scholarly journals Recognizing Reality—Unification of Official and Parallel Market Exchange Rates

2021 ◽  
Vol 20 (25) ◽  
Author(s):  
Simon Gray
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Case Studies ◽  
Economic Activity ◽  
Central Banks ◽  
Market Exchange ◽  
Market Clearing ◽  
Economic Agents ◽  
Market Exchange Rate ◽  
Clearing Rate

Some central banks have maintained overvalued official exchange rates, while unable to ensure that supply of foreign exchange meets legitimate demand for current account transactions at that price. A parallel exchange rate market develops, in such circumstances; and when the spread between the official and parallel rates is both substantial and sustained, price levels in the economy typically reflect the parallel market exchange rate. “Recognizing reality” by allowing economic agents to use a market clearing rate benefits economic activity without necessarily leading to more inflation. But a unified, market-clearing exchange rate will not stabilize without a supportive fiscal and monetary context. A number of country case studies are included; my thanks to Jie Ren for pulling together all the data for the country case studies, and the production of the charts.

Shining a Light on Purchasing Power Parities

2020 ◽  
Vol 12 (4) ◽  
pp. 71-108
Author(s):  
Maxim Pinkovskiy ◽  
Xavier Sala-i-Martin
Keyword(s):  
Exchange Rate ◽  
Economic Activity ◽  
Purchasing Power ◽  
Market Exchange ◽  
Price Data ◽  
Nighttime Lights ◽  
Survey Round ◽  
Market Exchange Rate ◽  
Purchasing Power Parities

We use satellite-recorded nighttime lights as an independent benchmark of economic activity in order to generate three findings in the study of PPP-adjusted estimates of GDP. First, PPP-adjusted estimates better describe poor economies than do market exchange rate-based estimates today, although this was not the case in the late 1990s. Second, estimates of PPPs have been steadily improving from one price survey round to the next. Third, it has tended to be optimal to only use the latest price data and to revise existing PPP-adjusted estimates whenever a new price survey is released. (JEL E23, E31, F31, O11, O57)

scholarly journals The Discrete Multicriteria Decision Methods And ARSV Model Used To Choice The Best Exchange Rate

2011 ◽  
Vol 14 (4) ◽  
Author(s):  
Maria del Carmen Garcia-Centeno ◽  
Roman Minguez Salido
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Stochastic Volatility ◽  
Econometric Model ◽  
Decision Matrix ◽  
Multicriteria Decision ◽  
Economic Agents ◽  
Decision Method ◽  
Decision Methods ◽  
Promethee Method

The exchange rate is a variable that economic agents have in consideration. For this reason, in this paper we suggest a decision method to compare several exchange rates. This method is the Promethee Method and it is a Multicriteria Decision Method used to order the preference between returns of the different exchange rates. We have used different statistic criteria to rank these exchange rates. To obtain the pay-off matrix it has been used one econometric model: Autoregressive Stochastic Volatility (ARSV) Model. We have proposed different generalized criteria and their corresponding thresholds. Both are used to evaluate the different exchange rate returns in the decision matrix or the pay-off matrix. These thresholds are suggested according to the obtained results in the decision matrix. Finally, we have obtained the best solution of the problem when all the criteria have the same importance for the decision-maker.

Conclusions

2016 ◽  
Author(s):  
Jeffry A. Frieden
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Policy ◽  
Theoretical Argument ◽  
Economic Agents ◽  
Cross Border ◽  
Domestic Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Export Competition

This chapter summarizes key findings. This book makes a simple theoretical argument about the distributional implications of exchange rate policy. It suggests that economic actors with important cross-border interests, exposed to currency volatility, will tend to prefer more stable and predictable exchange rates. It also claims that tradables producers will, all else being equal, tend to prefer a depreciated real exchange rate. These concerns will be tempered by the extent of exchange rate pass-through—that is, the degree to which currency movements affect domestic prices. The analysis in this book shows that countries whose economic agents are more involved in cross-border trade are more likely to fix their exchange rates in order to reduce currency volatility. Countries with large groups susceptible to import or export competition—import-competing manufacturers and export farmers—are more likely to choose flexible exchange rates that allow currency depreciations. Governments facing an election encourage or allow currency appreciation that increases the purchasing power of consumers.

scholarly journals Exchange Rate and Demand for Money in Nigeria

2015 ◽  
Vol 7 (2) ◽  
pp. 21
Author(s):  
BigBen Chukwuma Ogbonna
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Money Demand ◽  
Black Market ◽  
Easy Access ◽  
Market Exchange ◽  
Demand Model ◽  
Demand For Money ◽  
Official Exchange Rate

<p>This study is designed to examine empirically the impact of exchange rate on the stability of demand for money in Nigeria where official and black market exchange rates operate side by side due to exchange controls. Variants of money demand model are estimated using monthly data for the period of 2005-2013. Cointegration and system equation techniques combined with CUSUM and CUSUMSQ tests are employed in the data analysis. Results indicate that in all the variants of the money demand model, coefficients of exchange rates variable (official or black market exchange rates) manifest significant <em>t</em> statistics, meaning that the null hypothesis of restricting the coefficients of exchange rates in money demand model in Nigeria is rejected for each variant. This suggests that coefficient of exchange rates variable (OMEXR or BMEXR) belongs to the cointegrating space in all the instances. Judging from the freakiness of the coefficients of the variants of the money demand function and the results of the tests for stability of the models combined, the most appropriate  demand for money function for Nigeria appear to be the one that includes M1, the interest rate, inflation rate, and official exchange rate. This implies that in Nigeria, a greater percentage of the foreign exchange demand may be public sector driven and substantial percentage of the private sector foreign exchange needs is sourced from the official exchange rate market due to the substantial disparity between the two rates. This may mean consumers’ easy access to official exchange rate and transparency in the operation of official exchange rate market in Nigeria.</p>

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