The effects of the global financial crisis on the asymmetric relationship between exchange rate volatility and trade flows

2021 ◽  
Vol 39 (1) ◽  
Author(s):  
Bisharat Hussain Chang ◽  
Niaz Ahmed Bhutto ◽  
Farhan Ahmed ◽  
Zahida Abro ◽  
Nadia Anjum
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Nonlinear Ardl ◽  
Nonlinear Ardl Model ◽  
The Global Financial Crisis ◽  
The Relationship ◽  
Country Specific

Recent literature has shifted to examining whether the relationship between exchange rate volatility and trade flows is symmetric or asymmetric. However, this literature does not provide consistent findings. We extend the existing literature by examining whether the asymmetric relationship between exchange rate volatility and trade flows changes as a result of the global financial crisis. For this purpose, we use a nonlinear ARDL model on both the pre and the post-crisis period data. The pre-crisis and post-crisis periods cover the data from January 1986 to August 2008 and September 2008 to January 2018 respectively. Results indicate that the relationship changes as a result of global financial crisis however, this relationship is country specific as well on the type of model (export or import) selected.

The effects of the global financial crisis on the asymmetric relationship between exchange rate volatility and trade flows

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Bisharat Hussain Chang ◽  
Niaz Ahmed Bhutto ◽  
Farhan Ahmed ◽  
Zahida Abro ◽  
Nadia Anjum
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Nonlinear Ardl ◽  
Nonlinear Ardl Model ◽  
The Global Financial Crisis ◽  
The Relationship ◽  
Country Specific

Recent literature has shifted to examining whether the relationship between exchange rate volatility and trade flows is symmetric or asymmetric. However, this literature does not provide consistent findings. We extend the existing literature by examining whether the asymmetric relationship between exchange rate volatility and trade flows changes as a result of the global financial crisis. For this purpose, we use a nonlinear ARDL model on both the pre and the post-crisis period data. The pre-crisis and post-crisis periods cover the data from January 1986 to August 2008 and September 2008 to January 2018 respectively. Results indicate that the relationship changes as a result of global financial crisis however, this relationship is country specific as well on the type of model (export or import) selected.

scholarly journals Exchange Rate Risk and Uncertainty and Trade Flows: Asymmetric Evidence from Asia

2020 ◽  
Vol 13 (6) ◽  
pp. 128
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Parveen Akhtar ◽  
Sana Ullah ◽  
Muhammad Tariq Majeed
Keyword(s):  
Exchange Rate ◽  
Linear Models ◽  
Nonlinear Models ◽  
Exchange Rate Volatility ◽  
The Philippines ◽  
Trade Flows ◽  
Asian Countries ◽  
Exchange Rate Uncertainty ◽  
Nonlinear Ardl ◽  
Nonlinear Ardl Model

Very recently, the link between exchange rate volatility and trade flows has entered into a new direction in which researchers assess the possibility of asymmetric response of trade flows to a measure of exchange rate uncertainty. We add to this literature by estimating a linear and a nonlinear ARDL model to learn about the experiences of Asian countries, i.e., Pakistan, Japan, China, Korea, Singapore, Malaysia, the Philippines, and India. Like other studies in the literature, nonlinear models yielded relatively more significant results. In some cases, while the linear models showed no significant effects of exchange rate volatility on trade flows, the nonlinear models revealed significant effects. In some other cases, the opposite was true.

Macroprudential Policy - Taxonomy and Challenges

2011 ◽  
Vol 216 ◽  
pp. R1-R15 ◽  
Author(s):  
Erland W. Nier
Keyword(s):  
Financial Crisis ◽  
Financial Regulation ◽  
Global Financial Crisis ◽  
Policy Framework ◽  
Macroprudential Policy ◽  
Macroprudential Policies ◽  
The Global Financial Crisis ◽  
Governance Arrangements ◽  
Country Specific

There is increasing recognition that prior to the global financial crisis financial regulation had lacked a macroprudential perspective. There has since been a strong effort to make a new macroprudential orientation operational, including through the establishment of new macroprudential authorities or ‘committees’ in a number of jurisdictions. These developments raise — and this paper explores — the following three questions. First, what distinguishes macroprudential policy from microprudential policy and what are its key tasks? Second, what powers should be given to macroprudential authorities and what should be their mandate? Third, how can governance arrangements ensure that macroprudential policies are pursued effectively? While arrangements for macroprudential policy will to some extent be country-specific, we identify three basic challenges in setting up an effective macroprudential policy framework and discuss options to address them.

scholarly journals Sugar Prices vs. Financial Market Uncertainty in the Time of Crisis: Does COVID-19 Induce Structural Changes in the Relationship?

Agriculture ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 93
Author(s):  
Pavel Kotyza ◽  
Katarzyna Czech ◽  
Michał Wielechowski ◽  
Luboš Smutka ◽  
Petr Procházka
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Market ◽  
Structural Breaks ◽  
Structural Changes ◽  
Global Financial Crisis ◽  
Market Uncertainty ◽  
Volatility Index ◽  
The Global Financial Crisis ◽  
The Relationship

Securitization of the agricultural commodity market has accelerated since the beginning of the 21st century, particularly in the times of financial market uncertainty and crisis. Sugar belongs to the group of important agricultural commodities. The global financial crisis and the COVID-19 pandemic has caused a substantial increase in the stock market volatility. Moreover, the novel coronavirus hit both the sugar market’s supply and demand side, resulting in sugar stock changes. The paper aims to assess potential structural changes in the relationship between sugar prices and the financial market uncertainty in a crisis time. In more detail, using sequential Bai–Perron tests for structural breaks, we check whether the global financial crisis and the COVID-19 pandemic have induced structural breaks in that relationship. Sugar prices are represented by the S&P GSCI Sugar Index, while the S&P 500 option-implied volatility index (VIX) is used to show stock market uncertainty. To investigate the changes in the relationship between sugar prices and stock market uncertainty, a regression model with a sequential Bai–Perron test for structural breaks is applied for the daily data from 2000–2020. We reveal the existence of two structural breaks in the analysed relationship. The first breakpoint was linked to the global financial crisis outbreak, and the second occurred in December 2011. Surprisingly, the COVID-19 pandemic has not induced the statistically significant structural change. Based on the regression model with Bai–Perron structural changes, we show that from 2000 until the beginning of the global financial crisis, the relationship between the sugar prices and the financial market uncertainty was insignificant. The global financial crisis led to a structural change in the relationship. Since August 2008, we observe a significant and negative relationship between the S&P GSCI Sugar Index and the S&P 500 option-implied volatility index (VIX). Sensitivity analysis conducted for the different financial market uncertainty measures, i.e., the S&P 500 Realized Volatility Index confirms our findings.

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