Forward Looking Exporters

FEDS Notes ◽  
2021 ◽  
Vol 2021 (2998) ◽  
Author(s):  
François de Soyres ◽  
◽  
Erik Frohm ◽  
Emily Highkin ◽  
Carter Mix ◽  
...  
Keyword(s):  
Exchange Rate ◽  
Simple Relationship ◽  
Foreign Markets ◽  
Forward Looking

Economic textbooks outline a simple relationship between movements in a country’s exchange rate and its export volumes. When the exporter’s currency depreciates, export volumes are expected to increase due to competitiveness gains in foreign markets.

scholarly journals Evaluating Properties and Performance of Long Memory Models from an Emerging Foreign Markets Return Innovations

2021 ◽  
pp. 1-23
Author(s):  
Deebom Zorle Dum ◽  
Isaac Didi Essi ◽  
Amos Emeka
Keyword(s):  
Exchange Rate ◽  
Long Memory ◽  
Commodity Prices ◽  
International Markets ◽  
Memory Models ◽  
Information Criteria ◽  
Cocoa Bean ◽  
Foreign Markets ◽  
Ex Post ◽  
And Performance

The study investigates evaluate properties and performance of long memory models from emerging foreign markets return innovations between 1991 - 2020. The purpose of the study includes; investigate the persistence of shocks in Nigerian international markets, model long-range dependence, test the efficient markets hypothesis using fractionally integrated volatility models, develop an appropriate long memory model for Nigerian international markets, compare the advantages between short and long memory models in modeling for the returns in Nigerian international Markets and Give forecast values for future occurrences. The design for the study was an ex post facto research design. The data used for this study were Nigerian crude oil prices (Dollar per Barrel), exchange rate, and Agricultural Commodity prices extracted from the website of the Central Bank of Nigeria (CBN) www.cbn.ng. The total data points were 1044 and it spanned from 1st January 1991 to 30th January 2020. The statistical software used for data analysis was STATA 15 and OX metrics version 7. In an attempt to achieve the aim of the study, parametric and non-parametric methods of detecting Long Memory were applied. The study applied short and long memory models in an attempt to spot out the deficiencies associated with the short memory models. The results confirmed the presence of long memory in sales and returns on prices in Nigerian international markets. The presence of long memory in both sales and returns on prices in Nigerian International markets disprove the efficient market hypothesis which says that the future returns and volatility values are unpredictable. Similarly, base on performance evaluation using the Akaike information criteria, ARFIMA(1,-0.021,1) model was found to be the best fit model to the data after checking the adequacy of the model selected. Sequel to the above, it was recommended that there is a need for a strong financial and economic reform policy to curb persistent shocks in Nigerian international markets. This is because a stable local financial currency builds confidence in an economy, especially when foreign investors intend to invest in the country’s economy. For example, exchange rate policies also trim down the desire for local investors to trade in the international market. Also, for empirical estimation of long memory sales and returns on prices in Nigeria international markets, ARFIMA(1,-0.021,1) model should be considered appropriate. Two years (January, 20 to Dec-22) step ahead forecast shows that the predicted value for Cocoa Bean Sale using the ARFIMA (1,-0.021,1) falls between the range of 1.907247 to 1.915947.

COMPETITIVE DEVALUATION AS AN ELEMENT OF RUSSIA'S MODERN MONETARY POLICY

2021 ◽  
Vol 1 (195) ◽  
pp. 95-102
Author(s):  
K.G. Bunevich ◽  
◽  
T.A. Gorbacheva ◽  
A.N. Brodunov ◽  
◽  
...  
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Foreign Currency ◽  
Current System ◽  
Federal State ◽  
Foreign Markets ◽  
Fundamental Factor ◽  
Russian Economy ◽  
The Exchange Rate ◽  
The International Monetary Fund

The purpose of this article is to analyze the current system of exchange rate formation in Russia, to identify its main features. The dynamics of the exchange rate is of particular importance for Russian economy, which is among the so-called export-and resource-oriented. In such economies, the exchange rate is significantly dependent on the conditions of foreign markets, since the receipt of foreign exchange earnings from exports is the most important fundamental factor in the supply of foreign currency on the domestic market. On the other hand, the exchange rate itself is a factor in the external price competitiveness of Russian exports. The statistical databases of the Federal State Statistics Service and the Bank of Russia, as well as the statistical data of the International Monetary Fund group, the World Bank and the Organization for Economic Cooperation and Development, served as the information base for this study. The paper used critical and comparative analysis, a systematic approach to the study of information, retrospective, statistical and graphical methods, on the basis of which the prerequisites were investigated and the features of the current monetary policy and some of its individual elements were identified.

scholarly journals Investment and exchange rate uncertainty under different regimes

2014 ◽  
Vol 44 (3) ◽  
pp. 553-577
Author(s):  
Cristiano Aguiar de Oliveira
Keyword(s):  
Exchange Rate ◽  
Real Option ◽  
Investment Decision ◽  
Exchange Rate Regimes ◽  
Significant Loss ◽  
Project Investment ◽  
Foreign Markets ◽  
Exchange Rate Uncertainty ◽  
Regime Stability ◽  
The Impact

This paper examines the impact of the exchange rate uncertainty on investment under different exchange rate regimes. The paper presents a theoretical model where exchange rate is a stochastic process and investment decision behaves as a Real Option. The paper evaluates the performance of a new project investment under free float, fixed and intermediate exchange rate regimes (managed float and crawling peg). The comparison among the different regimes shows that the crawling peg has advantages when compared to other regimes. The regime stability implies that less currency devaluations are necessary to stimulate investment, especially when there is a significant loss of market power in foreign markets.

scholarly journals Product versus Process: Innovation Strategies of Multiproduct Firms

2018 ◽  
Vol 10 (1) ◽  
pp. 236-277 ◽  
Author(s):  
Lisandra Flach ◽  
Michael Irlacher
Keyword(s):  
Exchange Rate ◽  
Product Differentiation ◽  
Product Innovation ◽  
Process Innovation ◽  
Multiproduct Firms ◽  
Foreign Markets ◽  
Firm Level ◽  
Level Data ◽  
Firm Level Data ◽  
Innovation Strategies

We investigate the effects of better access to foreign markets on innovation strategies of multiproduct firms in industries with different scope for product differentiation. Industry-specific demand and cost linkages induce a distinction between the returns to innovation. In differentiated industries, cannibalization is lower and firms invest more in product innovation. In homogeneous industries, firms internalize intra-firm spillovers and invest more in process innovation. Using firm-level data and large exchange rate devaluations, we show that better access to foreign markets increases the incentive to innovate. However, we exploit differential effects across industries and show that the innovation strategies depend on the scope of differentiation. (JEL D22, D25, F14, G31, L60, O14, O31)

The Conduct of Fiscal Policy

1985 ◽  
Vol 113 ◽  
pp. 81-88 ◽  
Author(s):  
David Currie
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Open Economy ◽  
Policy Design ◽  
Macroeconomic Policy ◽  
Policy Rules ◽  
Central Focus ◽  
Policy Appraisal ◽  
Forward Looking

The central focus of this paper is on the conduct of fiscal policy. But the influence of fiscal policy cannot sensibly be examined separately from other aspects of macroeconomic policy, such as monetary, exchange rate and incomes policies. Because of this, we the opportunity to range quite widely. Two broad themes emerge. The first concerns the consequences of consistent forward-looking expectations for the design of policy. The second concerns the global consequences of adopting generally in many countries policy rules designed in the single open economy context. Since policy appraisal is usually conducted in the single economy context, and policy design with consistent expectations is still relatively underdeveloped, it is useful to take stock of these two issues.

Annex I. Fiscal Policy Simulations Using Forward-Looking Exchange Rates in Gem by Andrew Gurney∗

1990 ◽  
Vol 131 ◽  
pp. 47-50 ◽  
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Asset Price ◽  
Equilibrium Exchange Rate ◽  
Equilibrium Exchange ◽  
Short Run ◽  
Policy Simulations ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Forward Looking

In the past year we have attempted to incorporate forward-looking exchange rates into our econometric model, GEM. This work is still at an experimental stage, and hence will not be immediately available to model-users, but we feel we have made sufficient progress to present some of the results.The introduction of forward-looking exchange rates is consistent with modern economic theories of exchange-rate determination. These view the exchange rate as an asset price, which is valued according to the expected returns from holding domestic and foreign assets. This gives rise to the short-run arbitrage condition, that the interest-rate differential between equivalent assets in different currencies should equal the expected depreciation of the exchange rate between those currencies. The expected depreciation is determined by a longer-term view of the currencies' worth, which can be related to the fundamental equilibrium exchange rate (FEER), which would achieve a balance between the current account and long-term capital account flows. Previous work at the Institute has expanded on some of these issues. Davies (1988) and Gurney (1988) look at some the issues raised by forward-looking exchange rates. Barrell, Gurney, Pesaran and Wren-Lewis (1988) look at alternative forward-looking models and Barrell and Wren-Lewis (1989) investigate FEERs based on the trade equations used in GEM.

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