A re-examination of the exchange rate – interest rate differential relationship in Ghana

2021 ◽  
Author(s):  
Isaac Kwesi Ofori
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
The Exchange Rate ◽  
Differential Relationship

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

scholarly journals Exchange rate and interest rate distribution and volatility under the Portuguese target zone

2010 ◽  
Vol 57 (3) ◽  
pp. 261-282 ◽  
Author(s):  
Duarte Portugal ◽  
Sousa Andrade ◽  
Adelaide Duarte
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rate Volatility ◽  
European Monetary System ◽  
European Monetary ◽  
Target Zone ◽  
Rate Distribution ◽  
Economies In Transition ◽  
Portuguese Economy ◽  
The Exchange Rate

The aim of this study is to analyse the exchange rate and interest rate distribution and volatility under the participation of the Portuguese economy in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) based on some of the main predictions of the target zone literature. Portugal adopted this exchange rate target zone from April 6 1992 until December 31 1998. During this period, the exchange rate distribution reveals that the majority of the observations lie close to the central parity, thus rejecting one of the key predictions of the Paul Krugman (1991) model. The analysis of the data also shows that exchange rate volatility tended to increase as the exchange rate approached the edges of the band, contrary to the predictions of the basic model. Interest rate differential volatility, on the other hand, seemed to behave in line with theoretical predictions. This suggests an increase in the credibility of monetary policy, allowing us to conclude that the adoption of a target zone has contributed decisively to the creation of the macroeconomic stability conditions necessary for the participation in the European Monetary Union (EMU). The Portuguese integration process should therefore be considered as an example to be followed by other small open economies in transition to the euro area.

scholarly journals Trends and determinants of raising ECBs in Indian Context

2021 ◽  
Vol 9 (7) ◽  
pp. 01-08
Author(s):  
Ramakant Shukla
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Least Squares Method ◽  
Control Measures ◽  
Capital Control ◽  
Global Liquidity ◽  
Robust Least Squares ◽  
The Exchange Rate ◽  
The Cost ◽  
Interest Rate Differentials

This study examines the effect of capital control measures initiated during the last two decades in terms of all-in-cost ceilings and enhanced limits on ECB in India over the sample period 2004Q1 to 2020Q2. Using global liquidity, the exchange rate between INR/USD, imports and interest rate differentials as control variables and changes in capital control measures from 2008 to 2011 in the all-in-cost ceiling, and changes in the enhanced limits on ECBs from USD 500 million to USD 750 million under the automatic route in 2012, regression analysis of three ECB series show interesting results. Using Robust Least Squares method, we document that (1) the successive increment in all-in-cost ceilings on ECB from 2008 to 2011 is inducing ECBs to flow, indicating that Indian firms benefit more than they pay due to increase the cost for ECBs having maturities 3<5 years. However, such capital control measures are not effective on ECBs having maturities >5 years.  (2) The effect of the enhanced limits on ECBs from USD 500 million to USD 750 million under the automatic route in 2012 has a pronounced impact on ECB, averaging 1602.1 USD million per quarter. We observed that CCAs in India are initiated in response to the volatility of the exchange rate and global liquidity, imports, and interest rate differentials are significant variables in India's required capital control actions.

scholarly journals Exchange Rate Behaviour after Recent Float: The Experience of Pakistan

2004 ◽  
Vol 43 (4II) ◽  
pp. 829-852
Author(s):  
M. Ali Kemal ◽  
Rana Murad Haider
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Purchasing Power Parity ◽  
Exchange Rate Regime ◽  
Open Market ◽  
Market Exchange ◽  
Power Parity ◽  
Traded Goods ◽  
The Exchange Rate ◽  
The Interest Rate

Exchange rate is a price of traded goods in the world market. To maintain the commodities competitive in the market, exchange rate should be adjusted according to the change in prices. If it is adjusted accordingly, then we say that purchasing power parity (PPP) holds in that country. However, phenomenon of PPP is completely kicked out under floating exchange rate regime in the short run [see for example, Rogoff (1999); Mark and Choi (1997); MacDonald (1999); Obstfeld and Taylor (1997); Coleman (1995); O’Connel (1998) and Michael, et al. (1997)]. Recent statement by the President of the National Bank of Pakistan, that the exchange rate and the interest rate are two faces of the same coin [Bokhari (2004)], shows that the changes in the exchange rate is strongly associated with the changes in the interest rate differential.1 It is also argued that under free float the value of currency is determined by demand and supply of foreign exchange and to control the value of currency using open market operations interest rate is used as the key monetary policy tool. Moreover, deterioration of trade balance leads to deprecation in exchange to make the exports competitive in the market and vice versa.

scholarly journals Analisis Inflasi di Indonesia (Suatu Pendekatan Model Dinamik)

2018 ◽  
Vol 7 (2) ◽  
pp. 85
Author(s):  
Afrizal Afrizal
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Error Correction ◽  
Money Supply ◽  
Correction Term ◽  
Research Data ◽  
Cointegration Test ◽  
The Exchange Rate ◽  
The Interest Rate

This study aims to determine the magnitude of the effect of the money supply, the exchange rate of rupiah (exchange rate) and the interest rate on inflation in Indonesia during the period 2000.12016.4. The analysis tools used for this research data are: unit root test, integration degree test, cointegration test, error correction model / ECM. The results showed that all staioner research data at level 1 (first difference) based on cointegration test showed that the variables observed in this study co-integration or have long-term relationship. The ECM model used is valid, as indicated by the error correction term (ECT) coefficient is significant. In the short run the money supply, the exchange rate of rupiah (exchange rate) and the interest rate is not significant to the inflation rate, but in the long term is significant.

scholarly journals Impacts of the monetary policy on the exchange rate: case study of Vietnam

2019 ◽  
Vol 26 (2) ◽  
pp. 220-237
Author(s):  
Van Anh Pham
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Real Effective Exchange Rate ◽  
Content Type ◽  
Effective Exchange ◽  
Quantitative Results ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Effective Exchange Rate

Purpose The purpose of this paper is to evaluate and analyze impacts of the monetary policy (MP) – money aggregate and interest rate – on the exchange rate in Vietnam. Design/methodology/approach The study uses data over the period of 2008–2018 and applies the vector autoregression model, namely recursive restriction and sign restriction approaches. Findings The main empirical findings are as follows: a contraction of the money aggregate significantly leads to the real effective exchange rate (REER) depreciating and then appreciating; a tightening of the interest rate immediately causes the REER appreciating and then depreciating; and both the money aggregate and the interest rate strongly determine fluctuations of the REER. Originality/value The quantitative results imply that the MP affects the REER considerably.

scholarly journals Valuation of Quanto Floating Range Notes under the Cross-Currency LIBOR Market Model

2015 ◽  
Vol 7 (12) ◽  
pp. 70 ◽  
Author(s):  
Chi-Hsun Chou ◽  
Tsung-Yu Hsieh ◽  
Son-Nan Chen
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Market Model ◽  
Model Parameters ◽  
Rate Process ◽  
Multifactor Model ◽  
Libor Market Model ◽  
Empirical Results ◽  
The Cross ◽  
The Exchange Rate

<p>In this paper, we propose analytical valuation formulae for three types of quanto floating range notes based on the cross-currency LIBOR market model. The dynamics of forward LIBOR rates is a multifactor model that incorporates both the domestic and foreign interest rate process and the exchange rate process in a cross-currency environment. The derived formulae are analytically tractable and easy to implement in practice. The model parameters can be extracted directly from market quantities. We show that the empirical results are more accurate and robust than the results ofMonte Carlosimulation.</p>

scholarly journals PERANAN KEBIJAKAN MONETER DALAM MENJAGA STABILITAS PEREKONOMIAN INDONESIA SEBAGAI RESPON TERHADAP FLUKTUASI PEREKONOMIAN DUNIA

2007 ◽  
Vol 9 (2) ◽  
pp. 145-177
Author(s):  
M. Maulana Al Arif ◽  
Achmad Tohari
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Open Economy ◽  
Small Open Economy ◽  
Monthly Data ◽  
Vector Autoregressive ◽  
The World ◽  
The Exchange Rate ◽  
The Impact

This paper analyzes the impact of the inflation and the world interest rate on the Indonesian economy and the effectiveness of the Indonesian central bank policy to adopt the domestic macroeconomic fluctuation.Assuming Indonesia as a small-open economy, the Stuctural Vector Autoregressive Model is utilized on the monthly data during the periode of 1999: 1 – 2004: 12 covering the main domestic macroeconomic indicator (output, price, money supply, interest rate and the exchange rate) and the world oil price and world interest rate as the disturbance source.The analysis provides 2 main results, first, the international variables do have impacts on the domestic variables fluctuation, implying the fragility of the domestic economy due to the external shock, second, the monetary policy is effective on supporting the economic growth and stabilizing the price level. However, the Bank Indonesia policy to stabilize the international shock via the exchange rate channel, contributes to a higher impact of the international shock on domestic interest rate.Keywords: monetary policy, business cycle, SVARJEL Classification: E52, E32, C32, F41

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