scholarly journals The Exsistence of Economic Openness and the Strength of Real Exchange Rate

2019 ◽  
Vol 4 (1) ◽  
pp. 142-145
Author(s):  
Anggi Putri Kurniadi ◽  
Fradya Randa ◽  
Hasdi Aimon ◽  
Sri Ulfa Sentosa
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Money Supply ◽  
Real Exchange Rates ◽  
The Philippines ◽  
Terms Of Trade ◽  
Economic Openness ◽  
Net Foreign Assets ◽  
The Real

The important findings in this study are; First, economic openness in Indonesia is positively influenced by terms of trade and inflation, while in the Philippines it is positively affected by terms of trade and real exchange rates; Second, the strength of real exchange rates in Indonesia is positively influenced by money supply, net foreign assets, and economic openness, besides that it is negatively affected by inflation, while in the Philippines it is positively affected by the money supply; Third, economic opennes that affect the real exchange rate in Indonesia and the real exchange rate that affects the economic openness in the Philippines.

scholarly journals The Exsistence of Economic Openness and the Strength of Real Exchange Rate

2019 ◽  
Vol 4 (3) ◽  
pp. 89-92 ◽  
Author(s):  
Anggi Putri Kurniadi ◽  
Fradya Randa ◽  
Hasdi Aimon ◽  
Sri Ulfa Sentosa
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Money Supply ◽  
Real Exchange Rates ◽  
Simultaneous Equation ◽  
The Philippines ◽  
Terms Of Trade ◽  
Economic Openness ◽  
The Real

This study investigates the determinants and causality between economic openness and real exchange rates in Indonesia and the Philippines. This study uses time series from 1970 up to 2017 and the cross section is 2 countries (Indonesia and Philippines) using a simultaneous equation model panel. Indonesia has a low level of economic openness and high fluctuations in the real exchange rate, while the Philippines has a high level of economic openness and low real exchange rate fluctuations.The important findings in this study are; First, economic openness in Indonesia is positively influenced by terms of trade and inflation, while in the Philippines it is positively affected by terms of trade and real exchange rates; Second, the strength of real exchange rates in Indonesia is positively influenced by money supply, net foreign assets, and economic openness, besides that it is negatively affected by inflation, while in the Philippines it is positively affected by the money supply; Third, economic opennes that affect the real exchange rate in Indonesia and the real exchange rate that affects the economic openness in the Philippines. Based on this, the Philippines is used as a reference to improve the conditions of economic openness and fluctuations in the real exchange rate in Indonesia so that Indonesia can improve the conditions of economic openness and control the fluctuations in the real exchange rate.  

scholarly journals Determining Real Exchange Rates

1995 ◽  
Vol 34 (3) ◽  
pp. 263-276 ◽  
Author(s):  
Usman Afridi
Keyword(s):  
Exchange Rate ◽  
Empirical Study ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Rate Equation ◽  
Real Exchange Rates ◽  
Government Expenditure ◽  
Terms Of Trade ◽  
The Real ◽  
Domestic Credit

The paper re-examines the determinants of the real exchange rate equation, and suggests alternative determinants where appropriate, as well as improvements in proxies from those conventionally used. The paper emphasises the weaknesses of the multicountry approach to empirical study of the real exchange rate. While real exchange rates are determined for Pakistan, the terms-of-trade variable is found to be insignificant. Excess demand for domestic credit, capital flow, and the "opinions" variable are all found to be inversely related to the RER. Thus government expenditure on non-tradable is positively related; and better specification of the technological change variable shows support for the balance effect.

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.

scholarly journals Productivity Demand Shocks And Asia-Pacific Real Exchange Rates

2011 ◽  
Vol 8 (2) ◽  
Author(s):  
Ordean Olson
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Exchange Rates ◽  
The Philippines ◽  
Asia Pacific ◽  
Relative Prices ◽  
Significant Relationships ◽  
Relative Productivity

The evidence for a productivity-based explanation for real exchange rate behavior of East Asian currencies is examined using sectoral output and employment data, relative prices and relative productivities for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. Time series regressions of the real exchange rate on relative productivity ratios indicate significant relationships for the Philippines, Hong Kong, Thailand, Singapore, Taiwan and Korea. Only when augmenting the regressions with real oil prices are significant relationships obtained for Indonesia and Japan. Panel regression results are less supportive of a relative productivity view of real exchange rates except for Hong Kong, China and Thailand. Surprisingly, government spending does not appear to be a determinant of real exchange rates except for the countries of Malaysia, the Philippines, Taiwan and Thailand.

scholarly journals Do emigrants’ remittances cause Dutch disease? A developing countries case study

2019 ◽  
Vol 30 (1) ◽  
pp. 59-76
Author(s):  
Burçak Polat ◽  
Antonio Rodríguez Andrés
Keyword(s):  
Developing Countries ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Exchange Rates ◽  
Development Aid ◽  
Dutch Disease ◽  
The Real ◽  
Trade Competitiveness ◽  
Remittance Flows

Although the positive socio-economic effects of remittances for recipient countries in the short term are unmistakable, inflows of remittances may at the same time exert adverse effects on the trade competitiveness of an economy, by appreciating the real exchange rate. This phenomenon is characterised as an instance of the ‘Dutch disease’ – the negative impact of windfall revenue inflows on the competitiveness of other tradable sectors and hence on overall economic growth. While the real effect of workers’ remittances on real exchange rates in a recipient economy is still a controversial issue, several studies have analysed evidence for the existence of the ‘Dutch disease’ phenomenon in various sets of countries. The main objective of this study is to examine whether remittance flows have had any adverse effect on the international trade competitiveness of a selected group of developing countries during the period from 1995 to 2014. Using a one-step system Generalised Method of Moments specification within a simultaneous equation approach, it shows that remittance flows depreciate the real exchange rate at their levels and that the lagged value of remittances create the Dutch disease for this country group. In addition, we confirm that while trade openness and world real interest rates contribute to a depreciation in real exchange rates, gross domestic product per capita and net Official Development Aid inflows tend to appreciate real exchange rates. A policy implication is that trade liberalisation policies that lower tariff rates on capital imports and new export-oriented incentive programmes should be accompanied by measures designed to prevent appreciation in the real exchange rate: steps in this direction such as recent macroeconomic and prudential capital flow management initiatives are briefly referenced. JEL Codes: F20, F21, F22, F23

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 Real Exchange Rate Fluctuations Puzzle: Evidence For Advanced And Transition Economies

2011 ◽  
Vol 2 (10) ◽  
Author(s):  
Amalia Morales-Zumaquero
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Transition Economies ◽  
Real Exchange Rates ◽  
The Real ◽  
Exchange Rate Fluctuations ◽  
Traded Goods ◽  
Advanced Economies ◽  
Nominal Shocks

This paper tries to analyze the sources of the real exchange rate fluctuations for a set of advanced economies and Central and Eastern European transition economies. To address this, in a first step, we compute two measures of the share of the variance of the real exchange rate accounted for movements in the relative prices of traded goods between the countries. One measure is based on R2 coefficient and the other one is based on the mean-squared error (MSE) of the changes in the real exchange rate. In a second step, we estimate structural (identified) vector autoregression (SVAR) models, and decompose real and nominal exchange rate movements into those caused by real and nominal shocks. In a third step, we complete previous ones with an impulse-response analysis. Three central messages are derived from results: (1) for transition economies, under regimes of managed nominal exchange rates, the relative price of non-traded goods explain a large percentage of the variance of the real exchange rate; (2) there is evidence of instability in the variance decomposition of the real exchange rates for advanced economies across samples, and (3) as result of diverse fiscal and monetary policies in transition economies, real exchange rates in some economies are driven mostly by real shocks while in others are driven mostly by nominal shocks.

Exchange Rates and Nominal Interest Rates

2019 ◽  
pp. 126-135
Author(s):  
Harold L. Cole
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Real Exchange Rate ◽  
Exchange Rate Regimes ◽  
Real Exchange Rates ◽  
The Real ◽  
Nominal Interest Rates ◽  
Different Types ◽  
Interest Parity

This chapter discusses exchanges and the different types of exchange rate regimes. It describes how exchange rates impact on real exchange rates, and how movements in the real exchange rate are associated with boom-bust cycles. It also discusses interest parity.

Exploring real exchange rate effects on trade balances in Thailand

2002 ◽  
Vol 28 (11) ◽  
pp. 16-27 ◽  
Author(s):  
Tantatape Brahmasrene ◽  
Komain Jiranyakul
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Foreign Currency ◽  
Bilateral Trade ◽  
Real Exchange Rates ◽  
The Real ◽  
Cointegration Tests ◽  
Non Linear ◽  
The Impact

This study investigates the impact of real exchange rates on the trade balances between Thailand and its major trading partners. Previous empirical evidence gave mixed results of the impact of real exchange rates on trade balances. In this study, Augmented Dicky‐Fuller and Phillips‐Perron tests for stationarity followed by the cointegration tests are implemented. All variables in the model are nonstationary but cointegrated. In cointegrating regressions, biases are introduced by simultaneity and serial correlation in the error. The specification that deals with these problems is the non‐linear specification of Stock and Watson (1989). By using this non‐linear model as modified by Reinhart (1995), the results show that the impact of real exchange rates (Thai baht/foreign currency) on trade balances is significant in most cases. Therefore, the generalized Marshall‐Lerner condition seems to hold. Furthermore, the results show that the real exchange rates play a more important role in the determination of the bilateral trade balances than other factors. Since the real exchange rate variable plays a major role in this study, the policy recommendation is to prevent exchange rate misalignment. A policy that can neutralize the changes in nominal exchange rates and relative prices should be introduced to prevent further deterioration of the trade balance.

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