scholarly journals Relationship between International Reserves and FX Rate Movements

2020 ◽  
Vol 12 (17) ◽  
pp. 6961
Author(s):  
Yeonjeong Lee ◽  
Seong-Min Yoon
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Causal Relationship ◽  
Foreign Exchange ◽  
Tail Dependence ◽  
International Reserves ◽  
Causality Test ◽  
Monetary Authorities ◽  
Exchange Rate Movements ◽  
Significant Regression

This paper investigates the relationship between international reserves changes and foreign exchange rate movements for five Far Eastern countries (China, Japan, Taiwan, Hong Kong, and Korea) from January 1997 to May 2020. We use the quantile Granger causality test and the quantile autoregressive model to capture the monetary authorities’ motivations for intervention. The primary results of this study are as follows. First, in China and Hong Kong, we capture the mercantilists’ motive of accumulating their international reserves for the purpose of responding to the appreciation of currencies. Relatively speaking, the monetary authorities’ motivation for precautionary stabilizing their currencies is high in Korea and Japan. Second, we identify the asymmetric causal relationship between the variables. Considering the causal relationship with significant regression coefficients, these characteristics are found to be more evident in all countries. Last, we confirm the properties of the quantile- and tail-dependent relationship between the variables. In particular, Korea has a relatively stronger tail-dependence than other countries. That is, the causal relationship between the Korean foreign exchange reserves and the exchange rate is stronger at the rapid fluctuations of the variables, and this relationship is weakened at the moderate fluctuations of them.

scholarly journals The need for official reserves in Latin America: assessing the precautionary motive, 1995-2011

2015 ◽  
Vol 34 (65) ◽  
pp. 327-347
Author(s):  
Moritz Cruz
Keyword(s):  
Latin America ◽  
Foreign Exchange ◽  
Latin American ◽  
International Reserves ◽  
Main Concern ◽  
Monetary Authorities ◽  
Precautionary Motive ◽  
Latin American Countries ◽  
Output Costs

In this paper we estimate the demand for official reserves in Latin America during the period 1995-2011. We assume that the main concern of the monetary authorities to demand reserves is the fear of suffering external drains, and its associated output costs. In other words, we attempt to show that the so-called precautionary motive drives the demand for international reserves in the region. Our econometric results confirm that Latin American countries demand ever increasing amounts of foreign exchange to protect themselves against the likelihood of external drains.

Exchange Rates and the Effectiveness of Actual and Oral Official Interventions: A Survey on Findings, Issues and Policy Implications

2010 ◽  
Vol 10 (4) ◽  
pp. 1850213 ◽  
Author(s):  
Nevin Cavusoglu
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Policy Implications ◽  
Consistent Finding ◽  
Macroeconomic Variables ◽  
Explanatory Variables ◽  
Monetary Authorities ◽  
Exchange Rate Movements ◽  
Exchange Markets

Monetary authorities of many open economies have been regularly intervening in foreign exchange markets for years to limit volatility in exchange rates and/or push exchange rates back to some desired level. Such interventions have taken the form of actual and oral official interventions. Review of studies investigating the effectiveness of interventions reveals one major issue, related to the assumption that interventions are mostly sterilized. This assumption might lead to unreliable results when changes in interest rates and interventions are both used as explanatory variables for exchange rates. One major consistent finding is that intervention has a significant but short-lasting effect on exchange rates. Studies have reached this conclusion by investigating whether intervention has been effective in turning around the exchange rate over the few days, weeks or months following intervention(s). Only a few studies have investigated and provided evidence that intervention has been effective in limiting long swings in exchange rates. Studies testing for the effectiveness of interventions specifically through the signaling channel also provide evidence on the importance of macroeconomic variables for exchange rates. The significance of official intervention and official communication for exchange rate movements combined with the importance of macroeconomic variables for exchange rates provide a role for official intervention and parity announcement to influence exchange rate movements and limit the magnitude of exchange rate swings.

Equity-linked executive compensation, hedging and foreign exchange exposure: Australian evidence

2019 ◽  
Vol 45 (1) ◽  
pp. 72-93
Author(s):  
Blake Loriot ◽  
Elaine Hutson ◽  
Hue Hwa Au Yong
Keyword(s):  
Risk Management ◽  
Exchange Rate ◽  
Executive Compensation ◽  
Foreign Exchange ◽  
Jel Classification ◽  
Foreign Exchange Risk ◽  
Exchange Rate Movements ◽  
Exchange Risk ◽  
Foreign Exchange Exposure ◽  
Exchange Risk Management

Using a sample of 268 Australian firms over the period 2009–2014, we examine the relation between the equity-linked compensation (shares and options) of Australian executives – CEOs, CFOs and directors – and firms’ foreign exchange hedging programmes. We find that the greater the number of shares held by CEOs, the higher its exposure to exchange rate movements. While this suggests that remuneration in the form of shares has a critical downside, we also find evidence for a more positive and important role in foreign exchange risk management for the share- and option-related incentives provided to CFOs. JEL Classification: G32, G15, F31

Hong Kong and Denmark will keep currency pegs

2015 ◽  
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Foreign Exchange ◽  
Medium Term ◽  
Content Type ◽  
The Us ◽  
Exchange Rate Arrangements ◽  
Exchange Markets ◽  
Us Dollar ◽  
Currency Pegs

Subject The longevity and outlook for currency pegs. Significance The abandonment of the Swiss franc's three-year-old peg to the euro on January 15 put into question the longevity of pegged exchange rate arrangements. It also highlights how unusual such arrangements are today. Impacts The SNB will still have to continue to intervene in foreign-exchange markets to stabilise the Swiss franc. The SNB move will not cause Danish authorities to stop pegging the Danish krone to the euro. The near- and medium-term longevity of the Hong Kong dollar peg to the US dollar will not be questioned.

scholarly journals Relationship between Foreign Exchange Rate and Stock Price of Commercial Joint Stock Banks: Evidence from Vietnam

2016 ◽  
Vol 8 (7) ◽  
pp. 193 ◽  
Author(s):  
Tran Mong Uyen Ngan
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Stock Prices ◽  
Stock Price ◽  
Time Series Data ◽  
Foreign Exchange Rate ◽  
Series Data ◽  
Causality Test ◽  
Using Data ◽  
The Relationship

The relationship between foreign exchange rate and stock price is one popular topic that is interested by not only board managers of banks but also stock investors. By using data about foreign exchange rate between Vietnam Dong (VND) and United State Dollar (USD), stock prices data of nine commercial joint stock banks in Vietnam from the first day of 2013 to the last day of 2015, this paper try to answer the question “Does foreign exchange rate impact on stock price and vice verse?”. Applying Dickey Fuller test and Var Granger Causality test for the time series data, the results show that there is an impact of foreign exchange rate on stock price. Although the fluctuation in foreign exchange rate VND/USD causes the change in stock prices of commercial joint stock banks in Vietnam, however, the vector of this impact is not clearly. On the opposite way, the change in stock price does not cause the change in foreign exchange rate, this relation is one-way relation.

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