Rupee-Dollar Exchange Rate and Macroeconomic Fundamentals: An Empirical Analysis Using Flexible-Price Monetary Model

2011 ◽  
Vol 12 (2) ◽  
pp. 88-105
Author(s):  
C S Shylajan ◽  
Sreejesh S ◽  
Suresh K G
Keyword(s):  
Exchange Rate ◽  
Monetary Model ◽  
Macroeconomic Variables ◽  
Indian Context ◽  
Long Run ◽  
Macroeconomic Fundamentals ◽  
Short Run ◽  
Us Dollar ◽  
Casual Relationship ◽  
Test Result

This paper empirically investigates the link between Indian rupee-US dollar exchange rates and a set of macroeconomic fundamentals using flexible-price monetary model (FPMM) for the period 1996 M1 to 2010 M12. The Johanson-Juselius cointegration test result indicates the existence of long run relationship between exchange rate and the macroeconomic variables, implying the validity of FPMM model in Indian context even though there is no short run casual relationship exist in the VECM analysis.

scholarly journals Exchange Rates and Monetary Fundamentals: What Do We Learn from Linear and Nonlinear Regressions?

2014 ◽  
Vol 2014 ◽  
pp. 1-14 ◽  
Author(s):  
Guangfeng Zhang
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Correction Model ◽  
Exchange Rate Dynamics ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Short Run ◽  
Us Dollar ◽  
Linear And Nonlinear ◽  
Japanese Yen

This paper revisits the association between exchange rates and monetary fundamentals with the focus on both linear and nonlinear approaches. With the monthly data of Euro/US dollar and Japanese yen/US dollar, our linear analysis demonstrates the monetary model is a long-run description of exchange rate movements, and our nonlinear modelling suggests the error correction model describes the short-run adjustment of deviations of exchange rates, and monetary fundamentals are capable of explaining exchange rate dynamics under an unrestricted framework.

Exploring the relationship between macroeconomic indicators and sovereign credit default swap in Pakistan

2017 ◽  
Vol 18 (4) ◽  
pp. 368-380
Author(s):  
Abdul Rashid ◽  
Farooq Ahmad ◽  
Ammara Yasmin
Keyword(s):  
Exchange Rate ◽  
Credit Default Swap ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Credit Default ◽  
Macroeconomic Indicators ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate

Purpose This paper aims to empirically examine the long- and short-run relationship between macroeconomic indicators (exchange rates, interest rates, exports, imports, foreign reserves and the rate of inflation) and sovereign credit default swap (SCDS) spreads for Pakistan. Design/methodology/approach The authors apply the autoregressive distributed lag (ARDL) model to explore the level relationship between the macroeconomic variables and SCDS spreads. The error correction model is estimated to examine the short-run effects of the underlying macroeconomic variables on SCDS spreads. Finally, the long-run estimates are obtained in the ARDL framework. The study uses monthly data covering the period January 2001-February 2015. Findings The results indicate that there is a significant long-run relationship between the macroeconomic indicators and SCDS spreads. The estimated long-run coefficients reveal that both the interest rate and foreign exchange reserves are significantly and negatively, whereas imports and the rate of inflation are positively related to SCDS spreads. Yet, the results suggest that the exchange rate and exports do not have any significant long-run impact on SCDS spreads. The findings regarding the short-run relationship indicate that the exchange rate, imports and the rate of inflation are positively, whereas the interest rate and exports are negatively related to SCDS spreads. Practical implications The results suggest that State Bank of Pakistan should design monetary and foreign exchange rate polices to minimize unwanted variations in the exchange rate to reduce SCDS spreads. The results also suggest that it is incumbent to Pakistan Government to improve the balance of payments to reduce SCDS spreads. The findings also suggest that the inflation targeting policy can also help in reducing SCDS spreads. Originality/value This is the first study to examine the empirical determinants of SCDS spreads for Pakistan. Second, it estimates the short- and long-run effects in the ARDL framework. Third, it considers both internal and external empirical determinants of SCDS spreads.

Determinants of Workers’ Remittances in Nepal: An Empirical Study

2021 ◽  
Vol 3 (1) ◽  
pp. 126-140
Author(s):  
Naw Raj Bhatt ◽  
Melina Kharel
Keyword(s):  
Exchange Rate ◽  
Poverty Eradication ◽  
Exogenous Variables ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
Us Dollar ◽  
The Exchange Rate ◽  
External Sector ◽  
The Relationship

Background: Remittance has a crucial role in external sector stability, poverty eradication, and social as well as the human development of developing countries like Nepal. The determinants of remittance are widely discussed in the existing works of literature from altruism and portfolio approaches. Since the share of remittance in the current account, current transfer income, and forex reserve is significantly high, the study of major determinants of increasing remittance inflow is necessary. In this regard, this paper examines the relationship between remittance inflow, exchange rate, and workers outflow in Nepal. Objective: The main objective of this study was to examine the effect of the exchange rate and workers outflow on the remittance inflow of Nepal. Methods: This study employs the ARDL approach to co-integration to examine the relationship between remittance inflow as an endogenous variable and exchange rate and workers outflow as exogenous variables. Results: The coefficients of the exchange rate and workers outflow are significant and positive in long run as well as in the short-run whereas coefficients of the first lag value of workers outflow and remittance inflow itself are significant but negative. Conclusion: The significant and positive coefficient of exchange rate indicates that depreciation of Nepalese currency with US dollar (or rise in the exchange rate) rises the remittance inflow. Further, the remittance inflow also increases with an increase in workers outflow. The effect of the exchange rate on remittance is greater than that of workers outflow in both the long-run and short-run.

scholarly journals Determinants of Islamic Rural Bank Financing in Indonesia

JEJAK ◽  
2017 ◽  
Vol 10 (2) ◽  
pp. 273-288
Author(s):  
Arif Widodo ◽  
Istianah Asas
Keyword(s):  
Exchange Rate ◽  
Global Financial Crisis ◽  
Positive Impact ◽  
Impulse Response Function ◽  
Third Party ◽  
Correction Model ◽  
Macroeconomic Variables ◽  
Bank Financing ◽  
Long Run ◽  
Short Run

This research is designed to empirically investigate the determinants of Islamic rural banking financing in Indonesia after 2008 global financial crisis covering period 2009.1-2014.12. The methods applied in this research are Error Correction Model (ECM) and VAR/VECM. The results of ECM model demonstrate that the variable third party funds (DPK) and non-performing financing can significantly affect Islamic rural banking financing both in the short run and long run, while Return on Asset (ROA) and Profit-and-loss sharing does not have a significant influence. Islamic rural bank financing, however, was influenced by inflation and exchange rate as the proxy of macroeconomic variables in the short and long run. Furthermore, Impulse Response Function (IRF) and variance decomposition results show that Profit-and-loss sharing (PLS) has the largest positive impact to financing (39.08%), followed by third party fund (19.6%) and inflation (8.9%). While, the variables that contribute to reduce financing are non-performing financing (9.02%), followed by ROA (7.76%) and exchange rate (2.48%).

scholarly journals Exchange Rate Volatility and Its Implications on Macroeconomic Variables in East African Countries

2020 ◽  
Vol 7 (3) ◽  
pp. 145
Author(s):  
Nicas Yabu ◽  
Deogratius Kimolo
Keyword(s):  
Exchange Rate ◽  
Positive Impact ◽  
Export Performance ◽  
Exchange Rate Volatility ◽  
Mitigation Measures ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run ◽  
Lending Rates ◽  
The Exchange Rate

The study examines the extent of exchange rate volatility and its impact on key macroeconomic variables such as exports, FDI inflows, interest rate and inflation in Tanzania, Kenya and Uganda. The GARCH model is used to compute the extent of exchange rate volatility while the Panel Autoregressive Distributed Lag (ARDL) technique or pooled mean group (PMG) estimator was used to estimate the effects of exchange rate volatility on selected macroeconomic variables. The results indicate that volatility in the exchange rate is a real issue in all the sampled countries and is fundamentally driven by exports and FDI dynamics for the period under consideration. The results indicate a positive impact of the exchange rate volatility to export performance and lending rates in the long run. Exchange rate volatility appears to be detrimental to both export performance and leads to a reduction in lending rates in the short run. Also, the response of FDI to exchange rate volatility seems to be negative in the long run while in the short run the response from the volatility of real exchange rate seems is insignificant. Though not significant, the volatility of the exchange rate appears to have a positive impact on inflation. The study recommends that policymakers need institute mitigation measures which could smooth out excessive exchange rate volatility to minimize its likely impact on the economy. The study also indicated a need for the EAC countries to consider adopting inflation targeting monetary policy framework in order to contain inflation at the appropriate level.

scholarly journals Assessing Monetary Model of Exchange Rate Determination: Case of Indonesia

2020 ◽  
Vol 5 (6) ◽  
Author(s):  
Yuniarto Hadiwibowo ◽  
Raynal Yasni
Keyword(s):  
Exchange Rate ◽  
The United States ◽  
Monetary Model ◽  
Exchange Rate Determination ◽  
United States Dollar ◽  
Long Run ◽  
Fiscal Balance ◽  
Short Run ◽  
The Exchange Rate ◽  
Trade Partners

The main purpose of this paper is to assess the exchange rate determination in Indonesia after the Asian financial crisis. We use the Monetary Model to assess the prediction of the Indonesian Rupiah against the United States Dollar and other currencies of the largest trade partners of Indonesia. The models are the Flexible Price Monetary Model and the Sticky Price Monetary Model. We estimate short-run and long-run relationships using the Error Correction Model. The Monetary Model can explain partially the exchange rate variations, but the signs of money, income, and fiscal balance are not as expected. The causality may run from the exchange rate to money and price level.

scholarly journals Empirical Relationship between Macroeconomic Variables and Stock Prices of Indian Banking Sector: A Vector Error Correction Model Approach

2020 ◽  
Vol 12 (2) ◽  
pp. 189-198
Author(s):  
Aastha Khera ◽  
◽  
Neelam Dhanda ◽  
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Stock Prices ◽  
Banking Sector ◽  
Empirical Relationship ◽  
Correction Model ◽  
Macroeconomic Variables ◽  
Foreign Reserve ◽  
Long Run ◽  
Short Run

This existing study aims to investigate the relationship between Indian Bankingstock market prices and macroeconomic variables. The proxy for the Indian Banking stockmarket is Nifty Bank while Foreign Reserve, Exchange Rate (Indian vs US Dollar), Interestrate, and CPI are proxies of macroeconomic variables. Johansen Cointegration and VectorError Correction Model (VECM) on monthly data from January 2013 to July 2020 have beenapplied. Considering the results of cointegration, it is found that there is a long-run asso-ciation between the Indian Banking stock market and constituent macroeconomic variables.Next, the employment of VECM is done for inspecting long run and short-run causality.The result reveals long-run equilibrium in Indian commercial bankís stock prices comingfrom macroeconomic variables. This study has considerable imputations that investors candiversify their portfolio according to the ináuencing power of constituent selected macro-economic variables in the short run and the long run. Exchange rate and foreign reservesdrive the banking stock market in the short run whereas CPI and Interest rate do not createany signiÖcant impact.

scholarly journals Macroeconomic Variables Affecting Fish Production in Nigeria

2019 ◽  
Vol 9 (2) ◽  
pp. 216-230
Author(s):  
Edet Joshua Udoh ◽  
Sunday Brownson Akpan
Keyword(s):  
Exchange Rate ◽  
Fish Production ◽  
Demand Shocks ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run ◽  
Total Fish ◽  
Food Imports ◽  
The Stability ◽  
Aquaculture Production

The study is an attempt to examine the influence of macroeconomic variables on the growth of fishery sub-sector in Nigeria. The study covers the period from 1961 and 2017. The results apparently revealed that aquaculture production, artisanal fish production, and total fish production, grew exponentially at the rate of 8.90%, 3.75%, and 4.25% respectively. To be more precise, various other factors like, demand shocks, food imports, and variable exchange rate, affected artisanal fish production in the long-run; while exchange rate and demand shocks were significant in the short-run period. For the aquaculture production, demand shocks, credit potential, inflation, food imports, and exchange rate were some significant policy variables in the long-run; whereas demand shocks and exchange rate were also significant in the short-run period. Finally, as far as the total fish production is concerned, demand shocks, food imports, and exchange rate were significantly trending variables, both in the short and long-run periods. To promote fish production in Nigeria, fish imports should be gradually restricted and the economic system regulated to ensure the stability of naira exchange for the US dollar.

scholarly journals The Effect of Macroeconomic Factors on Stock Prices of Swiss Real Estate Companies

2016 ◽  
Vol 64 (6) ◽  
pp. 2015-2024 ◽  
Author(s):  
Marie Ligocká ◽  
Tomáš Pražák ◽  
Daniel Stavárek
Keyword(s):  
Interest Rate ◽  
Real Estate ◽  
Stock Prices ◽  
Causality Test ◽  
Macroeconomic Factors ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Macroeconomic Fundamentals ◽  
Short Run ◽  
Long Run Equilibrium

Stock values of companies listed on stock exchanges could be influenced by many factors. The aim of this article is to examine existence and character of relationship between stock prices of selected Swiss real estate companies and macroeconomic fundamentals (GDP, interest rate, price level). The existence of long-run equilibrium relationship between stock prices and macroeconomic fundamentals is tested with the Johansen cointegration. The short run dynamics between the variables is examined by Vector Error Correction modelling and the Granger causality test. During the period 2005 – 2014 we revealed a long‑run equilibrium for five of the six analyzed stocks. We also confirmed that macroeconomic variables and the interest rate in particular, can explain a long-run behavior of stock prices. By contrast, macroeconomic variables are usually short in explanation of short‑run dynamics of stock prices. However, the results differ substantially among the stocks and, hence, they prevent us from drawing any general conclusion for the entire real estate sector in Switzerland.

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