EXCHANGE RATES AND MONETARY POLICY: MODELLING STERLING'S EFFECTIVE EXCHANGE RATE, 1972–80

1981 ◽  
Vol 33 (supp) ◽  
pp. 201-247 ◽  
Author(s):  
GRAHAM HACCHE ◽  
JOHN TOWNEND
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Effective Exchange ◽  
Effective Exchange Rate

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.

The UK Economy

1995 ◽  
Vol 152 ◽  
pp. 9-28
Author(s):  
Garry Young
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Narrow Range ◽  
Inflationary Pressure ◽  
Effective Exchange ◽  
The Uk ◽  
Effective Exchange Rate

The sterling exchange rate was unusually stable in the two years following its departure from the ERM in September 1992. In effective terms it fluctuated within a fairly narrow range around an average of about 89 on the new effective exchange rate index and this was approximately the level at which it ended 1994. Since then it has depreciated by over 5 per cent and at the time of writing (11 May) there is some uncertainty as to whether it will fall further. This largely unexpected depreciation is of sufficient size to influence the development of the UK economy and in particular to increase the amount of inflationary pressure at a time when there are doubts about whether monetary policy has been tightened enough to deal with that which already exists.

scholarly journals Remittances and The Real Effective Exchange Rate: Empirical Evidence from Kyrgyzstan

2017 ◽  
Author(s):  
Burulcha Sulaimanova ◽  
Daniyar Jasoolov
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Labor Migration ◽  
Large Scale ◽  
Real Effective Exchange Rate ◽  
Labor Migrants ◽  
The World ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

Since 2000 the volume of economic reasoned migration has been rapidly rising in Kyrgyzstan. The number of labor migrants currently working abroad counts around 600 thousand people or about 10% of the population of Kyrgyzstan. With growing pattern of labor migration, the amount of remittances has grown as well. According to the World Bank, Kyrgyzstan is on the first place in the world in terms of share of remittances in the GDP (34%) in 2016. The main remittance sending countries for 2005-2016 periods are the Russian federation and Kazakhstan. The large scale of migration outflow and remittances, making domestic economy of Kyrgyzstan dependent on external shocks, related with migration. For this reason, the purpose of this study is to examine the impact the high level of remittances inflow from labor migration on the exchange rates, particularly on the reel effective exchange rate of Kyrgyzstan for the period of 2005-2016. The empirical analysis was carried out with Cointegration model, and according to the results obtained, the remittances and real effective exchange rates have long run relationship.

scholarly journals EXCHANGE RATES ELASTICITY OF EXPORTS IN ASEAN: THE ROLE OF GLOBAL VALUE CHAINS

2021 ◽  
Vol 15 (1) ◽  
pp. 1-26
Author(s):  
Defy Oktaviani ◽  
Nagendra Shrestha
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Value Chain ◽  
The Philippines ◽  
Least Square ◽  
Real Effective Exchange Rate ◽  
Global Value Chain ◽  
Dummy Variable ◽  
Effective Exchange ◽  
Effective Exchange Rate

Abstrak Perdebatan tentang pelemahan hubungan antara nilai tukar dan ekspor telah meningkat dalam beberapa tahun terakhir, dan meningkatnya tren perdagangan terkait rantai nilai global (Global Value Chain/GVC) diasumsikan menjadi sumber melemahnya hubungan di antara keduanya. Dengan menggunakan data spesifik industri manufaktur, studi ini bertujuan untuk menyelidiki dampak GVC pada hubungan Nilai Tukar Efektif Riil (Real Effective Exchange Rate/REER) dan ekspor di empat negara ASEAN. Estimasi dilakukan menggunakan regresi Least Square Dummy Variable (LSDV) untuk periode sampel dari tahun 2009 hingga 2015. Hasil penelitian ini menunjukkan bahwa di Filipina, koefisien elastisitas nilai tukar ekspor dan partisipasi ke GVC tidak signifikan secara statistik. Sebaliknya di Indonesia dan Malaysia, secara rata-rata, integrasi ke GVC dengan berbagai pengukuran akan menurunkan elastisitas ekspor terhadap perubahan REER sekitar 70% sampai 89%. Lebih lanjut, estimasi terhadap data Thailand dan kelompok empat negara ASEAN menunjukkan bahwa partisipasi pada GVC mengubah nilai dan tanda elastisitas ekspor terhadap REER. Kata Kunci: Ekspor, Nilai Tukar, Rantai Nilai Global   Abstract The debate on the issue of the disconnected relationship between exchange rates and exports has risen in recent years, with the growing trend of Global Value Chain (GVC)-related trade assumed to be the source of the weakening link between them. By employing manufacturing industry-specific data, this study aims to investigate the impact of GVC on the nexus of the Real Effective Exchange Rate (REER) and exports in four ASEAN countries. The estimations are conducted using Least Square Dummy Variable (LSDV) regression for the sample period from 2009 to 2015. The findings of this study suggest that for the Philippines, the coefficients of exchange rate elasticity of export and participation to GVC are not statistically significant. Conversely, in the case of Indonesia and Malaysia, integration to GVC, with various measurements, will reduce the REER elasticity of exports by around 70% to 89% on average. Furthermore, the estimation data on Thailand and a group of four countries implies that the presence of GVC changes both the value and the sign of REER elasticity of exports. Keywords: Export, Exchange Rates, Global Value Chain JEL Classification: F14, F15, F31

A FORECASTING APPROACH TO REAL EFFECTIVE EXCHANGE RATE-OIL PRICE NEXUS IN CHINA

2020 ◽  
pp. 1-17
Author(s):  
HAMID BAGHESTANI ◽  
SEHAR FATIMA
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Moving Average ◽  
Real Exchange Rates ◽  
Oil Prices ◽  
Exchange Rate Policy ◽  
Real Effective Exchange Rate ◽  
Effective Exchange ◽  
Rate Policy ◽  
Effective Exchange Rate

Motivated by the theoretical link between real exchange rates and oil prices, we utilize a univariate moving average (MA) and an augmented MA (A-MA) model to generate multi-period forecasts of China’s real effective exchange rate for 2008–2018. The MA model utilizes past information in real exchange rates, and the A-MA model utilizes past information in both real exchange rates and oil prices. We show that the A-MA forecasts are unbiased and embody useful predictive information beyond that contained in the MA forecasts. In addition, the A-MA forecasts are directionally accurate under asymmetric loss. Such accurate forecasts are useful as inputs for policymakers to design an optimal real exchange rate policy to promote trade and attract foreign investment, and for foreign entities that regard China as an attractive environment for investing in various sectors.

scholarly journals Aggregate and sector-specific exchange rate indexes for the Portuguese economy

2009 ◽  
Author(s):  
Fernando Alexandre ◽  
Pedro Bação ◽  
João Cerejeira ◽  
Miguel Portela
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Strongly Correlated ◽  
Effective Exchange ◽  
Portuguese Economy ◽  
The Portuguese Economy ◽  
Effective Exchange Rate

In this paper, we compute and compare aggregate and sector-specific exchange rate indexes for the Portuguese economy. We find that alternative effective exchange rate indexes are very similar between them. We also find that sector-specific effective exchange rates are strongly correlated with aggregate indexes. Nevertheless, we show that sector-specific exchange rates are more informative than aggregate exchange rates in explaining changes in employment: whereas aggregate indexes are statistically insignificant in employment equations, regressions using sector-specific exchange rate indexes show a statistically significant and economically large effect of exchange rates on employment.

The volatility of tourism demand and real effective exchange rates: a disaggregated analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Laron Delano Alleyne ◽  
Onoh-Obasi Okey ◽  
Winston Moore
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Volatility ◽  
Real Effective Exchange Rate ◽  
Tourism Demand ◽  
Content Type ◽  
Effective Exchange ◽  
The Usa ◽  
Effective Exchange Rate ◽  
The Impact

Purpose One of the main factors that can impact the cost of holidays to a particular destination is the exchange rate; exchange rate fluctuations impact the overall price of the holiday and should be expected to effect tourism demand. This paper aims to scrutinize the volatility of the real effective exchange rate between the source market relative to the holiday destination and tourism demand volatility, where the influence of disaggregated data is noted. Design/methodology/approach The study uses multivariate conditional volatility regressions to simulate the time-varying conditional variances of international visitor demand and exchange rates for the relatively mature Caribbean tourist destination of Barbados. Data on the country’s main source markets, the UK, the USA and Canada is used, where the decision to disaggregate the analysis by market allows the authors to contribute to policymaking, particularly the future of tourism marketing. Findings The volatility models used in the paper suggests that shocks to total arrivals, as well as the USA and UK markets tend to die out relatively quickly. Asymmetric effects were observed for total arrivals, mainly due to the combination of the different source markets and potential evidence of Butler’s (1980) concept of a tourist area’s cycle of growth. The results also highlight the significance of using disaggregated tourism demand models to simulate volatility, as aggregated models do not adequately capture source market specific shocks, due to the potential model misspecification. Exchange rate volatility is postulated to have resulted in the greater utilization of packaged tours in some markets, while the effects of the market’s online presence moderates the impact of exchange rate volatility on tourist arrivals. Markets should also explore the potential of attracting higher numbers of older tourist, as this group may have higher disposable incomes, thereby mitigating the influence of exchange rate volatility. Research limitations/implications Some of the explanatory variables were not available on a high enough frequency and proxies had to be used. However, the approach used was consistent with other papers in the literature. Practical implications The results from the paper suggest that the effects of exchange rate volatility in key source markets were offset by non-price factors in some markets and the existence of the exchange rate peg in others. In particular, the online presence of the destination was one of those non-price factors highlighted as being important. Originality/value In most theoretical models of tourism demand, disaggregation is not normally considered a significant aspect of the model. This paper contributes to the literature by investigating the impact real effective exchange rate volatility has on tourism demand at a disaggregated source country level. The approach highlights the importance of modeling tourism demand at a disaggregated level and provides important perspective from a mature small island destination.

The Sterling Effective Exchange Rate and Other Measures of UK Competitiveness

2005 ◽  
Vol 191 ◽  
pp. 54-63 ◽  
Author(s):  
Ray Barrell ◽  
Amanda Choy ◽  
Dawn Holland ◽  
Rebecca Riley
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rates ◽  
Relative Prices ◽  
Bilateral Exchange ◽  
Nominal Exchange Rates ◽  
Exchange Rate Movements ◽  
Effective Exchange ◽  
Summary Measures ◽  
Effective Exchange Rate

Movements in exchange rates attract much attention, both for the signals they may contain about future inflation prospects and for their implications for the competitiveness of firms. However, movements in bilateral exchange rates, for instance in sterling against the dollar or the euro, do not convey enough information for either policymakers or for firms except in relation to specific bilateral transactions. It is useful to construct summary measures of exchange rate movements, and there are a number of ways of doing this. The choice of measure depends upon the use to which it is to be put. Some measures, such as the effective exchange rate, are summary indicators, whilst others such as export competitive indices are more relevant when evaluating the prospects for export developments. Some indicators weight together nominal exchange rates. Others are measures of real exchange rates, weighting together exchange rate adjusted relative prices. The indicators chosen should be seen in the context in which they are used.

scholarly journals Calculation Methodology of the Effective Exchange Rate in Slovenia

2020 ◽  
Vol 12 (2) ◽  
pp. 20-37
Author(s):  
Črt Lenarčič ◽  
Sowmya Gayathri Ganesh
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
European Commission ◽  
Global Economy ◽  
Export Sector ◽  
Calculation Methodology ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Imf

The paper sets up a calculation of the effective exchange rate for Slovenia, and compares it to the methodologies used by the IMF, BIS, European Commission and ECB. Additionally we construct smaller regional effective exchange rates that help to explain the robustness of the Slovene export sector, especially in the cooling-off period of the global economy in recent years. The results show that some of the calculation methodologies can overshoot less favourable competitiveness dynamics. It is important to consider these results as different methodologies could draw different policy conclusions for the competitiveness stance of the Slovene economy.

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.

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