scholarly journals The Exchange Rates and Monetary Dynamics in Pakistan: An Autoregressive Distributed Lag (ARDL) Approach

2005 ◽  
Vol 10 (2) ◽  
pp. 87-99
Author(s):  
Muhammad Arshad Khan ◽  
Muhammad Zabir Sajjid
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Real Income ◽  
Real Effective Exchange Rate ◽  
Real Money ◽  
Long Run ◽  
Ardl Approach ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

In this paper we investigate both the long and short-run relationship between real money balances, real income, inflation rate, foreign interest rate and real effective exchange rate with reference to Pakistan over the period 1982Q2-2002Q4 using ARDL approach which is a newly developed econometric technique. The estimated results indicate that in the long-run real income, inflation rate, foreign interest rate and real effective exchange rate have a significant impact on real money balances in Pakistan. The dynamics of real money demand show that the effects of rate of inflation, foreign interest rate and the real effective exchange rate are much smaller in the short run than long run. The results also reveal that the demand for real money balances in Pakistan is stable, despite the economic reforms pursued by the government since the late 1980s.

The determinants of ASEAN-5 real effective exchange rate vis-á-vis the UK pound

2014 ◽  
Vol 10 (2) ◽  
pp. 98-118 ◽  
Author(s):  
Abdalrahman AbuDalu ◽  
Elsadig Musa Ahmed
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Real Effective Exchange Rate ◽  
Content Type ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
The Uk ◽  
Effective Exchange Rate

Purpose – The purpose of this paper is to present an empirical analysis of long-run and short-run forcing variables of purchasing power parity (PPP) for ASEAN-5 currencies vis-à-vis the UK pound, i.e. their real effective exchange rate (REER). Design/methodology/approach – This study uses a recently developed autoregressive distributed lag (ARDL) approach to co-integration (Pesaran et al., 2001) over the period 1991:Q1-2006:Q2. Our empirical results suggest that the foreign interest rate (R*) and domestic money supply (M1) are the significant long-run forcing variables of PPP for ASEAN-5 REERs for the three periods. Findings – In the short-run, the variables have different impacts during the sub-periods and full period for ASEAN-5 countries. The results suggest that the domestic money supply (M1) for Malaysia, domestic interest rate and foreign interest rate (R*) for Indonesia, domestic money supply (M1) and term of trades (TOT) for Philippines, foreign interest rate (R*) for Thailand, and foreign interest rate (R*) and net foreign assets (NFA) for Singapore, respectively, have the highest significant short-run forcing variable of PPP for countries REERs. Originality/value – In this respect, the outcomes can derive policy implication for the monetary authorities in these ASEAN-5 countries.

scholarly journals Currency Depreciation, Trade Balance and Intra-Industry Trade Interactions in Turkey’s OECD Trade

2016 ◽  
Vol 8 (4) ◽  
pp. 8 ◽  
Author(s):  
Mehmet Demiral
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Series Data ◽  
Adjustment Process ◽  
Industry Trade ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

<p>This study re-examines the determinants of Turkey’s trade balance in its manufactures trade with 33 OECD-member countries for the short-run and the long-run. Unlike other studies, in the relationships we also control the moderating effects of the availability of import substitutes proxied by intra-industry trade. We analyze quarterly aggregated time-series data of the period spanning from 1998.QI to 2015.QIII, following the autoregressive distributed lag (ARDL) bounds testing approach to the cointegration and the error correction modeling. Estimation results reveal that real effective exchange rate, together with domestic and foreign incomes are still among the core determinants of Turkey’s trade balance in the manufacturing sectors. There is no significant impact of domestic final oil prices that also include all the taxes on gasoline. The trade balance depends on domestic income negatively and the aggregated income of the OECD countries positively. The finding that real depreciation of Turkish lira against to those of Turkey’s OECD trade partners improves trade balance in both the short-run and the long-run, indicates no evidence of J-curve adjustment process. Unsurprisingly, the intra-industry trade seems to be an important factor that moderates the elasticities of trade balance to its determinants, especially to real effective exchange rate and domestic income. Overall results underline the importance of import-substitution capability besides the export-oriented production to ease the longstanding large trade deficits for Turkey.</p><strong></strong>

scholarly journals Different Approaches to Merchandise Trade Balance in Pakistan

2020 ◽  
Vol 12 (Number 2) ◽  
pp. 19-30
Author(s):  
Yousuf Aboya ◽  
Arsalan Hussain ◽  
Rohail Hassan ◽  
Hassan Mujtaba Nawaz Saleem ◽  
Aamir Hussain Siddiqui
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Trade Deficit ◽  
Real Effective Exchange Rate ◽  
Series Data ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Merchandise Trade ◽  
Effective Exchange Rate

The current study empirically examines the three major approaches to trade balance for Pakistan by utilizing the yearly data from 1972 to 2016. Monetary, elasticity, and absorption approaches were tested by developing a model that incorporates all three approaches. The significant contribution of the study is that it uses only the merchandise trade deficit account, which includes trade of only physical goods. The study used time-series data; therefore, variables have been tested for the stationarity, and it is found that there is a combination of I (0) and I (1) variables, so ARDL bounds testing approach to co-integration has been employed to find the short run and long run associations among the variables. The bound test results discovered that there is a presence of stable long-term association among the merchandise trade deficit account, real broad money supply, real effective exchange rate, and real domestic absorption. The results further revealed that merchandise trade discrepancy is determined purely by the real effective exchange rate, which specifies that the exchange rate's devaluation increases the deficit in the long run whereas in the short-run increase in domestic absorption decreases the merchandise trade deficit.

scholarly journals Econometric Analysis of Determinants of Real Effective Exchange Rate in Nigeria (1960-2015)

2016 ◽  
Vol 9 (1) ◽  
pp. 62-80 ◽  
Author(s):  
Waheed Ibrahim
Keyword(s):  
Exchange Rate ◽  
Crude Oil ◽  
Terms Of Trade ◽  
Oil Price ◽  
Real Effective Exchange Rate ◽  
Crude Oil Price ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

Abstract This study investigates the determinants of real effective exchange rate in Nigeria for the period between 1960 and 2015 using the vector error correction mechanism to separate long run from the short run fundamentals. The findings from the regression estimates revealed that; terms of trade, openness of the economy, net capital inflow and total government expenditure were the major long run determinants of real effective exchange rate in the country while variables such as; broad money supply (M2), nominal effective exchange rate, structural adjustment program dummy, June 12 crisis and change to civil rule dummies were revealed as the major short run determinants of exchange rate in Nigeria between 1960 and 2015. The study concludes by recommending that since the major variable of terms of trade (crude oil price) is out of the government control, the effect of shocks due to the fluctuations of crude oil price can be minimized by shifting the economy from a mono-product nation and diversify the economy to increase productive capacity. Also, the change to civil rule dummy used in the study revealed that the system has not been friendly with the country’s real effective exchange rate, thus needing to review the system and bringing out all negative activities there in to ensure Nigeria’s currency appreciation. Guided openness is also suggested to avert the danger that unguided trade liberalization may bring into the country.

Asymmetric Effects of Exchange Rate and Its Relationship with Foreign Investments: A Case of Indian Stock Market

2020 ◽  
pp. 097226292091410
Author(s):  
Saif Siddiqui ◽  
Preeti Roy
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Real Effective Exchange Rate ◽  
Rate Asymmetry ◽  
Long Run ◽  
High Volatility ◽  
Effective Exchange ◽  
Short Run ◽  
Indian Stock Market ◽  
Effective Exchange Rate

Emerging markets, including India, are witnessing an influx of foreign capital. The article investigates the role of exchange rate which influences both the net foreign institutional investments (FIIs) and the stock markets, using monthly data, from January 2008 to May 2018. The effects of real effective exchange rate are studied through non-linear ARDL co-integration. The long-run relationship is found in all the three models constructed. The results highlight the nature of FII flows in relation to exchange rate asymmetry. Real rupee depreciation has a long-run effect on their debt flows. The ‘adjustment asymmetry effect’ of exchange rate is found for equity flows in the long run. The similar effect is observed for the Nifty 50 model. Due to high volatility, even positive stock returns do not attract equity FII flows. In the short run, rupee depreciation in real terms negatively influences Nifty returns. The S&P 500 returns explain FII flows indicating information asymmetry. These outcomes serve a vital input for key stakeholders such as potential FIIs, domestic traders, regulators and policymakers.

Analyzing the Impact of Real Effective Exchange Rate and Investment on Trade Deficit in the United Kingdom

2021 ◽  
Vol 9 (2) ◽  
pp. 241-249
Author(s):  
Allah Ditta ◽  
Ruqayya Ibraheem ◽  
Muahammad Ayub
Keyword(s):  
United Kingdom ◽  
Exchange Rate ◽  
Trade Deficit ◽  
Real Effective Exchange Rate ◽  
The United Kingdom ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate ◽  
The Impact

The major purpose of this study is to determine the long-run and short-run determinants of the trade deficit in the United Kingdom (UK). The autoregressive distributive lagged (ARDL) approach has been employed for estimation purposes in this study. The study finds that there is negative and significant relationship exists between the real effective exchange rate (REER) and the export to import ratio in the long run. The empirical results reveal that a one percent increase in REER causes a decrease in the export to import ratio by 0.37%, while a positive relationship is observed between REER and the export to import ratio in the short run. The impact of gross fixed capital formation on the export to import ratio is statistically significant and negative in the long run as well as in the short run. The value is negative and statistically significant which validates convergence towards the equilibrium both in the case of UK exports to high-income and low-income trading partners (LITPs). The study suggests that real exchange rate and investment are major determinants for trade balance in the case of the United Kingdom and need proper attention.

Some dynamic macroeconomic perspectives for India’s economic growth

2020 ◽  
Vol 12 (4) ◽  
pp. 641-658
Author(s):  
Matiur Rahman ◽  
Anisul Islam
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Crude Oil ◽  
Real Effective Exchange Rate ◽  
Crude Oil Price ◽  
Content Type ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

Purpose The purpose of this paper is to study impacts of changes in crude oil price, money supply, fiscal deficit and effective exchange rate on India’s economic growth (expressing all variables in real term). Design/methodology/approach First, a simple macroeconomic model is formulated to this effect. Next, linear autoregressive distributed lag procedure and vector error-correction model are applied for growth empirics. Annual data are used from 1977 through 2015. Findings Rises in real crude oil price and monetized real fiscal deficits have negative short-run and long-run effects on real economic growth. Increase in real money supply and real effective exchange rate appreciation helps promote real economic growth in both short run and long run. In all cases, there is evidence of net interactive positive feedback effects among the variables in the short run. Real effective exchange rate appreciation dampens exports, but it is helpful to imports of capital goods and crude oil that contribute to economic growth. So, the net effect on the economy may be conjecturally positive. Originality/value To the best of the authors’ knowledge, this paper is unique because of the formulation of macro-economic model pertaining to the topic and its subsequent empirical verification. Moreover, this paper seems more comprehensive than some other studies, cited in the literature review.

scholarly journals Effects of Exchange Rate Volatility On Non-Traditional Exports In Ghana

2017 ◽  
Vol 7 (2017) ◽  
pp. 80-103
Author(s):  
Camara Kwasi Obeng
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Real Effective Exchange Rate ◽  
Distributed Lag ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Auto Regressive ◽  
The Government ◽  
Effective Exchange Rate

The government of Ghana has implemented a number of policies to strengthen the production and export of non-traditional products as a way of diversifying exports in Ghana with very little success. Foremost among these policies is the liberalization of exchange rate. Meanwhile, the exchange rate has been very volatile. The study, therefore, examines the effects of exchange rate volatility on non-traditional exports in Ghana.This study employed Auto-regressive Distributed Lag (ARDL) co-integration estimation technique for the investigation. The results indicate that exchange rate volatility negatively impacts Ghana’s non-traditional exports. Also, the effect is greater in the long- run than it is in the short-run. Other results also show that world income, growth rate of the economy and Treasury bill rate promote non-traditional exports, but real effective exchange rate does not. The value of the paper lies in the discussion of the short-run and long-run effects of exchange rate volatility on non-traditional exports in the Ghanaian context.

scholarly journals Determination of Long and Short Run Demand for Money in the West African Monetary Zone (WAMZ) Countries: A Panel Analysis

2018 ◽  
Vol 2 (2) ◽  
pp. 79-97
Author(s):  
Agya Atabani Adi ◽  
Joshua Sunday Riti
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Capital Mobility ◽  
Currency Substitution ◽  
Demand For Money ◽  
Interest Rate Spread ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

The paper examines demand for real money balances in six West Africa countries, over the 1985-2014 periods using panel Cointegration technique. The result shows that long run money demand is positively related to real income, inflation rate and inversely related to interest rate spread, real effective exchange rate and US real interest rate. Long run income elasticity is greater than unity and less than unity in short run. All variables are significant except effective exchange rate, thus; both currency substitution and capital mobility hypotheses hold in the long run while capital mobility holds only in the short run. We recommend that monetary aggregate should growth slower than economic growth to maintain price stability, countries should try to maintained stable exchange rate and ensured market driven interest rate policy. Keyword: Demand for Money; Interest Rate Spread; Capital Mobility and Currency Substitution, Panel Analysis.JEL CODE: E41, E52, C33, O11.

Remittances and Real Effective Exchange Rate

2018 ◽  
Vol 19 (1) ◽  
pp. 124-136 ◽  
Author(s):  
Ujjal Protim Dutta ◽  
Partha Pratim Sengupta
Keyword(s):  
Exchange Rate ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate ◽  
The Impact ◽  
Bound Test ◽  
Ardl Bound Test

Remittances in India have been growing rapidly since 1991. Most of the studies find that remittance has had a significant impact on real effective exchange rate (REER). It is imperative to evaluate the impact of a transfer such as remittance and aid on country’s competitiveness. This article is an attempt to investigate the impact of workers’ remittances and some selected macro-variables on REER of India using annual data from 1980–2015. The study conducted autoregressive distributive lag (ARDL) bound test co-integration approach to explore this long-run relationship. The ARDL bound test approach confirms significant long-run relationships among the selected variables at 1 per cent level of significance. In addition to this, the ARDL short-run error correction model implies that while REER may temporarily deviate from its long-run equilibrium, the deviations adjust towards the equilibrium level in the long run. JEL: F31, F35, F41

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