Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective

In the economic growth of a country, the banking sector plays a significant role (Alam, Rabbani, Tausif, & Abey, 2021). The overall objective of the study is to investigate the financial performance of commercial banks in emerging markets. The study tried to see the impact of governance, exchange rate volatility, trade openness, and internet access on the financial performance of commercial banks in Ethiopia during the years from 2014 to 2019. The study employed a random-effects model using balanced panel data. The result indicated that composite governance index, trade openness, and internet access have a positive and statistically significant effect on the financial performance of commercial banks as measured by their return on assets. However, the exchange rate volatility has a negative and statistically significant effect on the financial performance of commercial banks. On the other hand, the result of bank-specific variables considered in the study such as profit margin, asset utilization, net interest margin, overhead efficiency, and numbers of branches have a positive and statistically significant effect on the financial performance of commercial banks. Contrarily, the equity multiplier ratio has a negative and significant effect on the financial performance of commercial banks

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The Real Impacts of Excessive Exchange Rate Volatility in Emerging Markets

Sovereign Risk and Financial Crises ◽

10.1007/978-3-662-09950-6_11 ◽

2004 ◽

pp. 191-201 ◽

Cited By ~ 1

Author(s):

Ansgar Belke ◽

Ralph Setzer

Keyword(s):

Exchange Rate ◽

Emerging Markets ◽

Exchange Rate Volatility ◽

The Real

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Real exchange rate volatility and the choice of regimes in emerging markets

Journal of Asian Economics ◽

10.1016/j.asieco.2004.11.001 ◽

2005 ◽

Vol 15 (6) ◽

pp. 1005-1022 ◽

Cited By ~ 2

Author(s):

Terence D. Agbeyegbe ◽

Patrick N. Osakwe

Keyword(s):

Exchange Rate ◽

Emerging Markets ◽

Real Exchange Rate ◽

Exchange Rate Volatility ◽

Real Exchange Rate Volatility

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The impact of exchange rate volatility on emerging market exports

Acta Commercii ◽

10.4102/ac.v15i1.257 ◽

2015 ◽

Vol 15 (1) ◽

Cited By ~ 5

Author(s):

Johannes Khosa ◽

Ilse Botha ◽

Marinda Pretorius

Keyword(s):

Exchange Rate ◽

Emerging Markets ◽

Emerging Market ◽

Panel Data Analysis ◽

Exchange Rate Volatility ◽

Panel Cointegration ◽

Future Research ◽

Long Run ◽

The Impact ◽

The Relationship

Orientation: High exchange rate volatility has implications for business and policy decisions and exchange rate movements are important in debates around trade and trade policies. Research purpose: The purpose of the research was to determine the impact of exchange rate volatility on exports in emerging markets. Motivation for the study: A lack of clarity in literature regarding this relationship increases the risk of improper planning by export organisations as well as implementing suboptimal economic policies. Research design, approach and method: This research analysed the effect of exchange rate volatility on emerging market exports using a sample of nine emerging countries from 1995 to 2010. Panel data analysis was conducted. Volatility was measured by Generalised Autoregressive Conditional Heteroscedasticity and conventional standard deviation in order to determine if the instrument of volatility used influenced the nature of the relationship between exchange rate volatility and exports. The Pedroni residual cointegration method was used to test for panel cointegration in order to determine if there was a long-run relationship. Main findings: The results showed that exchange rate volatility had a significant negative effect on the performance of exports, regardless of the measure of volatility used. It was also evident that a long-run relationship did exist. Practical/managerial implications: The study concluded that the policy mix that will reduce exchange rate volatility (such as managed exchange rate regimes) and relatively competitive exchange rates were essential for emerging markets in order to sustain their exports performance. Contribution/value-add: This research provided policy makers of emerging market economies with new evidence pertaining to the relationship between exchange rate volatility and the performance of exports. This research contributed to the existing knowledge on the topic and provides a base for future research on related topics.

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Relationships between exchange rate regime, real exchange rate volatility and currency structure of government bonds in emerging markets

Review of Economic Perspectives ◽

10.2478/revecp-2020-0001 ◽

2020 ◽

Vol 20 (1) ◽

pp. 3-22

Author(s):

Viktar Dudzich

Keyword(s):

Exchange Rate ◽

Emerging Markets ◽

Real Exchange Rate ◽

Foreign Currency ◽

Exchange Rate Regime ◽

Exchange Rate Volatility ◽

Exchange Rate Policy ◽

Original Sin ◽

Rate Policy ◽

Real Exchange Rate Volatility

AbstractPublic foreign currency borrowing is a common problem of emerging markets. Scholars named it the original sin of foreign debt. It has a proven negative influence on economic growth and development, undermining financial stability, and increasing the probability of monetary crises. The roots of the original sin often lay in emerging markets’ institutional underdevelopment, with low-quality monetary policy, inappropriate exchange rate regime choice, and exchange rate mismanagement being stated among the most important causes. This paper evaluates the influence of the exchange rate policy on the emission of foreign currency sovereign bonds in emerging markets. The relationship is estimated using panel data and GMM approach, with exchange rate regime type (both de jure and de facto) and real exchange rate volatility serving as explanatory variables. The findings reveal that fixed exchange rate regime and high real exchange rate volatility is promoting the foreign currency borrowing. Thus countries that want to reduce the burden of the original sin should lean towards a more flexible exchange rate policy while maintaining their real exchange rate stable.

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