scholarly journals Trading Macro-Cycles of Foreign Exchange Markets Using Hybrid Models

2021 ◽  
Vol 13 (17) ◽  
pp. 9820
Author(s):  
Joseph Zhi Bin Ling ◽  
Albert K. Tsui ◽  
Zhaoyong Zhang
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Market Timing ◽  
Forecast Model ◽  
Interest Rate Parity ◽  
Bond Yield ◽  
Novel Approach ◽  
Timing Ability ◽  
The Government

Most existing studies on forecasting exchange rates focus on predicting next-period returns. In contrast, this study takes the novel approach of forecasting and trading the longer-term trends (macro-cycles) of exchange rates. It proposes a unique hybrid forecast model consisting of linear regression, multilayer neural network, and combination models embedded with technical trading rules and economic fundamentals to predict the macro-cycles of the selected currencies and investigate the predicative power and market timing ability of the model. The results confirm that the combination model has a significant predictive power and market timing ability, and outperforms the benchmark models in terms of returns. The finding that the government bond yield differentials and CPI differentials are the important factors in exchange rate forecasts further implies that interest rate parity and PPP have strong influence on foreign exchange market participants.

Monetary and Exchange Rate Policies for International Financial Stability: A Proposal

1988 ◽  
Vol 2 (1) ◽  
pp. 83-103 ◽  
Author(s):  
Ronald I McKinnon
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Purchasing Power Parity ◽  
Financial Stability ◽  
Foreign Exchange Market ◽  
The United States ◽  
Power Parity ◽  
Monetary Reform ◽  
Exchange Rate Fluctuations

What keeps the three major industrial blocs -- Western Europe, North America, and industrialized Asia -- from developing a common monetary standard to prevent exchange-rate fluctuations? One important reason is the differing theoretical perspectives of economic advisers. The first issue is whether or not a floating foreign exchange market -- where governments do not systematically target exchange rates -- is “efficient.” Many economists believe that exchange risk can be effectively hedged in forward markets so international monetary reform is unnecessary. Second, after a decade and a half of unremitting turbulence in the foreign exchange markets, economists cannot agree on “equilibrium” or desirable official targets for exchange rates if they were to be stabilized. The contending principles of purchasing power parity and of balanced trade yield very different estimates for the “correct” yen/dollar and mark/dollar exchange rates. Third, if the three major blocs can agree to fix nominal exchange rates within narrow bands, by what working rule should the new monetary standard be anchored to prevent worldwide inflation or deflation? After considering the magnitude of exchange-rate fluctuations since floating began in the early 1970s, I analyze these conceptual issues in the course of demonstrating how the central banks of Japan, the United States, and Germany (representing the continental European bloc) can establish fixed exchange rates and international monetary stability.

New Zimbabwean currency will struggle for traction

2019 ◽  
Keyword(s):  
Public Relations ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Market ◽  
Short Term ◽  
Content Type ◽  
International Reputation ◽  
Funding Programme ◽  
The Government ◽  
Recent Extension

Significance After a month of fuel protests and a violent military crackdown, Mangudya on February 20 effectively acknowledged Zimbabwean bond notes and electronic RTGS bank balances as part of a new currency scheme. The authorities' latest attempt to stabilise the parallel foreign exchange market, the RTGS dollar, will trade on a new interbank foreign exchange market on a ‘willing-buyer, willing seller’ basis. Impacts The recent extension of US sanctions will likely delay the prospect of a new IMF funding programme over the short term. The government will struggle to improve its international reputation despite a heightened public relations drive. Recent public protests are likely to have delayed the introduction of a brand-new national currency for now.

Floating Exchange Rates in Developing Countries: the Case of Zambia

1989 ◽  
Vol 27 (3) ◽  
pp. 503-519 ◽  
Author(s):  
Jürgen Wulf
Keyword(s):  
Developing Countries ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
International Monetary Fund ◽  
African Country ◽  
Reform Programme ◽  
The Government ◽  
Floating Exchange Rates ◽  
The International Monetary Fund ◽  
Internal Trade

When Zambia introduced weekly foreign-exchange auctions in October 1985 in order to determine the value of the kwacha vis-à-vis the dollar, together with other measures aiming at liberalising external and internal trade and at restructuring the pattern of production, they were widely acclaimed as a model for reforms elsewhere in the continent. The Economist praised Zambia for ‘taking one of the bravest economic gambles that any African country has taken’,1 implying that even in the view of liberal commentators the Government ran a considerable risk in trying to implement this reform programme. The new measures enabled Zambia to reach a fresh stand-by agreement with the International Monetary Fund in early 1986, the previous one having broken down in 1985 because the authorities failed to meet the I.M.F.'s economic targets.

Devisenmarktoperationen und Informationspolitik der Europäischen Zentralbank

2002 ◽  
Vol 3 (1) ◽  
pp. 49-68
Author(s):  
Michael Frenkel ◽  
Christian Pierdzioch ◽  
Georg Stadtmann
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Information Policy ◽  
Transmission Channel ◽  
Exchange Market ◽  
European Central ◽  
Transmission Channels ◽  
Market Intervention ◽  
Foreign Exchange Market Intervention

AbstractThis paper analyzes the effectiveness of the foreign exchange market interventions of the European Central Bank (ECB) by studying the information policy of the ECB and examining whether the ECB relied on a specific transmission channel to influence exchange rates. Against the background of a discussion of the transmission channels through which foreign exchange market interventions of central banks may affect exchange rates, we are led to the conclusion that the information policy of the ECB was not in line with the assumptions underlying the transmission channels discussed in the theoretical literature. We argue that this finding could provide a possible explanation for the ineffectiveness of the ECB's foreign exchange market intervention in the fall of 2000.

scholarly journals The “day-of-the-week” effects in the exchange rate of Latin American currencies

2019 ◽  
Vol 14 (PNEA) ◽  
pp. 485-507
Author(s):  
Roberto Joaquín Santillán Salgado ◽  
Alejandro Fonseca Ramírez ◽  
Luis Nelson Romero
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Latin American ◽  
Foreign Exchange Market ◽  
The United States ◽  
Management Decision ◽  
Exchange Market ◽  
Day Of The Week ◽  
The Exchange Rate

This paper examines the “day-of-the-week” anomaly in the foreign exchange market of six major Latin American countries’ currencies: (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), all with respect to the United States’ dollar. The returns of daily exchange rates are stationary, so we use linear regressions combined with GARCH, TARCH and EGARCH models to explore the presence of the “day-of-the-week” anomaly. The results confirm the presence of “abnormal” effects in some of the currencies and in some days of the week, particularly on Fridays and Mondays. Moreover, volatility in exchange rates shows clustering behavior, as well as leverage effects, which are carefully modelled in our analysis. This paper contributes to the literature by studying the “day-of-the-week” effects in currency exchange rate markets, a clear innovation with respect to the typical stock market analysis. The results reported are useful for foreign exchange market traders, currency exposure management decision makers, monetary authorities, and financial policy designers in the countries included in the study. Indeed, the results suggest the presence of a typical behavior of the exchange rate of all the currencies included in the sample.

scholarly journals Foreign Exchange Market and the Asset Approach

2021 ◽  
Vol 9 (9) ◽  
pp. 351-356
Author(s):  
Dr. Varsha Agarwal
Keyword(s):  
International Trade ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Foreign Currency ◽  
Trade Flows ◽  
Exchange Market ◽  
Abstract Exchange ◽  
Relative Prices ◽  
Goods And Services

Abstract: Exchange rates play a central role in international trade because they allow us to compare the prices of goods and services produced in different countries. A consumer deciding which of two American cars to buy must compare their dollar prices. Households and firms use exchange rates to translate foreign prices into domestic cur-rency terms. Once the money prices of domestic goods and imports have been expressed in terms of the same currency, households and firms can compute the relative prices that affect international trade flows. Keywords: Foreign Exchange, Exchange Rate, International Trade, Foreign Currency, FOREX Rate, Assets Approach.

scholarly journals Dirty float or clean intervention? The Bank of England in the foreign exchange market

2020 ◽  
Author(s):  
Alain Naef
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Central Banks ◽  
Exchange Market ◽  
Central Bank Intervention ◽  
Foreign Exchange Intervention ◽  
Developed Economies ◽  
Bank Of England ◽  
The 1960S

Abstract The effectiveness of central bank intervention is debated and despite literature showing mixed results, central banks regularly intervene in the foreign exchange market, both in developing and developed economies. Does foreign exchange intervention work? Using over 60,000 new daily observations on intervention and exchange rates, this paper is the first to study the Bank of England's foreign exchange intervention between 1952 and 1972. The main finding is that the Bank was unsuccessful in managing a credible exchange rate over that period. Running an event study, I demonstrate that betting systematically against the Bank of England would have been a profitable trading strategy. Pressures increased in the 1960s and the Bank eventually manipulated the publication of its reserve figures to avoid a run on sterling.

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