Are stable cryptocurrencies exempted from impossible trinity?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dimitrios Koutsoupakis
Keyword(s):  
Exchange Rate ◽  
Peer Review ◽  
Price Variation ◽  
Content Type ◽  
The Us ◽  
Us Dollar ◽  
Asset Classes ◽  
Complete Catalogue ◽  
Empirical Framework

PurposeWhile monetary autonomy is self-explanatory for cryptocurrencies such as Bitcoin with predetermined supply path, it is of great interest to probe into the monetary structures of Stablecoins. In these supply contracts and expands and capital restrictions apply due to the existence of reserves as the exchange rate arrangement adheres to a price rule.Design/methodology/approachEver since the launch of Bitcoin and its offspring, examination of cryptocurrencies' trading activity from the empirical finance viewpoint has received much attention and continues to do so. The particular monetary arrangements found in Stable cryptocurrencies (colloquially referred to as Stablecoins), however, have not been properly (1) classified and (2) studied within an empirical international finance and banking context. This paper provides an empirical framework analogous to Impossible Trinity for exploring monetary arrangements across Stablecoins wherein reserves are held as price stability is targeted.FindingsThe study findings of existence of the degree of achievement along the three dimensions of the Impossible Trinity hypothesis, namely monetary independence, exchange rate stability and financial openness for a representative sample able to cover all varieties of Stablecoins, provide fresh empirical insights and arguments to this growing literature with respect to the success of their embedded exchange rate stabilization mechanisms. While the hypothesis can be supported for all cryptocurrencies in question, the trade-off combination among exchange rate stability, capital openness and monetary independence varies with the categorical types of Stablecoins.Research limitations/implicationsIf Stable cryptocurrencies, therefore, claim the role of global monetary assets freed from sovereign limits and national boundaries, it is critical to explore whether they adhere to traditional monetary frameworks. It goes without saying that in this work the author does not use a complete catalogue of all the available Stablecoins, rather a complete catalogue of all the possible asset classes of Stablecoins. While there is a significant difficulty in finding Algorithmic Stablecoins and, so far, there is plethora of Stable Token initiatives, a broader sample to further examine these under this paper's empirical framework is suggested. Enrichment of the robustness analysis by constructing additional proxies, possibly building time series for the proposed cmo1 subindex and using additional estimation methods is encouraged.Practical implicationsStablecoins have been developed aiming to address the issue of excessive price variation in cryptocurrencies such as Bitcoin. Holders of Stablecoins enjoy the combined advantages of using a blockchain-based digital infrastructure in fulfilling the functions of store of value and media of exchange and of using a traditional currency, which merely plays the role of the unit of account (and in some circumstances the trusted reserve to which is convertible to). Understanding the varieties of Stablecoins and quantifying the components for success of their price stabilization may result in designing better Stablecoins.Social implicationsBlockchain and cryptocurrencies have introduced new challenges to money and banking. Cryptocurrencies, which independently float such as Bitcoin, have gained the interest so far due to price variation that allows for gains. But these should be by far not considered to be a substitute to traditional means of payment. Lately, Stablecoins have increasingly gained attention for that USD Tether/Bitcoin pair (a Stablecoin pegged to the US dollar at parity) has outrun the US dollar/Bitcoin pair as the most traded pair in digital exchanges marking the strong position and high demand for Stablecoins.Originality/valueThis approach uncovers the varieties of Stablecoins with respect to their monetary constraints compared to the rest of the cryptocurrencies, which independently float. In this paper, the author provides a conceptual framework for the analysis of the exchange rate mechanisms conditional on Stablecoin asset classes accompanied with an empirical study from the monetary viewpoint. This is the first work in this attempt. The empirical framework employed is analogous to the traditional theory of international monetary economics referred to as Impossible Trinityz.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/JES-06-2020-0279

Hong Kong and Denmark will keep currency pegs

2015 ◽  
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Foreign Exchange ◽  
Medium Term ◽  
Content Type ◽  
The Us ◽  
Exchange Rate Arrangements ◽  
Exchange Markets ◽  
Us Dollar ◽  
Currency Pegs

Subject The longevity and outlook for currency pegs. Significance The abandonment of the Swiss franc's three-year-old peg to the euro on January 15 put into question the longevity of pegged exchange rate arrangements. It also highlights how unusual such arrangements are today. Impacts The SNB will still have to continue to intervene in foreign-exchange markets to stabilise the Swiss franc. The SNB move will not cause Danish authorities to stop pegging the Danish krone to the euro. The near- and medium-term longevity of the Hong Kong dollar peg to the US dollar will not be questioned.

Effects of exchange rate and income on the US bilateral trade with China under Chinese managed floating exchange rate system

2018 ◽  
Vol 11 (3) ◽  
pp. 236-246 ◽  
Author(s):  
Yongqing Wang
Keyword(s):  
Exchange Rate ◽  
Bilateral Trade ◽  
Trade Deficit ◽  
Rate System ◽  
Content Type ◽  
Long Run ◽  
The Us ◽  
Floating Exchange Rate ◽  
Exchange Rate System ◽  
Us Dollar

Purpose China’s exchange rate system remains a public concern. This paper aims to investigate the effects of the appreciation of the US dollar (or depreciation of Chinese Yuan) under China’s “managed floating exchange rate system” on the US bilateral trade deficit with China, the US exports to China and the US imports from China. Design/methodology/approach The author uses quarterly data from 2005Q3 to 2017Q3 and applies autoregressive distributed lags model to carry out the empirical analysis. Findings The results suggest that both the US and Chinese income are important determinants of the US bilateral trade deficit with China, the US exports to China and the US imports from China. Further, the appreciation of the US dollar with respect to Chinese currency may discourage the US exports to China, but will not considerably promote the US imports from China in the long run. Finally, the appreciation of the US dollar does not contribute significantly to the US trade deficit with China in the long run. Originality/value Policymakers may want to pay attention to the results of currency depreciation on bilateral trade flows and trade balance in both the short and the long run. The results are different. Policymakers may also want to keep the following in mind: both the US and Chinese income are vital factors of bilateral trade balance, exports and imports.

Attitude change toward the Chinese during the US-China trade conflict: examining the roles of social media news sharing and perceived news feed performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nicky Chang Bi ◽  
Yanqin Lu ◽  
Louisa Ha ◽  
Peiqin Chen
Keyword(s):  
Social Media ◽  
Peer Review ◽  
Attitude Change ◽  
Content Type ◽  
News Consumption ◽  
China Trade ◽  
The Us ◽  
The Impact ◽  
News Sharing

PurposeSocial media have become an increasingly important source for people to learn about politics and public affairs. The purpose of this study is to investigate the role of social media news sharing as a reasoning process of the O-S-R-O-R model and the moderation role of social media news performance on the association between news consumption and attitudinal changes.Design/methodology/approachA national survey was conducted in the US. The researcher recruited participants in the Qualtrics national panel by following the census adult demographic breakdown.FindingsThis study finds that social media news consumption on the US-China trade conflict is likely to lead Americans to change attitudes toward Chinese, and this relationship is mediated by social media news sharing. In addition, the indirect relationship via news sharing is found particularly strong among individuals who perceive social media news fair and balanced.Originality/valueThis study extends the literature by examining social media news engagement on the ongoing trade conflict between the US and China. It reveals that the impact of social media news consumption on people's attitudinal and behavioral changes depends on people's perceived news quality on these platforms. Theoretical contribution to the O-S-R-O-R model and practical implications to social media news are discussed in terms of the role that social media platforms play in attitude change.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/OIR-05-2020-0178

Assessment on RMB valuation – a triangular analysis approach

2014 ◽  
Vol 4 (1) ◽  
pp. 76-95 ◽  
Author(s):  
Peijie Wang ◽  
Bing Zhang
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Academic Research ◽  
Analytical Framework ◽  
Flexible Exchange Rate ◽  
Analysis Approach ◽  
Content Type ◽  
No Arbitrage ◽  
The Us ◽  
Us Dollar

Purpose – The authors make assessment on RMB valuation and to contribute to the fierce debate on this important issue, which is perceived to have a great effect on the improvement or deterioration in trade balance. A triangular analysis approach is put forward and empirical assessment is made. The paper aims to discuss these issues. Design/methodology/approach – A triangular analysis approach based on no arbitrage conditions for three currencies, and causality and influence analysis. Findings – First, it has been found that the movements in the RMB dollar exchange rate do influence the dollar euro exchange rate and the former do have a causality effect on the latter, in both the long run and the short term. Second, it is implied that the RMB is overvalued vis-à-vis the US dollar, as the analysis suggests that an overvalued euro vis-à-vis the US dollar would imply a kind of overvaluation of the RMB vis-à-vis the US dollar, and by any conventional measures the euro has appeared to be overvalued vis-à-vis the US dollar, especially in the months before the last financial crisis. Practical implications – First, the peg of the RMB to the US dollar that undervalues the RMB vis-à-vis the US dollar will not help promote China's overall trade balance or export even if undervaluation of currencies can ever help improve nations' terms of trade. Second, no stability in RMB exchange rates can be claimed by pegging the RMB to the US dollar, as the exchange rate of the RMB vis-à-vis currencies other than the US dollar would be as volatile as that between the US dollar and the euro and other convertible currencies. Originality/value – A new triangular analysis approach in international finance research. First, there is an advantage to adopt this seemingly simple analytical framework: it is highly reliable; no triangular arbitrage conditions have to be met even under exchange controls, whilst PPP may not hold even with flexible exchange rate regimes. Second, it does away with the thinking confined to small open economies that has dominated academic research for so long and is totally inapplicable to the RMB case.

Forecasting Euro against US dollar via combination of NARDL and Univariate techniques during COVID-19

foresight ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad AsadUllah ◽  
Muhammad Adnan Bashir ◽  
Abdur Rahman Aleemi
Keyword(s):  
Time Series ◽  
Exchange Rate ◽  
Percentage Error ◽  
Arbitrage Pricing Theory ◽  
Content Type ◽  
Exchange Rate Fluctuations ◽  
The Us ◽  
Combined Models ◽  
Us Dollar ◽  
The Individual

Purpose The purpose of this study is to examine the accuracy of combined models with the individual models in terms of forecasting Euro against US dollar during COVID-19 era. During COVID, the euro shows sharp fluctuation in upward and downward trend; therefore, this study is keen to find out the best-fitted model which forecasts more accurately during the pandemic. Design/methodology/approach The descriptive design has been adopted in this research. The three univariate models, i.e. autoregressive integrated moving averages (ARIMA), Naïve, exponential smoothing (ES) model, and one multivariate model, i.e. nonlinear autoregressive distributive lags (NARDL), are selected to forecast the exchange rate of Euro against the US dollar during the COVID. The above models are combined via equal weights and var-cor methods to find out the accuracy of forecasting as Poon and Granger (2003) showed that combined models can forecast better than individual models. Findings NARDL outperforms all remaining individual models, i.e. ARIMA, Naïve and ES. By applying a combination of different models via different techniques, the combination of NARDL and Naïve models outperforms all combination of models by scoring the least mean absolute percentage error value, i.e. 1.588. The combined forecasting of NARDL and Naïve techniques under var-cor method also outperforms the forecasting accuracy of individual models other than NARDL. It means the euro exchange rate against the US dollar which is dependent upon the macroeconomic fundamentals and recent observations of the time series. Practical implications The findings could help the FOREX market, hedgers, traders, businessmen, policymakers, economists, financial managers, etc., to minimize the risk indulged in global trade. It also helps to produce more accurate results in different financial models, i.e. capital asset pricing model and arbitrage pricing theory, because their findings may not be useful if exchange rate fluctuations do not trace effectively. Originality/value The NARDL models have been applied previously in different time series and only limited to the asymmetric or symmetric relationships. This study is using it for the forecasting exchange rate which is almost abandoned in earlier literature. Furthermore, this study combined the NARDL with univariate models to produce the accuracy which itself is a novelty. Moreover, the findings help to enhance the effectiveness of different financial theories as well.

The international strength of the euro will grow

2021 ◽  
Keyword(s):  
Euro Area ◽  
Financial Services ◽  
Raw Materials ◽  
Domestic Demand ◽  
Content Type ◽  
The Us ◽  
Us Dollar ◽  
Strategic Autonomy ◽  
Geopolitical Risks ◽  
The Eu

Significance The proposals identified areas where the euro could potentially become more dominant, such as the issuance of green bonds, digital currencies, and international trade in raw materials and energy. Ambitions to enhance the international leverage of the euro are being driven by the aim to strengthen EU strategic autonomy amid rising geopolitical risks. Impacts Developing its digital finance sector would be an opportunity for the EU to enhance its strategic autonomy in financial services. Challenging the US dollar would require the euro-area to rebalance its economy away from foreign to domestic demand. Member state division will prevent the economic reconfiguration the euro-area needed to make the euro a truly global currency.

Problem of Yuan Undervaluation in US-China Trade Relations

2012 ◽  
pp. 20-28
Author(s):  
A. Polivach
Keyword(s):  
Exchange Rate ◽  
National Currency ◽  
Chinese Government ◽  
Scientific Validity ◽  
Trade Relations ◽  
China Trade ◽  
The Us ◽  
World Economic ◽  
Us Dollar ◽  
World Economic Crisis

Before the world economic crisis the Chinese government restricted the sphere of the Yuan’s circulation exceptionally by the domestic market. Basically, until that time the Yuan was not freely convertible while the Chinese foreign trade transactions were operated with the help of the US dollar. This is a sufficient reason to state that the issue of Yuan’s underestimated exchange rate has no fundamental relevance. However, the crisis forced China to substantially extend the utilization of its national currency in the international settlements. This is especially true in case of mutual settlements with the neighbor countries. So far, presumably, the issue of Yuan’s underestimated exchange rate will, at last, receive a scientific validity only when the Chinese national currency will become fully convertible and the scales of its utilization will become comparable with those of the traditional hard currencies.

Sukuk and monetary policy transmission in Indonesia: the role of asset price and exchange rate channels

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suriani Suriani ◽  
M. Shabri Abd. Majid ◽  
Raja Masbar ◽  
Nazaruddin A. Wahid ◽  
Abdul Ghafar Ismail
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Asset Price ◽  
Transmission Mechanism ◽  
Monetary Policy Transmission ◽  
Content Type ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

Purpose The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in the Indonesian economy. Design/methodology/approach Using the monthly data from January 2003 to November 2017, this study uses a multivariate vector error correction model causality framework. To examine the role of sukuk in the monetary policy transmission mechanism through the asset price channel, this study uses the variables of consumption, inflation, interest rates, economic growth and the composite stock price index. Meanwhile, to examine the role of sukuk in the monetary policy transmission mechanism through the exchange rate channel, this study used variables of inflation, interest rates, economic growth, foreign investment and exchange rate. Findings This study documented that sukuk has no causal relationship with inflation through asset price and exchange rate channels. Nevertheless, sukuk has a bidirectional causal relationship with economic growth through asset price and exchange rate channels. Sukuk is also documented to have a causal relationship with monetary policy variables of interest rate and stock prices through asset price and exchange rate channels. Finally, a unidirectional causality is recorded running from the exchange rate to sukuk in the exchange rate channel. Research limitations/implications The finding of independence of the sukuk market from interest rates provides evidence that the trading of the sukuk in Indonesia has been in harmony with the Islamic tenets. Practical implications The relevant Indonesian authorities need to enhance both domestic and global sukuk markets as part of efforts to promote the sustainability of Islamic capital market development in Indonesia. Originality/value To the best of the authors’ knowledge, this study is among the first attempts to empirically investigate the role of sukuk in monetary policy transmission through asset price and exchange rate channels in the context of the Indonesian economy.

Sign in / Sign up

Export Citation Format

Share Document