What Drives the Nominal Yield Curve in Brazil?

2021 ◽  
Vol 40 (2) ◽  
pp. 267-284
Author(s):  
Marcelo Fernandes ◽  
Clemens Nunes ◽  
Yuri Reis
Keyword(s):  
Exchange Rate ◽  
Unemployment Rate ◽  
Risk Premium ◽  
Yield Curve ◽  
Spot Exchange Rate ◽  
Macroeconomic Indicators ◽  
The Exchange Rate

This paper describes the dynamics of the level, slope and curvature of the Brazilian nominal yield curve using only observable macroeconomic indicators. The model is able to explain 94.5% of the variation in the yield curve. We find that the main drivers of the level factor is the Brazil risk premium (5-year CDS spread) and the unemployment rate. In turn, the slope steepens with increases either in the SELIC rate or in the spot exchange rate, and flattens with increases in unemployment rate and commodity returns. Lastly, the curvature increases with the unemployment, inflation and SELIC rates, but decreases with changes in the exchange rate.  

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

Exploring the relationship between macroeconomic indicators and sovereign credit default swap in Pakistan

2017 ◽  
Vol 18 (4) ◽  
pp. 368-380
Author(s):  
Abdul Rashid ◽  
Farooq Ahmad ◽  
Ammara Yasmin
Keyword(s):  
Exchange Rate ◽  
Credit Default Swap ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Credit Default ◽  
Macroeconomic Indicators ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate

Purpose This paper aims to empirically examine the long- and short-run relationship between macroeconomic indicators (exchange rates, interest rates, exports, imports, foreign reserves and the rate of inflation) and sovereign credit default swap (SCDS) spreads for Pakistan. Design/methodology/approach The authors apply the autoregressive distributed lag (ARDL) model to explore the level relationship between the macroeconomic variables and SCDS spreads. The error correction model is estimated to examine the short-run effects of the underlying macroeconomic variables on SCDS spreads. Finally, the long-run estimates are obtained in the ARDL framework. The study uses monthly data covering the period January 2001-February 2015. Findings The results indicate that there is a significant long-run relationship between the macroeconomic indicators and SCDS spreads. The estimated long-run coefficients reveal that both the interest rate and foreign exchange reserves are significantly and negatively, whereas imports and the rate of inflation are positively related to SCDS spreads. Yet, the results suggest that the exchange rate and exports do not have any significant long-run impact on SCDS spreads. The findings regarding the short-run relationship indicate that the exchange rate, imports and the rate of inflation are positively, whereas the interest rate and exports are negatively related to SCDS spreads. Practical implications The results suggest that State Bank of Pakistan should design monetary and foreign exchange rate polices to minimize unwanted variations in the exchange rate to reduce SCDS spreads. The results also suggest that it is incumbent to Pakistan Government to improve the balance of payments to reduce SCDS spreads. The findings also suggest that the inflation targeting policy can also help in reducing SCDS spreads. Originality/value This is the first study to examine the empirical determinants of SCDS spreads for Pakistan. Second, it estimates the short- and long-run effects in the ARDL framework. Third, it considers both internal and external empirical determinants of SCDS spreads.

scholarly journals Exchange Rate Pass-Through to Domestic Prices: Evidence from OECD Countries

2017 ◽  
Author(s):  
Harun Bal ◽  
Mehmet Demiral ◽  
Filiz Yetiz
Keyword(s):  
Exchange Rate ◽  
Panel Data ◽  
Price Index ◽  
Oecd Countries ◽  
Domestic Prices ◽  
Macroeconomic Indicators ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Changes ◽  
Exchange Rate Pass Through

There is an immense literature on the effects of exchange rate changes on macroeconomic indicators, specifically on the trade balance, growth, inflation, and overall productivity in open economies. One of the main attempts in the related literature is about ascertaining whether the exchange rate fluctuations alter domestic prices. This possible mechanism is called as the pass-through effect which is getting more important since the argument that exchange rate adjustment is a part of the solution for global rebalancing is empirically well-supported. Starting from this claim, this study purposes to explore whether there is an exchange rate pass-through effect in 19 high-income OECD countries over the period 1990-2015. To this end, using a panel data set of consumer price index, producer price index proxied by wholesale price index, the nominal effective exchange rates, and industrial production presented by the value-added share of industry sectors in gross domestic product, structural vector autoregressive (VAR) and autoregressive distributed lag (ARDL) models are estimated in an unbalanced panel data analysis procedure. Results reveal that exchange rate pass-through effects on the domestic prices are significant but not that strong in both the short-run and the long-run. Expectedly, the pass-through effects tend to diminish over time. The study concludes that policy-makers need to consider policy actions accompanying the exchange rate changes to ensure domestic price stability which consequently interacts with many macroeconomic indicators.

scholarly journals Le taux de croissance de l’offre de monnaie et arbitrage entre le taux d’inflation et le taux de chômage au Canada

2009 ◽  
Vol 55 (3) ◽  
pp. 397-410
Author(s):  
Maurice N. Marchon
Keyword(s):  
Growth Rate ◽  
International Trade ◽  
Exchange Rate ◽  
Money Supply ◽  
Unemployment Rate ◽  
Output Growth ◽  
Real Output ◽  
Short Term ◽  
Trade Off ◽  
The Exchange Rate

This paper presents simulations results using a "Modified St. Louis Model" for Canada. These simulations identify opportunities of trade-off between inflation and unemployment rate. They reveal very slim opportunities of trade-off and demonstrate that any short-term gain in real output caused by monetary stimulus will have to be paid in term of compensating slower output growth to reduce inflationary expectations. This situation of no real trade-off shows up even if the model does not fully endogenize the exchange rate and international trade feedback of changes in money supply growth rate.

scholarly journals PENGARUH VARIABEL MAKRO EKONOMI TERHADAP PERTUMBUHAN EKONOMI INDONESIA TAHUN 2015-2019

2021 ◽  
Vol 2 (2) ◽  
pp. 88-99
Author(s):  
Feby Kinanda
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Unemployment Rate ◽  
Trade Balance ◽  
Inflation Rate ◽  
Short Term ◽  
Negative Effect ◽  
The Exchange Rate ◽  
Positive Effect

This study aims to analyze the effect of macroeconomic variables including the open unemployment rate, trade balance, inflation rate and the rupiah exchange rate against the dollar on Indonesian economic growth by using the ECM error correction model approach to see the long-term and short-term relationships that influence macro variables on economic growth. , in the long term the open unemployment rate variable, the trade balance, the inflation rate have a negative effect while the exchange rate has a positive effect, while in the short term the open unemployment rate, the inflation rate and the exchange rate have a negative effect while the trade balance has a positive effect.   Keywords: Economic Growth, Open Unemployment Rate, Trade Balance, Inflation, Exchange Rate

scholarly journals MEASURING EFFICIENCY OF SOUTH AMERICAN FOREIGN EXCHANGE DERIVATIVES MARKET IN MINIMIZING CURRENCY RISK:

2019 ◽  
Vol 2 (1) ◽  
pp. 1-10
Author(s):  
RAAD MOZIB LALON
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Exchange Rate Volatility ◽  
South American ◽  
Currency Risk ◽  
Measuring Efficiency ◽  
Spot Exchange Rate ◽  
Cross Country ◽  
The Exchange Rate

This paper attempts to reveal whether the foreign exchange (FX) derivatives market effectively and efficiently reduces the volatility to foreign exchange rate fiuctuations. Cross-country evidence suggests that development ofthe FXderivatives market does not boost up spot exchange rate volatility and reduces aggregate exposure to currency risk. Intraday evidence for Chile shows that activity in the forward market has not been associated with higher volatility in the exchange rate following the adoption ofa fioating exchange rate regime. The study also found no evidence that net positions of large participants in the FX derivatives market help to predict the exchange rate. These findings support the view that development of the FX derivatives market is valuable to reduce aggregate currency risk.

scholarly journals The Digital Transactions Currency for the BRICS

2020 ◽  
pp. 1760-1769
Author(s):  
Mikhail V. Zharikov
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Foreign Exchange Market ◽  
Practical Significance ◽  
Digital Currency ◽  
Macroeconomic Indicators ◽  
The Exchange Rate ◽  
Digital Transactions ◽  
The Interest Rate ◽  
Investment Portfolios

The article deals with the circulation of a digital currency as a worldwide problem. The topic has theoretical and practical significance because price stability, economic growth and development and market equilibrium depend on the quality of this circulation. Currency digitization has become a particularly acute issue with the outbreak of COVID-19, which made central banks to think about contactless means of payment. The research identified the significance of the most important macroeconomic indicators which may characterise the hypothetical shared digital currency for the BRICS, namely, a shared interest rate and the quantity of digital money in circulation needed for the international use. The exchange rate of the BRICS digital currency, if it ever goes into being, is going to heavily depend on the amount of the interest rate of the hypothetical creditor of last resort. This problem is quite significant, since for the international circulation it is very important to know the proportions in which the digital currency is to be exchanged for the currencies of other countries. The theoretical significance of the article is the development of a model’s basis to find the exchange rate of the digital currency. The practical significance of the paper is that it contains recommendations for foreign-exchange-market players to optimise their investment portfolios as well as for monetary authorities in the emerging economies to make some policy choices

scholarly journals The impact of some macroeconomic indicators on exchange rate fluctuations in Sudan in the period (1990- 2016): أثر بعض مؤشرات الاقتصاد الكلي على تقلبات أسعار الصرف في السودان في الفترة (1990- 2016)

2020 ◽  
Vol 4 (10) ◽  
Author(s):  
Abdelsamie Eltaeb Tayfor
Keyword(s):  
Exchange Rate ◽  
Time Series Regression ◽  
Econometric Methods ◽  
Exchange Rate Fluctuations ◽  
Data Collection And Analysis ◽  
Macroeconomic Indicators ◽  
Increase Productivity ◽  
The Exchange Rate ◽  
The Impact

The study aimed to identify the determinants and economic variables that affect the exchange rate in Sudan during the period (1990- 2016). The study used the descriptive analytical approach in data collection and analysis as well as the use of econometric methods in the construction of economic models and analysis of time series regression models to verify the existence of a long- term integrative relationship between independent variables and dependent variable. The results of the study showed a positive correlation between GDP, degree of economic openness, inflation and exchange rate during the study years, and an inverse relationship between money supply and exchange rate. The study recommended the need to move away from administrative decisions in determining the exchange rate, while achieving greater flexibility in the exchange rate, and increased interest in bank financing of projects that lead to increase productivity and improve GDP and thus improve the exchange rate by encouraging domestic exports.

scholarly journals AN ANALYSIS OF FACTORS AFFECTING NON-PERFORMING ASSETS IN INDIAN BANKING SECTOR

2021 ◽  
pp. 24-29
Author(s):  
Bhabani Mishra
Keyword(s):  
Exchange Rate ◽  
Unemployment Rate ◽  
Banking Sector ◽  
Negative Impact ◽  
Fixed Effect ◽  
Specific Factor ◽  
Macroeconomic Indicators ◽  
Specific Factors ◽  
Bad Assets ◽  
Bank Specific Factors

Deterioration of asset quality destabilizes the financial system by adversely affecting the efficiency, profitability, solvency and liquidity of the banking sector. Both macroeconomic and bank specific factors should be analysed properly to know their strength and direction of impact on the bad assets to have effective NPA resolution mechanism. Unemployment Rate Inflation, Economic Growth, Export rate, Exchange rate, Fiscal Deficit ratio are the macroeconomic indicators and Return on Assets, Credit Deposit ratio, Net Interest Margin are the bank specific factor that are taken from 2003-04 to 2019-20 to explain the variability in Non-performing assets of Public sector and Private sector banks. Fixed effect estimation with robust clustered standard error is used for the panel data regression. Paper found that except unemployment rate all other variables have significant impact on bad assets. Bank specific factor have strong negative impact on the dependent variables. Only exchange rate affects the non-performing loans positively but other macroeconomic variables are negatively associated. KEYWORDS: Non-Performing Assets, Macroeconomic indicators, bank specific factors, Fixed effect

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