Real and Monetary Factors in the Joint Determination of the Exchange Rate and the Interest Rate

1986 ◽  
Author(s):  
Shinji Takagi
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Joint Determination ◽  
The Exchange Rate ◽  
The Interest Rate

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 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 The Digital Transactions Currency for the BRICS

2020 ◽  
pp. 1760-1769
Author(s):  
Mikhail V. Zharikov
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Foreign Exchange Market ◽  
Practical Significance ◽  
Digital Currency ◽  
Macroeconomic Indicators ◽  
The Exchange Rate ◽  
Digital Transactions ◽  
The Interest Rate ◽  
Investment Portfolios

The article deals with the circulation of a digital currency as a worldwide problem. The topic has theoretical and practical significance because price stability, economic growth and development and market equilibrium depend on the quality of this circulation. Currency digitization has become a particularly acute issue with the outbreak of COVID-19, which made central banks to think about contactless means of payment. The research identified the significance of the most important macroeconomic indicators which may characterise the hypothetical shared digital currency for the BRICS, namely, a shared interest rate and the quantity of digital money in circulation needed for the international use. The exchange rate of the BRICS digital currency, if it ever goes into being, is going to heavily depend on the amount of the interest rate of the hypothetical creditor of last resort. This problem is quite significant, since for the international circulation it is very important to know the proportions in which the digital currency is to be exchanged for the currencies of other countries. The theoretical significance of the article is the development of a model’s basis to find the exchange rate of the digital currency. The practical significance of the paper is that it contains recommendations for foreign-exchange-market players to optimise their investment portfolios as well as for monetary authorities in the emerging economies to make some policy choices

scholarly journals Tegar Prasetya Analysis of Macroeconomic Influence Return on Assets Banking Study on Conventional Commercial Banks in Indonesia for the Year 2018–2020

2021 ◽  
Vol 6 (5) ◽  
pp. 268-275
Author(s):  
Tegar Prasetya ◽  
Hakiman Thamrin
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Commercial Banks ◽  
Time Series Data ◽  
Series Data ◽  
Analysis Tool ◽  
Return On Assets ◽  
Macroeconomic Variables ◽  
The Exchange Rate ◽  
The Interest Rate

This study aims to analyze the effect of macroeconomic variables on the return on banking assets. The data processing method used by the researcher is using the Vector Error Correction Model (VECM) as a data analysis tool and this study confirms that the extent to which it examines the positive and significant influence between macroeconomic variables on the return on banking assets. The data obtained is secondary data based on financial statements within a period of 3 years using monthly time series data. The results of this study indicate that there is a positive and significant effect on the exchange rate and CPI variables while it is negative and significant on the inflation, interest rate and IPI variables resulting from the long-term VECM estimation. While the results show that there is a positive and significant effect on the interest rate and CPI variables and a significant negative on the inflation variable, positive and insignificant on the exchange rate variable, negative and insignificant on the IPI variable on the ROA of the short-term VECM estimation results. The results of the measurement of the composition or contribution of the influence of the independent variable on the dependent variable show the interest rate variable with a value of 4.11% in the 10th period obtained through the results of the decomposition variance (VD) test on the return on assets (ROA) of banking studies at Conventional Commercial Banks in Indonesia.

scholarly journals The Effectiveness of the Monetary Transmission Mechanism in Ukraine since the Transition to Inflation Targeting

2019 ◽  
pp. 19-37
Author(s):  
Oleksandr Zholud ◽  
Volodymyr Lepushynskyi ◽  
Sergiy Nikolaychuk
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Monetary Transmission ◽  
Interest Rate Policy ◽  
Leading Role ◽  
The Exchange Rate ◽  
The Interest Rate

This paper analyzes the effectiveness of monetary transmission channels in Ukraine since the National Bank of Ukraine (NBU) transitioned to inflation targeting and after the central bank established its new approach to monetary policy implementation. The authors conclude that the central bank has sufficient control over short-term interest rates in the interbank market and that it uses them to influence other financial market indicators. At the same time, further transmission via the interest rate channel is constrained by weak lending and the banking system’s slow post-crisis recovery. The exchange rate channel remains the most powerful avenue of monetary transmission. After the NBU switched to a floating exchange rate and an active interest rate policy, its key rate became a means of influencing exchange rates. The exchange rate channel’s leading role is expected to gradually decrease but remains important, as is typical for small open economies.

scholarly journals Analisis Faktor-Faktor yang Mempengaruhi Nilai Tukar Rupiah Periode 1999Q1-2019Q2

2020 ◽  
Vol 11 (2) ◽  
pp. 197-209
Author(s):  
Erric Wijaya
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Oil Prices ◽  
Short Term ◽  
Long Run ◽  
The Exchange Rate ◽  
The Interest Rate

The exchange rate plays an important role in influencing the level of Indonesia's international trade towards trading partner countries. This study discusses the factors that influence the exchange rate of the rupiah against dollar both in the short and long term. The variables that are suspected to influence changes in exchange rates are the inflation rate, the interest rate (SBI), world oil prices, the value of exports, and the value of imports. This research was conducted during 1999 quarter 1 to 2019 quarter 2. The results showed that there was a long-term and short-term relationship between inflation rates, interest rates, world oil prices, exports and imports to the exchange rate. In the short term, the interest rate and world oil prices have a significant effect on the exchange rate. In the long run, the inflation rate, world oil prices and imports have a significant effect on the exchange rate.

scholarly journals The Effect of Foreign Debt on The Exchange Rate and Its Impact on Monetary Policy in Indonesia

Media Trend ◽  
2019 ◽  
Vol 14 (1) ◽  
pp. 128-135
Author(s):  
Diah Wahyuningsih ◽  
Uun Primangesti Ningsih
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Granger Causality ◽  
Impulse Response ◽  
Foreign Debt ◽  
Granger Causality Test ◽  
Causality Test ◽  
The Exchange Rate ◽  
The Interest Rate

The objectives of this study are to analyze the effect of foreign debt on the exchange rate that seen from the foreign debt and the exchange rate, and add the variable of inflationary monetary policy and the interest rate of BI Rate to test its impact on monetary policy in Indonesia. The approach in this study is quantitative approach. Data that used are Time Series data from Asian Development Bank and Indonesian World Bank in 1986-2013. Variables that used are exchange rate, foreign debt, inflation and the interest rate of BI Rate. Method that used in this study is Vector Auto Regression (VAR) analysis. The stages that used in this study testing are stationary test, optimal lag test, Granger causality test, impulse response test, and variance decomposite test in Eviews 6 program. The results of Granger causality test of all variables in this study are unlikely to have a relationship and there are only two variables that give an effect.Based on the results of Granger causality, it shows that there is bidirectional between foreign debt variable that has an effect on the exchange rate in Indonesia and the exchange rate has an effect on the foreign debt in Indonesia. While the foreign debt has an effect on the interest rate of BI Rate. For the results of impulse response test show that the exchange rate variable gives the biggest respond to the shock of foreign debt variable, compared to inflation and the interest rate of BI Rate variables. The results of Variance decomposite show that the contribution which given by foreign debt variable on the exchange rate is relatively bigger compared to the contribution that given by inflation and the interest rate of BI Rate variables.

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