scholarly journals Crude Oil Price Shocks, Exchange Rate Regimes and Monetary Policy in African Oil Producing Countries

2020 ◽  
Vol 5 (5) ◽  
Author(s):  
Adetona Sikiru Adedeji ◽  
Mojeed Olanrewaju Saliu
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Explanatory Power ◽  
Oil Price ◽  
Impulse Response Functions ◽  
Negative Effects ◽  
Interest Rate Policy ◽  
Development Indicators

This study investigated whether exchange rate regimes and interest rate policy have a significant explanatory power of oil price implications on African oil producing economies. Data for the study were sourced from World Development Indicators published by the World Bank and International Monetary Fund (World Economic Outlook). The study used a four variable Structural Vector Autoregressive (SVAR) model. Findings from the SVAR impulse response functions revealed that no exchange rate regime is the best, and no one is bad for African oil producing countries, judging from the costs and benefits that are associated with the three major exchange rate regimes. Findings from the study equally confirmed that expansionary monetary policy is more effective in insulating against and compensating for the negative effects of the shocks associated with the global oil price in the selected oil producing countries in Africa.

HOW THE EXCHANGE RATE REGIME AFFECTS ADJUSTMENT TO LARGE OIL PRICE SWINGS IN OIL EXPORTING COUNTRIES

2021 ◽  
Author(s):  
MAJED S. ALMOZAINI
Keyword(s):  
Exchange Rate ◽  
Money Supply ◽  
Government Spending ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Oil Price ◽  
Fixed Exchange Rate ◽  
Floating Exchange Rate ◽  
The Exchange Rate

The aim of this study is to analyze how oil price shocks affect the economic growth of floating exchange rate regimes and fixed exchange rate regimes in oil-exporting countries with a ratio of oil exports to total exports exceeding 70%. Also, this study seeks to determine what monetary and fiscal policies both regimes apply in order to curb business cycles and reduce inflationary and recessionary gaps. The analytical study uses panel data for the period from 1991 to 2019, covering 24 oil-exporting countries, from the World Economic Outlook (WEO) database and World Bank. The econometric model is estimated by applying a panel VECM to examine the short- and long-term interdependencies in the macroeconomic variables. The results demonstrate that when there is a negative shock to the oil price, the exchange rate of the floating exchange rate regimes depreciates, money supply increases, and government spending decreases. In contrast, the exchange rate of the fixed exchange rate regimes fluctuates slightly; the money supply slightly decreases in the near, medium, and long term; and government spending decreases.

scholarly journals Domestic Macroeconomic Adjustment to Oil Price Shocks Under Different Exchange Rate Regimes in Malaysia

2020 ◽  
Author(s):  
Fumitaka Furuoka ◽  
Wong Hock Tsen ◽  
Chong Hui Ing ◽  
Ting Siew King
Keyword(s):  
Exchange Rate ◽  
Time Series Data ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Flexible Exchange Rate ◽  
Oil Price ◽  
Series Data ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Fixed Exchange Rate

This study examined the insulation properties of flexible exchange rate regime and fixed exchange rate regime in response to the oil price shocks in Malaysia. A monthly time series data for the period 1980- 2005 was used to examine whether the response of output, exchange rate and price levels to the oil price shocks were different across the exchange rate regimes. For this purpose, this study employed the structural vector autoregressive model. Empirical results indicated that the short-run output responses to the oil price shocks are smoother under the flexible exchange rate regime compared to the situation under the fixed exchange rate regime.  

scholarly journals Contrôle De L’inflation En Regime De Change Fixe: Le Cas De La Communaute Economique Et Monetaire d’Afrique Centrale (CEMAC)

2017 ◽  
Vol 13 (10) ◽  
pp. 379
Author(s):  
Tangakou Soh Robert ◽  
Mba Fokwa Arsѐne ◽  
Akanga Reuben Johnson
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Endogenous Variable ◽  
Negative Effects ◽  
Development Indicators ◽  
Fixed Exchange Rate ◽  
The Exchange Rate ◽  
Main Determinants

This paper focuses on the determinants of inflation under different policy rules and fixed exchange rate regime, the example of the CEMAC zone. The purpose of this paper is to check the behaviour of inflation in fixed exchange rate regime for a flexible targeting period and a period of strict targeting. The data used are mainly from the World Bank, in «the book of world development indicators» contained in the CD -ROM (WDI 2015). Working for the periods 1977-1994, 1995-2012 and 1977-2012, the analyses was done with a dynamic panel that has the distinction of being among the independent variables, the endogenous variable lagged one or more periods. The endogenous variable is the rate of inflation. Estimates made from the Arellano and Bond (1991) method, it is clear that during the period (1977- 1994) of flexible inflation targeting, money supply, trade balance and the exchange rate are the main determinants of inflation. During the period (1995-2012) of strategy of strict inflation targeting, the main determinants of inflation are the benefits of natural resources, the trade balance and the economic crisis. The determinants of inflation have opposing effects of a match type to another and it is the combination of these effects for each variable that shows the different effects of the determinants of inflation over the period. The exchange rate increased the rate of inflation over the first sub-period (1977-1994) and throughout the entire period (1977-2012). In times (1995-2012) of strict inflation targeting, these negative effects were mitigated at the expense of economic growth. Countries with fixed exchange rate regime should not adopt a strict policy of inflation targeting, but should alternate with the growth objective by facilitating financing for investments.

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

Impact of external currency exposures on macroeconomic policies

2020 ◽  
pp. 23-40
Author(s):  
I. V. Prilepskiy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Positive Impact ◽  
Exchange Rate Regime ◽  
Macroeconomic Policies ◽  
Panel Regressions ◽  
Financial Account ◽  
Currency Exposure ◽  
Cross Country ◽  
The Impact

Based on cross-country panel regressions, the paper analyzes the impact of external currency exposures on monetary policy, exchange rate regime and capital controls. It is determined that positive net external position (which, e.g., is the case for Russia) is associated with a higher degree of monetary policy autonomy, i.e. the national key interest rate is less responsive to Fed/ECB policy and exchange rate fluctuations. Therefore, the risks of cross-country synchronization of financial cycles are reduced, while central banks are able to place a larger emphasis on their price stability mandates. Significant positive impact of net external currency exposure on exchange rate flexibility and financial account liberalization is only found in the context of static models. This is probably due to the two-way links between incentives for external assets/liabilities accumulation and these macroeconomic policy tools.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

scholarly journals Monetary Transmission Channel, Oil Price Shock and the Manufacturing Sector in Nigeria

2019 ◽  
Vol 19 (1) ◽  
pp. 89-113
Author(s):  
Adeleke Omolade ◽  
Philip Nwosa ◽  
Harold Ngalawa
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Rate ◽  
Manufacturing Sector ◽  
Output Growth ◽  
Oil Price ◽  
Monetary Transmission ◽  
Oil Price Shock ◽  
Price Shock ◽  
The Exchange Rate

Abstract Research background: The need for diversification of the Nigerian economy has been emphasized and the manufacturing sector has a major role in this. Being an oil producing country, monetary policy is an important macroeconomic policy that has always been used to manage the influence of oil price shock on the manufacturing sector. Purpose: The study examines the relationship between oil price shock, the monetary transmission mechanism and manufacturing output growth in Nigeria. Research methodology: The study applied the structural vector auto regression (SVAR) modelling technique and a descriptive analysis. Results: The results of the study show that the exchange rate is mostly affected by the oil price shock, while the monetary policy instruments and inflation rate are also very responsive to the exchange rate shock. The manufacturing sector output growth has also been shown to be strongly affected by the inflation rate and monetary policy shocks. Novelty: The study has revealed the most effective channel via which oil price shocks affect manufacturing output. The exchange rate channel of the monetary policy transmission mechanism is the most significant channel through which oil price shock affects manufacturing output growth in Nigeria. This shows that effective management of the exchange rate policy via the appropriate monetary policy approach can be used to minimize the adverse effect of oil price shocks on Nigerian manufacturing output.

scholarly journals The Determinants of Pakistan’s Trade Balance: An ARDL Cointegration Approach

2010 ◽  
Vol 15 (1) ◽  
pp. 1-26 ◽  
Author(s):  
Waliullah Waliullah ◽  
Mehmood Khan Kakar ◽  
Rehmatullah Kakar ◽  
Wakeel Khan
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Money Supply ◽  
Trade Balance ◽  
Exchange Rate Regime ◽  
Annual Data ◽  
Impulse Response Functions ◽  
Bounds Testing ◽  
Distributed Lag ◽  
Long Run

This article is an attempt to examine the short and long-run relationship between the trade balance, income, money supply, and real exchange rate in the case of Pakistan’s economy. Income and money variables are included in the model in order to examine the monetary and absorption approaches to the balance of payments, while the real exchange rate is used to evaluate the conventional approach of elasticities (Marshall Lerner condition). The bounds testing approach to cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework is applied to annual data for the period 1970 to 2005 in order to investigate whether a long-run equilibrium relationship exists between the trade balance and its determinants. Additionally, variance decompositions (VDCs) and impulse response functions (IRFs) are used to draw further inferences. The result of the bounds test indicates that there is a stable long-run relationship between the trade balance and income, money supply, and exchange rate variables. The estimated results show that exchange rate depreciation is positively related to the trade balance in the long and short run, consistent with the Marshall Lerner condition. The results provide strong evidence that money supply and income play a strong role in determining the behavior of the trade balance. The exchange rate regime can help improve the trade balance but will have a weaker influence than growth and monetary policy.

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