scholarly journals Remittances and exchange rate - Empirical evidence from emerging economies

2016 ◽  
Vol 19 (1) ◽  
pp. 39-51
Author(s):  
Canh Phuc Nguyen
Keyword(s):  
Exchange Rate ◽  
Panel Data ◽  
Emerging Markets ◽  
Interest Rates ◽  
Emerging Economies ◽  
Global Financial Crisis ◽  
Balance Of Payments ◽  
The Exchange Rate ◽  
Remittance Flows ◽  
Macroeconomic Risks

The exchange rate plays an important role to trade, investment and macroeconomic risks of open economies. There are many factors that affect the exchange rate such as inflation, interest rates, balance of payments where remittance flows receive more and more attention of economists due to their increase in their values, particularly in emerging economies. This study uses data from 21 countries which are classified as emerging markets in the period between 2001 and 2013 to investigate the impacts of remittances on exchange rate. Through panel data estimations, we found that remittances increase the value of the local currencies, which is not altered by the 2008 global financial crisis.

The Exchange Rate, Interest Rates and the Current Balance ln a Forward-Looking Model

1988 ◽  
Vol 125 ◽  
pp. 40-45 ◽  
Author(s):  
Andrew Gurney
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Balance Of Payments ◽  
Capital Inflows ◽  
The Other ◽  
Other Hand ◽  
The Exchange Rate ◽  
Temporary Rise ◽  
Forward Looking

In March this year, after a year in which policy appeared to be aimed at achieving stability against EMS currencies, the pound was allowed to rise sharply in response to large capital inflows. As with many fluctuations in exchange rates, this development was puzzling in that the prospects for the balance of payments suggested that the rise in sterling would not prove sustainable. On the other hand, high UK interest rates, particularly in relation to those available in EMS countries, provided some rationale for a temporary rise. This note uses a simple forward-looking equation for the exchange rate to illustrate the implications of alternative paths for interest rates and the balance of payments. A number of simulations are presented to illustrate the key elements of this approach.

scholarly journals On Foreign Direct Investment from the ASEAN-8 Countries: A Panel Data Estimation

2022 ◽  
Vol 19 ◽  
pp. 150-160
Author(s):  
Indra Suhendra ◽  
Navik Istikomah ◽  
Cep Jandi Anwar
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Panel Data ◽  
Interest Rates ◽  
Direct Investment ◽  
Capital Flight ◽  
Panel Data Estimation ◽  
The Exchange Rate ◽  
Loan Interest Rates

This paper examines how capital flight, loan interest rates, inflation, exchange rates and economic growth influence foreign direct investment in the ASEAN-8 countries. We apply fixed effect estimation to panel data for data belonging to eight countries from the period 1994 to 2018. The results show that capital flight and economic growth have a positive and significant effect on foreign direct investment. An increase in capital flight, capital retain from sources of funds which greater than the use of funds, has encouraged foreign direct investment to increase. Furthermore, increased economic growth has stimulated foreign direct investment. We find that an increase in loan interest rate (SIBOR), inflation and depreciation of the exchange rate triggers a significant decline in foreign direct investment. This finding implies that capital retention from capital flight and economic growth are the main factors that create an increase in foreign direct investment in the ASEAN-8 countries. Meanwhile, loan interest rates (SIBOR), inflation and depreciation of the exchange rate are the risk factors that investors need to consider when investing in those particular countries. This paper is useful for policy makers in the ASEAN-8 countries to consider these five variables, as the important factors that significantly influence foreign direct investment in the ASEAN-8 countries.

scholarly journals A Theory of Foreign Exchange Interventions

2021 ◽  
Author(s):  
Sebastián Fanelli ◽  
Ludwig Straub
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Open Economy ◽  
Small Open Economy ◽  
Bond Markets ◽  
Pecuniary Externality ◽  
Optimal Intervention ◽  
The Exchange Rate ◽  
Intervention Policy

Abstract We study a real small open economy with two key ingredients (1) partial segmentation of home and foreign bond markets and (2) a pecuniary externality that makes the real exchange rate excessively volatile in response to capital flows. Partial segmentation implies that, by intervening in the bond markets, the central bank can affect the exchange rate and the spread between home- and foreign-bond yields. Such interventions allow the central bank to address the pecuniary externality, but they are also costly, as foreigners make carry trade profits. We analytically characterize the optimal intervention policy that solves this trade-off: (1) the optimal policy leans against the wind, stabilizing the exchange rate; (2) it involves smooth spreads but allows exchange rates to jump; (3) it partly relies on “forward guidance,” with non-zero interventions even after the shock has subsided; (4) it requires credibility, in that central banks do not intervene without commitment. Finally, we shed light on the global consequences of widespread interventions, using a multi-country extension of our model. We find that, left to themselves, countries over-accumulate reserves, reducing welfare and leading to inefficiently low world interest rates.

scholarly journals Exchange Rate Volatility and Domestic Consumption: A Comparative Study of Developed, Developing and Emerging Economies

2019 ◽  
Vol 9 (3) ◽  
pp. 164
Author(s):  
Muhammad Zubair Chishti ◽  
Hafiz Syed Muhammad Azeem ◽  
Farrukh Mahmood ◽  
Adeel Ahmed Sheikh
Keyword(s):  
Exchange Rate ◽  
Panel Data ◽  
Developing Economies ◽  
Exchange Rate Volatility ◽  
Domestic Consumption ◽  
Aggregate Consumption ◽  
Developed Economies ◽  
Panel Data Estimation ◽  
The Exchange Rate ◽  
Data Estimation

The current study endeavors to explore the effects of oscillations in the exchange rate on the household aggregate consumption of developed, emerging, and developing economies, employing the panel data from 1995 to 2017. To select an appropriate panel data estimation technique, we apply Brush-Pagan & Hausman Tests for each set of chosen economies. Further, our study deduces that, in the case of developed economies, the oscillations in the exchange rate, significantly, affect the domestic consumption, supporting Alexander’s (1952) conjecture. However, in the case of emerging and developing economies, aggregate consumption does not respond to the exchange rate volatility.

Pricing currency options in the Heston/CIR double exponential jump-diffusion model

2017 ◽  
Vol 04 (01) ◽  
pp. 1750013 ◽  
Author(s):  
Rehez Ahlip ◽  
Laurence A. F. Park ◽  
Ante Prodan
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Analytical Formula ◽  
Jump Diffusion ◽  
Stochastic Volatility Model ◽  
Currency Options ◽  
Volatility Model ◽  
Double Exponential ◽  
Jump Diffusion Model ◽  
The Exchange Rate

We examine currency options in the double exponential jump-diffusion version of the Heston stochastic volatility model for the exchange rate. We assume, in addition, that the domestic and foreign stochastic interest rates are governed by the CIR dynamics. The instantaneous volatility is correlated with the dynamics of the exchange rate return, whereas the domestic and foreign short-term rates are assumed to be independent of the dynamics of the exchange rate and its volatility. The main result furnishes a semi-analytical formula for the price of the European currency call option in the hybrid foreign exchange/interest rates model.

scholarly journals Measuring the relationship between the balance of payments and the exchange rate - A case study of a group of Arab countries during the period 2000/2016-

2018 ◽  
Vol 2 (2) ◽  
pp. 44-66
Author(s):  
Abd Elouahid SERARMA ◽  
Newfel BAALOUL
Keyword(s):  
Exchange Rate ◽  
Empirical Studies ◽  
Arab Countries ◽  
Balance Of Payments ◽  
Rate System ◽  
Exchange Rate System ◽  
Independent Variable ◽  
The Exchange Rate ◽  
The Relationship

The Objective of this study is to examine the effect of exchange rate system on the balance of payments, with a case study of a group of Arab countries. First we shed light on the most important theoretical and empirical studies of exchange rate systems and their macroeconomics effects in one hand. In the other hand we study a case of six oil exporting Arab countries. To achieve this purpose we adopted a panel data and run an econometric model to examine the relationships between the variables during the period 2000 to 2016. The study concluded that there is a significant positive correlation between the exchange rate as an independent variable and the balance of payments as a dependent variable, and there is no deference in the effects of the exchange system in the study of six Arab economies.

scholarly journals r minus g negative

2020 ◽  
Vol 20 (52) ◽  
Author(s):  
Paolo Mauro ◽  
Jing Zhou
Keyword(s):  
Interest Rates ◽  
Emerging Economies ◽  
Global Financial Crisis ◽  
Borrowing Costs ◽  
Debt Dynamics ◽  
High Government ◽  
Traditional Assumption ◽  
Historical Database ◽  
Sovereign Defaults ◽  
The Global Financial Crisis

Contrary to the traditional assumption of interest rates on government debt exceeding economic growth, negative interest-growth differentials have become prevalent since the global financial crisis. As these differentials are a key determinant of public debt dynamics, can we sleep more soundly, despite high government debts? Our paper undertakes an empirical analysis of interestgrowth differentials, using the largest historical database on average effective government borrowing costs for 55 countries over up to 200 years. We document that negative differentials have occurred more often than not, in both advanced and emerging economies, and have often persisted for long historical stretches. Moreover, differentials are no higher prior to sovereign defaults than in normal times. Marginal (rather than average) government borrowing costs often rise abruptly and sharply, but just prior to default. Based on these results, our answer is: not really.

scholarly journals Effect of some economic indicators on external debt in Sudan from 2002-2017: أثر بعض المؤشرات الاقتصادية على الدين الخارجي في السودان للفترة 2002-2017

2019 ◽  
Vol 3 (12) ◽  
Author(s):  
Gosay Mahgoub mohammedsalih Baba,  Abdulazim Suliman Almahal
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Interest Rates ◽  
Current Account ◽  
South Sudan ◽  
External Debt ◽  
Balance Of Payments ◽  
Independent Variables ◽  
High Interest ◽  
Paris Club

    aim to determine the type and tracks of the correlation between variables of deficit of government budget، current account deficit of the balance of payments، exchange rate، Gross Domestic Product(GDP) on the total external debt and clarify the impact of separation or independence of South Sudan in September 2011،also the financial crisis in 2008 on variables of paper، the hypotheses included a positive correlation & impact between the independents variables deficit variables in the general budget and the deficit in the current account of balance of payments، GDP on dependent variable external debt of Sudan as the inverse correlation & impact between the exchange rate with total external debt for the period 2006-2017،used historical approach to describe reasons and evolution of the external debt problem of Sudan causes، in addition، analytical descriptive method by correlation test between the independent variables and the dependent variable to determine the relationship type، also used multiple regression model in measuring and estimating the effect of independent variables on the dependent. The results outcome،the cumulative value of bilateral debt and high interest rates (contractual interest and delayed interest) significantly affect the accumulation of Sudan's total foreign debt،،maintain both the deficits in budget and in current account also GDP values a positive correlation of statistical significance and a degree of impact on Sudan's external debt، with Reverse correlation exchange rate، caused from Both of the world financial crisis and the independence of South Sudan in 2011 the، indirect impact on the external debt through its effect of increasing the value of the dollar with a decline of local currency and increasing the budget deficit and its impact on external debt، However، refers the weakness of impact in current account due to growth of gold exports in the period under study. Also the high ratio of bilateral debt owed to non-members of the Paris Club and its high interest rates it is complicated possibility of a solution through the HIPC and others initiatives، The necessary of structural reforms in economic policies by focusing on supporting national production elements as to overcome the obstacles of domestic investment and the abolition of taxes and customs on Alumni projects، microfinance projects، exporters projects as well as trying to follow a rational economic policy using foreign loans in the narrowest limits، and focus on loans on concessional terms،necessary to create an economic partnership between Sudan and creditors countries focus of largest proportion of debts، which is the official bilateral debt (non-members of the Paris Club)، to promote and facilitate the position of Sudan in negotiation of initiative of the HIPC or With regard of interest rate because it is largest and most significant obstruction in Sudan external debt.    

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