Brazil's Recent Monetary Policy Facing Macroeconomic Dynamics and Exchange Rate Changes in Particular

2013 ◽  
Author(s):  
Ricardo Ramalhete Moreira
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Macroeconomic Dynamics ◽  
Exchange Rate Changes

Asymmetric impact of exchange rate changes on stock returns: evidence of two de facto regimes

2019 ◽  
Vol 19 (2) ◽  
pp. 147-173
Author(s):  
Walid M.A. Ahmed
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Spillover Effects ◽  
Content Type ◽  
Currency Depreciation ◽  
Long Run ◽  
Exchange Rate Changes

Purpose This study focuses on Egypt’s recent experience with exchange rate policies, examining the existence of spillover effects of exchange rate variations on stock prices across two different de facto regimes and whether these effects, if any, are asymmetric. Design/methodology/approach The empirical analysis is carried out using a nonlinear autoregressive distributed lag modeling framework, which permits testing for the presence of short- and long-run asymmetries. Relevant local and global factors are also included in the analysis as control variables. The authors divide the entire sample into a soft peg period and a free float one. Findings Over the soft peg regime period, both positive and negative changes in EGP/USD exchange rates seem to have a significant impact on stock returns, whether in the short or long run. Short-term asymmetric effects vanish in the free float period, while long-term asymmetries continue to exist. By and large, the authors find that currency depreciation tends to exercise a stronger influence on stock returns than does currency appreciation. Practical implications The results offer important insights for investors, regulators and policymakers. With the domestic currency depreciation having a negative impact on stock prices, investors should contemplate implementing appropriate currency hedging strategies to abate depreciation risks and, hence, preserve their expected rate of return on the Egyptian pound-denominated investments. In the current post-flotation era, the government could pursue a flexible inflation targeting monetary policy framework, with a view to both lowering the soaring inflation toward an announced target rate and stabilizing economic growth. The Central Bank of Egypt (CBE) could adopt indirect monetary policy instruments to secure tightened liquidity conditions. Besides, the CBE could raise policy rates to incentivize people to keep their money in local currency-denominated instruments, instead of dollarizing their savings, thereby relieving banks of foreign currency demand pressures. Nevertheless, while being beneficial to the country’s real economy on several aspects, such contractionary monetary measures may temporarily impinge on stock market performance. Accordingly, policymakers should consider precautionary measures that reduce the potential for price distortions and unnecessary volatility in the stock market. Originality/value To the best of the authors’ knowledge, the current study represents the first attempt to explore the potential impact of exchange rate changes under different regimes on Egypt’s stock market, thus contributing to the relevant research in this area.

Currency Crises, Monetary Policy and Corporate Balance Sheets

2007 ◽  
Vol 8 (3) ◽  
pp. 309-343 ◽  
Author(s):  
Sylvester C. W. Eijffinger ◽  
Benedikt Goderis
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Currency Crises ◽  
Balance Sheet ◽  
Balance Sheets ◽  
Output Loss ◽  
Balance Sheet Effects ◽  
Loss Compensation ◽  
Exchange Rate Changes

Abstract This paper studies how the exposure of a country’s corporate sector to interest rate and exchange rate changes affects the probability of a currency crisis. To analyze this question, we present a model that defines currency crises as situations in which the costs of maintaining a fixed exchange rate exceed the costs of abandonment. The results show that a higher exposure to interest rate changes increases the probability of crisis through an increased need for output loss compensation and an increased efficacy of monetary policy in stimulating output. A higher exposure to exchange rate changes also increases the need for output loss compensation. However, it lowers the efficacy of monetary policy in stimulating output through the adverse balance sheet effects of exchange rate depreciation. As a result, its effect on the probability of crisis is ambiguous.

The Exchange Rate as a Source of Disturbances: The UK 1979-2000

2002 ◽  
Vol 181 ◽  
pp. 96-112 ◽  
Author(s):  
David Cobham
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Policy Instrument ◽  
Monetary Regimes ◽  
Monetary Authorities ◽  
The Exchange Rate ◽  
Exchange Rate Changes ◽  
The Uk

Evidence is presented on the extent to which the possibility for the exchange rate to vary has been useful or unhelpful for UK monetary policy over the last two decades. ‘Large’ exchange rate changes and ‘large’ misalignments are identified, and the thinking and actions of the monetary authorities in response to the level of and changes in the exchange rate in successive monetary regimes are examined. It is argued that the exchange rate has not generally functioned as a useful automatic equilibrating mechanism or as a useful policy instrument; and that in nearly every phase there were movements of the exchange rate, or pressures on it, which for the authorities were unexpected and unwelcome. Thus the exchange rate has typically been a source of extraneous shocks.

On the Exchange Rate Policy

2010 ◽  
pp. 21-28
Author(s):  
K. Yudaeva
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Institutional Changes ◽  
Crisis Period ◽  
Local Currency ◽  
High Inflation ◽  
Rate Policy ◽  
The Exchange Rate

The level of trust in the local currency in Russia is very low largely because of relatively high inflation. As a result, Bank of Russia during crisis times can not afford monetary policy loosening and has to fight devaluation expectations. To change the situation in the post-crisis period Russia needs to live through a continuous period of low inflation. Modified inflation targeting can help achieve such a result. However, it should be amended with institutional changes, particularly development of hedging instruments.

Impact of external currency exposures on macroeconomic policies

2020 ◽  
pp. 23-40
Author(s):  
I. V. Prilepskiy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Positive Impact ◽  
Exchange Rate Regime ◽  
Macroeconomic Policies ◽  
Panel Regressions ◽  
Financial Account ◽  
Currency Exposure ◽  
Cross Country ◽  
The Impact

Based on cross-country panel regressions, the paper analyzes the impact of external currency exposures on monetary policy, exchange rate regime and capital controls. It is determined that positive net external position (which, e.g., is the case for Russia) is associated with a higher degree of monetary policy autonomy, i.e. the national key interest rate is less responsive to Fed/ECB policy and exchange rate fluctuations. Therefore, the risks of cross-country synchronization of financial cycles are reduced, while central banks are able to place a larger emphasis on their price stability mandates. Significant positive impact of net external currency exposure on exchange rate flexibility and financial account liberalization is only found in the context of static models. This is probably due to the two-way links between incentives for external assets/liabilities accumulation and these macroeconomic policy tools.

The influence of inflation targeting on the pass-through effect of the exchange rate

2018 ◽  
pp. 70-84
Author(s):  
Ph. S. Kartaev ◽  
Yu. I. Yakimova
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Short And Long Term ◽  
The Exchange Rate ◽  
Pass Through ◽  
The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

Monetary policy regimes in Russia: Guidelines for furtherquantitative studies

2017 ◽  
pp. 38-60 ◽  
Author(s):  
A. Pestova
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Quantitative Research ◽  
Policy Regimes ◽  
Policy Effects ◽  
Exchange Rate Targeting ◽  
Basic Parameters

This paper analyzes the basic parameters of monetary policy in 2000-2015 in Russia. We provide the overview of tools and objectives of monetary policy of the Bank of Russia and identify the periods of homogeneity of monetary policy regimes: from money base targeting to exchange rate targeting and finally, to interest rates policy. On the basis of this research we develop the recommendations for further quantitative research aimed at estimation of monetary policy effects in Russia.

Sign in / Sign up

Export Citation Format

Share Document