec...

26 CFR 1.905-5T - Foreign tax redeterminations and currency translation rules for foreign tax redeterminations...

Science.gov (United States)

2010-04-01

... the rate of exchange for the date of the payment of the foreign tax. Refunds of such taxes shall be translated into dollars at the rate of exchange for the date of the refund. (2) Foreign taxes deemed paid on... actual distribution and refunds of such taxes shall be translated into dollars at the rate of exchange...

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.

77 FR 62177 - Retail Foreign Exchange Transactions

Science.gov (United States)

2012-10-12

... \\5\\ (a retail foreign exchange (forex) rule). Transactions described in section 2(c)(2)(B)(i)(I...'s retail forex rule must treat similarly all such futures and options and all agreements, contracts... forex rules must prescribe appropriate requirements with respect to disclosure, recordkeeping, capital...

Football and exchange rates: empirical support for behavioral economics.

Science.gov (United States)

Eker, Gulin; Berument, Hakan; Dogan, Burak

2007-10-01

Recently, economic theory has been expanded to incorporate emotions, which have been assumed to play an important role in financial decisions. The present study illustrates this by showing a connection between the sports performance of popular national football teams (Besiktas, Fenerbahce, and Galatasaray) and performance of the Turkish economy. Specifically, a significant positive association was found between the success of three major professional Turkish football teams and the exchange rate of the Turkish lira against the U.S. dollar. The effect of the football success of several Turkish football teams on the exchange rate of the Turkish lira was examined using the simultaneous multiple regression model with predictor measures of wins, losses, and ties for different combinations of teams to predict the depreciation rate of the Turkish lira between the years 1987 and 2003. Wins by Turkish football teams against foreign (non-Turkish) rivals increased with exchange rate depreciation of the Turkish lira against the U.S. dollar.

Trading price jump clusters in foreign exchange markets

Czech Academy of Sciences Publication Activity Database

Novotný, Jan; Petrov, D.; Urga, G.

2015-01-01

Roč. 24, June (2015), s. 66-92 ISSN 1386-4181 Institutional support: PRVOUK-P23 Keywords : price jumps * foreign exchange markets * trading Subject RIV: AH - Economics Impact factor: 1.726, year: 2015

Influence of Foreign Direct Investments on Commodity Exchange of the Republic of Croatia

Directory of Open Access Journals (Sweden)

Goran Marijanović

2009-12-01

Full Text Available Almost all countries of the world try to ensure accelerated development of their economies with the help of foreign direct investments. Since the foreign direct investments, in addition to capital, potentially ensure the transfer of contemporary technology, management and marketing knowledge and skills respectively, they can be a signifcant growth factor of competitive abilities of national economies and involvement of countries into international exchange. Trough the RCA method and “Trade Overlap” index, this paper analyzes the infuence of foreign direct investments on the comparative advantages and specialization degree in international commodity exchange for the selected group of transition countries and the Republic of Croatia. The paper tries to determine how much the foreign direct investments have infuenced the structure change of the foreign trade exchange and whether they have contributed to export growth of more complex groups of products in the observed period.

Modeling foreign exchange risk premium in Armenia

Czech Academy of Sciences Publication Activity Database

Poghosyan, Tigran; Kočenda, Evžen; Zemčík, P.

2008-01-01

Roč. 44, č. 1 (2008), s. 41-61 ISSN 1540-496X R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:MSM0021620846 Keywords : foreign exchange risk premium * Armenia * affine term structure models Subject RIV: AH - Economics Impact factor: 0.611, year: 2008

Founder Family Influence and Foreign Exchange Risk Management

DEFF Research Database (Denmark)

Aabo, Tom; Kuhn, Jochen; Zanotti, Giovanni

2011-01-01

Purpose    The purpose of this study is to explore the influence of founder families in medium-sized, manufacturing firms and to investigate the impact of such influence on risk management - more specifically foreign exchange hedging and speculation. Design/methodology/approach This empirical study...... in the management team, are members of the board of directors, and/or are shareholders of the firm. We find no difference between such founder family firms and other firms in terms of the use / non-use decision related to foreign exchange derivatives but a marked difference in terms of the extent decision. Thus...... in medium-sized firms (as opposed to large, listed firms in most other studies) and adds to the sparse literature on the impact of founder family influence on risk management.  ...

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.

Test of Weak Form Efficiency: An Empirical Study of the Malaysian Foreign Exchange Market

OpenAIRE

Lim, Pei Mun

2011-01-01

This paper empirically tests the Efficient Market Hypothesis (EMH) in the weak sense for the Malaysian foreign exchange market. The hypothesis is tested using two ways. First is by testing the random walk hypothesis based on individual unit root test and second is by testing the profitability of simple technical trading rules. The study covers the high frequency daily data from January 1997 to December 2010 and the spot exchange rates are quoted as Malaysian Ringgit per unit of US Dollar. Due...

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.

De Facto Exchange Rate Regime in Korea: Is It Still A Dollar Peg?

Directory of Open Access Journals (Sweden)

Han Geun Moon

2002-06-01

Full Text Available The purpose of this paper is to test the common view on the actual exchange rate regime, using very simple but intuitive OLS regression models based on Frankel and Wei's work (1994. The results show that, firstly, East Asian countries including Korea have returned to the dollar peg or managed floating after the restoration from the crisis, as they did during the pre-crisis period. The results also show that Korea has substantially changed her exchange rate regime since January 2001, but other countries, even Taiwan and Singapore which had no crisis, are still the same as before. The sensitivity to the dollar has statistically significantly decreased, but sensitivity to the yen is almost twice as much as those in other countries. This result might come from the synchronization of Korean won with Japanese yen from November 2000, the change of the monetary policy framework from monetary targeting to the pure inflation targeting, and the full capital and foreign exchange liberalization since the second stage of foreign exchange liberalization (January 2001. However, 6 months (January 2001-June 15, 2001 is not enough to assess policy changes, and, we continuously need to monitor how the exchange rate policy evolves.

Modeling foreign exchange risk premium in Armenia

Czech Academy of Sciences Publication Activity Database

Poghosyan, T.; Kočenda, E.; Zemčík, Petr

2008-01-01

Roč. 44, č. 1 (2008), s. 41-61 ISSN 1540-496X R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : foreign exchange risk premium * Armenia * affine term structure models Subject RIV: AH - Economics Impact factor: 0.611, year: 2008

Exchange rate movement and import price of Machineries in Nigeria ...

African Journals Online (AJOL)

The empirical estimates reveal that one lag variability of import price, exchange rate, foreign cost, domestic competitors price and demand pressure proxied by GDP impact it in the long-run. However, the ECM coefficient is properly signed with -0.549. By implication, approximately 54% of the discrepancy from long run ...

The Financial Crisis through the Lens of Foreign Exchange Swap Markets

OpenAIRE

Crystal Ossolinski; Andrew Zurawski

2010-01-01

During the financial crisis, non-US banks relied increasingly on foreign exchange swap markets to fund their US dollar asset holdings. This caused the cost of borrowing US dollars via the swap market to rise above the measured cost of borrowing US dollars directly in money markets – an apparent deviation from the covered interest parity condition. Pricing in the Australian dollar foreign exchange swap market, and to a lesser degree the cross-currency swap market, also reflected the global s...

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.

Trade Adjustments to Exchange Rate Changes by Japanese Manufacturing MNEs: Intra-firm and arm's length transactions

OpenAIRE

ANDO Mitsuyo; KIMURA Fukunari

2013-01-01

This paper examines how Japanese manufacturing multinational enterprises (MNEs) adjust to exchange rate changes. Using the micro-data of Japanese manufacturing MNEs from 1994 to 2010, we find that exports tend to respond to exchange rate changes, in particular when wholly or majority-owned affiliates are dominant among their foreign affiliates and when intra-firm trade ratios are higher. Moreover, the responsiveness to exchange rate changes is higher for intra-firm exports than for total expo...

Trading price jump clusters in foreign exchange markets

Czech Academy of Sciences Publication Activity Database

Novotný, Jan; Petrov, D.; Urga, G.

2015-01-01

Roč. 24, June (2015), s. 66-92 ISSN 1386-4181 R&D Projects: GA ČR(CZ) GA14-27047S Institutional support: RVO:67985998 Keywords : price jumps * foreign exchange markets * trading Subject RIV: AH - Economics Impact factor: 1.726, year: 2015

The Efficient Market Hypothesis: Is It Applicable to the Foreign Exchange Market?

OpenAIRE

Nguyen, James

2004-01-01

The study analyses the applicability of the efficient market hypothesis to the foreign exchange market by testing the profitability of the filter rule on the spot market. The significance of the returns was validated by comparing them to the returns from randomly generated shuffled series via bootstrap methods. The results were surprising. For the total period (1984-2003) small filter rules could deliver significant returns indicating an inefficient foreign exchange market. However, once the ...

Exchange Rate Volatility, Inflation Uncertainty and Foreign Direct ...

African Journals Online (AJOL)

2008-10-07

Oct 7, 2008 ... volatility on foreign direct investment (FDI) inflows is important for a developing ... and inflation uncertainty were computed using the GARCH model and the results showed that volatility .... of currency and capital accounts, coupled with stable macroeconomic environment ..... 14.67561 Akaike info criterion.

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.

"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...

Time scale defined by the fractal structure of the price fluctuations in foreign exchange markets

Science.gov (United States)

Kumagai, Yoshiaki

2010-04-01

In this contribution, a new time scale named C-fluctuation time is defined by price fluctuations observed at a given resolution. The intraday fractal structures and the relations of the three time scales: real time (physical time), tick time and C-fluctuation time, in foreign exchange markets are analyzed. The data set used is trading prices of foreign exchange rates; US dollar (USD)/Japanese yen (JPY), USD/Euro (EUR), and EUR/JPY. The accuracy of the data is one minute and data within a minute are recorded in order of transaction. The series of instantaneous velocity of C-fluctuation time flowing are exponentially distributed for small C when they are measured by real time and for tiny C when they are measured by tick time. When the market is volatile, for larger C, the series of instantaneous velocity are exponentially distributed.

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.

The taxation of foreign exchange differences

OpenAIRE

2014-01-01

M.Com. (Taxation) One of the canons of context requires that a liability will be in 1986:para 4.47). taxation is certainty. "Certainty taxpayer be reasonably certain of what any given set of circumstances" (Margo in this his tax Report, It is submitted that, at present, there is not the desired certainty regarding the treatment of unrealised foreign exchange differences. This is proven by the internal memorandum circularised by the Commissioner of Inland Revenue, advising local Receivers o...

Growth, exchange rates and trade in Brazil: a structuralist post-Keynesian approach

Directory of Open Access Journals (Sweden)

Nelson H. Barbosa Filho

2004-01-01

Full Text Available This paper presents a structuralist post-Keynesian analysis of trade adjustment in Brazil. Based on the concept of the balance-of-payments (BoP constraint on growth, the paper investigates the relationship between income growth and real-exchange-rate devaluation necessary to adjust trade to a foreign-exchange constraint. The main result is that, with price-inelastic and income-elastic imports and based on its trade structure in 2002, Brazil may have to compensate an additional 1% of income growth with approximately 7% of real-exchange-rate devaluation in order to keep its trade balance stable in relation to GDP in the near future. Moreover, the trade parameters of Brazil seem to be unfavorable to growth with stable trade, that is, even moderate rates of GDP expansion lead to a substantial increase of imports and, therefore, require an also substantial devaluation of the real exchange rate to avoid a deterioration of the trade balance.

Growth, exchange rates and trade in Brazil: a structuralist post Keynesian approach

Directory of Open Access Journals (Sweden)

Nelson H. Barbosa Filho

2009-06-01

Full Text Available This paper presents a structuralist post-Keynesian analysis of trade adjustment in Brazil. Based on the concept of the balance-of-payments (BoP constraint on growth, the paper investigates the relationship between income growth and real-exchange-rate devaluation necessary to adjust trade to a foreign-exchange constraint. The main result is that, with price-inelastic and income-elastic imports and based on its trade structure in 2002, Brazil may have to compensate an additional 1% of income growth with approximately 7% of real-exchange-rate devaluation in order to keep its trade balance stable in relation to GDP in the near future. Moreover, the trade parameters of Brazil seem to be unfavorable to growth with stable trade, that is, even moderate rates of GDP expansion lead to a substantial increase of imports and, therefore, require an also substantial devaluation of the real exchange rate to avoid a deterioration of the trade balance.

Suggestions for foreign trade enterprises to reduce cost after implementation of RMB cross-border trade settlement

Directory of Open Access Journals (Sweden)

Jie Min

2017-03-01

Full Text Available After RMB cross-border trade settlement was implemented, the ability of foreign trade enterprises to evade foreign exchange risk has enhanced to a great extent. In the meantime, with exchange rate fluctuations, foreign trade enterprises have become more sensitive with exchange rate variation. Based on predecessors’achievement, this thesis reasonably proposed a cost model applicable to foreign trade enterprises, in which the variables are all related to exchange rate. Therefore, by making exchange rate estimation, this thesis conducted data analysis and modeling, so as to find a way for foreign trade enterprises to predict exchange rate in a reasonable way. The thesis reached the conclusion that foreign trade enterprises can better control their cost based on RMB cross-border settlement.

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

Segmentation and Time-of-Day Patterns in Foreign Exchange Markets

OpenAIRE

Angelo Ranaldo

2007-01-01

This paper sheds light on a puzzling pattern in foreign exchange markets: Domestic currencies appreciate (depreciate) systematically during foreign (domestic) working hours. These time-of-day patterns are statistically and economically highly significant. They pervasively persist across many years, even after accounting for calendar effects. This phenomenon is difficult to reconcile with the random walk and market efficiency hypothesis. Microstructural and behavioural explanations suggest tha...

26 CFR 1.905-4T - Notification of foreign tax redetermination (temporary).

Science.gov (United States)

2010-04-01

... foreign source general category income. The average exchange rate for 2008 was $1:1m. Also in 2008, X.... The average exchange rate for 2008 was $1:1n. X claimed a foreign tax credit of $150 ($100 (100m at $1... 300n of foreign source general category income. The average exchange rate for 2009 was $1.50:1n. X...

MONETARY TRANSMISSION CHANNELS IN FLEXIBLE MONETARY AND EXCHANGE RATE REGIMES: THE CASE OF SELECTED TRANSITION ECONOMIES

Directory of Open Access Journals (Sweden)

Kosta JOSIFIDIS

2010-01-01

Full Text Available The paper explores selected monetary transmission channels in the case of transition economies. Namely, an exchange rate channel, an interest rate channel, direct and indirect influence to an exchange rate, are focused. Specific (former transition economies are differentiated according the combination of implemented monetary and exchange rate regimes: exchange rate as a nominal anchor and rigid exchange rate regimes, exchange rate as a nominal anchor and intermediate exchange rate regimes, and implicit/explicit inflation targeting monetary regime and floating (managed/free exchange rate regime. The monetary transmission is tracked during different phases in a transition process towards the EU and compared between different nominal anchors and exchange rate regimes. In order to track the influence of a monetary policy instruments (impulses to different goals of a monetary policy (responses during the period from 6-24 months, we use VAR and VEC models. Monthly frequency of following time series are used in the models: nominal exchange rates, consumer price indexes, foreign exchange reserves, and reference interest rates. The aim of the paper is to point to the distinction between de jure and de facto exchange rate regimes, and to the adequacy of used combination of monetary and exchange rate regimes having in mind revealed features of investigated monetary transmission channels.

Volatility transmission in emerging European foreign exchange markets

Czech Academy of Sciences Publication Activity Database

Bubák, V.; Kočenda, Evžen; Žikeš, F.

2011-01-01

Roč. 35, č. 11 (2011), s. 2829-2841 ISSN 0378-4266 R&D Projects: GA ČR(CZ) GAP403/11/0020; GA MŠk LC542 Institutional research plan: CEZ:MSM0021620846 Keywords : foreign exchange markets * volatility * spillovers Subject RIV: AH - Economics Impact factor: 2.600, year: 2011

Dynamic communities in multichannel data: an application to the foreign exchange market during the 2007-2008 credit crisis.

Science.gov (United States)

Fenn, Daniel J; Porter, Mason A; McDonald, Mark; Williams, Stacy; Johnson, Neil F; Jones, Nick S

2009-09-01

We study the cluster dynamics of multichannel (multivariate) time series by representing their correlations as time-dependent networks and investigating the evolution of network communities. We employ a node-centric approach that allows us to track the effects of the community evolution on the functional roles of individual nodes without having to track entire communities. As an example, we consider a foreign exchange market network in which each node represents an exchange rate and each edge represents a time-dependent correlation between the rates. We study the period 2005-2008, which includes the recent credit and liquidity crisis. Using community detection, we find that exchange rates that are strongly attached to their community are persistently grouped with the same set of rates, whereas exchange rates that are important for the transfer of information tend to be positioned on the edges of communities. Our analysis successfully uncovers major trading changes that occurred in the market during the credit crisis.

Dynamic communities in multichannel data: An application to the foreign exchange market during the 2007-2008 credit crisis

Science.gov (United States)

Fenn, Daniel J.; Porter, Mason A.; McDonald, Mark; Williams, Stacy; Johnson, Neil F.; Jones, Nick S.

2009-09-01

We study the cluster dynamics of multichannel (multivariate) time series by representing their correlations as time-dependent networks and investigating the evolution of network communities. We employ a node-centric approach that allows us to track the effects of the community evolution on the functional roles of individual nodes without having to track entire communities. As an example, we consider a foreign exchange market network in which each node represents an exchange rate and each edge represents a time-dependent correlation between the rates. We study the period 2005-2008, which includes the recent credit and liquidity crisis. Using community detection, we find that exchange rates that are strongly attached to their community are persistently grouped with the same set of rates, whereas exchange rates that are important for the transfer of information tend to be positioned on the edges of communities. Our analysis successfully uncovers major trading changes that occurred in the market during the credit crisis.

Surfing the money tides: understanding the foreign exchange market through metaphors.

Science.gov (United States)

Oberlechner, Thomas; Slunecko, Thomas; Kronberger, Nicole

2004-03-01

This study describes metaphorical conceptualizations of the foreign exchange market held by market participants and examines how these metaphors socially construct the financial market. Findings are based on 55 semi-structured interviews with senior foreign exchange experts at banks and at financial news providers in Europe. We analysed interview transcripts by metaphor analysis, a method based on cognitive linguistics. Results indicate that market participants' understanding of financial markets revolves around seven metaphors, namely the market as a bazaar, as a machine, as gambling, as sports, as war, as a living being and as an ocean. Each of these metaphors highlights and conceals certain aspects of the foreign exchange market and entails a different set of implications on crucial market dimensions, such as the role of other market participants and market predictability. A correspondence analysis supports our assumption that metaphorical thinking corresponds with implicit assumptions about market predictability. A comparison of deliberately generated and implicitly used metaphors reveals notable differences. In particular, implicit metaphors are predominantly organic rather than mechanical. In contrast to academic models, interactive and organic metaphors, and not the machine metaphor, dominate the market accounts of participants.

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.

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

Do exchange rates follow random walks? A variance ratio test of the ...

African Journals Online (AJOL)

The random-walk hypothesis in foreign-exchange rates market is one of the most researched areas, particularly in developed economies. However, emerging markets in sub-Saharan Africa have received little attention in this regard. This study applies Lo and MacKinlay's (1988) conventional variance ratio test and Wright's ...

The models for financial crisis detection in Indonesia based on import, export, and foreign exchange reserves

Science.gov (United States)

Sugiyanto; Wibowo, Supriyadi; Rizky Aristina Suwardi, Vivi

2017-12-01

The severity of the financial crisis that occurred in Indonesia required an early warning system of financial crisis. The financial crisis in Indonesia can be detected based on imports, exports, and foreign exchange reserves. The purpose of the research is to determine an appropriate model to detect the financial crisis in Indonesia based on imports, exports, and foreign exchange reserves. Markov switching is an alternative framework for the approach often used in financial crisis detection. Combined volatility and Markov switching model with three states assumptions can be established if an AR and volatility models have been obtained. Imports, exports, and foreign exchange reserves data from January 1990 to December 2016 have the heteroscedasticity effect so that an ARCH model is used as a volatility model. Research shows that SWARCH(3.1) model is an appropriate model for detecting financial crisis in Indonesia based on imports, exports, and foreign exchange reserves.

Absorbing a windfall of foreign exchange: Dutch disease dynamics

NARCIS (Netherlands)

van der Ploeg, F.; Venables, A.J.

2013-01-01

The permanent income rule is seldom the optimal response to a windfall of foreign exchange, such as that from a resource discovery. Absorptive capacity constraints require domestic investment, and investment in structures requires non-traded inputs the supply of which is constrained by the initial

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

Balassa-Samuelson Effect in Won/Dollar and Won/Yen Exchange Rates

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Donghwan Oh

2010-06-01

Full Text Available This paper examines, using various models including a non-linear one, that the Balassa-Samuelson (BS effect can account for the persistence of deviations from PPP in the long-run movements of won/dollar and won/yen real exchange rates. In test for PPP hypothesis that incorporates the BS effect, using the generalized Johansen' cointegration method, it is found that a cointegration relationship exists between each of won/dollar and won/yen real exchange rate and the productivity variables of two countries. And in test for PPP hypothesis that incorporates other fundamentals such as cumulative current account balance, foreign exchange reserve, terms of trade as well as productivity differentials, using a behavioral equilibrium exchange rate approach, it is found that a cointegration relationship exists between each of won/dollar and won/yen real exchange rate and all of these fundamentals. However, the plus sign of the estimated coefficient of the productivity differentials variable, which means that domestic productivity improvement produces increase in each of won/dollar and won/yen real exchange rate is not coincident with the result that the BS effect expects theoretically. Finally, in test for PPP hypothesis that incorporates the BS effect, using a non-linear STAR model, it is found that the adjustment process in case of won/dollar real exchange rate from the long-run equilibrium level can be adequately explained by a non-linear LSTAR model. But, the evidence of diagnostic statistics, which shows the existence of autocorrelation of the residuals in most of lags, might suggest the inadequacy of LSTAR model specification.

Analysis of Foreign Exchange Interventions by Intervention Agent with an Artificial Market Approach

Science.gov (United States)

Matsui, Hiroki; Tojo, Satoshi

We propose a multi-agent system which learns intervention policies and evaluates the effect of interventions in an artificial foreign exchange market. Izumi et al. had presented a system called AGEDASI TOF to simulate artificial market, together with a support system for the government to decide foreign exchange policies. However, the system needed to fix the amount of governmental intervention prior to the simulation, and was not realistic. In addition, the interventions in the system did not affect supply and demand of currencies; thus we could not discuss the effect of intervention correctly. First, we improve the system so as to make much of the weights of influential factors. Thereafter, we introduce an intervention agent that has the role of the central bank to stabilize the market. We could show that the agent learned the effective intervention policies through the reinforcement learning, and that the exchange rate converged to a certain extent in the expected range. We could also estimate the amount of intervention, showing the efficacy of signaling. In this model, in order to investigate the aliasing of the perception of the intervention agent, we introduced a pseudo-agent who was supposed to be able to observe all the behaviors of dealer agents; with this super-agent, we discussed the adequate granularity for a market state description.

Random walk theory and exchange rate dynamics in transition economies

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Gradojević Nikola

2010-01-01

Full Text Available This paper investigates the validity of the random walk theory in the Euro-Serbian dinar exchange rate market. We apply Andrew Lo and Archie MacKinlay's (1988 conventional variance ratio test and Jonathan Wright's (2000 non-parametric ranks and signs based variance ratio tests to the daily Euro/Serbian dinar exchange rate returns using the data from January 2005 - December 2008. Both types of variance ratio tests overwhelmingly reject the random walk hypothesis over the data span. To assess the robustness of our findings, we examine the forecasting performance of a non-linear, nonparametric model in the spirit of Francis Diebold and James Nason (1990 and find that it is able to significantly improve upon the random walk model, thus confirming the existence of foreign exchange market imperfections in a small transition economy such as Serbia. In the last part of the paper, we conduct a comparative study on how our results relate to those of other transition economies in the region.

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...

Foreign Exchange Market Contagion in the Asian Crisis: A Regression-based Approach

NARCIS (Netherlands)

van Horen, N.; Jager, H.; Klaassen, F.J.G.M.

2006-01-01

This paper investigates whether, during the Asian crisis, contagion occurred from Thailand to the other crisis countries through the foreign exchange market, and, if so, determines the contribution of this contagion to the crisis. More specifically, we examine whether the effect of the exchange

Impact of Oil Price Shocks and Exchange Rate Volatility on Stock Market Behavior in Nigeria

Directory of Open Access Journals (Sweden)

Adedoyin I. Lawal

2016-09-01

Full Text Available The impact of exchange rate and oil prices fluctuation on the stock market has been a subject of hot debate among researchers. This study examined the impact of both the exchange rate volatility and oil price volatility on stock market volatility in Nigeria, so as to guide policy formulation based on the fact that the nation’s economy was foreign induced and mono-cultured with heavy dependence on oil. EGARCH estimation techniques were employed to examine if either the volatility in exchange rate, oil price volatility or both experts on stock market volatility in Nigeria. The result shows that share price volatility is induced by both the exchange rate volatility and oil price volatility. Thus, it is recommended that policymakers should pursue policies that tend to stabilize the exchange rate regime on the one hand, and guarantee the net oil exporting position for the economy, that market practitioners should formulate portfolio strategies in such a way that volatility in both exchange rates and oil price will be factored in time when investment decisions are being made.

Impact of exchange rate depreciation on the balance of payments: Empirical evidence from Nigeria

Directory of Open Access Journals (Sweden)

Martins Iyoboyi

2014-12-01

Full Text Available The paper investigates the impact of exchange rate depreciation on the balance of payments (BOP in Nigeria over the period 1961–2012. The analysis is based on a multivariate vector error correction framework. A long-term equilibrium relationship was found between BOP, exchange rate and other associated variables. The empirical results are in favour of bidirectional causality between BOP and other variables employed. Results of the generalized impulse response functions suggest that one standard deviation innovation on exchange rate reduces positive BOP in the medium and long term, while results of the variance decomposition indicate that a significant variation in Nigeria’s BOP is not due to changes in exchange rate movements. The policy implication is that exchange rate depreciation which has been preponderant in Nigeria since the mid-1980s has not been very useful in promoting the country’s positive BOP. It is recommended that growth in the real sector should be improved to enhance exports, create employment, curb inflation and reduce poverty, while cutting non-productive imports, attracting foreign private investment and implementing well coordinated macroeconomic policies that impact inflation positively and stimulate exchange rate stability.

EFFECTS OF THE APPLICATION OF TARGETING THE EXCHANGE RATE POLICY IN MACEDONIA

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KRUME NIKOLOSKI

2016-02-01

Full Text Available The monetary system and monetary – credit policy in the Republic of Macedonia were built after the country gained independence from the previous federal community, when Macedonia faced problems such as: termination of many plants, increase in unemployment, increase in budget and foreign trade deficit as well as high inflation rate. The macroeconomic stability narrowly understood as reducing the inflation rate, was the first measure of the economic policy, undertaken along with the monetary independence of Macedonia. In a small and open economy, the exchange rate policy has particular importance in the control of the inflation rate and beyond: in the real economic trends. The strategy of targeting the denar exchange rate was accepted and applied with the expectation that it would act in that direction, hence the monetary policy was focused on maintaining fixed exchange rate against the euro. The determination of the country to join the European Union and to become a member of other international financial organizations is yet another reason for choosing this strategy.

THE IMPLICATIONS OF VARYING EXCHANGE RATES FOR THE INTERNATIONAL TRADE

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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.

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....

Nanjing’s Cultural Exchanges with Foreign Countries

Institute of Scientific and Technical Information of China (English)

1996-01-01

AS an ancient capital city,Nanj-ing has a long history of cul-tural exchanges with foreigncountries.The ruler of the Kingdom ofEastern Wu(222-280 A.D.)sent en-voys to over 100 states in Hainan andSoutheast Asian islands.Some of thestates paid return visits.For instance,in243 the ruler of Funan(present-dayCambodia)sent a musical group to theEastern Wu King,who then built aFunan Music Hall for court maids tolearn Funan music and dances.Dur-ing the Southem Dynasties(420-589A.D.)exchanges with foreign countriesincreased and Funan sent envoysto Jianye and Jiankang(present-dayNanjing)over 30 times.Ancient SriLanka,which was known as the LionState in ancient China,Tianzhu(an-cient India).Persia,the Korean Penin-

22 CFR 3.12 - Exemption of grants and other foreign government assistance in cultural exchange programs from...

Science.gov (United States)

2010-04-01

... FOREIGN GOVERNMENTS § 3.12 Exemption of grants and other foreign government assistance in cultural... 22 Foreign Relations 1 2010-04-01 2010-04-01 false Exemption of grants and other foreign government assistance in cultural exchange programs from coverage of foreign gifts and decorations...

Inverse Statistics in the Foreign Exchange Market

OpenAIRE

Jensen, M. H.; Johansen, A.; Petroni, F.; Simonsen, I.

2004-01-01

We investigate intra-day foreign exchange (FX) time series using the inverse statistic analysis developed in [1,2]. Specifically, we study the time-averaged distributions of waiting times needed to obtain a certain increase (decrease) $\\rho$ in the price of an investment. The analysis is performed for the Deutsch mark (DM) against the $US for the full year of 1998, but similar results are obtained for the Japanese Yen against the $US. With high statistical significance, the presence of "reson...

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 –...

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.

The performance of one belt and one road exchange rate: Based on improved singular spectrum analysis

Science.gov (United States)

Lai, Lin; Guo, Kun

2017-10-01

;One Belt and One Road; strategy in China is on push of foreign trade openness at northwest, southwest and northeast, absorption of the excess capacity and new support for economic increase. However, the fluctuation in RMB exchange rate with the countries along the road is unstable so related Chinese enterprises will face high risk of exchange rate. Precise explanation or prediction for exchange rate has been the challengeable hop point in the international finance. This paper decomposed the One Belt One Road Exchange Rate Index (OBORR) and the RMB Effective Exchange Rate Index (CNYX) into trend term, market fluctuation term and noise term using improved singular spectrum analysis (SSA). It turns out that the increasing velocity of OBORR is greater than that of CNYX in the long term, and there is dynamic lead-lag structure in the medium term. In the short term, the fluctuation range and frequency of OBORR are greater than those of CNYX, which means there will be more exchange rate risks in One Belt and One Road countries.

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.

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.

The Evolution of Foreign Exchange Markets in the Context of Global Crisis

Directory of Open Access Journals (Sweden)

Mariana Trandafir

2011-12-01

Full Text Available The FX market is the world’s largest financial market. The global financial systeminvolves effective and efficient exchange of currencies. Corporations and investors participate in themarket for operational needs: to reduce risk by hedging currency exposures; to convert their returnsfrom international investments into domestic currencies and to make cross-border investments andraise finance outside home markets. Central banks participate in the market. This paper analyzesforeign exchange marketsactivity before and under the condition the global crisis. The method ofresearch is the comparative analysis used on the global and European level. The research is importantand actual because it reveals the changeswhich have defined a new paradigm forthe foreignexchange marketsand which contributed to the increasing of the global foreign exchange marketturnover during the global crisis. The main conclusion of the paper is that the innovativedevelopments in electronic trading technology and institutional trading arrangements are behind theevolution of the foreign exchange markets. The analysis is supported by statistical tables and uses therecent officialBank for International Settlements and European Central Bank statistic databases.

77 FR 41671 - Extension of Interim Final Temporary Rule on Retail Foreign Exchange Transactions

Science.gov (United States)

2012-07-16

... Exchange Act,\\3\\ shall not enter into, or offer to enter into, a foreign exchange (``forex'') transaction... conditions as the Federal regulatory agency shall prescribe (``retail forex rule'').\\6\\ A Federal regulatory agency's [[Page 41672

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 ...

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

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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.

AN ECONOMETRIC ANALYSIS ON THE ECONOMIC DETERMINANTS OF FOREIGN DIRECT INVESTMENTS IN TURKEY

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SEVDA YAPRAKLI

2013-06-01

Full Text Available The purpose of this study is to investigate whether there is a relationship among foreign direct investment and some of the macroeconomics variables in Turkey. For this purpose for the period of 1970-2006, the relationships among foreign direct investment and GDP, labour cost, real exchange rate, openness and foreign trade deficit are econometrically analyzed by employing multivariate cointegration analysis and error correction model. According to the results, FDI is positively effected by GDP and openness, and negatively by labour cost, real exchange rate ve foreign trade deficit variables. Morever, bi-directional causality is observed among FDI and GDP and real exchange rate.

Management of Liquidity Risk Using Foreign Exchange Swap Contracts

Directory of Open Access Journals (Sweden)

Ivica Prga

2009-12-01

Full Text Available Croatian banks, like the other world banks, are exposed to liquidity risk. This is very significant question to them, particularly in this complex and crisis time. Therefore, the Croatian banks pay much attention to the management of liquidity. In these attempts, the banks use various derivative financial instruments of which the foreign exchange swap contracts are particularly remarkable.

Forecasting of foreign exchange rates of Taiwan’s major trading partners by novel nonlinear Grey Bernoulli model NGBM(1, 1)

Science.gov (United States)

Chen, Chun-I.; Chen, Hong Long; Chen, Shuo-Pei

2008-08-01

The traditional Grey Model is easy to understand and simple to calculate, with satisfactory accuracy, but it is also lack of flexibility to adjust the model to acquire higher forecasting precision. This research studies feasibility and effectiveness of a novel Grey model together with the concept of the Bernoulli differential equation in ordinary differential equation. In this research, the author names this newly proposed model as Nonlinear Grey Bernoulli Model (NGBM). The NGBM is nonlinear differential equation with power index n. By controlling n, the curvature of the solution curve could be adjusted to fit the result of one time accumulated generating operation (1-AGO) of raw data. One extreme case from Grey system textbook is studied by NGBM, and two published articles are chosen for practical tests of NGBM. The results prove the novel NGBM is feasible and efficient. Finally, NGBM is used to forecast 2005 foreign exchange rates of twelve Taiwan major trading partners, including Taiwan.

Determinants and effectiveness of foreign exchange market intervention in Georgia

Czech Academy of Sciences Publication Activity Database

Loiseau-Aslanidi, Olga

2011-01-01

Roč. 47, č. 4 (2011), s. 75-95 ISSN 1540-496X R&D Projects: GA MŠk LC542 Grant - others:UK(CZ) GAUK 259027 Institutional research plan: CEZ:MSM0021620846 Keywords : determinants of intervention * effectiveness of intervention * foreign exchange intervention Subject RIV: AH - Economics Impact factor: 0.953, year: 2011

Persistent profitability of technical analysis on foreign exchange markets?

OpenAIRE

L. MENKHOFF; M. SCHLUMBERGER

1995-01-01

The effect of technical analyses on the performance of subsequent policies and actions in the foreign exchange markets is analysed using three cases. Results show that use of technical analyses is persistently profitable. Participants, however, tend to view short-term market risk as important and thus decide to forego some of the rules derived from technical analysis. This observation does not negate the theory on efficient learning.

Evaluation of Foreign Investment in Power Plants using Real Options

Science.gov (United States)

Kato, Moritoshi; Zhou, Yicheng

This paper proposes new methods for evaluating foreign investment in power plants under market uncertainty using a real options approach. We suppose a thermal power plant project in a deregulated electricity market. One of our proposed methods is that we calculate the cash flow generated by the project in a reference year using actual market data to incorporate periodic characteristics of energy prices into a yearly cash flow model. We make the stochastic yearly cash flow model with the initial value which is the cash flow in the reference year, and certain trend and volatility. Then we calculate the real options value (ROV) of the project which has abandonment options using the yearly cash flow model. Another our proposed method is that we evaluate foreign currency/domestic currency exchange rate risk by representing ROV in foreign currency as yearly pay off and exchanging it to ROV in domestic currency using a stochastic exchange rate model. We analyze the effect of the heat rate and operation and maintenance costs of the power plant on ROV, and evaluate exchange rate risk through numerical examples. Our proposed method will be useful for the risk management of foreign investment in power plants.

Dynamic relationship between Japanese Yen exchange rates and market anxiety: A new perspective based on MF-DCCA

Science.gov (United States)

Lu, Xinsheng; Sun, Xinxin; Ge, Jintian

2017-05-01

This paper investigates the dynamic relationship between Japanese Yen exchange rates and market anxiety during the period from January 5, 1998 to April 18, 2016. A quantitative technique of multifractal detrended cross-correlation analysis (MF-DCCA) is used to explore the multifractal features of the cross-correlations between USD/JPY, AUD/JPY exchange rates and the market anxiety gauge VIX. The investigation shows that the causal relationship between Japanese Yen exchange rates and VIX are bidirectional in general, and the cross-correlations between the two sets of time series are multifractal. Strong evidence suggests that the cross-correlation exponents tend to exhibit different volatility patterns in response to diverse external shocks such as financial distress and widening in interest rate spread, suggesting that the cross-correlated behavior between Japanese Yen exchange rates and VIX are susceptible to economic uncertainties and risks. In addition, the performances of two market anxiety gauges, the VIX and the TED spread, are compared and the sources of multifractality are also traced. Thus, this paper contributes to the literature by shedding light on the unique driving forces of the Yen exchange rate fluctuations in the international foreign exchange market.

Macroeconomic sources of foreign exchange risk in new EU members

Czech Academy of Sciences Publication Activity Database

Kočenda, Evžen; Poghosyan, T.

2009-01-01

Roč. 33, č. 11 (2009), s. 2164-2173 ISSN 0378-4266 R&D Projects: GA ČR(CZ) GA402/08/1376; GA MŠk LC542 Institutional research plan: CEZ:MSM0021620846 Keywords : foreign exchange risk * time-varying risk premium * Stochastic discount factor * new EU member countries Subject RIV: AH - Economics Impact factor: 1.908, year: 2009

Turbulent cascades in foreign exchange markets

Science.gov (United States)

Ghashghaie, S.; Breymann, W.; Peinke, J.; Talkner, P.; Dodge, Y.

1996-06-01

THE availability of high-frequency data for financial markets has made it possible to study market dynamics on timescales of less than a day1. For foreign exchange (FX) rates Müller et al.2 have shown that there is a net flow of information from long to short timescales: the behaviour of long-term traders (who watch the markets only from time to time) influences the behaviour of short-term traders (who watch the markets continuously). Motivated by this hierarchical feature, we have studied FX market dynamics in more detail, and report here an analogy between these dynamics and hydrodynamic turbulence3-8. Specifically, the relationship between the probability density of FX price changes (δx) and the time delay (δt) (Fig. la) is much the same as the relationship between the probability density of the velocity differences (δv) of two points in a turbulent flow and their spatial separation δr (Fig. 1b). Guided by this similarity we claim that there is an information cascade in FX market dynamics that corresponds to the energy cascade in hydrodynamic turbulence. On the basis of this analogy we can now rationalize the statistics of FX price differences at different time delays, which is important for, for example, option pricing. The analogy also provides a conceptual framework for understanding the short-term dynamics of speculative markets.

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...

Foreign Exchange Speculation: An Event Study

Directory of Open Access Journals (Sweden)

Rob Hayward

2018-02-01

Full Text Available Does speculation facilitate price discovery or instability? If it is price discovery, it is beneficial and should be encouraged; if it is instability, welfare is enhanced by its reduction. This paper seeks to distinguish between these two characteristics by analysing those times when speculation in the foreign exchange market is most extreme. A series of event studies are conducted on the extremes of speculative sentiment and speculative activity. If speculation is noise, extreme sentiment and extreme positions should lead to overshooting and increase risk of subsequent reversals. The finding that speculative extremes do not provide information about subsequent returns implies that speculation is part of the process of price discovery and that efforts to reduce it would reduce the informational efficiency of financial markets.

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...

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...

Segmentation across International Equity, Bond, and Foreign Exchange Markets

OpenAIRE

Cathy Ning; Stephen Sapp

2009-01-01

In this paper, we examine the integration of international financial markets. The integration of financial markets across countries and across asset classes is assumed to hold in most empirical studies, but has only been tested for certain countries and certain asset classes. We test for the integration of international equity, bond and foreign exchange markets. Our results indicate that the three classes of assets are segmented. Investigating potential explanations for this segmentation, we ...

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

International Nuclear Information System (INIS)

Cao, Guangxi; Zhang, Qi; Li, Qingchen

2017-01-01

Highlights: • Mutual information is used as the edge weights of nodes instead of PCC, which overcomes the shortcomings of linear correlation functions. • SGD turns into a new cluster center and gradually becomes a point connecting the Asian and European clusters during and after the US sub-prime crisis. • Liang's entropy theory, which has not been adopted before in the global foreign exchange market, is considered. - Abstract: The foreign exchange (FX) market is a typical complex dynamic system under the background of exchange rate marketization reform and is an important part of the financial market. This study aims to generate an international FX network based on complex network theory. This study employs the mutual information method to judge the nonlinear characteristics of 54 major currencies in international FX markets. Through this method, we find that the FX network possesses a small average path length and a large clustering coefficient under different thresholds and that it exhibits small-world characteristics as a whole. Results show that the relationship between FX rates is close. Volatility can quickly transfer in the whole market, and the FX volatility of influential individual states transfers at a fast pace and a large scale. The period from July 21, 2005 to March 31, 2015 is subdivided into three sub-periods (i.e., before, during, and after the US sub-prime crisis) to analyze the topology evolution of FX markets using the maximum spanning tree approach. Results show that the USD gradually lost its core position, EUR remained a stable center, and the center of the Asian cluster became unstable. Liang's entropy theory is used to analyze the causal relationship between the four large clusters of the world.

Volatility spillover between crude oil and exchange rate: A copula-CARR approach

Science.gov (United States)

Pu, Y. J.; Guo, M. Y.

2017-11-01

Oil provides a powerful impetus for modern society's production and life. The influences of oil price fluctuations on socio-economic development are obvious, and it draws more attention from scholars. However, the distribution of oil is highly centralized, which leads to the vast majority of oil trading through foreign trade. As a result, exchange rate plays an important role in the oil business. Study on the relationship between exchange rate and crude oil gradually becomes a hot research topic in recent years. In this paper, we use copula and CARR model to study correlation structure and relationship between crude oil price and exchange rate. We establish CARR models as marginal models and use five copulas which are Gaussian Copula, Student-t Copula, Gumbel Copula, Clayton Copula and Frank Copula to study the correlation structure between NYMEX crude oil price range and U. S. Dollar Index range. Furthermore, we use Copula-CARR model with structural breaks to detect the change points in the correlation structure between NYMEX crude oil price range and U. S. Dollar Index range. Empirical results show that the change points are closely related to the actual economic events.

Testing for Nonlinear Granger Causality in the Price-Volume Relations of Taiwan's Stock and Foreign Exchange Markets

OpenAIRE

Shyh-Wei Chen; Chun-Wei Chen

2006-01-01

This paper investigates the price-volume relationships of Taiwan's stock and foreign exchange markets. We first adopt the traditional linear Granger causality test to achieve this goal. In addition, the nonlinearity feature is also taken into account. We employ the nonlinear Granger causality test, championed by Hiemstra and Jones (1994), to detect the nonlinear relationships among stock and foreign exchange markets. The empirical results show that there do exist nonlinear price-volume relati...

Expansion of the public sector, the current account and the exchange rate

OpenAIRE

Ohr, Renate

1985-01-01

Attributing the foreign trade effects of an expansion in the state budget to a single cause cannot do justice to the multitude of macro-economic interrelationships. Both theory and observation can reveal quite differing links between the public sector financial balance, the balance of payments and the exchange rate. The financing and nature of additional budgetary expenditure and the pattern of private investors’ expectations therefore have to be taken into consideration to obtain a clear pic...

Modeling exchange rate volatility in CEEC countries: Impact of global financial and European sovereign debt crisis

Directory of Open Access Journals (Sweden)

Miletić Siniša

2015-01-01

Full Text Available The aim of this study is to envisage the impact of global financial (GFC and European sovereign debt crisis (ESDC on foreign exchange markets of emerg- ing countries in Central and Eastern Europe CEEC countries (Czech Republic, Hungary, Romania, poland and Serbia. The daily returns of exchange rates on Czech Republic koruna (CZK, Hungarian forint (HuF, Romanian lea (RoL, polish zloty (pLZ and Serbian dinar (RSD, all against the Euro are analyzed during the period from 3rd January 2000 to15th April 2013, in respect. To examine the impact of global financial crisis and European sovereign debt crisis, dummy variables were adopted. overall results imply that global financial crisis has no impact on exchange rate returns in selected CEEC countries, while European sovereign debt crisis inf luencing in depreciation of polish zloty by 8% and Roma- nian lea by 6%. obtained results by our calculation, imply that global financial crisis increased enhanced volatility on exchange rate returns of Czech koruna, Romanian lea and polish zloty. Moreover, results of empirical analysis imply that this impact has the strongest inf luence in volatility on exchange rate returns of polish zloty.

A Dealer Model of Foreign Exchange Market with Finite Assets

Science.gov (United States)

Hamano, Tomoya; Kanazawa, Kiyoshi; Takayasu, Hideki; Takayasu, Misako

An agent-based model is introduced to study the finite-asset effect in foreign exchange markets. We find that the transacted price asymptotically approaches an equilibrium price, which is determined by the monetary balance between the pair of currencies. We phenomenologically derive a formula to estimate the equilibrium price, and we model its relaxation dynamics around the equilibrium price on the basis of a Langevin-like equation.

The Application of Exchange Network Theory to the Analysis of Foreign Direct Investment in the People’s Republic of China

Science.gov (United States)

1988-12-01

engaged in import substitution may also sell to the domestic market in exchange for foreign currency. 5) Countertrade . Foreign enterprises may purchasi...becomes less viable. Similarly, the undesireability of the RMB makes countertrade , currency trading, and reinvestment questionable options. In... countertrade , there is little incentive for Chinese enterprises to sell there export worthy products for RMB when they could be earning foreign exchange by

The Impact of Foreign Policy on Educational Exchange: The Swedish State Scholarship Programme 1938-1990

Science.gov (United States)

Åkerlund, Andreas

2014-01-01

Programmes of international educational exchange are not only carried out for educational purposes, but form an important part of modern-day public diplomacy. Through exchange programmes education and research are linked with foreign policy interests, which then in turn should affect the international contacts of universities and research…

Correlation structures in short-term variabilities of stock indices and exchange rates

Science.gov (United States)

Nakamura, Tomomichi; Small, Michael

2007-09-01

Financial data usually show irregular fluctuations and some trends. We investigate whether there are correlation structures in short-term variabilities (irregular fluctuations) among financial data from the viewpoint of deterministic dynamical systems. Our method is based on the small-shuffle surrogate method. The data we use are daily closing price of Standard & Poor's 500 and the volume, and daily foreign exchange rates, Euro/US Dollar (USD), British Pound/USD and Japanese Yen/USD. We found that these data are not independent.

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.

The Exchange Rate Adjustment Role in Imperfect Competition: the Case of the Czech Republic

OpenAIRE

Filip Novotný

2008-01-01

One of the approaches to an international trade analysis is the assumption of prevailing imperfect competition where monopolistic firms determine prices of their production on segmented foreign markets. Based on aggregate data of quarterly financial indicators of non-financial enterprises, the hypothesis was tested whether producers based in the Czech Republic absorb nominal exchange rate fluctuations in their profit margins. Estimated results indicate that domestic private firms absorb a sub...

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.

42 CFR 413.74 - Payment to a foreign hospital.

Science.gov (United States)

2010-10-01

... chapter. (d) Exchange rate. Payment to the hospital will be subject to the official exchange rate on the... 42 Public Health 2 2010-10-01 2010-10-01 false Payment to a foreign hospital. 413.74 Section 413...; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES Payments to Providers § 413...

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...

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.

The Transmission of Foreign Shocks to South Eastern European Economies

DEFF Research Database (Denmark)

Petrevski, Goran; Bogoev, Jane; Tevdovski, Dragan

2014-01-01

This paper investigates the transmission of foreign shocks to economic activity and macroeconomic policies in the South Eastern European (SEE) economies with fixed exchange rate regimes: Croatia, Macedonia and Bulgaria. Specifically, we provide empirical evidence on the influence of the EMU policy...... with rigid exchange rate regimes, with different degree of integration within the EU. As for the methodological issues, we employ recursive Vector Auto regressions to identify the exogenous shocks in the euro-area. Generally, the estimated results imply that euro-zone economic activity has significant...... reference rate are relatively quickly transmitted to domestic money market rates. We can explain these effects by several factors, such as: the fixed exchange rates, the relatively high integration of SEE financial markets to EMU financial markets as well as the dependence of banks on foreign financing...

Dutch courage? Effects of acute alcohol consumption on self-ratings and observer ratings of foreign language skills.

Science.gov (United States)

Renner, Fritz; Kersbergen, Inge; Field, Matt; Werthmann, Jessica

2018-01-01

A popular belief is that alcohol improves the ability to speak in a foreign language. The effect of acute alcohol consumption on perceived foreign language performance and actual foreign language performance in foreign language learners has not been investigated. The aim of the current study was to test the effects of acute alcohol consumption on self-rated and observer-rated verbal foreign language performance in participants who have recently learned this language. Fifty native German speakers who had recently learned Dutch were randomized to receive either a low dose of alcohol or a control beverage that contained no alcohol. Following the experimental manipulation, participants took part in a standardized discussion in Dutch with a blinded experimenter. The discussion was audio-recorded and foreign language skills were subsequently rated by two native Dutch speakers who were blind to the experimental condition (observer-rating). Participants also rated their own individual Dutch language skills during the discussion (self-rating). Participants who consumed alcohol had significantly better observer-ratings for their Dutch language, specifically better pronunciation, compared with those who did not consume alcohol. However, alcohol had no effect on self-ratings of Dutch language skills. Acute alcohol consumption may have beneficial effects on the pronunciation of a foreign language in people who have recently learned that language.

Estimation of time-dependent Hurst exponents with variational smoothing and application to forecasting foreign exchange rates

Science.gov (United States)

Garcin, Matthieu

2017-10-01

Hurst exponents depict the long memory of a time series. For human-dependent phenomena, as in finance, this feature may vary in the time. It justifies modelling dynamics by multifractional Brownian motions, which are consistent with time-dependent Hurst exponents. We improve the existing literature on estimating time-dependent Hurst exponents by proposing a smooth estimate obtained by variational calculus. This method is very general and not restricted to the sole Hurst framework. It is globally more accurate and easier than other existing non-parametric estimation techniques. Besides, in the field of Hurst exponents, it makes it possible to make forecasts based on the estimated multifractional Brownian motion. The application to high-frequency foreign exchange markets (GBP, CHF, SEK, USD, CAD, AUD, JPY, CNY and SGD, all against EUR) shows significantly good forecasts. When the Hurst exponent is higher than 0.5, what depicts a long-memory feature, the accuracy is higher.

Technical analysis in the foreign exchange market: a layman's guide

OpenAIRE

Christopher J. Neely

1997-01-01

Economists have traditionally been skeptical of the value of technical analysis, the use of past price behavior to guide trading decisions in asset markets. Instead, they have relied on the logic of the efficient markets hypothesis. Christopher J. Neely briefly explains the fundamentals of technical analysis and the efficient markets hypothesis as applied to the foreign exchange market, evaluates the profitability of simple trading rules, and reviews recent ideas that might justify extrapolat...

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...

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...

26 CFR 1.1249-1 - Gain from certain sales or exchanges of patents, etc., to foreign corporations.

Science.gov (United States)

2010-04-01

... 26 Internal Revenue 11 2010-04-01 2010-04-01 true Gain from certain sales or exchanges of patents... Capital Gains and Losses § 1.1249-1 Gain from certain sales or exchanges of patents, etc., to foreign corporations. (a) General rule. Section 1249 provides that if gain is recognized from the sale or exchange...

Models for financial crisis detection in Indonesia based on M1, M2 per foreign exchange reverse, and M2 multiplier indicators

Science.gov (United States)

Sugiyanto; Zukhronah, Etik; Pratiwi, Esteti Sophia

2017-12-01

Indonesia has been hit by financial crisis in the middle of 1997. The financial crisis that has occurred gives a severe impact to the economy of Indonesia resulting the needs for a detection system of financial crisis. Crisis can be detected based on several indicators such as M1, M2 per foreign exchange reserves, and M2 multiplier. These three indicators can affect the exchange rate stability and may further affect the financial stability so that it can be one of the causes of the financial crisis. This research aims to determine the appropriate model that can detect the financial crisis in Indonesia. Markov switching is an alternative model that can be approach and used often for detecting financial crisis. We can determine the combination of volatility and Markov switching model with AR and volatility model are determined first. The results of this research are that M1 can be modelled by SWARCH (3, 1) while M2 per foreign research exchange reserves and M2 multiplier can be modelled by SWARCH(3,2).

Keterlibatan Bank Syariah Dalam Aplikasi Perdagangan Foreign Exchange (FOREX

Directory of Open Access Journals (Sweden)

Abdul Wahab

2017-09-01

Full Text Available Bank pada hakikatnya adalah lembaga intermediasi antara penabung dan investor, tak terkecuali Bank Syariah. Namun Bank Syariah harus patuh dan tunduk kepada ketentuan-ketentuan syariah yang berlandaskan Al Qur’an dan As Sunnah. Bank Syariah diharapkan terus melakukan inovasi-inovasi dalam produknya, terutama dalam bidang jasa-jasa, seperti perdagangan valuta asing, karena jasa foreign exchange ini belum banyak mendapatkan perhatian dari elemen Bank Shariah dalam penciptaan inovasi produk. Diharapkan dengan inovasi produk valuta asing dapat memberikan kontribusi yang signifikan bagi kinerja Bank Shariah di Indonesia.

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 ...

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...

Study on Return and Volatility Spillover Effects among Stock, CDS, and Foreign Exchange Markets in Korea

Directory of Open Access Journals (Sweden)

Taly I

2015-09-01

Full Text Available The key objective of this study is to investigate the return and volatility spillover effects among stock market, credit default swap (CDS market and foreign exchange market for three countries: Korea, the US and Japan. Using the trivariate VAR BEKK GARCH (1,1 model, the study finds that there are significant return and volatility spillover effects between the Korean CDS market and the Korean stock market. In addition, the return spillover effects from foreign exchange markets and the US stock market to the Korean stock market, and the volatility spillover effect from the Japanese stock market to the Korean stock market are both significant.

TRANSAKSI PASAR MATA UANG (FOREIGN EXCHANGE DALAM PERSPEKTIF FIQH ISLAM

Directory of Open Access Journals (Sweden)

Bakhrul Huda

2015-09-01

Full Text Available The article discusses the mechanism of foreign exchange through what so-called Forex teamster. The study concludes that trading, viewed from the aspect of goods exchanged, consists of three kinds, namely barter, buying and selling of goods with money, and money exchange. It is allowed to use broker’s service in money exchange activity. It has been even a compulsory (wâjib ‘ayn for a trader to select and chose a legal and trusteed broker in order to assure and secure his money. The reason is that a broker becomes not only wakîl (a trustee or an agent of trader to proceed the transaction of the trader into the market, but also plays role as a responsible person who guarantees the trustiness of market over the trader. In other words, a broker has to make the market trusts every trader’s transaction. The transaction has to cover all benefits and risks. It can be understood, therefore, that non-dealing desk broker is a person who meets the requirements of wakâlah and d}amân contacts implemented within Forex transaction.

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

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...

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...

Economic fluctuations in a small economy with two productive sectors under a floating exchange rate regime

Directory of Open Access Journals (Sweden)

José Ustorgio Mora Mora

2013-06-01

Full Text Available This paper presents a theoretical model of aggregate supply and demand in a small economy with two productive sectors, under a flexible exchange regime and imperfect capital mobility. Only one of the production sectors is assumed to produce an exportable commodity sold at world market prices, while the production of the other sector is assumed to supply the domestic market. This model helps to explain how the impact of both domestic (economic policy, productivity, etc. and foreign (changes in exchange terms shocks is spread. In every case studied, results show that real output increases consistently with those cases postulated by economic theory. Conversely, the effects on the price level, the exchange rate and the real interest rate are ambiguous. In terms of domestic shocks, fiscal or monetary policy may be seen as a way to stabilize or stimulate the economy but the costs involved raise the price level.

An empirical study of the substitution of foreign for domestic savings in Brazil

Directory of Open Access Journals (Sweden)

Luiz Carlos Bresser-Pereira

2014-01-01

Full Text Available This study aims to investigate the relations between the level of the real exchange rate, foreign savings and domestic savings in Brazil. The appreciation of the domestic currency caused by financing the current account deficit reduces the expected profit rate in the tradable goods industry, leading to a drop in domestic savings and the substitution of foreign for domestic savings. An econometric analysis of the Brazilian economy indicates a stable long-term relation between the exchange rate and domestic savings, and that relative devaluations of the real exchange rate positively and significantly affect domestic savings in 1994–2013. The estimations’ results persist even after the period is divided into two samples, after tests showing the presence of a structural break in the model in 2002. In addition, the results of the estimations performed on the two samples confirm the presence of substitution of foreign for domestic savings.

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.

Exchange rate risk in Central European countries

Czech Academy of Sciences Publication Activity Database

Kočenda, Evžen; Poghosyan, T.

2010-01-01

Roč. 60, č. 1 (2010), s. 22-39 ISSN 0015-1920 R&D Projects: GA ČR(CZ) GA402/08/1376; GA MŠk LC542 Institutional research plan: CEZ:MSM0021620846 Keywords : foreign exchange risk * time-varying risk premium * stochastic discount factor Subject RIV: AH - Economics Impact factor: 0.278, year: 2010 http://journal.fsv.cuni.cz/storage/1178_str_22_39_-_ko%C4%8Denda.pdf

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.

Exchange Rate as a Determinant of Foreign Direct Investment: Does it Really Matter? Theoretical Aspects, Literature Review and Applied Proposal

Directory of Open Access Journals (Sweden)

Isabel Cristina Ruiz

2005-10-01

Full Text Available This paper re-examines the role of exchange rates as determinant of FDI. It extends the analysis to include the issue of how exchange rates determine the decision of invest in one country depending on whether the firm is deciding to invest on the country to service the local market or to invest on the country in order to re-export. This paper offers a broad literature review of the state of the empirical research in order to draw conclusions of the real importance of the exchange rate as a determinant of FDI. Details of FDI current behavior in Latin American are described and I propose a model of FDI to be applied for these countries. Data sources are given.

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...

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...

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...

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...

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.

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.

Stock returns and foreign investment in Brazil

OpenAIRE

Reis, Luciana; Meurer, Roberto; Da Silva, Sergio

2008-01-01

We examine the relationship between stock returns and foreign investment in Brazil, and find that the inflows of foreign investment boosted the returns from 1995 to 2005. There was a strong contemporaneous correlation, although not Granger-causality. Foreign investment along with the exchange rate, the influence of the world stock markets, and country risk can explain 73 percent of the changes that occurred in the stock returns over the period. We also find that positive feedback trading play...

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.

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...

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

Capital Controls and the Real Exchange Rate

NARCIS (Netherlands)

van Wijnbergen, S.J.G.

1990-01-01

Capital import taxes lower (raise) world (home) interest rates. This shifts home expenditure from the present to the future and foreign expenditure from the future to today. With identical home and foreign expenditure patterns, the change in the composition of world expenditure has no effects on

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.

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.

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.

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.

Problems related to the foreign exchange earnings of Surinam's shrimp industry

Directory of Open Access Journals (Sweden)

Pottier, D.

1989-01-01

Full Text Available The shrimp grounds of Surinam are actually fully exploited by some 136 trawlers of the Florida type, ranging from 100 to 130 GRT. Through export and import levies and fishing licence fees the country was able to obtain a small piece of the foreign currency cake. The Republic of Surinam has been looking for means to increase the benefits from its shrimp business. The alleged huge profits made by foreign vessels inspired the country to invest in a national shrimp fleet and man it with national crew (SUGAM. For reasons explained in the text Sugam has difficultes to operate with a gain. This paper will review Sugam's attempt to earn hard currency. An analysis is made of the foreign exchange earnings of Sugam and is compared with the results of a Korean company. The main conclusions are as follows : shrimp exploitation in a fully exploited Exclusive Economic Zone can only be brought to success by fishermen of proven ability. Each vessel should make trips lasting from 45 to 60 days and be some 280 days at sea per year. Surinam should also reconsider its present policy of shrimp purchasing.

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...

Strong Dollar, Weak Dollar: Foreign Exchange Rates and the U.S. Economy.

Science.gov (United States)

Schilling, Tim

Many generalizations sound simple enough--for example, "strong is good, weak is bad"--but they can be confusing when talking about money. This booklet explores how the U.S. dollar and foreign currencies affect each other and how their interaction affects the individual and the economy. The booklet contains the following sections:…

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.

Effects of Financial Crises on the Long Memory Volatility Dependency of Foreign Exchange Rates: the Asian Crisis vs. the Global Crisis

Directory of Open Access Journals (Sweden)

Young Wook Han

2014-03-01

Full Text Available This paper examines the effects of financial crises on the long memory volatility dependency of daily exchange returns focusing on the Asian crisis in 97-98 and the Global crisis in 08-09. By using the daily KRW-USD and JPY-USD exchange rates which have different trading regions and volumes, this paper first applies both the parametric FIGARCH model and the semi-parametric Local Whittle method to estimate the long memory volatility dependency of the daily returns and the temporally aggregated returns of the two exchange rates. Then it compares the effects of the two financial crises on the long memory volatility dependency of the daily returns. The estimation results reflect that the long memory volatility dependency of the KRW-USD is generally greater than that of the JPY-USD returns and the long memory dependency of the two returns appears to be invariant to temporal aggregation. And, the two financial crises appear to affect the volatility dynamics of all the returns by inducing greater long memory dependency in the volatility process of the exchange returns, but the degree of the effects of the two crises seems to be different on the exchange rates.

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.

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.

Model Uncertainty and Exchange Rate Forecasting

NARCIS (Netherlands)

Kouwenberg, R.; Markiewicz, A.; Verhoeks, R.; Zwinkels, R.C.J.

2017-01-01

Exchange rate models with uncertain and incomplete information predict that investors focus on a small set of fundamentals that changes frequently over time. We design a model selection rule that captures the current set of fundamentals that best predicts the exchange rate. Out-of-sample tests show

Model Uncertainty and Exchange Rate Forecasting

NARCIS (Netherlands)

R.R.P. Kouwenberg (Roy); A. Markiewicz (Agnieszka); R. Verhoeks (Ralph); R.C.J. Zwinkels (Remco)

2013-01-01

textabstractWe propose a theoretical framework of exchange rate behavior where investors focus on a subset of economic fundamentals. We find that any adjustment in the set of predictors used by investors leads to changes in the relation between the exchange rate and fundamentals. We test the

14 CFR 65.43 - Rating privileges and exchange.

Science.gov (United States)

2010-01-01

... 14 Aeronautics and Space 2 2010-01-01 2010-01-01 false Rating privileges and exchange. 65.43... § 65.43 Rating privileges and exchange. (a) The holder of a senior rating on August 31, 1970, may at any time after that date exchange his rating for a facility rating at the same air traffic control...

The feasibility of a fixed exchange rate regime for new EU-members: evidence from real exchange rates

NARCIS (Netherlands)

Candelon, B.; Kool, C.J.M.; Raabe, K.; van Veen, T.

2005-01-01

In this paper, we estimate fundamental bilateral real exchange rates for a group of eight accession countries using a panel-cointegration approach for the period 1993-2003. We document a significant positive link between productivity levels and the corresponding real exchange rate levels. Future

The feasibility of a fixed exchange rate regime for new EU-members : Evidence from real exchange rates

NARCIS (Netherlands)

Candelon, B.; Kool, C.J.M.; Raabe, K.; Veen, van A.P. (Tom)

2005-01-01

In this paper, we estimate fundamental bilateral real exchange rates for a group of eight accession countries using a panel-cointegration approach for the period 1993-2003. We document a significant positive link between productivity levels and the corresponding real exchange rate levels. Future

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.

A re-examination of the exchange rate overshooting hypothesis ...

African Journals Online (AJOL)

Southern African Business Review ... This finding is inconsistent with the monetary model of exchange rate determination, which asserts that there is a long-run relationship between the exchange rate ... Key words: Exchange rates, monetary model, autoregressive distributed lag, cointegration, exchange rate overshooting ...

Modeling Philippine Stock Exchange Composite Index Using Time Series Analysis

Science.gov (United States)

Gayo, W. S.; Urrutia, J. D.; Temple, J. M. F.; Sandoval, J. R. D.; Sanglay, J. E. A.

2015-06-01

This study was conducted to develop a time series model of the Philippine Stock Exchange Composite Index and its volatility using the finite mixture of ARIMA model with conditional variance equations such as ARCH, GARCH, EG ARCH, TARCH and PARCH models. Also, the study aimed to find out the reason behind the behaviorof PSEi, that is, which of the economic variables - Consumer Price Index, crude oil price, foreign exchange rate, gold price, interest rate, money supply, price-earnings ratio, Producers’ Price Index and terms of trade - can be used in projecting future values of PSEi and this was examined using Granger Causality Test. The findings showed that the best time series model for Philippine Stock Exchange Composite index is ARIMA(1,1,5) - ARCH(1). Also, Consumer Price Index, crude oil price and foreign exchange rate are factors concluded to Granger cause Philippine Stock Exchange Composite Index.

Exchange Rate Regime in Russia, Evaluation and Recommendations

OpenAIRE

Olga, Vasilevskaya

2009-01-01

This paper studies exchange rate choice in Russia with respect to social, economic and political determinants. The study deliberately narrowed the scope of the discussion to two extreme cases, i.e. fixed and floating exchange rate. Today Russia applies managed floating exchange rate arrangement and it is important to determine the direction of the further monetary policy development either towards fixed or floating exchange rate. The paper argues that the logical extension of the historical t...

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.

Modeling inflation rates and exchange rates in Ghana: application of multivariate GARCH models.

Science.gov (United States)

Nortey, Ezekiel Nn; Ngoh, Delali D; Doku-Amponsah, Kwabena; Ofori-Boateng, Kenneth

2015-01-01

This paper was aimed at investigating the volatility and conditional relationship among inflation rates, exchange rates and interest rates as well as to construct a model using multivariate GARCH DCC and BEKK models using Ghana data from January 1990 to December 2013. The study revealed that the cumulative depreciation of the cedi to the US dollar from 1990 to 2013 is 7,010.2% and the yearly weighted depreciation of the cedi to the US dollar for the period is 20.4%. There was evidence that, the fact that inflation rate was stable, does not mean that exchange rates and interest rates are expected to be stable. Rather, when the cedi performs well on the forex, inflation rates and interest rates react positively and become stable in the long run. The BEKK model is robust to modelling and forecasting volatility of inflation rates, exchange rates and interest rates. The DCC model is robust to model the conditional and unconditional correlation among inflation rates, exchange rates and interest rates. The BEKK model, which forecasted high exchange rate volatility for the year 2014, is very robust for modelling the exchange rates in Ghana. The mean equation of the DCC model is also robust to forecast inflation rates in Ghana.

Essays on exchange rate policy in developing countries

OpenAIRE

Khamfula, Y.A.

1999-01-01

The breakdown of the Bretton Woods system of pegged exchange rates has since 1971 given developing countries a wider range of choice with regard to their exchange rate regimes than had previously existed. With the emergence of a variety of exchange rate regimes, increasing attention has been given to the rationale for choosing one type of regime over another and how the variations in the nominal or real exchange rate affect the economies of these countries. This Ph.D. thesis is a combination ...

Returns Effect, Shocks and Volatility Transmission between Foreign Exchange-Stock Markets in Nigeria

Directory of Open Access Journals (Sweden)

Agya Atabani Adi

2017-03-01

Full Text Available The paper examined effect of passed return on current return, shocks spillover and volatility transmission between FX-Stock markets. Using result obtained from VAR-GARCH models, we also calculate the optimal weight and risk minimizing hedging ratio for FX-Stock markets and employed the newly developed bivariate GARCH framework Findings reveal evidence of short term predictability in both markets through time. One period lagged returns significantly impact current return in both markets, and impact was greater in FX market both VAR-GARCH and VAR-AGARCH models. There were evidence of bi-directional volatility transmission in both markets and uni-directional shocks spillover from stock to FX market in both models. VAR-AGARCH model showed evidence of leverage effect; bad news has more impact on volatility than positive news of the same magnitude. We showed that optimal polio of FX-Stock market should holds more foreign exchange to stocks in their asset polio. Our result showed evidence of effective hedging in FX-Stock markets in Nigerian. Hence, the inclusion of stocks in diversified polio of foreign exchange could improve it risks adjusted performance of hedging ratio.

Impacts of Korea's Exchange Rate Uncertainty on Exports

Directory of Open Access Journals (Sweden)

Kwon Sik Kim

2003-12-01

Full Text Available This paper examines the effects of two types of uncertainty related to the real effective exchange rate (REER in Korea for export trends. To decompose uncertainties into two types of component, I propose an advanced generalized Markov switching model, as developed by Hamilton (1989 and then expanded by Kim and Kim (1996. The proposed model is useful in uncovering two sources of uncertainty: the permanent component of REER and the purely transitory component. I think that the two types of uncertainties have a different effect on export trends in Korea. The transitory component of REER has no effect on the export trend at 5-percent significance, but the permanent component has an effect at this level. In addition, the degree of uncertainty, consisting of low, medium and high uncertainty in the permanent component, and low, medium and high uncertainty in transitory component of REER, also has different effects on export trends in Korea. Only high uncertainty in permanent components effects export trends. The results show that when the policy authority intends to prevent the shrinkage of exports due to the deepening of uncertainties in the foreign exchange market, the economic impacts of its intervention could appear differently according to the characteristics and degree of the uncertainties. Therefore, they imply that its economic measures, which could not grasp the sources of uncertainties properly, may even bring economic costs.

Fiscal Policy and Welfare under Different Exchange Rate Regimes

DEFF Research Database (Denmark)

Østrup, Finn

a representativeindividual's utility, it is demonstrated that there are differences betweenexchange rate regimes with respect to the level of government spending. Thesedifferences arise first because a rise in government spending affects macroeconomicvariables differently under different exchange rate regimes......, and secondbecause the government's inclination to expand government spending is affectedby inflation which depends on the exchange rate regime. At low rates of inflation,the government is inclined to set a higher level of government spending under afixed exchange rate regime than under a floating exchange rate...... regime in whichthe monetary authority optimises preferences which include an employment targetand an inflation target. As government spending affects the representativeindividual's utility, the choice of exchange rate regime has an impact on welfare.Keywords: exchange rate regimes; fiscal policy...

China; Sources of Real Exchange Rate Fluctuations

OpenAIRE

Tao Wang

2004-01-01

This paper reviews the evolution of China's real effective exchange rate between 1980 and 2002, and uses a structural vector autoregression model to study the relative importance of different types of macroeconomic shocks for fluctuations in the real exchange rate. The structural decomposition shows that relative real demand and supply shocks account for most of the variations in real exchange rate changes during the estimation period. The paper also finds that supply shocks are as important ...

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

Essays on exchange rate policy in developing countries

NARCIS (Netherlands)

Khamfula, Y.A.

1999-01-01

The breakdown of the Bretton Woods system of pegged exchange rates has since 1971 given developing countries a wider range of choice with regard to their exchange rate regimes than had previously existed. With the emergence of a variety of exchange rate regimes, increasing attention has been given

OUTWARD BRAZILIAN FOREIGN DIRECT INVESTMENT: IMPULSES AND RESPONSES

Directory of Open Access Journals (Sweden)

Ronald de Oliveira Concer

2010-12-01

Full Text Available This paper models the outward foreign direct investment from Brazil series using time a series econometrics model, namely the Vector Auto Regressive (VAR model. We have drawn impulse response functions for the key relevant factors that may explain the outward foreign direct investment flows. We start with a review of the literature on the Dunning location approach to international business. We worked with a data set of quarterly observations from Q1-1995 to Q1-2010. We carried also out Granger causality tests as for determining whether international business travelling should be included as an explanatory variable in our model. Results stressed that although the strong exchange rate in Brazil is often blamed for forcing companies to invest abroad, the evidence found in the aggregate data suggests that there is not a significant relationship between the level of foreign exchange rate and the outward Brazilian foreign direct investment. Differently from previous studies, this paper uses impulse response functions to present dynamic results, thus avoiding the typical binary results “affect” or “don’t affect”, and in so doing we provide a more detailed insight into this important location factor.

OUTWARD BRAZILIAN FOREIGN DIRECT INVESTMENT: IMPULSES AND RESPONSES

Directory of Open Access Journals (Sweden)

Ronald de Oliveira Concer

2010-01-01

Full Text Available This paper models the outward foreign direct investment from Brazil series using time a series econometrics model, namely the Vector Auto Regressive (VAR model. We have drawn impulse response functions for the key relevant factors that may explain the outward foreign direct investment flows. We start with a review of the literature on the Dunning location approach to international business. We worked with a data set of quarterly observations from Q1-1995 to Q1-2010. We carried also out Granger causality tests as for determining whether international business travelling should be included as an explanatory variable in our model. Results stressed that although the strong exchange rate in Brazil is often blamed for forcing companies to invest abroad, the evidence found in the aggregate data suggests that there is not a significant relationship between the level of foreign exchange rate and the outward Brazilian foreign direct investment. Differently from previous studies, this paper uses impulse response functions to present dynamic results, thus avoiding the typical binary results “affect” or “don’t affect”, and in so doing we provide a more detailed insight into this important location factor.

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...

Increasing Stability in the Mix of Exchange-rate Policies.

OpenAIRE

Mushin, Jerry

2008-01-01

This paper is an examination of the experience of exchange-rate policy systems since 1996 and a comparison with the experience of 1978 to 1995. Exchange-rate policy has become more stable than it was in the earlier period. In addition, it has become polarized, with almost all countries choosing either a fixed exchange-rate regime (especially in low-GDP countries) or a floating exchange-rate regime (especially in high-GDP countries). Limited-flexibility exchange-rate systems have become unimpo...

Stay Rates of Foreign Doctorate Recipients from U.S. Universities, 2013

Energy Technology Data Exchange (ETDEWEB)

Finn, Michael G. [Oak Ridge Inst. for Science and Education (ORISE), Oak Ridge, TN (United States); Pennington, Leigh Ann [Oak Ridge Inst. for Science and Education (ORISE), Oak Ridge, TN (United States)

2018-01-01

This study estimates the stay rate of foreign nationals who receive doctorates in science and engineering from U.S. universities. Stay rates are estimated using tax records in a way that does not violate individual confidentiality. The 2013 stay rate for all foreign doctorate recipients, including those on permanent visas at graduation, was 70 percent for those graduating 5 years earlier, and 62 percent for those graduating 10 years earlier.

Real Exchange Rates in Advanced Transition Economies

Directory of Open Access Journals (Sweden)

Sanja Grubacic

2015-10-01

Full Text Available The recent evidence from Eastern Europe suggests that one of the major obstacles towards the adoption of euro may lie in the impact that the recession of 2008 exerted on the trajectory of real exchange rates in new member countries (European Commission, 2015.  This paper aims to establish and explain the relationship between the external shocks derived from the global financial crisis and recession of 2008 and equilibrium real exchange rate in advanced transition economies of Eastern Europe. The interplay between the external and internal balances is explained by developing an inter-temporal optimizing model of the real exchange rate determination in a small open economy with structural distortions. The results of our model suggest that, in the aftermath of recession, if the Eastern European economies attempt to restore and maintain the balance between the consumption, saving, and investment, the equilibrium real exchange rate will tend to reverse its trajectory from appreciation to depreciation over time in order to encourage a greater production in the future. The equilibrium real exchange rate depreciation in the future may obtain either as a result of an increase in the direct subsidies on investment or as a result of reduced subsidies on the "net-of-investment" income.  The deprecation of countries’ real exchange rate, however, may continue to act as an effective constraint against the adoption of euro.

The influence of interest rates on the exchange rate and exchange rate volatility

OpenAIRE

Florin MAVRIS; Dumitru-Cristian OANEA

2014-01-01

The dynamic of interest rates has been the subject of attention by both traders and researchers. We see in what manner different factors that depend on the actions of central banks that influence them by using a GARCH type model and we compare its performance with other models to see what approach explains and predicts the movement of the exchange rate. To better understand the type of model that is applicable the data is tested for heteroskedasticity, and only after that the model is impleme...

Exchange rate policy under sovereign default risk

OpenAIRE

Schabert, Andreas

2011-01-01

We examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal insolvency. Under interest rate policy and floating exchange rates the equilibrium is indetermined. Under a fixed exchange rate the equilibrium is uniquely determined and independent of sovereign default.

The determinants of exchange rates and the movements of EUR/RON exchange rate via non-linear stochastic processes

Directory of Open Access Journals (Sweden)

Petrică Andreea-Cristina

2017-07-01

Full Text Available Modeling exchange rate volatility became an important topic for research debate starting with 1973, when many countries switched to floating exchange rate system. In this paper, we focus on the EUR/RON exchange rate both as an economic measure and present the implied economic links, and also as a financial investment and analyze its movements and fluctuations through two volatility stochastic processes: the Standard Generalized Autoregressive Conditionally Heteroscedastic Model (GARCH and the Exponential Generalized Autoregressive Conditionally Heteroscedastic Model (EGARCH. The objective of the conditional variance processes is to capture dependency in the return series of the EUR/RON exchange rate. On this account, analyzing exchange rates could be seen as the input for economic decisions regarding Romanian macroeconomics - the exchange rates being influenced by many factors such as: interest rates, inflation, trading relationships with other countries (imports and exports, or investments - portfolio optimization, risk management, asset pricing. Therefore, we talk about political stability and economic performance of a country that represents a link between the two types of inputs mentioned above and influences both the macroeconomics and the investments. Based on time-varying volatility, we examine implied volatility of daily returns of EUR/RON exchange rate using the standard GARCH model and the asymmetric EGARCH model, whose parameters are estimated through the maximum likelihood method and the error terms follow two distributions (Normal and Student’s t. The empirical results show EGARCH(2,1 with Asymmetric order 2 and Student’s t error terms distribution performs better than all the estimated standard GARCH models (GARCH(1,1, GARCH(1,2, GARCH(2,1 and GARCH(2,2. This conclusion is supported by the major advantage of the EGARCH model compared to the GARCH model which consists in allowing good and bad news having different impact on the

76 FR 56103 - Retail Foreign Exchange Transactions; Conforming Changes to Existing Regulations in Response to...

Science.gov (United States)

2011-09-12

... off-exchange foreign currency transactions with members of the retail public (i.e., retail forex... various provisions of the CEA as amended by the Dodd-Frank Act with respect to retail forex transactions... counterparty to a retail forex transaction under CEA Section 2(c)(2)(B) (``permitted counterparty''), which...

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.

Exchange-rate regimes and economic growth: An empirical evaluation

OpenAIRE

Simón Sosvilla-Rivero; María del Carmen Ramos-Herrera

2014-01-01

Based on a dataset of 123 economies, this paper empirically investigates the relation between exchange-rate regimes and economic growth. We find that growth performance is best under intermediate exchange rate regimes, while the smallest growth rates are associated with flexible exchange rates. Nevertheless, this conclusion is tempered when we analyze the countries by income level: even though countries that adopt intermediate exchange-rate regimes are characterized by higher economic growth,...

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...

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.

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.

International Evidence on the Role of Monetary Policy in the Uncovered Interest Rate Parity Puzzle

OpenAIRE

Alfred V Guender

2015-01-01

CPI inflation targeting necessitates a flexible exchange rate regime. This paper embeds an endogenous target rule into a simple open economy macro model to explain the UIP puzzle. The model predicts that the change in the exchange rate is inversely related to the lagged interest rate differential. Openness and aversion to inflation variability determine the strength of this linkage. Foreign inflation and the foreign interest rate also affect exchange rate changes. This hypothesis is tested on...

Determining the Exchange Rate: Purchasing Power Parity – PPP

Directory of Open Access Journals (Sweden)

Bangun WIDOYOKO

2018-05-01

Full Text Available This study aimed to examine the effect of inflation on the issue of exchange rate determination of the forward exchange rate on the exchange rate of RMB (Renminbi to Rupiah. Inflation has been chosen as an independent variable because of its close relation to PPP (purchasing power parity theory. Analyses in this research have used logistic analysis with time series data. The data that has been used include exchange rate data with the period 2007-2017 with a sample size of 132 data. The results of this study have shown that inflation is effective in determining the exchange rate.

Does Exchange Rate Volatility Affect Korea's Seaborne Import Volume?

Directory of Open Access Journals (Sweden)

Chang Beom Kim

2017-03-01

Full Text Available This study used monthly data from 2000 to 2015 to analyze the effects of USD/KRW exchange rate volatility on seaborne import volume in Korea. The results of an autoregressive distributed lag (ARDL analysis indicate that USD/KRW exchange rate volatility has a statistically significant negative influence on Korea's seaborne import volume. Moreover, the results of a vector error correction model (VECM analysis found that the USD/KRW exchange rate volatility exhibited short-term unidirectional causality on import volume and real income, and confirmed bidirectional causality between the real effective exchange rate and exchange rate volatility.

Unanticipated money and the demand for foreign assets : a rational expectations approach

NARCIS (Netherlands)

Kumah, F.Y.

1995-01-01

This paper is an attempt at empirically investigating one of the building blocks of the foreign exchange market - the demand for foreign financial assets - under two alternative monetary policy rules (the fixed rate of growth of money rule and the feedback monetary policy rule) using time series

Managing India's Foreign Exchange Reserve: A preliminary exploration of issues and options

OpenAIRE

Chaisse, Julien; Chakraborty, Debashis; Mukherjee, Jaydeep

2010-01-01

Since mid-nineties, India’s foreign exchange reserves (FER) – both nominal and real adjusted for price level – started growing considerably and reached a new peak of US$ 251985 million in 2008-09. The fact that such unprecedented accumulation of FER build-up has materialized despite India's balance of payment on its current account being mostly negative, has raised debates on the major potential challenges for Indian Sovereign Wealth Fund (SWF), in case they come to existence. Using the two m...

Exchange Rates’ Effect on Spot and Futures Equity Index Markets: A Study on Borsa Istanbul

Directory of Open Access Journals (Sweden)

Ayben Koy

2017-06-01

Full Text Available This paper examines the linkages between the foreign exchange rates, spot equity index and equity index futures. The study aims to investi-gate whether there is difference between the spot and futures markets in the scope of relation with the foreign exchange rates’ returns and which leads the other. The relationships are examined by using the vector autoregression (VAR model, impulse-response functions, variance decomposition and Granger Causality tests. The sample of the study consists of US dollar to Turkish Lira rate (USD/TRY, Euro to Turkish Lira rate (EUR/TRY, BIST 30 Index and BIST 30 Index Futures. The data of the study includes the period between January 2011 and December 2014 with daily data range. Our results have evidence that the foreign exchange rate markets in Turkey are driven by the equity market.

The Effects of Foreign Capital Inflows

Directory of Open Access Journals (Sweden)

Sangyong Joo

1998-03-01

Full Text Available This thesis analyzes the pre-1996 foreign capital inflows to Korea and the major impact of macroeconomic variables, discussed the background of South Korean foreign exchange crisis. VAR model using the analysis results reflect the impact of capital inflows and the increase in the volume of overseas department of communication makes the current account deteriorated, and no increase in revenue. It is well known that the positive effects of free capital flows can lower interest rates, but after 1980 the results of analysis of data showed that, despite the freedom of capital inflows, but interest rates did not decline. In contrast, the increase in domestic credit makes incomes increase, although in the short term, but it makes interest rates decline. Under the circumstance than the inflow of overseas capital did not bring positive effects to economic circumstances, although the private sector (private enterprises and the number of financial institutions has worsened the financial structure, but the government finances and private consumption has been showing a strong and stable trend, deflation does not exist. One particularly striking is the sudden increase of the phenomenon of short-term debt, although a higher proportion of short-term debt, but the basic conditions for economic point of view, the inevitability and certainty of the foreign exchange crisis, there is still room for debate.

Exchange rate volatility and international trade: The option approach

OpenAIRE

Franke, Günter

1986-01-01

Usually it is argued that an increase in exchange rate volatility reduces the volume of international trade since trading firms are risk averse. This paper shows for risk neutral firms that the expected international trade volume in standardized commodities grows with exchange rate volatility. The firms adjust their trade volume to the exchange rate level. The more favorable the exchange rate is, the higher is the export volume. If the rate drops below some level, exports are stopped. Thus in...

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...

Overcoming Fear of Floating: Exchange Rate Policies in Chile.

OpenAIRE

Jose De Gregorio; Andrea Tokman R.

2004-01-01

The paper reviews the exchange rate management experience in Chile, with particular emphasis on the floating exchange rate regime and its two forex intervention episodes. It presents evidence on Chile’s favorable conditions to face exchange rate shocks: a well-developed financial sector, that offers hedging opportunities taken up by the corporate sector to decrease its vulnerability through balance sheet effects; and a low and decreasing level of passthrough from the exchange rate to prices. ...

Domestic Price, (Expected) Foreign Price, and Travel Spending by Canadians in the United States

OpenAIRE

Jan Vilasuso; Fredric C. Menz

1998-01-01

In this paper, the authors develop and test a model to explain travel expenditures in the United States by Canadians. The model examines a consumer's choice problem where income is allocated between domestic and foreign consumption. Consumers do not know the foreign price level and base their spending in part on expected foreign price. In addition to expected foreign price, domestic price, exchange rates, income, and foreign price uncertainty influence travel spending. Empirically, each deter...

Exchange rates and climate change: An application of fund

NARCIS (Netherlands)

Tol, R.S.J.

2006-01-01

As economic and emissions scenarios assume convergence of per capita incomes, they are sensitivity to the exchange rate used for international comparison. Particularly, developing countries are project to grow slower with a purchasing power exchange rate than with a market exchange rate. Different

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.