scholarly journals EXCHANGE RATE FLEXIBILITY, CAPITAL MOBILITY AND INFLATION TRANSMISSION IN MALAYSIA

2009 ◽  
Vol 8 (1) ◽  
Author(s):  
Mansor H. Ibrahim
Keyword(s):  
Exchange Rate ◽  
Capital Mobility ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
International Transmission ◽  
Exchange Rate Flexibility ◽  
The Us ◽  
Small Economy ◽  
Inflation Transmission ◽  
Limited Exchange

The paper assesses the international transmission of inflation for a small economy, Malaysia, over three sample periods marked by different degrees of exchange rate flexibility. Contradicting to conventional wisdom of less pronounced foreign nominal influences under the flexible exchange rate regime, this research finds evidence that the inflation transmission from the US to Malaysia is strongest during the period marked by increasing exchange rate flexibility (i.e. 1993-1998). This research also observes significant inflation effects of exchange rate depreciation during the same period. While this research observe less pronounced impacts of the US during the limited exchange rate flexibility period (i.e. 1988-1999), the US influences are virtually absent during the recent fixed regime (i.e. 1998-2005). This research believes that the intensity of capital flows across the three periods might have explained the results.

Inflation targeting and exchange rate regimes in emerging markets

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Christian Ebeke ◽  
Armand Fouejieu
Keyword(s):  
Exchange Rate ◽  
Emerging Markets ◽  
Inflation Targeting ◽  
Propensity Scores ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Marginal Effect ◽  
It Adoption ◽  
Exchange Rate Flexibility ◽  
The Exchange Rate

Abstract This paper investigates the effects of the adoption of inflation targeting (IT) on the choice of exchange rate regime in emerging markets (EMs), conditional on certain macroeconomic conditions. Using a large sample of EMs and after dampening the endogeneity of the adoption of IT using a selection on observables, we find that IT countries on average have a relatively more flexible exchange rate regime than other EMs. However, the flexibility of the exchange rate regime shows strong heterogeneity among IT countries. IT countries with low trade and financial openness and with a large share of external debt exhibit a lower exchange rate flexibility than others. Moreover, the marginal effect of IT adoption on the exchange rate flexibility increases with the duration of the IT regime in place, and with the propensity scores to adopt it.

scholarly journals Current Account Dynamics, Adjustment and Capital Mobility in Bangladesh

2013 ◽  
Vol 2 (2) ◽  
pp. 117-126
Author(s):  
Mohammad Masud Alam ◽  
Rezai Karim Khondker ◽  
Mohammad Shahansha Molla
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Capital Market ◽  
Capital Mobility ◽  
Market Integration ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Policy Implications ◽  
Current Account Dynamics ◽  
Real Shocks

This paper examines current account (CA) dynamics, its relationship with the degree of capital mobility and the state of integration of the Bangladesh capital market with the global capital market. For the period 1976-2012, findings of AR (1) process shows a rigid CA position along with its slow adjustment and its inflexibility against real shocks, lower degree of capital mobility and a slow progress of capital market integration with the rest of the world. Compared to the period of fixed exchange rate regime, lesser degree of  rigidity has been observed during the flexible exchange rate period suggesting a smooth and flexible current account position; but shows an increased degree of rigidity and capital immobility for the overall time period under consideration. These findings reveal some important policy implications in respects of current and capital account liberalization, deregulation of domestic markets and removing entry barriers on the part of Bangladesh to boost up FDI and remittance inflows.  

scholarly journals POST – CRISIS EXCHANGE RATE POLICY IN INDONESIA

2017 ◽  
Vol 2 (2) ◽  
Author(s):  
Abdul Hadi Ilman
Keyword(s):  
Exchange Rate ◽  
Capital Mobility ◽  
Exchange Rate Regime ◽  
Foreign Debt ◽  
International Market ◽  
Flexible Exchange Rate ◽  
Exchange Rate Policy ◽  
Asian Tigers ◽  
Rate Policy ◽  
The Exchange Rate

In 1997 Indonesia was hit by a severe financial crisis which led to the change of almost everything in the country, including the exchange rate regime; from managed floating to free floating or flexible exchange rate. It has been a major conclusion from academic debate that maintaining exchange rate at a certain level or band (soft peg) was no longer workable in the more integrated financial system, international market, and free flow of capital mobility across economy.Indonesia once was known as one of the “Asian Tigers” which were believed to be the next industrialized economies as was being indicated by astounding macroeconomic performance since the early 1990s. The exchange rate management, in which the objective was to have a competitiveness in the international market, was making a huge contribution to that performance. No one suspected those countries would be hit by the crisis until Thailand’s Bath was under attacked and suddenly it spread expeditiously to other economies.Domestically, economy of Indonesia was funded by foreign debt in the several years before crisis to leverage the economy, especially private sector. Thus, when the currency crisis was happening, the value of rupiah was depreciated so much and the central bank could not afford to stabilize the value of rupiah in the market. Then a huge amount of the dollar-denominated short term debt was suspected to default since the debt value in rupiah was becoming very large.

scholarly journals Do Exchange Rate Regimes Matter for Inflation and Exchange Rate Dynamics? The Case of Central America

2011 ◽  
Vol 43 (2) ◽  
pp. 327-354 ◽  
Author(s):  
RODRIGO CAPUTO G. ◽  
IGAL MAGENDZO
Keyword(s):  
Exchange Rate ◽  
El Salvador ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Flexible Exchange Rate ◽  
Central American ◽  
Exchange Rate Flexibility ◽  
Inflation Persistence ◽  
Exchange Rate Dynamics ◽  
Time Away

AbstractThis paper makes an empirical contribution to discussion of the optimal exchange rate regime. Using a new dataset for Central American countries, we compare the dynamics of the real exchange rate (RER) between dollarised and non-dollarised countries. Our results show that the two dollarised countries in the region, El Salvador and Panama, are quite different in terms of RER dynamics. In El Salvador the RER spends more time away from its equilibrium level than in the non-dollarised countries in the region, while the contrary is true for Panama. We also find that inflation persistence is similar in El Salvador to the other countries, but smaller in Panama. This leads us to the conclusion that some degree of exchange rate flexibility helps countries to have a more aligned RER. Nevertheless, a long-lived, highly credible dollarised economy, like Panama, can reduce inflation persistence to such an extent that RER misalignments are in fact less frequent than in countries with more flexible exchange rate regimes.

scholarly journals Exchange rate regime choice

2006 ◽  
Vol 53 (3) ◽  
pp. 313-334 ◽  
Author(s):  
Emilija Beker
Keyword(s):  
Decision Making ◽  
Exchange Rate ◽  
Shelf Life ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Point Of View ◽  
External Factors ◽  
Advantages And Disadvantages ◽  
Complex Process ◽  
Highly Sensitive

The choice of an adequate exchange rate regime proves to be a highly sensitive field within which the economic authorities present and confirm themselves. The advantages and disadvantages of fixed and flexible exchange rate regimes, which have been quite relativized from the conventional point of view, together with simultaneous, but not synchronized effects of structural and external factors, remain permanently questioned throughout a complex process of exchange rate regime decision making. The paper reflects the attempt of critical identification of the key exchange rate performances with emphasis on continuous non-uniformity and (un)certainty of shelf life of a relevant choice.

scholarly journals Still tied by golden fetters: the global response to the US recession of 1937–1938

2012 ◽  
Vol 19 (1) ◽  
pp. 21-48 ◽  
Author(s):  
Scott Urban ◽  
Tobias Straumann
Keyword(s):  
Exchange Rate ◽  
Gold Standard ◽  
Exchange Rate Regime ◽  
Central Banking ◽  
Eastern European ◽  
Standard View ◽  
Global Response ◽  
Policy Regime ◽  
The Us ◽  
Eastern European Countries

The US recession of 1937–8 is one of the deepest on record. Yet it did not produce a global depression – quite unlike 1930. According to the standard view, this reflected an unfettering of central banking after the collapse of the international gold standard circa 1931. We challenge this view. While Germany and a couple of Central and Eastern European countries were sheltered by binding exchange controls, most countries were still constrained by their golden fetters, as our new exchange rate regime classification suggests. The underlying policy regime was surprisingly similar to that of the 1929–30 downturn. What mattered was a quick reversal in US policy in 1938 and, for many countries, a more plentiful stock of international reserves.

Greece and Hong Kong

2017 ◽  
Author(s):  
Yue Chim Richard Wong
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Economic Shocks ◽  
Fixed Rate ◽  
Policy Tool ◽  
Monetary Independence ◽  
Monetary Unit ◽  
The Us ◽  
Us Dollar

Both Greece and Hong Kong have unified exchange rate regimes. Greece, as a member of the Eurozone, uses the euro as its local monetary unit. Hong Kong, under the linked exchange rate regime, uses a local monetary unit with its currency fully backed by the US dollar at a fixed rate. As a consequence, both economies have surrendered monetary independence to an external monetary authority. Both have committed to not using currency devaluation or revaluation as a policy tool for stabilizing their economies when they are struck by financial and economic shocks. The only way they could regain monetary independence would be, in Greece’s case, exiting the Eurozone and reissuing the drachma, and in Hong Kong’s case, breaking the linked exchange rate and putting in place an alternative monetary arrangement for issuing the Hong Kong dollar. An economy that has joined a unified exchange rate regime will face situations from time to time when the requirements of global economic integration will be in conflict with the requirements of a political democracy.

Negotiating the Trilemma: The Indian Experience

2012 ◽  
Vol 12 (1) ◽  
pp. 1850249 ◽  
Author(s):  
Abhijit Sen Gupta ◽  
Ganesh Manjhi
Keyword(s):  
Exchange Rate ◽  
Capital Flows ◽  
Current Account Deficit ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Active Management ◽  
Reserve Bank ◽  
Indian Experience ◽  
Policy Objectives ◽  
Healthy Growth

Increased integration with the global capital markets in recent years has forced India to negotiate the trilemma, balancing the objectives of monetary independence, exchange rate stability, and orderly capital flows. India’s calibrated approach towards liberalization of capital account, wherein certain flows and agents were accorded priority in the liberalization process, has helped India to deal with the trilemma. In this paper, we examine India’s experience in negotiating the trilemma during the last three decades. In doing so, we deviate from the existing literature by quantifying the various policy objectives under the trilemma. This allows us to analyze the extent to which pursuit of an objective has entailed giving up two other objectives. Using empirical methods, we find that India has been constrained by the trilemma during the last three decades. However, instead of adopting corner solutions, India has juggled the various policy objectives under the trilemma as per the demands of the macroeconomic situation. The overall policy architecture encompassed active management of capital flows, especially volatile flows and debt flows, a moderately flexible exchange rate regime with the Reserve Bank of India (RBI) intervening at times to prevent excessive volatility, sterilization of these interventions through multiple instruments, and building up of a stockpile of reserves. This intermediate approach has suited India well as it has been able to maintain a healthy growth rate, targeted monetary and credit growth rates, a moderate inflation rate through most of the period, and a sustainable current account deficit.

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