Currency regimes and external competitiveness: the role of institutions, trade agreements and monetary frameworks

2021 ◽  
pp. 1-30
Author(s):  
Zunaira Aman ◽  
Sushanta Mallick ◽  
Ilayda Nemlioglu
Keyword(s):  
Inflation Targeting ◽  
Trade Agreements ◽  
Real Effective Exchange Rate ◽  
Policy Framework ◽  
Financial Openness ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Monetary Policy Framework

Abstract The literature lacks consensus on the role of currency regimes in explaining external competitiveness. Countries not only differ in terms of currency regimes, but can also have different institutional arrangements, namely trade agreements and inflation targeting (IT) frameworks in addition to the overall quality of governance. Hence, using the real effective exchange rate and by covering 35 developing countries over the period 1975–2014, we investigate the role of currency regimes in explaining the degree of misalignment while considering institutional factors. First, we find that intermediate regimes limit the currency misalignment with greater financial openness (FO). Second, non-reciprocal preferential trade agreements improve price competitiveness, whereas free trade and reciprocal ones can only be beneficial with a higher degree of FO. Third, misalignments in fixed regimes decline in the presence of stronger institutions or in countries with an IT type of monetary policy framework. The above results remain robust to alternative specifications.

Calculation and Application of the Real Effective Exchange Rate in the Monetary Policy Framework

2006 ◽  
pp. 65-74
Author(s):  
A. Navoi
Keyword(s):  
Exchange Rate ◽  
Transition Economy ◽  
Real Effective Exchange Rate ◽  
Policy Framework ◽  
The Real ◽  
Exchange Rate Dynamics ◽  
Economic Interpretation ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Monetary Policy Framework

The theory and principles of construction of basic derived indicators of exchange rate dynamics, their economic interpretation and tendencies in the real effective exchange rates dynamics in the countries with transition economy, including Russia, are considered in the article. It is attempted to generalize the methods adopted in the international practice in calculating the real effective exchange rate, to ground the efficiency of the approaches to calculation of basic derived indicators of the rouble’s exchange rate dynamics adopted by Bank of Russia, to estimate the prospects of dynamics of the real effective exchange rate of the rouble.

The czech embarrassment of inflation targeting in transition

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Martin Mandel ◽  
Vladimír Kosmata
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Framework ◽  
The Third ◽  
Interest Rate Volatility ◽  
Monetary Targeting ◽  
Theoretical Assumptions ◽  
National Bank ◽  
Monetary Policy Framework

In 1998 the Czech National Bank (CNB) changed its monetary policy framework and started to target inflation. The article discusses main theoretical aspects of inflation targeting and some practical problems with implementation of inflation targeting. The main characteristics of the inflation and monetary targeting are described in the first and second part. The third part deals with practical issues connected with inflation targeting (number of countries using inflation targeting, quality of inflation predictions, inflation and interest rate volatility). In the final part the CNB monetary policy function is estimated and the results are compared with the theoretical assumptions of the inflation targeting.

scholarly journals Real Effective Exchange Rate: A Transmission Channel for the Impact of Economic Growth on Exports in Vietnam

2016 ◽  
Vol 23 (01) ◽  
pp. 121-136
Author(s):  
Hiep Nguyen Quang ◽  
Nha Nguyen Thi
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Positive Impact ◽  
Real Effective Exchange Rate ◽  
Var Model ◽  
Transmission Channel ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

This article analyzes the role of real effective exchange rate as a transmission channel for the impact of economic growth on Vietnam’s exports. Using quarterly data for the period of 1994–2013, the analysis results show that economic growth, real effective exchange rate (REER), and exports tend to fluctuate in the same direction. Furthermore, according to the results of the VAR model, economic growth impacts on and promotes export growth through increased productivity that improves the competitive advantage of products. The exchange rate, as an important channel, allows for a positive impact of economic growth on exports in Vietnam.

The Role of Manufacturing Sector in Economic Diversification of Nigeria (1986-2016)

2021 ◽  
pp. 1-8
Author(s):  
Musa Ize Nana ◽  
◽  
kyarem N Richard ◽  
Zubair A Zulaihatu ◽  
◽  
...  
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Direct Investment ◽  
Manufacturing Sector ◽  
Real Effective Exchange Rate ◽  
Economic Diversification ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate

It is widely accepted that an effective manufacturing sector serve as perfect tool for export diversification in developing countries. Therefore, this study investigated the role of manufacturing sector on economic diversification in Nigeria from the period of 1986-2016. In order to achieve the objective of the study, ARDL technique was employed to establish long-run relationship between diversification proxy by Theil index decomposed into Theil Total (TT), Theil Between (TB) and Theil Within (TW) and Manufacturing sector which was proxy by Manufacturing Capacity Utilization(MCU) and Manufacturing Value Added (MVA) controlled by Gross Fixed Capital Formation (GFCF), Foreign Direct Investment (FDI) and Real Effective Exchange Rate (REER). The result revealed that long-run relationship exist among the estimated variables in the three models. MCU, MVA and GFCF promote total diversification and horizontal diversification in the long-run but the coefficients of MCU and MVA are insignificant. On the other hand, only Foreign direct investment and real effective exchange rate promote vertical diversification. The study recommended protection of infant industries, local sourcing of raw materials for production, Government programs that encourage competition among manufacturers in Nigeria and improved infrastructural development in order to enhance the productivity of the manufacturing sector in Nigeria that will position it for global competitiveness

scholarly journals Restoring international competitiveness in Croatia: The role of fiscal and monetary policy

2013 ◽  
Vol 58 (199) ◽  
pp. 39-55
Author(s):  
Tomislav Coric ◽  
Hrvoje Simovic ◽  
Milan Deskar-Skrbic
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Fiscal Policy ◽  
International Competitiveness ◽  
Real Effective Exchange Rate ◽  
Labour Costs ◽  
Unit Labour Costs ◽  
Effective Exchange ◽  
Effective Exchange Rate

Croatia has joined the European Union as a country with several substantial structural problems, of which the most important is weak competitiveness. Although competitiveness can be viewed from the ?institutional? perspective, which includes World Development Indicators (WDI) and Doing Business reports, in this paper the authors focus on the more standard view of competitiveness based on unit labour costs (ULC) and real effective exchange rate (REER). As a small, open and highly dollarized/euroised economy that has to coordinate its economic policy with the EU policy framework, Croatia has limited space for increasing international competitiveness using monetary policy measures aimed at (nominal) devaluation of the national currency. Therefore economic policy stakeholders should focus on decreasing unit labour costs and real effective exchange rate mainly through the process of internal devaluation, which is based on adequate fiscal policy measures. In this paper the authors analyse the role of monetary and fiscal policy in the deteriorating real effective exchange rate and unit labour costs since 2000, and their current capabilities and restrictions in restoring international competitiveness. The Structural VAR model (SVAR) is used to estimate the effects of foreign (banking) capital, credit growth, and current public expenditure on REER and ULC. The preliminary hypothesis of the paper is that monetary policy should continue to support bank lending activities and the role of fiscal policy is to achieve an internal devaluation, which will increase the competitiveness of the Croatian economy. Restoring international competitiveness is necessary due to its impact on net exports and consequently the economic recovery of the national economy, which has faced recession conditions for five years in a row. Also, restoring competitiveness is one of the most important preconditions for the success of a small country joining the single European market.

Responses of Monetary Policy to Inflation, the Output Gap, and Real Exchange Rates: The Case of Australia, Canada, and New Zealand

2010 ◽  
Vol 10 (2) ◽  
pp. 1850196 ◽  
Author(s):  
Bruno S. Sergi ◽  
Yu Hsing
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
New Zealand ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Real Exchange Rates ◽  
Real Effective Exchange Rate ◽  
Output Gap ◽  
Effective Exchange ◽  
Effective Exchange Rate

This study shows that the policy rate reacts positively to the inflation rate, the output gap, and the lagged real effective exchange rate for Australia, Canada, and New Zealand and negatively to the current real effective exchange rate for Australia and Canada. The inflation rate has a greater impact on the policy rate for New Zealand than for Australia and Canada whereas the output gap has a greater effect on the policy rate for Australia and Canada than for New Zealand. Since the adoption of inflation targeting, the intercept of the monetary-policy function has decreased in each of the three countries, and the slope coefficient of the inflation rate has increased for Australia and New Zealand but has decreased for Canada.

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