scholarly journals Is gold a safe haven for the dynamic risk of foreign exchange?

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Kuan-Min Wang ◽  
Thanh-Binh Nguyen Thi ◽  
Yuan-Ming Lee
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Safe Haven ◽  
Dynamic Hedging ◽  
Exchange Rate Fluctuations ◽  
Hedging Strategies ◽  
Long Run ◽  
Exchange Risk ◽  
Short Run ◽  
The Government

AbstractThis paper uses the panel data of 15 countries from 2009 to 2020 to construct the time-varying parameter panel vector error correction model for testing the hypothesis of dynamic hedging characteristics of gold on exchange rate. As the existing literature has never considered that the foreign exchange risk hedged by gold is dynamic, this study can fill the research gap in this area. The empirical results show that: First, gold can partly hedge against the depreciation of the currency in the long run; second, gold is unable to hedge against the risk of the exchange rate when considering dynamic hedging effects in the short run; third, when facing unexpected shocks, the impulse response shows that the gold returns have reversible reactions compared to exchange rate fluctuations; therefore, gold can regard as a safe haven for foreign exchange markets; Finally, the government, as well as investors should always be concerned about these dynamic risks and formulate effective hedging strategies to control the currency uncertainty.

scholarly journals Are the Responses of Sectoral Energy Imports Asymmetric to Exchange Rate Volatilities in Pakistan? Evidence From Recent Foreign Exchange Regime

2021 ◽  
Vol 9 ◽  
Author(s):  
Abdul Saqib ◽  
Tze-Haw Chan ◽  
Alexey Mikhaylov ◽  
Hooi Hooi Lean
Keyword(s):  
Exchange Rate ◽  
Crude Oil ◽  
Foreign Exchange ◽  
Exchange Rate Volatility ◽  
Asymmetric Effects ◽  
Unit Root Testing ◽  
Long Run ◽  
Short Run ◽  
Bound Test

Growing energy demand but stagnant production followed by volatile exchange rate leads Pakistan to energy imbalances and potential economic contraction. Yet, studies on sectoral energy imports are limited and inconclusive without accessing the asymmetric effect of currency fluctuations. We examine the impacts of Pakistani rupee volatility on monthly energy imports based on the nonlinear autoregressive distributed lag (NARDL) estimations. Augmented Dickey–Fuller and Phillips–Perron tests were used to conduct unit root testing, and the bound testing approach was used to examine the long-term cointegration. The long-run asymmetry was tested with the Wald test, and using the NARDL model, we examined both short-run and long-run asymmetric effects of exchange rate volatility on energy imports. The bound test was established and supported through ECMt−1 (t-test), cointegrating the relationship between exchange rate volatility and energy imports in a long term. Among others, both short-run and long-run asymmetric effects were found for crude oil, coal, electricity, and petroleum products. Rupee depreciation increased crude oil and electricity imports, while the appreciation effects were insignificant. Overall, the empirical assessment reveals that the foreign exchange volatility effect is sectoral specific and asymmetric in Pakistan. It offers new insights into re-strategizing the energy policy and refining the import substitution plan.

scholarly journals Impact of Exchange Rate Volatility on Unemployment in Pakistan

2021 ◽  
Vol VI (II) ◽  
pp. 49-66
Author(s):  
Atiq Ur Rahman ◽  
Salyha Zulfiqar Ali Shah ◽  
Qamar uz Zaman
Keyword(s):  
Developing Countries ◽  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Stability Tests ◽  
Long Run ◽  
Short Run ◽  
The Government ◽  
The Relationship ◽  
Long Run Equilibrium

Unemployment is an alarming issue for bothdeveloped and developing countries, which sometimesvaries from region to region as well. Unemployment accompaniedwith Exchange Rate Volatility (ERV, hereafter) worsens thesituation. This paper tries to explore the relationship between ERVand unemployment and other selected factors in the case ofPakistan from 1980 to 2018. After necessary simulation, the studysupported the analyses through the autoregressive distributed lagmodel. Where, long-run coefficient reveals that ERV and exportsboth are positively affecting unemployment; whereas, import isinversely related to unemployment. Alternatively, export and GDPare inversely affecting unemployment in the short run; further,stability tests also support the relationship between the selectedvariables to achieve the long-run equilibrium. The study furthersuggests that the Government of Pakistan need to stabilizeexchange rate to control unemployment, which is 8 percent in thelong-run and 11 percent in the short run.

scholarly journals Impact of Macroeconomic Indicators on the Yuan-SDR Exchange Rate

2021 ◽  
Vol 11 (7) ◽  
pp. 59-71
Author(s):  
Debesh Bhowmik
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Inflation Rate ◽  
Impulse Response Function ◽  
Cyclical Fluctuations ◽  
Long Run ◽  
Macroeconomic Indicators ◽  
Macroeconomic Impact ◽  
Short Run ◽  
The Impact

The paper endeavours to explore the macroeconomic impact on the Yuan SDR exchange rate of China during 2017m1-2021m6 to justify the internationalization of RMB which had entered into the SDR basket of IMF in October 2016.To evaluate the impact ,the paper used the methodology of Johansen (1988) cointegration and vector error correction model considering monthly Yuan per SDR as dependent variable and monthly GDP, inflation rate, foreign exchange reserves, export and import as the independent macro-economic variables. The pattern of trendline of Yuan per SDR is found nonlinear having cyclical fluctuations and seasonal variations according to Hamilton (2018). The paper also found that Yuan per SDR has significant long run causalities with export, import, inflation rate, GDP and foreign exchange rate of China during the specified period. Even, Yuan per SDR has significant short run causality with export only. The cointegrating equation converged towards the equilibrium with the speed of adjustment 11.83% per month significantly. The impulse response function of import to Yuan per SDR showed significantly convergent. The VECM contains autocorrelation problem and unit root for which it is non-stationary.

Social Networks, Exchange Rate Fluctuation, and Economic Growth: ARDL Approach

Tékhne ◽  
2019 ◽  
Vol 17 (1) ◽  
pp. 1-9 ◽  
Author(s):  
Pejman Ebrahimi ◽  
Hamidreza Alipour ◽  
Abbas Gholampour ◽  
Mahsa Ahmadi
Keyword(s):  
Economic Growth ◽  
Social Networks ◽  
Exchange Rate ◽  
Foreign Exchange Market ◽  
Annual Data ◽  
Exchange Rate Fluctuations ◽  
Long Run ◽  
Rate Fluctuation ◽  
Short Run ◽  
Research Findings

Abstract This study aimed to investigate the effects of social network propaganda on exchange rate and also exchange rate fluctuations on Iran economic growth. This study uses annual data to analyse the long-run and short-run relationship between variables for the period of 1993–2018. Data were collected from the Central Bank of Iran. The autoregressive distributive lag (ARDL) method proposed by Pesaran, Shin, and Smith (2001) was used. The results of long-run analysis show that a 1% increase in negative propaganda of social media about the exchange rate leads to a 3.8% decline in long-run economic growth. Also, a 1% increase in exchange rate fluctuations results in a 3.5% decrease in economic growth. Research findings also indicate negative short-run impacts of social networks on the excitement of the foreign exchange market and, ultimately, on economic growth.

Modeling Foreign Exchange Rate Pass-Through using the Exponential GARCH

2014 ◽  
pp. 139-190
Author(s):  
Baoying Lai ◽  
Nathan Lael Joseph
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Rate ◽  
Pricing To Market ◽  
Export Prices ◽  
Long Run ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Meat Sector

In this chapter, the authors use an EGARCH-ECM to estimate the pass-through effects of Foreign Exchange (FX) rate changes and changes in producers’ prices for 20 U.K. export sectors. The long-run adjustments of export prices to FX rate changes and changes in producers’ prices are within the range of –1.02% (for the Textiles sector) and –17.22% (for the Meat sector). The contemporaneous Pricing-To-Market (PTM) coefficients are within the range of –72.84% (for the Fuels sector) and –8.05% (for the Textiles sector). Short-run FX rate pass-through is not complete even after several months. Rolling EGARCH-ECMs show that the short and long-run effects of changes in FX rate and producers’ prices vary substantially, as do asymmetry and volatility estimates before equilibrium is achieved.

scholarly journals Effects of Exchange Rate Volatility On Non-Traditional Exports In Ghana

2017 ◽  
Vol 7 (2017) ◽  
pp. 80-103
Author(s):  
Camara Kwasi Obeng
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Real Effective Exchange Rate ◽  
Distributed Lag ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Auto Regressive ◽  
The Government ◽  
Effective Exchange Rate

The government of Ghana has implemented a number of policies to strengthen the production and export of non-traditional products as a way of diversifying exports in Ghana with very little success. Foremost among these policies is the liberalization of exchange rate. Meanwhile, the exchange rate has been very volatile. The study, therefore, examines the effects of exchange rate volatility on non-traditional exports in Ghana.This study employed Auto-regressive Distributed Lag (ARDL) co-integration estimation technique for the investigation. The results indicate that exchange rate volatility negatively impacts Ghana’s non-traditional exports. Also, the effect is greater in the long- run than it is in the short-run. Other results also show that world income, growth rate of the economy and Treasury bill rate promote non-traditional exports, but real effective exchange rate does not. The value of the paper lies in the discussion of the short-run and long-run effects of exchange rate volatility on non-traditional exports in the Ghanaian context.

scholarly journals Triangular Causality and Controlling Parallel Exchange Market

2019 ◽  
Vol 3 (1) ◽  
pp. 20-32
Author(s):  
Bijan Bidabad
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Price Level ◽  
Balance Of Payments ◽  
Market Liquidity ◽  
Exchange Market ◽  
Long Run ◽  
Short Run ◽  
The Exchange Rate ◽  
The Relationship

In this paper, the triangular relationship of money, price, and foreign exchange in a causality context are studied. It is concluded that regulating the exchange rate by volume of liquidity in a period of less than a year is not possible, but in annual and biannual analyses we can regulate the exchange rate through controlling the liquidity. In other words, in the long run, the exchange rate is affected by liquidity and price level, but in the short run, the price level has only temporary effects on the exchange rate. The results of the study show that: liquidity affects the exchange rate in the long run; price affects the liquidity in the long run; in the long run, liquidity and exchange rate affect prices.  Our results show that injection of foreign exchange into the parallel exchange market with different lags has little effects with different directions on the exchange rate. The same result is true for the relationship between liquidity and dollar rate. In other words, in spite of the long run relationship between exchange rate and liquidity, we cannot justify this relationship in the short run. The same is true with the balance of payments position and exchange rate in the short run. By simulating the relationship between injecting (selling) foreign exchange in the parallel exchange market, liquidity and the cumulative balance of payments all with exchange rate, we can conclude that in the short run, regulating exchange rate by instruments such as selling exchange in the parallel market or controlling the liquidity is not possible, but in the long run, conducting foreign exchange sale policy and controlling the liquidity and the balance of payments position can control the exchange market.

Pengujian Resiko Redenominasi terhadap Nilai Tukar Rupiah

Owner ◽  
2021 ◽  
Vol 5 (2) ◽  
pp. 620-630
Author(s):  
Abdul Holik
Keyword(s):  
Exchange Rate ◽  
Inflation Rate ◽  
Positive Impact ◽  
Credit Default Swap ◽  
Economic Agents ◽  
Long Run ◽  
Short Run ◽  
The Exchange Rate ◽  
The Government ◽  
The Impact

The redenomination is a breakthrough policy to induce stabilization because making transactions easier among the economic agents. This quantitative research aims to find the properness of the redenomination policy in Indonesia. The focus of this research is to analyze the impact of redenomination risk on rupiah exchange rate performance. It is conducted from April 1st, 2015 until May 9th, 2016. The method of analysis used here is VECM (Vector Error Correction Model) to find relation reciprocally among the three variables: CDS (Credit Default Swap) as a proxy for redenomination risk, exchange rate, and sovereign yields. Based on the result, we find that there are negative impacts in the long-run and short-run from redenomination risk on the rupiah exchange rate. Meanwhile, the sovereign yield has a positive impact on the rupiah exchange rate in the long run. In the short run, the exchange rate has a positive impact on redenomination, as well as on sovereign yield. The sovereign yield also has a positive effect on the exchange rate, as well as on the redenomination risk. But there is no impact of redenomination risk on the sovereign yield. From this finding, we should suggest that redenomination is a not proper decision yet. It is because the weakness of rupiah after its implementation due to sentiment of over-confidence among the economic agents sometimes triggers uncontrollable and high inflation rate. For the successful policy, previously the government should take action to reduce the inflation rate.

Determinants of foreign exchange reserve accumulation: empirical evidence from foreign exchange constrained economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hayelom Yrgaw Gereziher ◽  
Naser Yenus Nuru
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Unit Root ◽  
Inflation Rate ◽  
Unit Root Tests ◽  
Foreign Exchange Reserve ◽  
Content Type ◽  
Long Run ◽  
Reserve Accumulation ◽  
Short Run

PurposeThe main purpose of this study is to investigate the determinants of foreign exchange reserve accumulation in a foreign exchange constrained economy, namely Ethiopia, over the period of 1981 up to 2017.Design/methodology/approachIn this study, autoregressive distributed lag (ARDL) model is used. Besides, standard unit-root tests such as augmented Dickey Fuller (ADF) and Phillips–Perron (PP) tests are employed to check for the stationarity of the series.FindingsAccording to the results of unit-root tests, our variables are found to be a mixture of I(0) and I(1), and none of our series is I(2). The results of our ARDL model indicates, in the short run, foreign exchange reserve accumulation of Ethiopia is negatively and significantly affected by inflation rate and exchange rate. But, in the long run, inflation rate affects foreign exchange reserve positively and significantly. Additionally, in the long run, external debt affects foreign exchange reserve positively. Similar to its effect in the short run, exchange rate also affects foreign exchange reserve negatively in the long run.Originality/valueThis paper has its originality as it contributes in reasoning out the factors determining, both in the short-run and long-run, foreign exchange deficiency in any developing country with foreign exchange deficiency, taking Ethiopian economy as a case study, and fills the scarce literature on the determinants of foreign exchange reserve accumulation in a developing country.

scholarly journals The Dynamics between External Public Debt and Foreign Exchange Reserve of Ethiopia Economy: 1981 to 2019

2021 ◽  
Vol 23 (11) ◽  
pp. 791-824
Author(s):  
Solomon Kebede Menza ◽  
◽  
Zerihun Getachew ◽  
Berhanu Kuma ◽  
Tora Abebe ◽  
...  
Keyword(s):  
Foreign Exchange ◽  
Public Debt ◽  
Service Sector ◽  
Tariff Rate ◽  
Foreign Exchange Reserve ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run ◽  
Short Run ◽  
The Government

This paper empirically examined the short-run and long-run dynamics among external public debt and foreign exchange reserve of Ethiopia. The two variables are playing a pivotal role in the growth and development of nations economy. To achieve the objective the study took 39 years data from the year 1981 to 2019 from National bank of Ethiopia and World Bank data sets. The study used descriptive analysis and empirical methods of analysis. The Autoregressive Distributed Lag model with error correction models were employed after checking the possible assumptions of our economic series. The results of ADF test statistics confirms our economic series are stationary at level and first difference forms. Bounds co-integration test suggests one co-integrating relationship between the variables taking foreign exchange reserve as the outcome variable. According to the descriptive method of analysis, on average, in Ethiopia the trend for service sector indicated that an ever improvement of the sector throughout the periods and supplementing the notion of change from agriculture base to service sector. In addition, the trade tariff rate of Ethiopian economy is indicating a downward movement and this in turn justifies the relative openness of the economy to the globe. In the same manner the financial development indicator of the nation is rising, which assures relative improvement in the financial sector. On the other hand, according to the Autoregressive Distributed Lag model in the short -run average trade tariff rate, share of manufacturing sector from the GDP, and lagged value of EPD itself predicts the external public debt significant at least at less than 10 percent level of significance. Moreover, the error correction model revealed that in the long-run, financial development indicator, debt service payment, and average trade tariff rate were predicting the stock of foreign exchange reserve for Ethiopian economy. The result also indicates that in the short-run, only the share of agriculture and service sectors are significantly predicting the variations of the stock of foreign exchange reserve, ceteris paribus. Finally, the concerned body specially the government of Ethiopia should limit or reduce the amount of external debt inflows that has an adverse effect on debt service payment, and recheck the budget sources for financing different projects especially manufacturing industries rather than highly basing on external sources in the form of external public debt . More importantly, the government should enhance the value of export potential, among others.

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