Fiscal Sustainability: The Impact of Real Exchange Rate Shocks on Debt Valuation, Interest Rates and GDP Growth

2012 ◽  
Vol 40 (9) ◽  
pp. 1762-1783 ◽  
Author(s):  
Claudia Martínez Carrera ◽  
Rodrigo Vergara
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Real Exchange Rate ◽  
Fiscal Sustainability ◽  
Gdp Growth ◽  
Exchange Rate Shocks ◽  
Debt Valuation ◽  
The Impact

scholarly journals The Effect of Exchange Rate Movements and Economic Growth on Job Creation

2017 ◽  
Vol 62 (2) ◽  
pp. 20-41
Author(s):  
Chama Chipeta ◽  
Daniel Francois Meyer ◽  
Paul-Francois Muzindutsi
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Job Creation ◽  
Vector Autoregressive ◽  
The Real ◽  
Long Run ◽  
Exchange Rate Shocks ◽  
The Impact

Abstract Job creation is at the centre of economic development and remains a source of sustenance for social and human relations. The creation of a job-enabling economic environment is imperative in promoting social and economic cohesiveness in the macro and microeconomic environment. Any shocks to the economy, particularly those of exchange rate shocks and changes in economic growth, may negatively affect the labour market and job creation. This study made use of quarterly observations, from the first quarter of 1995 to the fourth quarter of 2015, to investigate the effect of the real exchange rate and economic growth on South Africa’s employment status. South Africa, a developing country, was selected as a case study due to its high unemployment rate that is still increasing. The Vector Autoregressive (VAR) model and multivariate co-integration techniques were used in assessing the impact and responsiveness of employment to the real exchange rate and real economic growth in South Africa. Findings of this study revealed that employment responds positively to economic growth and negatively to the real exchange rate in the long-run. The short-run displays a positive relationship between real economic growth and employment, while the relationship between employment and the real exchange rate is also negative. However, the effect of economic growth in creating jobs is not significant enough in stimulating job creation in South Africa, as indicated by results in variance decomposition. Movements in the exchange rate exerted a significant short and long-run negative effect on employment dynamics; implying that a depreciation of the rand against the U.S. dollar is associated with decrease in overall employment. Exchange rate stability is thus important for economic growth and job creation in South Africa. The study provided further recommendations on promoting job creation in South Africa and other developing countries.

scholarly journals Government Budget Deficits and Exchange Rate Determination: Evidence from Pakistan

1992 ◽  
Vol 31 (4II) ◽  
pp. 871-882 ◽  
Author(s):  
Nadeem A. Burney ◽  
Naeem Akjitar
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Real Exchange Rate ◽  
Relative Effectiveness ◽  
Policy Instrument ◽  
Nominal Exchange Rate ◽  
Relative Price ◽  
Budget Deficits ◽  
The Real ◽  
The Impact

It is now generally accepted that the real exchange rate is a key relative price in an econom/ Changes in the real exchange rate influence foreign trade flows, balance of payments, the structure and level of production, allocation of resources, etc. While the real exchange rate is an endogenous variable that responds to both exogenous as well as policy-induced shocks, the nominal exchange rate is usually taken as a policy instrument. The two rates, however, are found to be related to each other. 2 For effective policy-making, it is imperative to have some idea about different factors that influence the real exchange rate. Equally important is the knowledge of the manner in which the real exchange rate responds to changes in the exogenous variables. While there is a general consensus that the impact of various exogenous shocks on the exchange rate is transmitted through four broad channels, namely, (i) absolute prices, (ii) relative prices, (iii) income, and (iv) interest rates, the relative importance of each of these channels is found to vary across countries. In general, it depends on the degree of openness of the economy and the relative effectiveness of the fiscal and the monetary sectors within a country.

scholarly journals Economic and Monetary Integration in ECOWAS Countries: A Panel VAR Approach to Identify Macroeconomic Shocks

2021 ◽  
Vol 7 (2) ◽  
pp. 61-87
Author(s):  
Asta Ndongo ◽  
Ibrahima Thione Diop
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Economic Activity ◽  
West African ◽  
The Other ◽  
Panel Var ◽  
Policy Shocks ◽  
Exchange Rate Shocks ◽  
The Impact

This paper studies the impact of output, exchange rate, price, and economic policies (fiscal and monetary) shocks to Economic Community of West African States (ECOWAS) economies over the period 1977-2019. The results of the impulse response functions obtained from the panel VAR show that monetary policy shocks stimulate economic activity, whereas fiscal shocks lead to a contraction. Moreover, these economic policy shocks lead to an increase in the price level. Finally, they have opposite effects on the real exchange rate: a monetary policy shock leads to an appreciation of national currencies against the US dollar, while a fiscal innovation leads to a depreciation of these currencies. As for exchange rate and price shocks, they create inflation and consequently a decline in economic activity. Furthermore, the forecast error variance decomposition reveals that real exchange rate shocks contribute the most to future fluctuations in macroeconomic variables in ECOWAS countries. Moreover, a comparison of the impact on the two currency areas, West African Economic and Monetary Union (WAEMU) and West African Monetary Zone (WAMZ), shows the degree of asymmetry between the two areas. The analysis shows, on the one hand, that shocks are more persistent and significant in the WAMZ and, on the other hand, that except for real exchange rate shocks, the two zones respond asymmetrically to shocks emanating from the other variables.

scholarly journals Mobile Money Use: The Impact of Macroeconomic Policy and Regulation

Economies ◽  
2021 ◽  
Vol 9 (2) ◽  
pp. 51
Author(s):  
Lorna Katusiime
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Financial Innovation ◽  
Macroeconomic Policy ◽  
Mobile Money ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run ◽  
Short Run ◽  
The Impact

This paper examines the effects of macroeconomic policy and regulatory environment on mobile money usage. Specifically, we develop an autoregressive distributed lag model to investigate the effect of key macroeconomic variables and mobile money tax on mobile money usage in Uganda. Using monthly data spanning the period March 2009 to September 2020, we find that in the short run, mobile money usage is positively affected by inflation while financial innovation, exchange rate, interest rates and mobile money tax negatively affect mobile money usage in Uganda. In the long run, mobile money usage is positively affected by economic activity, inflation and the COVID-19 pandemic crisis while mobile money customer balances, interest rate, exchange rate, financial innovation and mobile money tax negatively affect mobile money usage.

Open Door System and Endogenous Growth in Indian Economy: An Empirical Analysis on the Role of Human Capital and R&D in Explaining Industrial Productivity

2021 ◽  
Vol 46 (1) ◽  
pp. 24-37
Author(s):  
Arjun K. ◽  
Sanjay Kumar ◽  
A. Sankaran ◽  
Mousumi Das
Keyword(s):  
Human Capital ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Endogenous Growth ◽  
Value Added ◽  
Capital Formation ◽  
Knowledge Capital ◽  
Test Technique ◽  
Long Run ◽  
The Impact

The present study investigates the impact of human capital, knowledge capital which is a function of human capital, and real exchange rate scenario in explaining long-run industrial total factor productivity (TFP) from 1980 to 2015 on the theoretical basis of the open endogenous growth model. The variables employed in the contemporary study include manufacturing value added (MNVA) as industrial output measure, gross fixed capital formation (GFCF) as a measure of capital and labour input which is measured using employment data. Gross enrolment ratio (GER) is taken as a measure for human capital formation, expenditure on research and development (R&D) as a proxy for knowledge capital, and real exchange rate indicates global economic shocks. The study involves estimating TFP for Industrial Sector during the post-liberalization period by employing Cobb-Douglas production function. The ARDL bounds test technique for cointegration revealed long-run relation among the varying factors studied. The Toda-Yamamoto causality test concluded bi-directional causality running between, R&D expenditure and Industrial TFP which sends a strong signal to the policymakers for a well-framed long-term integrated approach for human & knowledge capital formation which will act as a strong impetus for manufacturing firms to come up in terms of augmenting production and productivity and expanding foreign market horizon. JEL Classification: D24, E2, J24

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