Asian Currency Unit: Searching for Optimal Currency Basket Structure

2015 ◽  
pp. 40-51
Author(s):  
E. Arapova
Keyword(s):  
Exchange Rates ◽  
Financial Stability ◽  
Weighted Average ◽  
Original Method ◽  
Monetary Integration ◽  
Core Element ◽  
Financial Cooperation ◽  
Long Run ◽  
National Currencies ◽  
Macroeconomic Indicators

The article examines the prospects of monetary integration in East Asia and the specific issue of the Asian Currency Unit (ACU) that could potentially become a core element of Asian monetary integration in the long run. The research explores main initiatives underlying financial cooperation and key obstacles hampering monetary integration in the region. The concept of Asian currency unit was introduced by the East Asian countries as one of the mechanisms aimed to ensure regional financial stability. Being a weighted average of regional currencies ACU is highly negatively affected by the volatility of Asian currencies’ exchange rates. That’s why the main aim of the article is to find the “optimal ACU currency basket structure” with minimal variance able to deliver stability in intra-regional exchange rates. The paper offers the author’s attempt to answer three main questions. First, what kind of criteria/macroeconomic indicators must underlie the ACU basket computation. Second, what national currencies should be included in this basket. Third, what weights are to be attributed to the national currencies for achieving an optimal basket structure. The research considers five alternative configurations of the ACU basket. The best one should be neither too rigid nor too volatile; it must be a compromise solution meeting interests of the main regional actors. Initial estimates of the ACU currency weights are based on the RIETI concept that is based on consideration of three main economic indicators, namely, the member countries shares in the aggregate GDP, foreign trade and outward investment. The author complemented the basic methodology by an extra criterion – countries’ shares in aggregate international reserves. The final conclusions on the optimal ACU basket composition are made through the analysis of the aggregated variation coefficient for each alternative set of the national currencies. The coefficient is calculated according to the original method developed by the author. The calculations are based on the national currencies’ monthly exchange rates data generated for the period January 2009 – February 2014. The analysis results in proposition of an optimal ACU basket structure with the calculated optimal countries’ weights. The author gives the recommendations for higher efficiency and regional financial stability.

scholarly journals Macroeconomic factors that influence the bank loans rate in international and Ukrainian practice

2021 ◽  
Vol 19 (4) ◽  
pp. 35-47
Author(s):  
Sergiy Ivakhnenkov ◽  
Svitlana Hlushchenko ◽  
Kamilla Sverenko
Keyword(s):  
Foreign Currency ◽  
Weighted Average ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Macroeconomic Factors ◽  
Long Run ◽  
Macroeconomic Indicators ◽  
Ease Of Doing Business ◽  
The Cost

The goal of the paper is to disclose the links between the dynamics of macroeconomic indicators and the level of bank loan rates based on international and Ukrainian practice. On the basis of the previous analysis, the paper also aims to identify the key trends in the formation of loan prices in the long run and identify problematic issues related to bank loan rates. The main characteristics of bank lending rates in Ukraine are: a) their high rates; b) sharp changes in the weighted average bank loan rates from year to year; c) higher loan rates for households compared to the cost of bank loans for businesses; d) higher bank loan rates for short- and medium-term loans versus long-term ones; e) lower rates on loans in foreign currency compared to the loans in hryvnia; and f) high share of non-performing loans to households and businesses in bank portfolios. In the context of world and Ukrainian practice, the paper demonstrates the reverse effect between macroeconomic indicators such as GDP per capita, the ratio of loans to GDP, the ease of doing business index and bank loan rates. The article also demonstrates a direct relationship between the dynamics of inflation rate in the country, the dynamics of non-performing bank loans and their rates.

scholarly journals Exchange Rates and Monetary Fundamentals: What Do We Learn from Linear and Nonlinear Regressions?

2014 ◽  
Vol 2014 ◽  
pp. 1-14 ◽  
Author(s):  
Guangfeng Zhang
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Correction Model ◽  
Exchange Rate Dynamics ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Short Run ◽  
Us Dollar ◽  
Linear And Nonlinear ◽  
Japanese Yen

This paper revisits the association between exchange rates and monetary fundamentals with the focus on both linear and nonlinear approaches. With the monthly data of Euro/US dollar and Japanese yen/US dollar, our linear analysis demonstrates the monetary model is a long-run description of exchange rate movements, and our nonlinear modelling suggests the error correction model describes the short-run adjustment of deviations of exchange rates, and monetary fundamentals are capable of explaining exchange rate dynamics under an unrestricted framework.

Monetary and Exchange Rate Policies for International Financial Stability: A Proposal

1988 ◽  
Vol 2 (1) ◽  
pp. 83-103 ◽  
Author(s):  
Ronald I McKinnon
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Purchasing Power Parity ◽  
Financial Stability ◽  
Foreign Exchange Market ◽  
The United States ◽  
Power Parity ◽  
Monetary Reform ◽  
Exchange Rate Fluctuations

What keeps the three major industrial blocs -- Western Europe, North America, and industrialized Asia -- from developing a common monetary standard to prevent exchange-rate fluctuations? One important reason is the differing theoretical perspectives of economic advisers. The first issue is whether or not a floating foreign exchange market -- where governments do not systematically target exchange rates -- is “efficient.” Many economists believe that exchange risk can be effectively hedged in forward markets so international monetary reform is unnecessary. Second, after a decade and a half of unremitting turbulence in the foreign exchange markets, economists cannot agree on “equilibrium” or desirable official targets for exchange rates if they were to be stabilized. The contending principles of purchasing power parity and of balanced trade yield very different estimates for the “correct” yen/dollar and mark/dollar exchange rates. Third, if the three major blocs can agree to fix nominal exchange rates within narrow bands, by what working rule should the new monetary standard be anchored to prevent worldwide inflation or deflation? After considering the magnitude of exchange-rate fluctuations since floating began in the early 1970s, I analyze these conceptual issues in the course of demonstrating how the central banks of Japan, the United States, and Germany (representing the continental European bloc) can establish fixed exchange rates and international monetary stability.

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.

La grande crisi globale: una sfida per la politica industriale e per le imprese

2009 ◽  
pp. 9-19
Author(s):  
Riccardo Varaldo ◽  
Lucio Lamberti
Keyword(s):  
Financial Stability ◽  
Business Models ◽  
Jel Classification ◽  
Credit Crunch ◽  
Corporate Structure ◽  
Research And Innovation ◽  
Leading Role ◽  
Long Run ◽  
Rapid Action ◽  
Political Approach

- The years to come are going to be very complex for global economies, a true challenge for industrial policy and corporate decisions. The first priority has been to ensure financial stability and to mitigate the credit crunch effects on economies, but a new strategic issue has to be put rapidly in place: the public rescue policy for economies and corporates. All measures must be taken to avoid the disruption of societies and economies, and this effort needs to be coordinated at the European and international level. In the short term, Italian industries will be less affected due to a higher flexibility and a less procyclical banking effect, but they will be very vulnerable in the long run because of the fragility of the corporate structure. More than other countries, Italy needs rapid action and a strategic political approach. Research and innovation are a must, and universities have to play a leading role in this phase. Keywords: recession, credit crunch, supply chain, business models, R&D policies, industrial Policies Parole chiave: recessione, restrizione del credito, filiera, modelli di business, politiche di R&S, politiche industriali JEL Classification: L25

Book Reviews

2015 ◽  
Vol 53 (2) ◽  
pp. 365-367
Keyword(s):  
United States ◽  
Political Economy ◽  
Exchange Rates ◽  
Latin American ◽  
Currency Crises ◽  
The United States ◽  
Exchange Rate Policy ◽  
Monetary Integration ◽  
The Political ◽  
Currency Policy

Benjamin J. Cohen of University of California, Santa Barbara reviews “Currency Politics: The Political Economy of Exchange Rate Policy”, by Jeffry A. Frieden. The Econlit abstract of this book begins: “Analyzes the politics surrounding exchange rates, including the influence of industries on the political process. Discusses the political economy of currency choice; a theory of currency policy preferences; the United States─from greenbacks to gold, 1862-79; the United States─silver threats among the gold, 1880-96; European monetary integration─from Bretton Woods to the euro and beyond; Latin American currency policy, 1970-2010; the political economy of Latin American currency crises; and the politics of exchange rates─implications and extensions.” Frieden is Professor of Government at Harvard University.

scholarly journals Exchange rate and monetary fundamentals: Long run relationship revisited

2015 ◽  
Vol 62 (1) ◽  
pp. 33-54
Author(s):  
Niyati Bhanja ◽  
Arif Dar ◽  
Aviral Tiwari
Keyword(s):  
Exchange Rate ◽  
Maximum Likelihood ◽  
Exchange Rates ◽  
Integration Method ◽  
Nominal Exchange Rate ◽  
Monetary Model ◽  
Integration Approach ◽  
Long Run ◽  
Monetary Approach ◽  
Likelihood Approach

This study re-examines the long run validity of the monetary approach to exchange rate determination for India. In particular, the long run association of bilateral nominal exchange rate of Indian rupee vis-?-vis USD, Pound-sterling, Yen and Euro against the corresponding monetary fundamentals that the model underlines has been tested using Johansen-Juselius maximum likelihood framework and Gregory-Hansen co-integration approach. Irrespective of the exchange rates the study finds a co-integrating relationship among the variables using Johansen-Juselius maximum likelihood approach. The Gregory-Hansen co-integration method allows for one break determined endogenously in three specifications also confirms the long run relationship. Our results, hence, suggest that the monetary model is a valid theory of long run equilibrium condition for the rupee-dollar, rupee-pound, rupee-yen and rupee-euro exchange rates.

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