scholarly journals Identifying the determinants that cause the value movements of currencies Denar, Kuna and Dinar

2018 ◽  
Vol 4 (2) ◽  
pp. 78-85
Author(s):  
Vesna Bucevska ◽  
Goran Mojanoski
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Economic Management ◽  
The Real ◽  
Long Run ◽  
Floating Exchange Rate ◽  
Relationship Of ◽  
The Relationship

AbstractThis paper aims to evaluate the relationship of real exchange rates of domestic currencies with macroeconomic variables in Macedonia, Croatia and Serbia by using econometric approaches. Macedonia is characterized by the regime of a fixed exchange rate, Croatia is characterized by a managed floating exchange rate, while Serbia is characterized by the regime of a floating exchange rate. The choice of an exchange rate regime is an important aspect of economic management, in order to ensure competitiveness, macroeconomic stability and development. Evaluation of the relationship of Croatian, Macedonian and Serbian real exchange rates is performed by employing the consistent methodology of vector error correction modelling (VECM). According to the results of the analyses of the real exchange rates on the long run, the selected independent variables have long-run causality in case of the real exchange rate of Croatian Kuna. In case of Macedonian Denar and Serbian Dinar the VECM is inappropriate.

South Africa’s Trade Performance under Alternative Exchange Rate Regimes

2018 ◽  
Vol 10 (6) ◽  
pp. 261
Author(s):  
Romaine Patrick ◽  
Phocenah Nyatanga
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Series Data ◽  
Growth Strategies ◽  
The Real ◽  
Real Price ◽  
Floating Exchange Rate

This study examined the effect exchange rates have on import and export volumes under alternative exchange rate policies adopted in South Africa over the period 1960 to 2017. Using quarterly time series data for the stated period, a log-linear error correction model is employed to estimate the country’s export and import elasticities, taking into account Gross Domestic Product (GDP), the real price of exports, the real price of imports and real exchange rates. Using the freely floating exchange rate regime as the base period, the study concluded that both export and import volumes are lower under a system of fixed exchange rates. Export and import volumes were also found to be lower under the dual exchange rate regime, relative to the freely floating exchange rate regime. In accordance with export-led growth strategies, exports were found to be higher and imports lower under a managed floating exchange rate regime. It is therefore recommended that South Africa revert to a more managed exchange rate regime, until the South African economy is developed to accommodate a freely floating exchange rate regime.

scholarly journals South Africa’s Trade Performance under Alternative Exchange Rate Regimes

2018 ◽  
Vol 10 (6(J)) ◽  
pp. 261-271
Author(s):  
Romaine Patrick ◽  
Phocenah Nyatanga
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Series Data ◽  
Growth Strategies ◽  
The Real ◽  
Real Price ◽  
Floating Exchange Rate

This study examined the effect exchange rates have on import and export volumes under alternative exchange rate policies adopted in South Africa over the period 1960 to 2017. Using quarterly time series data for the stated period, a log-linear error correction model is employed to estimate the country’s export and import elasticities, taking into account Gross Domestic Product (GDP), the real price of exports, the real price of imports and real exchange rates. Using the freely floating exchange rate regime as the base period, the study concluded that both export and import volumes are lower under a system of fixed exchange rates. Export and import volumes were also found to be lower under the dual exchange rate regime, relative to the freely floating exchange rate regime. In accordance with export-led growth strategies, exports were found to be higher and imports lower under a managed floating exchange rate regime. It is therefore recommended that South Africa revert to a more managed exchange rate regime, until the South African economy is developed to accommodate a freely floating exchange rate regime.

scholarly journals The Long-run Relationship between Real Exchange Rate and Real Interest Rate in Asian Countries: An Application of Panel Cointegration

2001 ◽  
Vol 40 (4II) ◽  
pp. 577-602 ◽  
Author(s):  
Shaista Alam ◽  
Muhammad Sabihuddin Butt ◽  
Azhar Iqbal
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Interest Rate ◽  
Real Exchange Rates ◽  
Panel Cointegration ◽  
The Real ◽  
Long Run ◽  
Interest Rate Differentials

The role of exchange rate policy in economic development has been the subject of much debate and controversy in the development literature. Interest rates and exchange rates are usually viewed as important in the transmission of monetary impulses to the real economy. In the short run the standard view of academics and policy-makers is that a monetary expansion lowers the interest rate and rises the exchange rate, with these price changes then affecting the level and composition of aggregate demand. Frequently, these influences are described as the liquidity effects of monetary expansion, viewed as the joint effect of providing larger quantities of money to the private sector. Popular theories of exchange-rate determination also predict a link between real exchange rates and real interest rate differentials. These theories combine the uncovered interest parity relationship with the assumption that the real exchange rate deviates from its long-run level only temporarily. Under these assumptions, shocks to the real exchange rate—which are often viewed as caused by shocks to monetary policy—are expected to reverse themselves over time. This study investigates the long-run relationship between real exchange rates and real interest rate differentials using recently developed panel cointegration technique. Although this kind of relationship has been studied by a number of researchers,1 very little evidence in support of the relationship has been reported in the case of developing countries. For example, Meese and Rogoff (1988) and Edison and Pauls (1993), among others, used the Engle-Granger cointegration method and fail to establish a clear long-run relationship in their analysis.

scholarly journals THE RESPONSE OF ZIMBABWE TOBACCO EXPORTS TO REAL EXCHANGE RATES VOLATILITY

2020 ◽  
Vol 56 (2) ◽  
Author(s):  
Knowledge Mutodi ◽  
Tinashe Chuchu ◽  
Eugine Tafadzwa Maziriri
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Exchange Rates ◽  
Exchange Rate Volatility ◽  
Response Model ◽  
The Real ◽  
Long Run ◽  
Exchange Rates Volatility ◽  
Real Exchange Rate Volatility

The focus of this study was on investigating the response of tobacco exports to real exchange rates and real exchange rate volatility and other factors in Zimbabwe using secondary data spanning from 1980 to 2019. Bilateral nominal exchange rates and time-variant weights of Zimbabwe’s 10 major trading partners were calculated and used to compute the real exchange rate index. The time-dependent weighting system was used to better represent the evolution of trade patterns in the index. The arithmetic method was employed for computing the index. Generalized autoregressive conditional heteroskedasticity (GARCH) and autoregressive conditional heteroscedasticity (ARCH) models were used to generate the real exchange rate volatility index. The export response function was adopted as the tobacco exports response model. The variables in the tobacco exports response model were the realworld Gross Domestic Product (GDP), real exchange rate, terms of trade, real exchange rate volatility and dollarization. A vector error correction model (VECM) was used to estimate the response of tobacco exports to real exchange rate, real exchange rate volatility and other factors. The VECM results indicated that real world GDP was insignificant in both the short and long run. In the long run, the real exchange rate appreciation had a negative impact on tobacco exports. Conversely, in the short run, the depreciation of real exchange rate had a positive impact on tobacco exports. Hence, the government has to adopt other mechanisms that reduce uncertain movements of exchange rates.

Real Exchange Rates and Currency Risk Premiums

2019 ◽  
Vol 10 (1) ◽  
pp. 94-121 ◽  
Author(s):  
Pierluigi Balduzzi ◽  
I-Hsuan Ethan Chiang
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Predictive Power ◽  
Real Exchange Rates ◽  
Currency Risk ◽  
Risk Premiums ◽  
The Real ◽  
Long Run ◽  
Long Run Risks

Abstract Standard finite horizon tests uncover only weak evidence of the predictive power of the real exchange rate for excess currency returns. On the other hand, in long-horizon tests, the real exchange rate strongly and negatively predicts future excess currency returns. Conversely, we can attribute most of the variability in real exchange rates to changes in currency risk premiums. The “habit” and “long-run risks” models replicate the predictive power of the real exchange rate for excess currency returns, but substantially overstate the fraction of the volatility of the real exchange rate due to risk premiums. Received December 14, 2017; Editorial decision October 14, 2018 by Editor: Raman Uppal. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Long Memory and Parity Reversion in Real Exchange Rate

2020 ◽  
Author(s):  
Abd. Ghafar Ismail ◽  
Wahi Ismail
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Purchasing Power Parity ◽  
Long Memory ◽  
Real Exchange Rates ◽  
Power Parity ◽  
Equilibrium Relation ◽  
Long Memory Process ◽  
Long Run ◽  
Floating Exchange Rate

This paper examines the post Bretton Woods experience of the Malaysian Ringgit. In this period, Malaysia moved from a managed to a floating exchange rate environment.We examine persistence in real exchange rates by estimating fractionally integrated ARIMA models and find evidence of long memory, which induces persistence though this long memory need not be associated with a unit root. The results show that three out of four exchange rates being examined display mean reversion. The long memory process re-establishes the Purchasing Power Parity as a meaningful concept of long-run equilibrium relation between the exchange rate and relative prices.

scholarly journals Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation

2020 ◽  
Vol 130 (630) ◽  
pp. 1715-1728 ◽  
Author(s):  
Torfinn Harding ◽  
Radoslaw Stefanski ◽  
Gerhard Toews
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Direct Evidence ◽  
Oil And Gas ◽  
Real Exchange Rates ◽  
Labour Productivity ◽  
Dutch Disease ◽  
The Real ◽  
Traded Goods

Abstract We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. A giant discovery with the value of 10% of a country’s GDP appreciates the real exchange rate by 1.5% within ten years following the discovery. The appreciation starts before production begins and the non-traded component of the real exchange rate drives the appreciation. Labour reallocates from the traded goods sector to the non-traded goods sector, leading to changes in labour productivity. These findings provide direct evidence on the channels central to the theories of the Dutch disease and the Balassa–Samuelson effect.

Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach

2012 ◽  
Vol 232 (2) ◽  
Author(s):  
Michael Frenkel ◽  
Isabell Koske
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Exchange Rates ◽  
Oecd Countries ◽  
The Real ◽  
Estimation Strategy ◽  
Limited Availability ◽  
Two Step Estimation ◽  
The Eu

SummaryThis paper derives equilibrium real exchange rates for the EU member countries that joined in 2004 and in 2007. Our analysis is based on the natural real exchange rate approach and uses data for the period 1980-2007. We employ a two-step estimation strategy to deal with the limited availability and reliability of data from these countries. We first estimate the model for a panel of 17 OECD countries and then apply the estimated relationship to the new EU member countries. While the model does not support the appreciation of some of the examined currencies in 2005-2007, the development of several other currencies of the CEECs appears to be fairly in line with our NATREX estimates.

Common Trends and Common Cycles in Oil Price and Real Exchange Rate

2014 ◽  
Vol 14 (2) ◽  
pp. 249-263 ◽  
Author(s):  
Hem C. Basnet ◽  
Puneet Vatsa ◽  
Subhash Sharma
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Crude Oil ◽  
Real Exchange Rates ◽  
Oil Prices ◽  
Oil Price ◽  
Cycle Decomposition ◽  
The Real ◽  
Crude Oil Prices ◽  
Common Cycles

This study explores the long- and short-run movement between oil prices and the real exchange rates of two large oil-exporting countries – Canada and Norway. Cointegration and serial correlation common features tests are jointly used to identify the long-term common trend and short-term common cycles. Our test results find that oil prices and the real exchange rates of the Canadian Dollar and the Norwegian Krone have two shared trends and one shared cycle. The trend–cycle decomposition shows a great deal of positive comovement among the trend and cyclical components. The two currencies show economic dynamics very similar to crude oil prices. They do not exhibit any qualitative differences in the trajectory of the trend and cycles when controlling for different crude oil prices. Our results indicate that oil price fluctuations play significant role in explaining the exchange rate movements of oil-exporting countries.

scholarly journals The relationship between exchange rates and international trade: a literature review

2013 ◽  
Vol 12 (3) ◽  
pp. 577-605 ◽  
Author(s):  
MARC AUBOIN ◽  
MICHELE RUTA
Keyword(s):  
International Trade ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Small Firms ◽  
Exchange Rate Volatility ◽  
Production Networks ◽  
Global Production Networks ◽  
Long Run ◽  
The Impact ◽  
The Relationship

AbstractThis paper surveys a wide body of economic literature on the relationship between exchange rates and trade. Specifically, two main issues are investigated: the impact of exchange rate volatility and of currency misalignments on international trade flows. On average, exchange rate volatility has a negative (even if not large) impact on trade. The extent of this effect depends on a number of factors, including the existence of hedging instruments, the structure of production (e.g. the prevalence of small firms), and the degree of economic integration across countries. The second issue involves exchange rate misalignments, which are predicted to have short-run effects in models with price rigidities. However, the exact impact depends on a number of features, such as the pricing strategy of firms engaging in international trade and the importance of global production networks. Trade effects of currency misalignments are predicted to disappear in the long-run, unless an economy is characterized by other relevant distortions. Empirical results broadly confirm these theoretical predictions.

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