scholarly journals Implications of New Keynesian Theory for Benchmarking of Monetary Efficiency

2016 ◽  
Vol 3 (2) ◽  
pp. 76 ◽  
Author(s):  
Oghenovo Adewale Obrimah
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Cross Section ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Balance Of Payments ◽  
New Keynesian ◽  
Keynesian Theory ◽  
Floating Exchange Rate

Relative to free floating exchange rate regimes, I find the adoption of a hybrid exchange rate regime induces alternate monetary policy responses within the context of new Keynesian theory. Specifically, while the efficiency with which an economy is managed can be derived from comparisons of effects of inflation or balance of payments on exchange rates within a cross-section of countries that run free floating exchange rate regimes, this is not the case within a cross-section of countries that operate hybrid exchange rate regimes. In countries that operate hybrid exchange rate regimes, the efficiency with which an economy is managed is derived from comparisons of the effects of exchange rates on inflation or balance of payments situations. In so far as measurement of economic distortions are concerned, while relations between deposit or lending interest rates and inflows of Foreign Direct Investment (FDI) into countries with hybrid exchange rate regimes yield insights into the extent to which inflows of foreign capital induce distortionary effects on price equilibriums, these relations do not yield similar insights within a cross-section of countries that run free floating exchange rate regimes. These findings, generated within the context of new Keynesian theory, identify theoretically appropriate differences in benchmarking of economic efficiency conditional on differences in exchange rate regimes.

scholarly journals EXOGENOUS INTEREST RATE AND EXCHANGE RATE DYNAMICS UNDER ELASTIC EXPECTATIONS

2021 ◽  
Vol 80 (318) ◽  
pp. 3
Author(s):  
Franklin Serrano ◽  
Ricardo Summa ◽  
Gabriel Aidar
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Exchange Rate Regimes ◽  
Nominal Exchange Rate ◽  
Exchange Rate Dynamics ◽  
Policy Variable ◽  
Nominal Exchange Rates ◽  
Floating Exchange Rate ◽  
Short Run

<div class="WordSection1"><h1 align="center"><strong style="font-size: 10px;">ABSTRACT</strong></h1></div><p>A theory analyzing the short run dynamics of nominal exchange rates under exogenous interest rates and free imperfect international capital markets is presented. Introducing elastic exchange rate expectations leads to cumulative changes in the spot and forward exchange rates in the same direction. We find that free floating exchange rate regimes are intrinsically unstable, as the nominal exchange rate is an institutional or policy variable that has no ‘fundamental equilibrium’ level. Implications for monetary policy and exchange market interventions of this potential instability are derived. Our results help to explain both the empirical prevalence of dirty floating exchange rate regimes and some aspects of the uncovered interest parity ‘failure’.</p><p> </p><p align="center">TASA DE INTERÉS EXÓGENA Y DINÁMICA DEL TIPO DE CAMBIO CON EXPECTATIVAS ELÁSTICAS</p><p align="center"><strong>RESUMEN </strong></p><p>Presentamos un análisis teórico de la dinámica de corto plazo de los tipos de cambio nominales con tasas de interés exógenas y libres e imperfecta movilidad internacional de capitales. La introducción de expectativas de tipo de cambio elásticas conduce a variaciones acumulativas en los tipos de cambio <em>spot</em> y <em>forward</em> en la misma dirección. Los regímenes de tipo de cambio de flotación libre son intrínsicamente inestables, dado que el tipo de cambio nominal es una variable institucional o de política que no tiene un nivel de “equilibrio fundamental”. Derivamos implicaciones de esta inestabilidad potencial para la política monetaria y las intervenciones en los mercados cambiarios. Los resultados ayudan a explicar la prevalencia de tipos de cambio de flotación sucia y aspectos de la “falla” de la paridad de tasas de interés descubierta.</p>

South Africa’s Trade Performance under Alternative Exchange Rate Regimes

2018 ◽  
Vol 10 (6) ◽  
pp. 261
Author(s):  
Romaine Patrick ◽  
Phocenah Nyatanga
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Series Data ◽  
Growth Strategies ◽  
The Real ◽  
Real Price ◽  
Floating Exchange Rate

This study examined the effect exchange rates have on import and export volumes under alternative exchange rate policies adopted in South Africa over the period 1960 to 2017. Using quarterly time series data for the stated period, a log-linear error correction model is employed to estimate the country’s export and import elasticities, taking into account Gross Domestic Product (GDP), the real price of exports, the real price of imports and real exchange rates. Using the freely floating exchange rate regime as the base period, the study concluded that both export and import volumes are lower under a system of fixed exchange rates. Export and import volumes were also found to be lower under the dual exchange rate regime, relative to the freely floating exchange rate regime. In accordance with export-led growth strategies, exports were found to be higher and imports lower under a managed floating exchange rate regime. It is therefore recommended that South Africa revert to a more managed exchange rate regime, until the South African economy is developed to accommodate a freely floating exchange rate regime.

scholarly journals South Africa’s Trade Performance under Alternative Exchange Rate Regimes

2018 ◽  
Vol 10 (6(J)) ◽  
pp. 261-271
Author(s):  
Romaine Patrick ◽  
Phocenah Nyatanga
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Series Data ◽  
Growth Strategies ◽  
The Real ◽  
Real Price ◽  
Floating Exchange Rate

This study examined the effect exchange rates have on import and export volumes under alternative exchange rate policies adopted in South Africa over the period 1960 to 2017. Using quarterly time series data for the stated period, a log-linear error correction model is employed to estimate the country’s export and import elasticities, taking into account Gross Domestic Product (GDP), the real price of exports, the real price of imports and real exchange rates. Using the freely floating exchange rate regime as the base period, the study concluded that both export and import volumes are lower under a system of fixed exchange rates. Export and import volumes were also found to be lower under the dual exchange rate regime, relative to the freely floating exchange rate regime. In accordance with export-led growth strategies, exports were found to be higher and imports lower under a managed floating exchange rate regime. It is therefore recommended that South Africa revert to a more managed exchange rate regime, until the South African economy is developed to accommodate a freely floating exchange rate regime.

HOW THE EXCHANGE RATE REGIME AFFECTS ADJUSTMENT TO LARGE OIL PRICE SWINGS IN OIL EXPORTING COUNTRIES

2021 ◽  
Author(s):  
MAJED S. ALMOZAINI
Keyword(s):  
Exchange Rate ◽  
Money Supply ◽  
Government Spending ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Oil Price ◽  
Fixed Exchange Rate ◽  
Floating Exchange Rate ◽  
The Exchange Rate

The aim of this study is to analyze how oil price shocks affect the economic growth of floating exchange rate regimes and fixed exchange rate regimes in oil-exporting countries with a ratio of oil exports to total exports exceeding 70%. Also, this study seeks to determine what monetary and fiscal policies both regimes apply in order to curb business cycles and reduce inflationary and recessionary gaps. The analytical study uses panel data for the period from 1991 to 2019, covering 24 oil-exporting countries, from the World Economic Outlook (WEO) database and World Bank. The econometric model is estimated by applying a panel VECM to examine the short- and long-term interdependencies in the macroeconomic variables. The results demonstrate that when there is a negative shock to the oil price, the exchange rate of the floating exchange rate regimes depreciates, money supply increases, and government spending decreases. In contrast, the exchange rate of the fixed exchange rate regimes fluctuates slightly; the money supply slightly decreases in the near, medium, and long term; and government spending decreases.

In Search of Lost Time

2019 ◽  
Vol 19 (230) ◽  
Author(s):  
Antonio David ◽  
Carlos Eduardo Gonçalves
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Flexible Exchange Rate ◽  
Output Growth ◽  
Sudden Stops ◽  
Sudden Stop ◽  
Large Panel ◽  
Floating Exchange Rate ◽  
Lost Time

This paper investigates what factors affect the duration of sudden stops in capital flows using quarterly data for a large panel of countries. We find that countries with floating exchange rate regimes tend to experience shorter sudden stop episodes and that fixed exchange rate regimes are associated with longer periods of low output growth following sudden stops. These effects are quantitatively large: having a flexible exchange rate regime increases the probability of exiting the sudden stop state by between 50 to 80 percent. Flexible exchange rate regimes significantly shorten the duration of output decelerations following sudden stops by over 30 percent. Positive variations in terms of trade also abbreviate the duration of sudden stops. In terms of policies, identification is trickier, but the evidence suggests that monetary policy tightening shortens the duration of sudden stops. Changes in capital account restrictions do not seem to matter.

scholarly journals The Effects of Exchange Rates on Macroeconomic Variables: A Study of the Selected Emerging Economies

2013 ◽  
Author(s):  
Birgül Cambazoğlu ◽  
Hacer Simay Karaalp Orhan ◽  
Konstantinos Vergos
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Exchange Rate Regime ◽  
Consumer Price Index ◽  
Real Effective Exchange Rate ◽  
Total Output ◽  
Data Set ◽  
Net Exports ◽  
Floating Exchange Rate ◽  
The Exchange Rate

The exchange rate channel of the monetary transmission mechanism has gained importance through widespread use of the floating exchange rate regime with increased globalization. In this context, this study aims to explore the effectiveness of the exchange rate channel on net exports and thereby total output and price level using vector auto-regression (VAR) models. The sample countries are Turkey and Argentina, which have employed a floating exchange rate regime since 22 February 2001 and 11 February 2002, respectively. The monthly data set consists of five macro-economic variables, which are short-term interest rates, the real effective exchange rate, net exports, the consumer price index, and the industrial production index for the period 2003 to 2010. The impulse-response function outcomes indicate that the operation of the exchange rate channel is effective, both in Turkey and in Argentina.

Exchange Rates and Nominal Interest Rates

2019 ◽  
pp. 126-135
Author(s):  
Harold L. Cole
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Real Exchange Rate ◽  
Exchange Rate Regimes ◽  
Real Exchange Rates ◽  
The Real ◽  
Nominal Interest Rates ◽  
Different Types ◽  
Interest Parity

This chapter discusses exchanges and the different types of exchange rate regimes. It describes how exchange rates impact on real exchange rates, and how movements in the real exchange rate are associated with boom-bust cycles. It also discusses interest parity.

scholarly journals Identifying the determinants that cause the value movements of currencies Denar, Kuna and Dinar

2018 ◽  
Vol 4 (2) ◽  
pp. 78-85
Author(s):  
Vesna Bucevska ◽  
Goran Mojanoski
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Economic Management ◽  
The Real ◽  
Long Run ◽  
Floating Exchange Rate ◽  
Relationship Of ◽  
The Relationship

AbstractThis paper aims to evaluate the relationship of real exchange rates of domestic currencies with macroeconomic variables in Macedonia, Croatia and Serbia by using econometric approaches. Macedonia is characterized by the regime of a fixed exchange rate, Croatia is characterized by a managed floating exchange rate, while Serbia is characterized by the regime of a floating exchange rate. The choice of an exchange rate regime is an important aspect of economic management, in order to ensure competitiveness, macroeconomic stability and development. Evaluation of the relationship of Croatian, Macedonian and Serbian real exchange rates is performed by employing the consistent methodology of vector error correction modelling (VECM). According to the results of the analyses of the real exchange rates on the long run, the selected independent variables have long-run causality in case of the real exchange rate of Croatian Kuna. In case of Macedonian Denar and Serbian Dinar the VECM is inappropriate.

The Exchange Rate, Interest Rates and the Current Balance ln a Forward-Looking Model

1988 ◽  
Vol 125 ◽  
pp. 40-45 ◽  
Author(s):  
Andrew Gurney
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Balance Of Payments ◽  
Capital Inflows ◽  
The Other ◽  
Other Hand ◽  
The Exchange Rate ◽  
Temporary Rise ◽  
Forward Looking

In March this year, after a year in which policy appeared to be aimed at achieving stability against EMS currencies, the pound was allowed to rise sharply in response to large capital inflows. As with many fluctuations in exchange rates, this development was puzzling in that the prospects for the balance of payments suggested that the rise in sterling would not prove sustainable. On the other hand, high UK interest rates, particularly in relation to those available in EMS countries, provided some rationale for a temporary rise. This note uses a simple forward-looking equation for the exchange rate to illustrate the implications of alternative paths for interest rates and the balance of payments. A number of simulations are presented to illustrate the key elements of this approach.

Sign in / Sign up

Export Citation Format

Share Document