scholarly journals Does the Mundell-Fleming Model Apply to Malaysia's Output?

2021 ◽  
Vol 10 (2) ◽  
Author(s):  
Yu Hsing
Keyword(s):  
Exchange Rate ◽  
Inflation Rate ◽  
Rate Increase ◽  
Monetary Expansion ◽  
Expected Inflation ◽  
Fixed Exchange Rate ◽  
Stock Value ◽  
Floating Exchange Rate ◽  
Floating System ◽  
Model Apply

Based on an extended Mundell-Fleming model, this paper finds that both fiscal expansion and monetary expansion raise output in Malaysia and that a lower real interest rate, a higher stock value, a lower real oil price and a lower expected inflation rate increase output. Hence, a managed floating system with no predetermined path of the exchange rate adopted by Malaysia may lead to better outcomes than the predictions of the Mundell- Fleming model that fiscal expansion does not raise output under a floating exchange rate but increases output under a fixed exchange rate whereas monetary expansion increases output under a floating exchange rate but does not affect output under a fixed exchange rate (Mankiw, 2019).

scholarly journals Inflation Expectations in Turkey: Determinants and Roles in Missing Inflation Targets

2018 ◽  
Vol 7 (3) ◽  
pp. 73-90 ◽  
Author(s):  
Umit Bulut
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Oil Price ◽  
Output Gap ◽  
Inflation Expectations ◽  
Inflation Target ◽  
Distributed Lag ◽  
Expected Inflation ◽  
Target Output

Abstract This paper aims at specifying the determinants of 12-month ahead and 24-month ahead inflation expectations in Turkey by using monthly data from April 2006 to December 2016. Put differently, this paper tries to shed light on how inflation expectations respond to changes in past inflation rate, inflation target, output gap, USD/TL exchange rate, oil price, and EMBI in Turkey. To this end, the paper first conducts unit root tests in order to detect the order of integration of the variables. Then, the paper employs the autoregressive distributed lag approach to examine whether there is a cointegration relationship among variables and to estimate long-run parameters. According to the findings, 12-month ahead expected inflation rate is positively related to past inflation rate, inflation target, output gap, USD/TL exchange rate, and oil price and is negatively related to EMBI. Besides, 24-month ahead expected inflation rate is positively related to past inflation rate and USD/TL exchange rate and is negatively related to inflation target and EMBI. Upon its findings, the paper makes some inferences about the success of inflation targeting strategy in Turkey.

scholarly journals Application of Monetary Models of Exchange Rate Determination for Poland

2008 ◽  
Vol 3 (2) ◽  
pp. 19-24 ◽  
Author(s):  
Yu Hsing
Keyword(s):  
Exchange Rate ◽  
Inflation Rate ◽  
Mean Squared Error ◽  
Nominal Exchange Rate ◽  
Exchange Rate Determination ◽  
Mean Absolute Percent Error ◽  
Expected Inflation ◽  
Squared Error ◽  
Monetary Models ◽  
Absolute Percent Error

Application of Monetary Models of Exchange Rate Determination for PolandThe zloty/USD exchange rate is examined based on the Dornbusch model, the Bilson model, the Frenkel model, and the Frankel model. Empirical results show that the coefficient of the relative money supply is positive and significant, that the coefficient of the relative output is negative and significant, and that the Bilson model or the Frenkel model applies to Poland. Hence, the nominal exchange rate is positively affected by the relative interest rate and the relative expected inflation rate. The Balassa-Samuelson effect is confirmed in both models. The Bilson model has a smaller root mean squared error or mean absolute percent error than the Frenkel model.

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.

scholarly journals PERBEDAAN MANAGED FLOAT EXCHANGE RATE SYSTEM DAN FREELY FLOATING EXCHANGE RATE SYSTEM DI INDONESIA

2003 ◽  
Vol 2 (2) ◽  
Author(s):  
Mudji Utami
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Relative Rate ◽  
Supply And Demand ◽  
Rate System ◽  
Float Exchange Rate ◽  
Significant Difference ◽  
Floating Exchange Rate ◽  
Floating System ◽  
Exchange Rate System

Consequence of the freely floating system and freely foreign exchange system, rupiah could he easily fluctuated, because exchange rate shift not in response but as governed by the interaction between supply and demand in the money markets. The supply and demand forces are influenced by the relative interest rate and relative of inflation. Thus this study examine whether there is a difference of magnitude in the influence of the relative interest rate and relative rate of inflation to the USD - IRD exchange rate when Indonesia adopts respectively the managed float exchange rate system and the freely floating exchange rate system. The finding shows at the level of confidence 95%, that there is no significant difference in the influence of the relative interest rate and relative rate of inflation to the USD - IRD exchange rates between both systems.

scholarly journals Debt, Growth, and Poverty in the International Monetary System (The Quaid-i-Azam Memorial Lecture)

2001 ◽  
Vol 40 (4I) ◽  
pp. 283-314
Author(s):  
Robert A. Mundell
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
International Monetary System ◽  
Memorial Lecture ◽  
Rate System ◽  
Currency Area ◽  
Monetary System ◽  
Fixed Exchange Rate ◽  
Floating Exchange Rate ◽  
Exchange Rate System

This paper explores the relationship between debt, growth, and poverty and the international monetary system. With a well-functioning international monetary system, economic policy works well, instruments are assigned to targets appropriately, and discipline is maintained. The fixed exchange rate is contrasted with alternative monetary rules. The monetary rule is the weakest system; monetary targeting has failed in every country in which it has been tried. An advantage of the fixed exchange rate is the clue it provides to the price level, interest rate, and future monetary policy. Other things being equal, the use of a currencies basket is inferior to a single currency peg, while a freely floating exchange rate system puts itself at the mercy of speculators. The paper points out the conditions for a successful currency area as a consensus on a common inflation rate; a common basket of goods with which to measure inflation; exchange rate that must be locked; member countries must adopt a common monetary policy; and a formula must be devised for distributing and using the seigniorage profits from monetary expansion. There is a need to study the possibility of an Asian currency area and the links between the APEC and the SAARC. Regular and mutual surveillance on monetary, fiscal, and exchange rate convergence, and policies that minimise exchange rate uncertainty and work towards a currency club area based on a common anchor— initially the dollar—are needed. Setting up of an Asian Monetary Fund is also suggested, one that is closely modelled on the original IMF articles of agreement and will provide an anchored fixed exchange rate system.

scholarly journals Is Real Depreciation and More Government Spending Expansionary? The Case of Montenegro

2017 ◽  
Vol 10 (2) ◽  
pp. 103-113
Author(s):  
Yu Hsing
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Fiscal Policy ◽  
Euro Area ◽  
Government Spending ◽  
Inflation Rate ◽  
Oil Price ◽  
Real Gdp ◽  
Expected Inflation ◽  
Lending Rate

AbstractEmploying an extended IS-MP-AS model to study the effects of the exchange rate, fiscal policy and other related variables in Montenegro, the paper finds that real depreciation of the Euro, a lower government spending-to-GDP ratio, a lower real lending rate in the Euro area, a lower lagged real oil price, a higher lagged real GDP in Germany, and a lower expected inflation rate would promote economic growth.

scholarly journals Will Malawi’s Inflation Continue Declining?

2021 ◽  
Author(s):  
Hopestone Kayiska Chavula
Keyword(s):  
Exchange Rate ◽  
Money Supply ◽  
Inflation Rate ◽  
Output Growth ◽  
Special Focus ◽  
Fiscal Deficits ◽  
Distributed Lag ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Floating Exchange Rate

The main objective of this chapter is to examine and determine the main factors that have driven inflation rate in Malawi since 2001, with a special focus on the period 2013–2019, during which inflation rate has continuously declined reaching 9% in 2019, from 36% in 2013. The chapter also tries to assess whether this decline will continue as per the performance of the underlying economic fundamentals both in the short- and the long-run. The study employs the autoregressive distributed lag (ARDL) model framework to examine the drivers of inflation both in the short- and the long-run using quarterly data, over the period of 2001–2019. The results reveal that reduction in headline inflation has mainly been driven by money supply growth, fiscal deficits, and output growth in the short-run, while only output has driven inflation decline in the long-run. The results also show that after floating exchange rate in 2012, inflation decline has mainly been driven by output growth despite inflationary pressures from the exchange rate and import prices. Model forecasts show that inflation may increase up to 19.4% by December 2020, if money supply growth, fiscal deficits, and exchange rate movements are not taken care of.

Impacts of the Exchange Rate and the Global Interest Rate on Real Output for Ten Selected Latin American Countries

2012 ◽  
Vol 12 (1) ◽  
pp. 1850253 ◽  
Author(s):  
Yu Hsing
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Latin American ◽  
Inflation Rate ◽  
Early Years ◽  
Currency Depreciation ◽  
Real Gdp ◽  
Expected Inflation ◽  
Monetary Policy Reaction Function ◽  
Latin American Countries

This paper examines the effects of currency depreciation or appreciation, the changing global interest rate and other related macroeconomic variables on real GDP for ten selected Latin American countries, namely, Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, Uruguay and Venezuela. The monetary policy reaction function is incorporated in the formulation of the model. There are several major findings. Currency depreciation hurts real GDP for Argentina, Brazil, Colombia, Mexico, Uruguay and Venezuela whereas the real exchange rate and real GDP exhibit a backward-bending relationship for Bolivia, Chile, Paraguay and Peru, suggesting that currency depreciation increases real GDP in early years whereas currency appreciation raises real GDP in recent years. Except for Bolivia and Paraguay, a higher global interest rate reduces real GDP. Expansionary fiscal policy is effective for Argentina, Mexico and Paraguay. Except for Chile, Paraguay and Venezuela, a higher expected inflation rate reduces real GDP. Hence, currency depreciation may be contractionary or expansionary, depending upon the level of real GDP or the state of economic development.

scholarly journals Does the Mundell-Fleming Model Apply to Australia’s Economy?

2019 ◽  
Vol 1 (1) ◽  
pp. 1
Author(s):  
Yu Hsing
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Stock Price ◽  
Inflation Rate ◽  
Oil Price ◽  
Expected Inflation ◽  
Model Apply

<p><em>Applying an extended Mundell-Fleming Model to Australia, this paper finds that expansionary fiscal policy does not affect output whereas expansionary monetary policy raises output. In addition, a higher real stock price, a lower real oil price or a lower expected inflation rate would increase output. Hence, the predictions of the Mundell-Fleming model works for Australia’s economy. </em></p>

Challenges in the International Business Market Through Fixed Currency Systems: A Study Based on Business Scenario in UAE

2019 ◽  
Vol 16 (12) ◽  
pp. 5370-5377
Author(s):  
C. T. Sunil Kumar ◽  
V. P. Sriraman ◽  
Mahesh R. Pillai
Keyword(s):  
Exchange Rate ◽  
International Business ◽  
Capital Gains ◽  
Global Business ◽  
Rate System ◽  
Doing Business ◽  
Fixed Exchange Rate ◽  
Gold Silver ◽  
Floating Exchange Rate ◽  
Exchange Rate System

The contemporary global business scenario is significantly dynamic that incorporates modern financial and business potentials and possibilities making business avenues simultaneously flexible and fair. Until recent past sea was considered as worst option to reach nations for doing business. However, after realization of the concept that business can easily be spread beyond national boundaries, men started conquering lands for conducting business and to earn higher income and profit. Consequently, the business faced the challenge of meeting larger demands of goods and services across the nations, as a results business started dealings in number of possibilities such as exchange of facilities, barter system, gold/silver related commodities. Meanwhile, the disadvantage of doing business across borders in such a way was widely propagated. As a result nations and business were forced to use a unique and commonly accepted commodity as a medium of exchange, which should overcome the problems of barter system and gold rates system. This led to the birth of modern currency and further advancements in the form of financial instruments including paper currencies and bullion exchanges. Majority of the modern day business are guided by the profit, and doing business in international currency relatively increases the rate of profit. At the beginning nations started exploring number of possibilities of trade on the basis of fixed and floating exchange rate for capital gains. This modern type of multiple payment settlement system in business across borders has increased the attractiveness of international business; customers search for quality products at competitive prices. Consequently, companies and even economies have been considering international business as best alternative for earing higher profits while at the same time doing business with developed and stable economies. Trade among countries and regions needs unified currency, which has been made easy through introduction of fixed and floating exchange rate systems. Countries entering into international trade agreements either fix-up a common value for the currency in which regular trading happens with another nation or tie up with the currency of a develop economy. The fixed exchange rate system has enabled countries to make prior financial arrangements required for modern day businesses. Present study has been carried out to properly examine the currency arrangements in UAE against US Dollars and other GCC countries’ currencies. Hence the study has evaluated the expected benefits of fixed exchange rate system in case of UAE. In addition to that, prime factors that significantly affect the process of pegging UAE currency against major currencies such as USD, Euro, and Pound Sterling have also been examined.

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