scholarly journals The effects of Japanese foreign exchange market interventions on the yen/U.S. dollar exchange rate volatility

2005 ◽  
Vol 14 (1) ◽  
pp. 27-39 ◽  
Author(s):  
Michael Frenkel ◽  
Christian Pierdzioch ◽  
Georg Stadtmann
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Exchange Market ◽  
Dollar Exchange Rate

Optimistic and pessimistic economic sentiments and US Dollar exchange rate

2021 ◽  
Author(s):  
Sonia Kumari ◽  
Suresh Kumar Oad Rajput ◽  
Rana Yassir Hussain ◽  
Jahanzeb Marwat ◽  
Haroon Hussain
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Ordinary Least Squares ◽  
Exchange Market ◽  
Dollar Exchange Rate ◽  
The Us ◽  
Short Run ◽  
Us Dollar ◽  
The Exchange Rate

This study investigates the affiliation of various proxies of economic sentiments and the US Dollar exchange rate, mainly focusing on the real effective exchange rate of USD pairing with three other major currencies (USDEUR, USDGBP, and USDCAD). The study has employed Google Trends data of economy optimistic and pessimistic sentiments index and survey-based economy sentiments data on monthly basis from January 2004 to December 2018. The study engaged Ordinary Least Squares (OLS) and Auto-Regressive Distributed Lag (ARDL) estimation techniques to evaluate the short-run and long-run effects of economy-related sentiments and macroeconomic variables on the exchange rate. The results from the study found that Economy Optimistic Sentiments Index (EOSI) and Economy Pessimistic Sentiments Index (EPSI) appreciate and depreciate the US Dollar exchange rate in the short-run, respectively. Our sentiment measures are robust to survey-based Michigan Consumer Sentiment Index (MSCI), Consumer Confidence Index (CCI), and various macroeconomic factors. The MSCI and CCI sentiments show a long-term impact on the foreign exchange market. This study implies that economic sentiments play a vital role in the foreign exchange market and it is essential to consider behavioral aspects when modeling the exchange rate movements.

scholarly journals Covered interest arbitrage opportunities in the South African foreign exchange market

1987 ◽  
Vol 18 (4) ◽  
pp. 209-214
Author(s):  
C. De J. Correia ◽  
R. F. Knight
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
South African ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Market ◽  
The South ◽  
Dollar Exchange Rate ◽  
Interest Parity ◽  
Interest Differential

The Interest Parity Theory states that in an efficient market, any interest differential between local and foreign sources of finance will be offset by the forward premium/discount. Therefore, opportunities to engage in profitable Covered Interest Arbitrage transactions will be eliminated quickly. The fall in the Rand/Dollar exchange rate resulted in many South African companies reporting substantial foreign exchange losses on offshore loans. Companies were attracted to foreign sources of finance because of lower foreign interest rates. The authors conclude, on the basis of empirical tests, that the forward Rand/Dollar exchange rate followed its interest parity value very closely over the period August 1983 - August 1985. Opportunities to engage in risk-free arbitrage activities were offset by related transaction costs. The South African foreign exchange market is efficient to the extent that risk-free profit opportunities did not exist for the period under review and therefore there was no benefit, after adjusting for risk, for South African management to borrow from offshore sources of finance.

Asymmetric effect of exchange rate volatility on trade in sub-Saharan African countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
James Temitope Dada
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Asymmetric Structure ◽  
Asymmetric Effect ◽  
Exchange Market ◽  
African Countries ◽  
Content Type ◽  
Sub Saharan

PurposeThe purpose of this study is to examine the effect of asymmetric structure inherent in exchange rate volatility on trade in sub-Saharan African countries from 2005 to 2017.Design/methodology/approach17 countries in sub-Saharan African Countries are used for the study. Exchange rate volatility is generated using generalised autoregressive conditional heteroscedacity (1,1), while the asymmetric components of exchange rate volatility are generated using a refined approach of cumulative partial sum developed by Granger and Yoon (2002). Two-step generalised method of moments is used as the estimation technique in order to address the problem of endogeneity, commonly found in panel data.FindingsThe result from the study shows the evidence of exchange rate volatility clustering which is strictly persistent in sub-Saharan African countries. The asymmetric components (positive and negative shocks) of exchange rate volatility have negative and significant effect on trade in the region. Meanwhile, the effect of negative exchange rate volatility is higher on trade when compared with the positive exchange rate volatility. Furthermore, real exchange rate has negative and significant effect on trade in sub-Saharan African countries.Research limitations/implicationsThe outcomes of this study are important for participants in foreign exchange market. As investors in foreign exchange market react more to the negative news than positive news, investors need to diversify their risk. Also, regulators in the market need to formulate appropriate macroeconomic policies that will stabilize exchange rate in the region.Originality/valueThis study deviates from extant studies in the literature by incorporating asymmetric structure into the exchange rate trade nexus using a refined approach.

scholarly journals Impact of Exchange Rate Management on the Nigerian Economic Growth: Empirical Validation

2019 ◽  
pp. 28-35
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Monetary Economics ◽  
Exchange Market ◽  
Central Bank Intervention ◽  
Foreign Exchange Intervention ◽  
International Money

Adewuyi, (2002). Balance of Payments Constraints and Growth Rate Differences under Alternative Police Regimes. Nigerian Institute of Social and Economic Research (NISER) Monograph Series No. 10, Ibadan, Nigeria. Adebiyi, M. A. (2007). An Evaluation of Foreign Exchange Intervention and Monetary Aggregates in Nigeria (1986-2003). The University of Munich Finance Journal, 4 (2),1-19. Aghin, P.; Bacchetta, P.; Ranciere, R. & Rogoff, K. (2006). Exchange rate volatility and productivity growth: The role of financial development. Journal of Monetary Economics, 56 (4), 494–51. Bonser-Neal, C. & Tanner, G. (1996). Central Bank Intervention and Volatility of Exchange Rates: Evidence from the Options Market. Journal of International Money and Finance, 18 (2), 23-45. Dominguez, K. (1990). Market Responses to Coordinated Central Bank Intervention. Carnegie Rochester Conference Series on Public Policy, 32 Dominguez, K. (1998). Central Bank Intervention and Exchange Rate Volatility. Journal of International and Finance, 15 (4). Dominguez, K & Frankel, J. A. (1993). Does Foreign Exchange Intervention matter? The Portfolio effect. American Economic Review, 83 (5), 231-259 Dubas, J.M., Lee, B.J., & Mark, N.C. (2005). Effective Exchange Rate Classifications and Growth. NBER Working Paper No. 11272 Frankel, J.A. ((1992). In search of the Exchange rate Premium: A Six-Currency Test assuming mean-variance optimization. Journal of International Money and Finance,1(2),19-32 Gosh, A. (1992). Is it Signinaling? Exchange Rate intervention and the Dollar Deutssche-Mark Rate. Journal of International Economics, 32(4), 45-67 Granger, C.W.J. & Newbold, P. 1974). Spurious regression in Econometrics, Journal of Econometrics 2 (4) 111-120. Harris R.G. (2002). New Economy and the Exchange Rate Regime. Centre for International Economics Studies, Discussion paper, No 111. Humpage, O. (1989). On the Effectiveness of Foreign Exchange Market Intervention. Federal Reserve Bank of Cleveland. Kaminsky, G & Lewis, K (1996). Does Foreign Exchange Intervention signal future monetary policy? Journal of Monetary Economics, 37(2), 66-89 Nwankwo (G.O) (1980). Money and capital markets in Nigeria Today. University of Lagos Press, Nigeria. Odusola A.F. and Akinlo, A.E. (2001). Output, Inflation, and Exchange Rate in Developing Countries: An Application to Nigeria. Developing Economies, 39(2). Oloyede, J. A. (2002). Principles of International Finance. Forthright Educational Publishers, Lagos. Rano-Aliyu S.U. (2009). Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation. Research Journal of International Studies 10(4) 23-45. Rognoff, K. (1984). The effects of sterilized intervention: An analysis of weekly data. Journal of Monetary Economics, 2 (2), 14-34. Sarno, L. & Taylor, M. P. (2001). Official intervention in the Foreign Exchange Market: Is it effective, and if so, how does it work? Journal of Economic Literature, 3(1), 39-56. Simatele, M.C.H.(2003). Financial Sector Reforms and Monetary Policy in Zambia. Ph.D Dissertation, Economics Studies, Department of Economics, School of Economics and Commercial Law, Goteborg University. Unugbro, A.O (2007). The Impact of Exchange Rate Fluctuation on Capital Inflow: The Nigerian Experience. The Nigeria Academic Journal of Social Sciences, 6(4),1-21

Volatility Spillover Structure of Stock and Foreign Exchange Market between Korea, Japan, and Hong Kong

2006 ◽  
pp. 162-182
Author(s):  
Masayuki Susai
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Foreign Exchange Rate ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Portfolio Risk ◽  
International Portfolio

Highly developed IT technology can be the source of volatility spillover between markets located in other countries. In this chapter, we investigate the interrelationship between stock returns in North East Asian countries and the effect of foreign exchange rate volatility on the interrelationship between stock returns. We bring out clear simultaneous interrelationship between stock return and foreign exchange volatility. Focusing on covariance of each asset returns, if we do not take foreign exchange rate volatility into account when we evaluate our international portfolio, the portfolio risk might be underevaluated. The analysis shows that foreign exchange market turbulence might be accompanied by increase in covariance between stock returns. Just after the Asian currency crisis, the relationship between stock returns and foreign exchange turbulence might have changed. For managing international portfolio risk, we should be aware of foreign exchange risk and structural change in covariance between stock returns.

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