Exchange Rate Misalignment and International Law

2011 ◽  
Vol 105 (3) ◽  
pp. 423-476 ◽  
Author(s):  
Claus D. Zimmermann
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
International Law ◽  
Real Exchange Rate ◽  
Foreign Exchange ◽  
Exchange Rate Policy ◽  
Exchange Rate Misalignment ◽  
Rate Policy ◽  
Exchange Markets ◽  
Trade Conflicts

History is replete with examples where states have interfered with foreign exchange markets in order to influence exchange rates. The trade conflicts between the two world wars, for instance, were fought not only via the imposition of tariffs, but also via competitive devaluations. Since then, straightforward competitive devaluations have become a rare phenomenon; contemporary scenarios, in which exchange rate policies are criticized for their potentially protectionist impact, tend to be much more sophisticated. The exchange rate policy followed by China is certainly the outstanding, yet not exclusive, example. In recent years policymakers worldwide have criticized China for maintaining an undervalued real exchange rate as part of its strategy of export-led growth.

Fear of Free Floating or Forced Exchange Rate Fixing

2004 ◽  
pp. 112-122
Author(s):  
O. Osipova
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Float Exchange Rate ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate Arrangements ◽  
Pass Through

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

The real equilibrium exchange rate in a commodity­exporting economy: the experience of Azerbaijan

2021 ◽  
pp. 25-38
Author(s):  
Vusal Gasimli ◽  
Vusala Jafarova
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Oil Prices ◽  
Exchange Rate Policy ◽  
Current Account Balance ◽  
Equilibrium Exchange Rate ◽  
Long Run ◽  
Equilibrium Exchange ◽  
Rate Policy ◽  
Relative Productivity

The case of Azerbaijan serves to study the adequacy of exchange-rate policy in a resource-rich economy. This paper analyses the behavior of Azerbaijan’s external accounts over the past twenty years. Declining oil prices made an existing exchange-rate peg unsustainable and led to a large devaluation in 2015. Since then, the current account balance has improved, but by less than expected. We use the EBA-Lite method to derive regression-based estimates of the equilibrium real exchange rate, and relate misalignments to measures of “policy gaps”. Our findings suggest that only a few years after the devaluation, Azerbaijan’s currency has once more become overvalued. Moreover, the equilibrium real exchange rate is volatile and hardly compatible with a long-run exchange rate peg. Exchange rate policy should try to accommodate shifts in the fundamental determinants such as relative productivity and real oil prices.

scholarly journals The choice of an exchange rate regime: Outcomes and constraints

2006 ◽  
Vol 51 (168) ◽  
pp. 73-94 ◽  
Author(s):  
Srdjan Marinkovic
Keyword(s):  
Exchange Rate ◽  
Slow Growth ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Country Study ◽  
Exchange Rate Misalignment ◽  
Rate Policy ◽  
Policy Measures ◽  
Exchange Policy ◽  
The Stability

An inappropriate exchange rate policy is likely to undermine overall efforts to transform the economy. Namely, it is now well accepted either at the theoretical or policy level that situations of real exchange rate misalignment could be translated into important welfare costs. This country study highlights "irrelevancy" of the stability criteria when slow growth recovery threatens to endanger even social roots of determination for reform. We discuss foreign exchange policy and other related policy measures that are likely to align economic and political goals inside a trade-off between stability and growth.

scholarly journals Exchange rate policy, growth, and foreign trade in China

2011 ◽  
Vol 56 (190) ◽  
pp. 103-139 ◽  
Author(s):  
Mirjana Gligoric
Keyword(s):  
Exchange Rate ◽  
Foreign Trade ◽  
Foreign Exchange ◽  
Global Economy ◽  
Trade Deficit ◽  
Exchange Rate Policy ◽  
Negative Effects ◽  
Bilateral Relations ◽  
The Usa ◽  
Rate Policy

This paper analyzes a hot topic: the influence of an undervalued currency on macroeconomic variables - primarily on the economic growth and trade balance of a country, but also on employment, foreign exchange reserves, competition, and living standards. It also reviews and explains the consequences of yuan undervaluation, points out the need for its appreciation, and states the negative effects that stem from this measure. Special attention is given to the problematic bilateral relations between China and the USA and the reasons why Americans are worried about the exchange rate policy that China implements. Although yuan appreciation would decrease the American foreign trade deficit, it also raises the question of further financing of the American deficit. There are also other problems that the possible appreciation would cause for the American economy, due to the effect of J-curve, passthrough, larger costs of input imported from China, etc. Therefore, Chinese foreign exchange policy is an important subject, but it is not the solution to the problems of the global economy - which have deeper roots than that. However, there is no excuse for China implementing unfair exchange rate policies, or replacing such policies with controversial protectionist policies (as some authors have suggested).

scholarly journals Capital Controls or Real Exchange Rate Policy? A Pecuniary Externality Perspective

2013 ◽  
Author(s):  
Gianluca Benigno ◽  
Huigang Chen ◽  
Alessandro Rebucci ◽  
Christopher Otrok ◽  
Eric Young
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Capital Controls ◽  
Exchange Rate Policy ◽  
Pecuniary Externality ◽  
Rate Policy

The long-run effects of geopolitical risk on foreign exchange markets: evidence from some ASEAN countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hon Chung Hui
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Risk Index ◽  
Foreign Exchange Markets ◽  
Content Type ◽  
Long Run ◽  
Exchange Markets ◽  
Exchange Rate Models ◽  
Asean Countries

PurposeThe purpose of this paper is to analyse the long-run relationship between geopolitical risk and exchange rates in four ASEAN countries.Design/methodology/approachWe augment theoretical nominal exchange rate models available in the literature with the geopolitical risk index developed by Caldara and Iacoviello (2019), and then estimate these models using the ARDL approach to Cointegration.FindingsOur analysis uncovers evidence of Cointegration in the exchange rate models when the MYR-USD, IDR-USD, THB-USD and PHP-USD exchange rates are used as dependent variable. Next, geopolitical risk is a significant long-run driver for these exchange rates. Third, in all countries higher geopolitical risk leads to a depreciation of domestic currency.Research limitations/implicationsThere are implications for entrepreneurs, central banks, portfolio managers and arbitrageurs who actively trade in financial markets. Financial market players can benefit from a better understanding of how geopolitical events affect the portfolio of financial assets across various countries, while entrepreneurs can work out hedging strategies.Originality/valueThis is a contribution to the study of interlinkages between political risk and foreign exchange markets. It is the first study to adopt the geopolitical risk index of Caldara and Iacoviello (2019) to the study the foreign exchange markets of ASEAN countries.

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