Exchange rate effect on money demand in Pakistan

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Iffat Zehra ◽  
Muhammad Kashif ◽  
Imran Umer Chhapra
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Demand Model ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Nardl Model

PurposeThis paper aims to examine association of money demand with key macroeconomic variables in Pakistan. The paper also investigates the asymmetric effect of real effective exchange rate (REER) on money demand.Design/methodology/approachThe study employs both linear autoregressive distributed lag (ARDL) and non-linear autoregressive distributed lag (NARDL) model. Annual data from 1970 to 2018 is used which is subjected to non-linearity through partial sum concept. Empirical analysis is conducted to prove if money demand is influenced by currency appreciation or depreciation, for long and short run.FindingsCointegration test indicates existence of a long-run relationship between money demand and its determinants. Results from NARDL model suggest negative relation between money demand and inflation in long and short run. Real income shows positive but a very minimal and insignificant effect on money demand in long and short run. Impact of call money rates is statistically significant and negative on M1 and M2. Wald tests and differing coefficient sign confirm presence of asymmetric relation of REER in long run with M2, whereas in short run we observe a linear, symmetrical relation of REER with M1 and M2. Stability diagnostic tests (CUSUM and CUSUMSQ) verify stability of M2 demand model in Pakistan.Practical implicationsResults signify that role of money demand is imperative as a monetary policy tool and it can be utilized to achieve objective of price stability. Additionally, exchange rate movements should be critically examined by monetary authorities to avoid inflationary pressures resulting from an increase in demand for broad monetary aggregate.Originality/valueThe paper contributes to scarce monetary literature on asymmetrical effects of exchange rate in Pakistan. Impact of variables has been studied through linear approach, but this paper is unique since it attempts to explore non-linear relationships.

scholarly journals EVIDENCE OF AN ASYMMETRIC IMPACT OF THE DEVALUATION OF CURRENCY ON INFLATION:

2019 ◽  
Vol 4 (1) ◽  
pp. 101-103
Author(s):  
Ahmed Balarabe Musa
Keyword(s):  
Exchange Rate ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Lag Model ◽  
Asymmetric Impact ◽  
The Impact

The research is aimed at evaluating the existence of asymmetry or otherwise of the impact of devaluation of currency on inflation in Malaysia for the period 1970 – 2017. Non-linear autoregressive distributed lag model (NARDL) was used as the evaluation econometric tool of the research. The findings of the study reveal that devaluation of currency has an inflationary impact in both short run and long run. Whereas, revaluation of currency does not have any impact neither in the short run nor in the long run. This confirms the upward flexibility of the impact of the increases in the changes in the exchange rate on inflation at the same time reaffirms its rigidity downward.

scholarly journals Asymmetric Effects of Exchange Rate on Monetary Policy in Emerging Countries: A Non-Linear ARDL Approach in Uganda

2020 ◽  
Vol 7 (5) ◽  
pp. 24
Author(s):  
Allan Kayongo ◽  
Asumani Guloba ◽  
Joseph Muvawala
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Economic Uncertainty ◽  
Ardl Model ◽  
Real Money ◽  
Asymmetric Effects ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Exchange Rate Depreciation

Many money demand studies have been carried out on Uganda, however, these studies perceive and incorporate exchange rate as a linear determinant of real money demand. Indeed, exchange rate may have asymmetric effects on real money demand; with exchange rate appreciation having different effects from exchange rate depreciation. Therefore, this is the first study to estimate exchange rate asymmetries in Uganda, for the period 2008Q3 and 2018Q4. The study uses both the linear ARDL and non-linear ARDL methodologies to accomplish its goal. This is also done by incorporating an economic uncertainty index, which is critical, especially in light of the novel global coronavirus pandemic, that has disrupted trade, movement and supply chains. The error correction terms of both models are negative and significant, with the one of the non-linear ARDL twice as much as that of the linear ARDL. Indeed, the study confirms the existence of exchange rate asymmetries on Uganda’s real money demand. In the linear ARDL model, exchange rate has a positive effect in the long run but a negative result in the short run. On one hand, the non-linear ARDL model reveals that an exchange rate depreciation of the Uganda Shillings negatively affects real money demand in the short run. On the other hand, an exchange rate appreciation positively effects real money demand. Notably, economic uncertainty has insignificant effects in both models, except for its lags in the non-linear model. The implication of these findings is that macro-economic policy management in Uganda should be cognizant of these asymmetric effects of exchange rate, for effective planning, policy and implementation.

scholarly journals DYNAMIC EFFECTS OF REMITTANCES ON EXTERNAL RESERVES IN NIGERIA: THE ROLE OF INFLATION AND STRUCTURAL BREAKS

2019 ◽  
Vol 13 (1) ◽  
pp. 119-141
Author(s):  
E. A. OLUBIYI ◽  
A. RAHEEM ◽  
A. A. ADEMOKOYA
Keyword(s):  
Exchange Rate ◽  
Structural Breaks ◽  
Flexible Exchange Rate ◽  
Jel Classification ◽  
Additional Information ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Floating Exchange Rate ◽  
Short Run

This study provides additional information about the drivers of external reserves in Nigeria.  The result using Autoregressive Distributed Lag (ARDL) model estimation approach for the period 1980-2015 shows that remittances, among other macroeconomic variables, increased external reserves in the short run but weakens it in the long run. Remittances depletes external reserves through its effect on inflation rate and the nonsterilized intervention of the Central Bank.  Furthermore, regime shift to relatively floating exchange rate causes remittances to increase reserves.  From the foregoing, it is important for the authorities to continue operating relatively flexible exchange rate, and curtail excessive spending of remittances.   Keywords: , , , , . JEL Classification: F31, F24, C22, F31  

FAKTOR-FAKTOR YANG MEMPENGARUHI NILAI IMPOR KEDELAI INDONESIA

2014 ◽  
Vol 8 (1) ◽  
pp. 117-138 ◽  
Author(s):  
Aziz Muslim
Keyword(s):  
Time Series ◽  
Exchange Rate ◽  
Soybean Oil ◽  
Secondary Data ◽  
Cointegration Analysis ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Government Role ◽  
Short Run

Kajian ini bertujuan untuk menentukan faktor-faktor yang mempengaruhi impor kedelai Indonesia. Data yang digunakan adalah data sekunder berbentuk time series, diolah dan dianalisis dengan metode estimasi dan kointegrasi Autoregressive Distributed Lag (ARDL). Hasil penelitian menunjukkan bahwa faktor-faktor yang mempengaruhi impor kedelai Indonesia dalam jangka pendek adalah impor kedelai sebelumnya, harga kedelai USA, harga minyak kedelai Argentina, dan nilai tukar Rupiah. Dalam jangka panjang faktor yang berpengaruh adalah harga minyak kedelai Argentina, PDB Indonesia, dan nilai tukar Rupiah. Kajian ini merekomendasikan bahwa mekanisme pengamanan stok kedelai maupun minyak kedelai bermanfaat untuk menjaga ketersediaan pangan dalam negeri. Peran aktif pemerintah dalam mengamankan stok kedelai nasional serta pengumpulan data-data tentang impor kedelai merupakan tuntutan yang mendesak. Untuk menjaga kestabilan harga dan pasokan kedelai dalam negeri perlu ada upaya untuk mendiversifikasi negara asal impor. The aim of this study is to determine the factors that affect Indonesia’s imports of soybean. The study utilized time series secondary data and Autoregressive Distributed Lag (ARDL) cointegration analysis. The results reveal that in the short run Indonesia’s import of soybean are influenced by Indonesia's soybean imports in the previous year, price of USA’s soybean, Argentina’s soybean oil price, and the Rupiah exchange rate. In the long run Indonesia’s imports of soybean are influenced by Argentina’s soybean oil, Indonesia GDP, and the Rupiah exchange rate. This study recommends that mechanism to maintain soybean stocks demanded is useful for food security.Therefore Government role is important in providing the accurate data on soybean stock, and diversification of the country of origin is crucial to maintain price stability and supply continuity in the country

Dynamic Effects of Exchange Rate Movements on Productivity Levels: New Evidence From Nigeria Based on NARDL

2021 ◽  
pp. 245513332110507
Author(s):  
Emmanuel Uche ◽  
Sunday Ikedinobi Nwamiri
Keyword(s):  
Exchange Rate ◽  
Output Growth ◽  
Distributed Lag ◽  
Dynamic Relationship ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Depreciation

The dynamic relationship between exchange rate movements (appreciation and depreciation) and macroeconomic fundamentals had preoccupied the minds of researchers across the globe. Consequently, extensive research works have been conducted to unravel the puzzle; however, the findings remain inconclusive. The inconclusiveness of these researches may not be unconnected with the choice of model, the omission of key variables and erroneous assumption of symmetric interrelationships of the variables. To mitigate such error and fill the observed research gaps, this study leveraged on the non-linear autoregressive distributed lag to trace the possible asymmetric pass-through of the exchange rate to output growth in Nigeria. The study made use of monthly time series for the period 2000M1–2018M12 for empirical estimations. The empirical findings reveal an asymmetric pass-through from exchange rate to productivity. Exchange rate depreciation led to output retardation in the short run, but neither appreciation nor depreciation of the exchange affected output in the long run. The findings highlight that exchange rate depreciation of the local currency does not improve the country’s productivity. This reveals a disconnection and misalignment between exchange and productivity in Nigeria. The findings call for proper alignment of the Naira exchange rate with the U.S. dollar for improved productivity in the economy.

scholarly journals Asymmetrical Linkages between Foreign Exchange and Stock Markets: Empirical Evidence through Linear and Non-Linear ARDL

2018 ◽  
Vol 11 (3) ◽  
pp. 51 ◽  
Author(s):  
Rabia Luqman ◽  
Rehana Kouser
Keyword(s):  
Time Series Data ◽  
Equity Markets ◽  
Series Data ◽  
Policy Makers ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Daily Time

The symmetrical relationship between currency and equity markets has gained much attention among academicians and policy makers in the recent era. Many studies conducted on this relationship have concluded that there is short-run relationship between these variables and found less evidence about a long-run relationship. Moreover, all previous studies supposed the linear or symmetrical relationship between these variables. In this study, we use daily time series data from G8+5 countries and Pakistan for 2000–2016 and apply linear and non-linear autoregressive distributed lag (ARDL) to check the symmetrical and asymmetrical relationship between currency and equity markets. Results have shown that there are asymmetrical linkages between the currency and equity markets.

Growth impact of CO2 emissions caused by tourist arrivals in Turkey

2016 ◽  
Vol 8 (1) ◽  
pp. 19-37 ◽  
Author(s):  
Vedat Yorucu
Keyword(s):  
Error Correction ◽  
Error Correction Models ◽  
Content Type ◽  
Foreign Tourist ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Dynamic Relationships ◽  
Long Run Equilibrium

Purpose – The purpose of this study is to analyze the determinants of changes in carbon dioxide (CO2) emissions for Turkey by utilizing the autoregressive distributed lag approach to investigate the long-run equilibrium relationships of CO2 emissions between foreign tourist arrivals (FTAs) and electricity consumption (ELC). The results reveal that foreign tourists and ELC are significant determinants of a long-run equilibrium relationship with CO2 emissions from electricity and heat production and CO2 emissions from transport for Turkey, respectively. The results of the conditional error correction models (CECM) confirm that there are long-run causal relationships from the growing number of foreign tourist arrivals and the increase of ELC toward the growth of CO2 emissions during 1960-2010. The results of autoregressive distributed lag (ARDL) error correction models for CO2 emissions also validate significant dynamic relationships between CO2 emissions, ELC and tourist arrivals in the short run. Design/methodology/approach – ARDL modeling and Bounds test approach were used in this study. Findings – Rapid tourism development in Turkey has triggered CO2 emissions. The growth of CO2 emissions in Turkey threatens sustainability. The hypothesis of “The growth of CO2 emissions in Turkey” is validated. Tourist arrivals, ELC and CO2 emissions are co-integrated. CECMs confirm the growth of CO2 emissions during 1960-2010. ARDL modeling shows significant relationships between CO2 emissions and other variables. Originality/value – Results of ARDL error correction models for CO2 emissions validate the hypothesis that there are significant dynamic relationships between CO2 emissions, ELC and tourist arrivals in Turkey for the short run.

An empirical investigation of the relationship between the real exchange rate and net FDI inflows in Mauritius

2019 ◽  
Vol 11 (1) ◽  
pp. 63-74 ◽  
Author(s):  
Ashok Babubudjnauth ◽  
Boopendra Seetanah
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
The Impact ◽  
Time Series Methodology ◽  
Official Sources ◽  
The Relationship

Purpose The purpose of this paper is to find out the impact of real exchange rate on foreign direct investment (FDI) in Mauritius. Design/methodology/approach Autoregressive distributed lag time series methodology is used. Findings Real exchange rate depreciation enhances inflows of FDI in both the short and long run. Originality/value The research is original, and data used are from official sources.

Factors determining bank deposit growth in Turkey: an empirical analysis

2020 ◽  
Vol 14 (2) ◽  
pp. 121-132
Author(s):  
Ibrahim Nandom Yakubu ◽  
Aziza Hashi Abokor
Keyword(s):  
Money Supply ◽  
Banking Sector ◽  
Empirical Studies ◽  
Key Factors ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run

Purpose This paper aims to examine the key factors determining bank deposit growth in Turkey for the period 2000Q1–2016Q4. Design/methodology/approach The study employs the autoregressive distributed lag approach to investigate the effect of bank-level and macroeconomic factors on deposit growth. Findings The results reveal that bank stability, banking sector efficiency, broad money supply, economic growth, and inflation are significant determinants of deposit growth in the long run. The findings further show that in the short run, only branch expansion and broad money supply are relevant for bank deposit mobilization. Originality/value This paper departs from the extant empirical studies that focus on the determinants of individual savings behaviour in Turkey. Considering the short- and long-run time dimensions, the authors distinctively examine how bank characteristics influence deposit growth, thus presenting a relatively pioneering attempt in this context.

scholarly journals Short Term Portfolio Investment and BI Rate: Do They Determine the Stabilization of Rupiah Exchange Rate in Indonesia?

2019 ◽  
Vol 8 (1) ◽  
pp. 18
Author(s):  
Chenny Seftarita ◽  
Fitriyani Fitriyani ◽  
Cut Zakia Rizki ◽  
Diana Sapha ◽  
Abd. Jamal
Keyword(s):  
Exchange Rate ◽  
Stock Price ◽  
Short Term ◽  
Private Debt ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Stability ◽  
Portfolio Investments

This study aims to investigate the influence of short-term portfolio investments and BI interest rate on fluctuation of rupiah exchange rate in Indonesia. The data used is quarterly data from 2010 to 2016 collected from Indonesia Central Bank. Using the Autoregressive Distributed Lag (ARDL) method, the result showed that rupiah exchange rate was strongly influenced by shocks in the private debt securities, joint stock price index, and BI Rate, both in the long run and short run. Moreover, it is found that there was a short-run and long-run balance relationship between Short Term Portfolio Investments and BI rate against the rupiah exchange rate. Thus, it is recommended that in order to stabilize the exchange rate, it is necessary to maintain the stability of short-term portfolio investments.  

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