scholarly journals The Exchange Rate in the Monetary Transmission Mechanism

2003 ◽  
Author(s):  
Jan Przystupa
Keyword(s):  
Exchange Rate ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
The Exchange Rate

scholarly journals The monetary transmission mechanism in Brazil: evidence from a var analysis

2008 ◽  
Vol 38 (1) ◽  
pp. 7-30 ◽  
Author(s):  
Viviane Luporini
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Economic Activity ◽  
Commodity Prices ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Time Interval ◽  
Monetary Shocks ◽  
Real Gdp ◽  
The Exchange Rate

This article presents evidence on the interest channel of the monetary policy for the Brazilian economy of the 1990s analyzing the effects of an unexpected change in the baseline interest rate on output, prices and the exchange rate in a vector autoregression system. Our main results are: a) a tightening in the monetary policy affects economic activity immediately, reducing the rate of growth of real GDP; b) the exchange rate and prices are affected only after a time interval, with inflation assuming a downward trend only two months after the monetary shock; c) results do not change when the specification is controlled for international conditions, commodity prices or other measures of inflation and economic activity; d) monetary shocks have a significant impact on the volatility of output and inflation in the benchmark model e) monetary shocks have a significant impact on the volatility of the debt/GDP ratio in the control-model.

CHARACTERIZING THE MONETARY TRANSMISSION MECHANISM IN A SMALL OPEN ECONOMY: THE CASE OF MALAYSIA

2003 ◽  
Vol 48 (02) ◽  
pp. 113-134 ◽  
Author(s):  
WEE BENG GAN ◽  
LEE YING SOON
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Open Economy ◽  
Small Open Economy ◽  
Policy Instrument ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Monetary Transmission Mechanism

This paper evaluates the monetary policy response of Malaysia's central bank and the nature of monetary transmission mechanism in the 1990s when the exchange rate was on a managed float and the capital account was open. Structural vector autogression analysis is employed to evaluate how the central bank sets short term interest rates taking into consideration the constraints faced in adjusting the policy instrument to shocks to the economy. The impulse response functions and the variance decomposition indicate that the central bank preferred to use foreign exchange intervention rather than interest rate to stabilize the ringgit exchange rate. The results suggest that a sustained high level of interest rates would have caused a prolonged and deep contraction in output during the East Asian financial crisis.

scholarly journals Symposium on the Monetary Transmission Mechanism

1995 ◽  
Vol 9 (4) ◽  
pp. 3-10 ◽  
Author(s):  
Frederic S Mishkin
Keyword(s):  
Exchange Rate ◽  
Asset Price ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Credit Channel ◽  
Monetary Transmission Mechanism ◽  
Transmission Mechanisms ◽  
Price Effects ◽  
Rate Effects ◽  
Monetary Transmission Mechanisms

Understanding of monetary transmission mechanisms is crucial to answering a broad range of questions. These transmission mechanisms include interest-rate effects, exchange-rate effects, other asset price effects, and the so-called credit channel. This introduction to the symposium provides an overview of the main types of monetary transmission mechanisms found in the literature and a perspective on how the papers in the symposium relate to the overall literature and to each other.

scholarly journals The monetary transmission mechanism in Polish economy

2012 ◽  
Vol 3 (3) ◽  
pp. 21-35
Author(s):  
Adam Waszkowski
Keyword(s):  
Exchange Rate ◽  
Output Growth ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Recursive Structure ◽  
Monetary Transmission Mechanism ◽  
Price Puzzle ◽  
Macroeconomic Indicators ◽  
Polish Economy ◽  
The Impact

The aim of this article is to define the monetary transmission mechanism of the Polish economy and to identify the impact of shocks from the monetary policy on macroeconomic indicators such as price levels or GDP. In this regard there were used a theoretical vector autoregression model and conducted its recursive structure proposed by Sims (1980) using Cholesky decomposition. This allowed to isolate the impact of shocks: a supply, a demand, monetary and exchange rate on the value and output growth, inflation and exchange rate. Thanks to this it was visualized in the Polish economy a phenomenon of output and price puzzle.

scholarly journals Innovation Mechanism in Monetary Policy Forecasting: Unification of all Macroeconomic Puzzles in SVAR Model

2020 ◽  
pp. 219-230
Author(s):  
Angela Kuznyetsova ◽  
Olha Klishchuk ◽  
Andrew Lisnyak ◽  
Atik Kerimov ◽  
Azer Babayev
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Foreign Exchange ◽  
Half Life ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
The Real ◽  
Monetary Transmission Mechanism ◽  
The Impact

The article is devoted to developing a forecasting mechanism unifying all macroeconomic puzzles, which violate fundamental macroeconomic relationships among variables of the monetary transmission mechanism in Ukraine. The violations mentioned above caused by breaking one-law price (PPP puzzle), uncovered interest rates rule (UIP puzzle), plausible emergence of new sophisticated financial instruments, and causality of international risk-sharing conditions under the financial capital spillover. The authors calculated the residuals in the VAR model of monetary transmission mechanism (MTM) to analyze the correlations between shocks and disturbances in these variables. Furtherly these correlations were put in constructing the restriction matrix for building a structural vector autoregressive model. The correlations between shocks and disturbances were employed for estimating the impulse response functions used for determining the duration of half-life shocks for the real exchange rate. The obtained results allowed noticing that relationships between macroeconomic variables in the monetary transmission mechanism were not similar if considering the established foreign exchange arrangement. In particular, during 2007-2020, relationships among MTM variables were violated. Besides, the half-life duration of the real exchange rate was far longer. While in cases for Ukraine before switching to floating exchange rate regime and after it became less explicit and half-lives were shorter. The findings allowed confirming the impact of the currency arrangement switching on violation of traditional linkages between the variables of foreign exchange rate channel of MTM. Thus, it showed that during the fixed arrangement, absolutely all reactions were violated. Although after the introduction of a flexible exchange rate, the sign of REER correlation with foreign trade terms has changed to positive and more strengthened. Therefore, it has demonstrated a positive impact on the dynamics of real GDP and lower inflation. The findings of the current study could be used to improve existed methodical approaches for establishing structural constraints on variables responses to the shock of the exchange rate. The algorithm for designing optimal monetary policy strategies could take place in empirical data and forecasting exchange rate volatility. Keywords: PPP puzzle, UIP puzzle, MTM, financial innovations, REER, SVAR.

scholarly journals THE INFLUENCE OF THE FOREIGN EXCHANGE CHANNEL OF THE TRANSMISSION MECHANISM AND FOREIGN EXCHANGE POLICY ON ECONOMIC DEVELOPMENT

2021 ◽  
Vol 26 (3(88)) ◽  
Author(s):  
Svitlana Mishchenko ◽  
Volodymyr Mishchenko ◽  
Svitlana Naumenkova
Keyword(s):  
Growth Rate ◽  
Economic Development ◽  
Exchange Rate ◽  
Central Bank ◽  
Foreign Exchange ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
Real Gdp ◽  
The Impact

The article examines the peculiarities of the functioning of the currency channel of the monetary transmission mechanism of the central bank and its impact on the economic development of Ukraine in 2005-2020. The study was conducted on the basis of the use of linear regression models and the calculation of relevant indicators that characterize the reliability of the proposed models. The main economic parameters on which the dynamics of the hryvnia exchange rate has the greatest influence are determined and the methods of assessing the efficiency of the monetary channel currency transmission channel are improved. Based on the analysis and quantitative assessment of the impact of the weighted average exchange rate of hryvnia to the US dollar on the dynamics of the monetary base, monetary aggregates, lending rates, the base interest rate of the National Bank of Ukraine and the yield on short-term domestic government bonds, the main economic tendencies and links in the mechanism of functioning of the currency channel of monetary transmission were defined. In order to assess the impact of the currency channel on the main macroeconomic indicators, the impact of the dynamics of the hryvnia exchange rate on the growth rate of real GDP, inflation, the level of monetization of the economy and financial dollarization was determined. It is substantiated that the appreciation of the hryvnia exchange rate against leading currencies significantly restrains the growth rate of real GDP and contributes to rising inflation, which requires additional measures by the NBU to improve currency regulation and control. Based on the generalization of the NBU practice, the main directions are identified and a it was developed the system of measures to improve the efficiency of the monetary channel of the monetary transmission mechanism based on increasing the banking system's resilience to internal and external shocks, maintaining relative exchange rate stability and low volatility, ensuring effective foreign exchange market management, maintaining the balance of payments, as well as improving the efficiency of currency regulation and the implementation by the central bank of a prudent monetary policy that ensures the effective transmission of monetary impulses from the central bank to the real sector of the economy.

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