Expectations and exchange rates in a Keynes–Harvey model: an analysis of the Brazilian case from 2002 to 2017

2021 ◽  
Vol 9 (2) ◽  
pp. 270-288
Author(s):  
Leandro Vieira Araújo Lima ◽  
Fábio Henrique Bittes Terra
Keyword(s):  
Exchange Rate ◽  
Nominal Exchange Rate ◽  
Gdp Growth ◽  
Future Expectations ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Distributed Lag Models ◽  
The Exchange Rate ◽  
Statistical Relationships ◽  
Decision Making Model

This paper investigates the statistical relationship between the future expectations of the exchange rate and GDP growth and the current nominal exchange rate in Brazil during the period 2002–2017. The theoretical framework on which the paper is based is a decision-making model grounded in Keynes (1921; 1936) and Harvey (2006; 2009a), from which the paper's empirical model emerges. This model is tested empirically with autoregressive distributed lag models to identify short- and long-term statistical relationships in time series. The empirical estimations suggest that expectations of future changes in both the exchange rate and GDP growth have a statistically significant relationship with the current nominal exchange rate in Brazil, just as the Keynes–Harvey model predicts.

scholarly journals A Cointegration of the Exchange Rate and Macroeconomic Fundamentals: The Case of the Indonesian Rupiah vis-á-vis Currencies of Primary Trade Partners

2019 ◽  
Vol 12 (2) ◽  
pp. 87 ◽  
Author(s):  
Agus Salim ◽  
Kai Shi
Keyword(s):  
Exchange Rate ◽  
Emerging Market ◽  
Exchange Rate Volatility ◽  
Trade Surplus ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Macroeconomic Fundamentals ◽  
The Exchange Rate ◽  
Trade Partners

Since the appearance of persistent research finding a disconnection between the exchange rate and its macroeconomic fundamentals, the empirical debate has not stopped. Studies employ various methods to explain the presence of the exchange rate disconnect puzzle, including applying models to the case of emerging market economies. However, the exchange rate has different determinants in some countries. To revisit this puzzle in an emerging market currency, we analyzed the cointegration of the exchange rate of the Indonesian Rupiah vis-á-vis currencies of primary trade partners and its macroeconomic fundamentals. The empirical results based on Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) models show that the fundamental variables consistently drive the exchange rate. The trade surplus as an extended nonlinear variable revealed high feedback to the exchange rate volatility in the long-run.

العلاقة التبادلية بين سعر الصرف وأسعار الأسهم دراسة تطبيقية في سوق اسطنبول للأوراق المالية للمدة 2005-2020

2021 ◽  
Vol 1 (1) ◽  
Author(s):  
سعدالله ألنعيمي
Keyword(s):  
Exchange Rate ◽  
Stock Prices ◽  
Negative Impact ◽  
Reciprocal Relationship ◽  
Nominal Exchange Rate ◽  
Share Price ◽  
Theoretical Interpretation ◽  
Short Term ◽  
The Exchange Rate

The study aims to analyzing the reciprocal relationship between the nominal exchange rate of the Turkish lira versus the U.S. dollar and the stock prices of the companies listed on the Istanbul Stock Exchange (ISE) expressed in the general market index for the period from 2005 to 2020 with 192 monthly observations, based on the traditional theory and the theory of portfolio balance model in theoretical interpretation for that relationship, aiming to identify the effect of the exchange rate on stock prices, as well as to analyze the causal relationship between those variables and to identify which of them is the cause or which is the result, using the Autoregressive Distributed Lag (ARDL) model. The research found that the exchange rate has a positive effect on stock prices in the long term, despite the emergence of the negative impact in the short term, but the long-term relationship has corrected the course of the short-term relationship with a time period not exceeding one month, in addition to proving that this relationship takes one direction. From the exchange rate towards stock prices, that is, the exchange rate is the reason and stock prices are the result, therefore the results of this research helps investors to predict future trends of stock prices depending on the exchange rate changes, and it also enables the companies, especially those with foreign transactions, to manage price risks the exchange rate in order to avoid its negative impact on its share price, as it represents an obstacle to achieving its main goal of maximizing the share price

scholarly journals Dollarization in Sierra Leone: Evidence and Some Policy Options

2020 ◽  
Vol 7 (4) ◽  
pp. 160
Author(s):  
Abu Bakarr TARAWALIE ◽  
Amadu JALLOH
Keyword(s):  
Exchange Rate ◽  
Sierra Leone ◽  
Correction Term ◽  
Financial Deepening ◽  
Policy Makers ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Short Run ◽  
Key Policy ◽  
Main Determinants

This study aims to empirically investigate the determinants of dollarization in Sierra. It uses quarterly data from 1992Q1 to 2017Q4 and autoregressive distributed lag Bound Testing technique. Both the long and short run results revealed that inflation, exchange rate depreciation, financial deepening and war dummy were the main determinants of dollarization in Sierra Leone during the study period. The error correction term depicts that 53 percent of any disequilibrium in dollarization will be corrected within a year. A key policy recommendation is that policy makers should implement prudent policies that will ensure broader macroeconomic stability (including price stability and exchange rate stability) as a recipe for de-dollarization in Sierra Leone.

Exchange Rate Pass-Through: A Case Study of a Small Open Economy

2007 ◽  
Vol 7 (3) ◽  
pp. 1850112 ◽  
Author(s):  
Olajide Oladipo
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Nominal Exchange Rate ◽  
Production Costs ◽  
Policy Implications ◽  
Relative Price ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Future Path

The exchange rate pass-through for Nigeria imports is estimated by applying an econometric procedure to sectoral data which avoids the pit-falls in previous studies. We use the mark-up approach, which implies setting export prices as a mark-up on production costs. So, the price facing importers is the exchange rate adjusted production costs where mark-up depends on the competitive pressures in the import's market and the nominal exchange rate. Our results indicate incomplete pass-through at varying degrees across sectors, which implies that the foreign exporters passed on only part of the increase in their costs of production to import prices. Also, it reveals that the effort of the Nigerian government in encouraging companies to use local inputs where possible instead of relying on imported intermediate inputs is gradually yielding positive results. Important policy implications that follow from our results of incomplete pass-through to domestic prices could influence CBN forecasts of future path of inflation, a key element in the conduct of monetary policy. Indeed, the successful implementation of monetary policy presupposes that CBN has not only a good understanding of inflation dynamics but is also relatively successful at predicting the future path of inflation. Also, our results imply that the exchange rate policy may be a blunt instrument when used to restore external balance since relative price adjustments will be limited. Furthermore, the incomplete pass-through suggests that exchange rate changes are likely to lead to smaller real effects on the economy through lower changes in both the terms of trade and import volumes and finally, the extent of inflation (deflation) effects of exchange rate depreciation (appreciation) operating through changes in the prices of imported goods will be moderated.

The determinants of corporate profitability: an investigation of Indian manufacturing firms

2018 ◽  
Vol 13 (1) ◽  
pp. 66-86 ◽  
Author(s):  
Swagatika Nanda ◽  
Ajaya Kumar Panda
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Panel Data Analysis ◽  
Rate Sensitivity ◽  
Manufacturing Firms ◽  
Least Square ◽  
Nominal Exchange Rate ◽  
Content Type ◽  
Crisis Period ◽  
The Exchange Rate

Purpose The purpose of this paper is to examine the firm-specific and macroeconomic determinants of profitability of Indian manufacturing firms. It assesses the main determinants of firm’s profitability in the pre-crisis and post-crisis period from 2000 to 2015. Design/methodology/approach This methodology splits the factors that influence firm profitability in two groups: firm-specific (internal) factors and macroeconomic indicators. It further aims to look at the consistency of the factors in the pre-crisis and post-crisis period. The return on assets and the net profit margin are considered as proxy for corporate profits. The panel generalized least square and panel vector auto-regression model have been employed, and it is observed that the exchange rate seems to have played a major role in the crisis period by explaining the earning quotient for Indian firms. Findings This paper concludes that the firm-specific variables and exchange rate channels are quite relevant in explaining the profitability of Indian manufacturing firms. It accepts the hypotheses that size and liquidity enhances whereas leverage discourages the profitability. Few exceptions have been observed during the crisis period. The study also concludes that in the short run, the changes in exchange rate are not increasing profitability, but in the long run, it increases profitability as the volatility of nominal exchange rate is positively impacting profitability. Moreover, the study finds that the nominal exchange rate index is more informative and explains that profitability is better than real exchange rate index in the case of Indian manufacturing firms over the study period. Research limitations/implications The managers and the policy makers should give utmost importance to the firm-specific determinants, especially after the crisis period, and consider the appropriate exchange rate to evaluate firm performance for making any change in the policy to make any business profitable. Originality/value This study has been conducted over a longer time by using advanced panel data analysis techniques on the recent data. The study period properly captures the crisis time and the research includes different selection of profitability that highlights corporate earnings pattern. Moreover, validation of the exchange rate sensitivity of profitability over nominal and real exchange rate increases the robustness of the study. Moreover, on Indian manufacturing firms, the study is very significant and unique.

scholarly journals Exchange rate modelling in the development community using the ARDL cointegration approach: The case of emerging markets

2020 ◽  
Vol 10 (2) ◽  
pp. 53-70
Author(s):  
Abdulkader Aljandali ◽  
Christos Kallandranis
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Equilibrium Exchange Rate ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Ex Post ◽  
Long Run ◽  
Equilibrium Exchange ◽  
Exchange Rate Movements ◽  
Exchange Rate Models

Despite rising interest in African economies, there is little prior research on the determinants of exchange rate movements in the region. This paper examines the monthly exchange rates of the country members of the Southern African Development Community (SADC) from 1990 to 2010 inclusive. Long-run equilibrium exchange rate models are established, exchange rate determinants are identified, and ex-post forecasts are generated for a period of 18 months (Sekantsi, 2011). The autoregressive distributed lag (ARDL) cointegration model is used in this paper, given its statistical advantages over commonly, applied cointegration techniques. Findings show that the ARDL method generates accurate forecasts for eight out of 11 sampled exchange rates. In keeping with earlier literature (e.g., Redda & Muzindusti, 2017; Zerihun & Breitenbach, 2017; etc.), findings suggest that the chances of SADC member countries fulfilling the requirements of a currency union are quite low. This paper marks one of the first attempts in the literature to forecast exchange rates in SADC using the ARDL approach (Pesaran & Shin, 1995). The results would be of interest to policy-makers, researchers and investors.

scholarly journals Investigation of Turkey and Azerbaijan Economy Macroeconomic Variables

2020 ◽  
Author(s):  
Volkan Öngel ◽  
Hasan Sadık Tatlı ◽  
Gözde Bozkurt
Keyword(s):  
Exchange Rate ◽  
Gdp Growth ◽  
Employment Rate ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Annual Frequency ◽  
Causality Relationship ◽  
The Exchange Rate ◽  
The One ◽  
Data Frequency

The study aims to determine the presence or absence of causality relationship between economic growth, employment, inflation, exchange rate, import, export in Turkey, and Azerbaijan. In the study, the two countries' annual frequency data from 1992-2018 were analyzed with the Granger causality test. According to the study, the employment rate of GDP growth appears to be the one-way Granger cause for Turkey. Also, it has been determined that the import and exchange rate is caused to the employment rate. It was observed that GDP growth and export were active on inflation and were Granger cause to inflation. It is determined that GDP growth in Azerbaijan is Granger cause to exchange rate and employment. It is also observed that the exchange rate affects inflation. According to the findings, GDP growth has an impact on the employment rate in both countries. While GDP growth is found to be active over inflation in Turkey, it is seen to be valid on the exchange rate in Azerbaijan. Research differs from similar studies in the literature in terms of variables used and countries. The findings of the research have some limitations. The data frequency used in the research starts in 1992, depending on Azerbaijan gaining its independence in 1991. The data used in the research are on an annual basis. Also, local/regional and global crisis effects have been ignored for both countries.

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