scholarly journals A General and Theoretical FX Model for the Multi-Currency Basket: Economic, Financial and Mathematical Approach

2021 ◽  
Vol 12 (5) ◽  
pp. 255
Author(s):  
Amine El Bied
Keyword(s):  
Exchange Rate ◽  
General Theory ◽  
Financial Markets ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Point Of View ◽  
Mathematical Approach ◽  
Foreign Currencies ◽  
Teachers And Students ◽  
Ex Nihilo

The multi-currency basket is an exchange rate regime in which the currency is pegged to several foreign currencies. The basket is defined by its composing foreign currencies, and by the weighting of each currency in the basket. The exchange rate in such a regime is pegged to a weighted basket of currencies.We propose to present the benefits and the drawbacks of such an exchange rate regime from a macroeconomic and financial point of view. We also formulate mathematically a general theory of Foreign Exchange in the case of a currency under the regime of a multi-currency basket. The creation ex nihilo of a general model for a multi-currency basket results in equations applicable in all cases. The article covers theoretical and practical aspects of this exchange rate regime, responding to the most concrete issues faced by financial markets’ professionals, and should also interest academics, teachers and students.

scholarly journals Exchange rate regime choice

2006 ◽  
Vol 53 (3) ◽  
pp. 313-334 ◽  
Author(s):  
Emilija Beker
Keyword(s):  
Decision Making ◽  
Exchange Rate ◽  
Shelf Life ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Point Of View ◽  
External Factors ◽  
Advantages And Disadvantages ◽  
Complex Process ◽  
Highly Sensitive

The choice of an adequate exchange rate regime proves to be a highly sensitive field within which the economic authorities present and confirm themselves. The advantages and disadvantages of fixed and flexible exchange rate regimes, which have been quite relativized from the conventional point of view, together with simultaneous, but not synchronized effects of structural and external factors, remain permanently questioned throughout a complex process of exchange rate regime decision making. The paper reflects the attempt of critical identification of the key exchange rate performances with emphasis on continuous non-uniformity and (un)certainty of shelf life of a relevant choice.

Capital Control and Monetary Policy in Asian Emerging Market Economies

2018 ◽  
Vol 17 (2) ◽  
pp. 111-134
Author(s):  
Yongseung Jung ◽  
Soyoung Kim ◽  
Doo Yong Yang
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Labor Market ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Elasticity Of Substitution ◽  
Price Stability ◽  
Emerging Market Economies ◽  
Capital Control

This paper explores two policy options in emerging market economies (EMEs) to cope with volatile capital flows due to external monetary policy shocks; capital control policy and choice of exchange rate regime. Both tools reinforce each other when a foreign exchange risk premium shock hits the economy. A contractionary U.S. monetary policy shock has significant real effects in EMEs. Conventional wisdom tells us that a free floating exchange rate with inflation targeting is better when a country faces foreign shocks. However, we show that a flexible exchange rate with less capital controls is not the best option in EMEs based on vector autoregression analysis. Moreover, we set up a small open economy new Keynesian model with real wage and price rigidities. It shows that the small economy with labor market frictions is more vulnerable to exogenous shocks such as a foreign exchange rate shock under a fixed exchange rate regime than under a flexible exchange regime. We show that maintaining price stability is not desirable when there are substantial frictions in the labor market and the intratemporal elasticity of substitution is high. Finally, the model shows that the welfare cost difference between a policy of maintaining purchasing power and a policy aimed at price stability reverses as the intratemporal elasticity of substitution between home and foreign goods increases.

scholarly journals MEASURING EFFICIENCY OF SOUTH AMERICAN FOREIGN EXCHANGE DERIVATIVES MARKET IN MINIMIZING CURRENCY RISK:

2019 ◽  
Vol 2 (1) ◽  
pp. 1-10
Author(s):  
RAAD MOZIB LALON
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Exchange Rate Volatility ◽  
South American ◽  
Currency Risk ◽  
Measuring Efficiency ◽  
Spot Exchange Rate ◽  
Cross Country ◽  
The Exchange Rate

This paper attempts to reveal whether the foreign exchange (FX) derivatives market effectively and efficiently reduces the volatility to foreign exchange rate fiuctuations. Cross-country evidence suggests that development ofthe FXderivatives market does not boost up spot exchange rate volatility and reduces aggregate exposure to currency risk. Intraday evidence for Chile shows that activity in the forward market has not been associated with higher volatility in the exchange rate following the adoption ofa fioating exchange rate regime. The study also found no evidence that net positions of large participants in the FX derivatives market help to predict the exchange rate. These findings support the view that development of the FX derivatives market is valuable to reduce aggregate currency risk.

scholarly journals The influence of factors on the security management of the foreign exchange market in Ukraine

2021 ◽  
Vol 2021 (2) ◽  
pp. 315-327
Author(s):  
Oksana Svatiuk ◽  
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Regime ◽  
Security Management ◽  
Economic Security ◽  
The State ◽  
Exchange Market ◽  
State Management ◽  
Floating Exchange Rate

The article analyzes the principles of development and security management of the foreign exchange market of Ukraine. Substantiates the influence of factors on the functioning of the foreign exchange market such as: improvement of the regulatory framework; monetary policy on the stabilization of the floating exchange rate regime; lending to the National Bank of Ukraine within the current 18-month stand-by program from the International Monetary Fund; replenishment of the market currency through the purchase and sale of government bonds; the influence of international and domestic factors on the liberalization of the foreign exchange market in Ukraine; receipt of a share of currency more than 10% of the population working abroad; restoring the confidence of individuals and entrepreneurs in the national currency. The structure and analysis of the process and dynamics of the foreign exchange market of Ukraine are characterized. The author evaluates the security management of currency regulation of the floating exchange rate regime, which directly affects the state of the foreign exchange market (Fig. 1). The state of exchange rate regulation and its impact on the foreign exchange market on the basis of personal observation during 2015-2021 are studied. The main advantage of this article is the clarification of the elements of the mechanism of currency regulation, which is due to the negative impact of a wide range of external and internal factors on the tools (Fig. 2). This mechanism is a powerful lever of state management of economic security and regulation of foreign exchange market liberalization in the context of a significant deterioration of the crisis situation in Ukraine in recent years. The main areas of security management of the mechanism of functioning of the foreign exchange market of Ukraine are the following. The first is optimization of the procedure of foreign exchange interventions of the NBU – schedule, parameters of interventions. This will increase the transparency and predictability of NBU operations in the foreign exchange market. NBU managers should abandon discriminatory approach to ensure all banks have equal access to interventions. The second is increasing of the digitization and disclosure of communication policies with actors. Its deterioration is due to negative comments addressed to banks regarding speculative actions on exchange rate formation, non-compliance with the requirements of the NBU in lending, security management and customer distrust. The third is strengthening of the reserve requirements for bank security management in order to reduce the excessive liquidity of the banking system.

Emerging Markets Central Banks Exchange Rate Policy

2011 ◽  
pp. 21-34 ◽  
Author(s):  
S. Andryushin ◽  
V. Kuznetsova
Keyword(s):  
Exchange Rate ◽  
Emerging Markets ◽  
Exchange Rate Regime ◽  
Central Banks ◽  
Exchange Rate Policy ◽  
Point Of View ◽  
Nominal Exchange Rate ◽  
Safeguard Measures ◽  
Rate Policy ◽  
The Exchange Rate

The article analyzes the emerging markets central banks exchange rate policy, while they choose the exchange rate regime in conditions of financial globalization. The authors present the new IMF exchange rate regimes taxonomy which separates them using historical data about nominal exchange rate developments. They identify some factors which affect the exchange rate regime option from the macroeconomic point of view. The article reviews some national markets safeguard measures from external shocks generated by international capital inflow or outflow.

Stability of the Exchange–Rate Agreements and Public Debt Management: the Italian Experience within the EMS

2002 ◽  
Vol 20 (1) ◽  
pp. 53-73
Author(s):  
Bernardo Maggi
Keyword(s):  
Exchange Rate ◽  
Public Debt ◽  
Critical Condition ◽  
Currency Crises ◽  
Exchange Rate Regime ◽  
Point Of View ◽  
Debt Management ◽  
Specific Reference ◽  
Italian Experience ◽  
Public Debt Management

Abstract This paper analyses the issue of the interdependence between fundamentals and expectations in the emergence of a currency crisis from both a theoretical and an empirical point of view with specific reference to the Italian case.Theoretically, currency crises depend as much on fundamentals as on expectations, and the latter again on the critical condition of the former for the associated profit opportunity. Hence, in order to reduce the risk of a new speculative attack, an appropriate public debt management, which for its high level is the main fundamental in Italy, and fiscal policy must be adopted. These may be implemented with the evaluation of the probability associated to devaluation, which enables the policy-maker to identify the critical condition for die occurrence of the crisis. The empirical analysis also provides evidence in favour of the theory that points public budget government policy as one of the major factors in leading to a non-viable fixed exchange rate regime.

scholarly journals DETERMINANTS OF FOREIGN EXCHANGE RESERVES IN INDIA

2021 ◽  
Vol 9 (2) ◽  
pp. 229-240
Author(s):  
Aman Verma ◽  
Suman Bhakri
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Optimum Level ◽  
Foreign Exchange Reserves ◽  
Macroeconomic Factors ◽  
Self Sufficiency ◽  
History Of ◽  
Unforeseen Contingencies ◽  
Day To Day Operations

Motivation/Background: A country holds foreign exchange reserves for maintaining liquidity and safety. The country possess certain amount of foreign reserves to meet their day to day operations and to meet the unforeseen contingencies. The optimum level of reserves helps a country to be self-reliant and have a self-sufficiency to meet their payment obligations. Methods: The paper has used double log regression model to find out the relevant and significant determinants of foreign exchange reserves in India. There are several factors like exchange rate regime, quality of institutions, history of financial crisis, degree of openness, country to country differences, dominate in conceptualizing and measuring reserve adequacy for any country. Results: The results of the current study shows that inflow of FDI, exchange rate, exports, short term debt and time affects the value of foreign exchange reserves in India. Conclusion: The study concludes that there are four major macroeconomic factors that affect the value of foreign exchange reserves and it is statistically significant also.  The current paper can be of great use for the policy makers of India, in a way that they should consider the relevant determinants of foreign exchange reserves while accumulating it.

scholarly journals Interest Rate and Foreign Exchange Risk Exposures of Australian Banks: A Note

2009 ◽  
Author(s):  
Abul F. M. Shamsuddin
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Financial System ◽  
Flexible Exchange Rate ◽  
Risk Exposure ◽  
Exchange Risk ◽  
Exchange Rate Changes

The abolition of most government controls over the Australian financial system in the 1980s, the advent of a flexible exchange rate regime in 1983 and the globalisation of the financial system in the 1990s have created new opportunities for Australian banks but exposed them to new sources of risk. This study estimates systematic risk exposure of publicly listed Australian banks with respect to market, interest rate and foreign exchange rate using a GARCH-in-Mean model. Not surprisingly, the results suggest that nearly all banks exhibit varying degrees of market risk exposure. However, stock returns of large banks are highly sensitive to interest rate changes, while most small banks are almost immune to both interest and exchange rate changes.  

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