scholarly journals Exchange Rate Volatility and Monetary Policy Shocks

2022 ◽  
Author(s):  
Gbalam Peter Eze ◽  
Tonprebofa Waikumo Okotori
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Forecast Error ◽  
Exchange Rate Volatility ◽  
Error Variance ◽  
Variance Decomposition ◽  
Long Run ◽  
Forecast Error Variance ◽  
Short Run ◽  
The Exchange Rate

The study investigated the influence of innovations in monetary policy on the rate of exchange volatility in Nigeria. The research adopted vector error correction model as well as impulse response function and forecast error variance decomposition function in the estimation using two models derived in the study. Monthly data between the periods 2009 and 2019 were adopted for the research. Our findings show that in the long run; all the monetary policy variables have a significant long run correlation with volatility in the exchange rate; but that money supply and the rate of exchange seem to have significant short run impact on volatility in the exchange rate, the other variables such as liquidity ratio or monetary policy rate did not show a significant short run relationship with the volatility in the exchange rate. Further findings on the volatility impulse response and the forecast error variance decomposition suggest a significant link between volatility in the exchange rate and money supply though the link was much more pronounced. The use of monthly data shows that the managed exchange rate regime by the CBN seems to have the desired effect in exchange rate volatility and thus having a critical impact on inflationary spikes.

scholarly journals Exchange Rate Volatility and Its Implications on Macroeconomic Variables in East African Countries

2020 ◽  
Vol 7 (3) ◽  
pp. 145
Author(s):  
Nicas Yabu ◽  
Deogratius Kimolo
Keyword(s):  
Exchange Rate ◽  
Positive Impact ◽  
Export Performance ◽  
Exchange Rate Volatility ◽  
Mitigation Measures ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run ◽  
Lending Rates ◽  
The Exchange Rate

The study examines the extent of exchange rate volatility and its impact on key macroeconomic variables such as exports, FDI inflows, interest rate and inflation in Tanzania, Kenya and Uganda. The GARCH model is used to compute the extent of exchange rate volatility while the Panel Autoregressive Distributed Lag (ARDL) technique or pooled mean group (PMG) estimator was used to estimate the effects of exchange rate volatility on selected macroeconomic variables. The results indicate that volatility in the exchange rate is a real issue in all the sampled countries and is fundamentally driven by exports and FDI dynamics for the period under consideration. The results indicate a positive impact of the exchange rate volatility to export performance and lending rates in the long run. Exchange rate volatility appears to be detrimental to both export performance and leads to a reduction in lending rates in the short run. Also, the response of FDI to exchange rate volatility seems to be negative in the long run while in the short run the response from the volatility of real exchange rate seems is insignificant. Though not significant, the volatility of the exchange rate appears to have a positive impact on inflation. The study recommends that policymakers need institute mitigation measures which could smooth out excessive exchange rate volatility to minimize its likely impact on the economy. The study also indicated a need for the EAC countries to consider adopting inflation targeting monetary policy framework in order to contain inflation at the appropriate level.

scholarly journals Exchange Rate Volatility and Trade Flows: Evidence from China, Pakistan and India

2015 ◽  
Vol 7 (11) ◽  
pp. 121 ◽  
Author(s):  
Sarfaraz Ahmed Shaikh ◽  
Ouyang Hongbing
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Series Data ◽  
General Level ◽  
Negatively Associated ◽  
Long Run ◽  
Short Run ◽  
The Exchange Rate ◽  
The Impact

This study examines the impact of exchange rate fluctuations on trade flows in case of China, Pakistan and India by using the time series data from 1980 to 2013. Most of the researchers have advocated that exchange rate volatility is negatively associated with general level of trade. In this study we have used the standard deviation of the moving average of the logarithm of the exchange rate as a proxy for volatility. And to investigate this relationship, we have applied the Autoregressive Distributive Lag (ARDL) approach for co-integration which estimates the short and long run relationship among the variables for the said period. The results of this empirical work have suggested that exchange rate volatility is negatively associated with Chinese exports in short run while positively associated in long run. However, in the case of Pakistan and India both in the short run and long run, the exchange rate volatility is negatively associated with total volume of trade.

scholarly journals THE EXCHANGE RATE VOLATILITY AND EXPORT PERFORMANCE: THE CASE OF INDONESIA'S EXPORTS TO JAPAN AND THE US

2017 ◽  
Vol 20 (1) ◽  
pp. 49-70
Author(s):  
Shinta Fitrianti
Keyword(s):  
Exchange Rate ◽  
Global Financial Crisis ◽  
Export Performance ◽  
Exchange Rate Volatility ◽  
Commodity Price ◽  
Long Run ◽  
The Us ◽  
Short Run ◽  
The Exchange Rate ◽  
The Impact

This paper investigates the long-run and short-run impacts of the exchange rate volatility onIndonesia’s real exports to its major trading partners; Japan and US. The study uses monthly data from January 1998 to October 2015 in order to capture the structural break period of the Global Financial Crisis 2008. In addition, commodity price is included as an explanatory variable. The index of exchange rate volatility is generated using moving sample standard deviation of the growth of the real exchange rate. This paper estimates the long-run cointegration using Autoregressive Distributed Lag (ARDL) bounds testing, while for the short-run dynamic this paper use error-correction-model (ECM). The findings suggest rupiah volatility against the Japanese yen reduces Indonesia’s export to Japan, both in the short and the long-run. Fluctuation of rupiah against the US dollar helps Indonesia’s export to the US in the short run, but the impact is not carried out to the long-run. On the other hand, the impact of commodity price shock is negligible, except for the long-run export to Japan.

scholarly journals Relationship between Technological Advancement and Agricultural Production: Evidence from India

2020 ◽  
Vol 8 (6) ◽  
pp. 2088-2094
Keyword(s):  
Agricultural Production ◽  
Forecast Error ◽  
Error Variance ◽  
Technological Advancement ◽  
Food Grains ◽  
Long Run ◽  
Forecast Error Variance ◽  
Short Run ◽  
Impact Of Technology ◽  
The Impact

Indian economy has more than 60% of the work force engaged in it and with the sectoral contribution of 17- 18% to country's GDP in 2018-19. Despite such heavy dependence and high significance of the agricultural sector, per capita productivity in agriculture over the past few decades is less in comparison to the productivity in other sectors. Available statistics shows that agricultural production has rose marginally during the period of green revolution (starting in 1960s) which was driven by the technology revolution. Technology revolution here means- ‘seed-fertiliser-water technology’ or modern technology. In the present study, a detailed time series analysis for a time period of 36 years (1981-2017) is made to study the impact of technology in production in both the short run and long run. Firstly, the present status of technology use is studied and secondly a crop-output model is considered depicting the role of technology in production of India. Here, the impact of technology is measured using variables such as gross irrigated area, Pesticide use, Synthetic nitrogen fertilizer (NPK) uses, use of improved seed varieties (HYVs) etc. and their impact upon agricultural production (food grains as well as non-food grains) is tested using various econometric tests such as Johansen Co-integration test, regression estimates etc. A composite index has been constructed using PCA method as a proxy to technology. To examine the linkage between technological advancement and agricultural production in India, we employed the Vector auto regression (VAR) model proposed by Sims. To draw inferences on the results of VAR, we also used forecast error variance decomposition (FEVD) which gives both short-run impact and long-run impact of each variable in explaining the forecast error variance of the dependent variable.

scholarly journals Monte Carlo Analysis of Forecast Error Variance Decompositions under Alternative Model Identification Schemes

2018 ◽  
Vol 5 (338) ◽  
pp. 115-131
Author(s):  
Anna Staszewska-Bystrova
Keyword(s):  
Monte Carlo ◽  
Forecast Error ◽  
Model Identification ◽  
Error Variance ◽  
Estimation Errors ◽  
Identification Schemes ◽  
Long Run ◽  
Forecast Error Variance ◽  
Short Run ◽  
The Impact

The goal of the paper is to investigate the estimation precision of forecast error variance decomposition (FEVD) based on stable structural vector autoregressive models identified using short‑run and long‑run restrictions. The analysis is performed by means of Monte Carlo experiments. It is demonstrated that for processes with roots close to one, selected FEVD parameters can be esti­mated more accurately using recursive restrictions on the long‑run multipliers than under recursive restrictions on the impact effects of shocks. This finding contributes to the discussion of pros and cons of using alternative identification schemes by providing counterexamples for the notion that short‑run identifying restrictions lead to smaller estimation errors than long‑run restrictions.

scholarly journals Real Exchange Rate and Manufacturing Performance in Nigeria

2021 ◽  
Vol 10 (2) ◽  
pp. 279
Author(s):  
Abiola John Asaleye ◽  
Rotdelmwa Filibus Maimako ◽  
Henry Inegbedion ◽  
Adedoyin Isola Lawal ◽  
Adeyemi A. Ogundipe
Keyword(s):  
Exchange Rate ◽  
Manufacturing Sector ◽  
Forecast Error ◽  
Impulse Response Function ◽  
Long Run ◽  
Manufacturing Performance ◽  
Short Run ◽  
Sector Performance ◽  
The Exchange Rate ◽  
The Impact

The efficacy of currency devaluation to improve output in Nigeria is under debate, and coupled with an unsatisfactory result in the behaviour of the manufacturing sector performance regenerated interest of this study to investigate the impact of exchange rate on output and employment in the sector. The work uses Structural Vector Autoregression, ECM and Canonical Co-integrating Regression to examine the shock effect, short and long-run elasticities of exchange rate on the manufacturing performance. While employment and output are used as a proxy for manufacturing sector performance. The findings show that changes in the exchange rate are fairly elastic with output and employment both in short and long-run. However, changes in the exchange rate are insignificant with employment in the short run. The variance decomposition form the SVAR shows that forecast error shock of the exchange rate is more prolong on employment than output. Consequently, the result of the estimation of the Impulse Response Function from the Monte Carlos shows that one standard deviation of the exchange shock adversely affect employment. The outcome of the result indicates that the Nigerian exchange rate has not improved output and employment in the manufacturing sector. Several factors may be accounted for this, although, it may be due to cost-push inflationary pressure and unfavourable competitiveness. The study suggests the need to encourage long-term supply-side policies among others to improve the situation.   Received: 7 June 2020 / Accepted: 9 January 2021 / Published: 5 March 2021

scholarly journals Effect of exchange rate volatility on Rwandan coffee price and export volumes

Agro-Science ◽  
2021 ◽  
Vol 21 (1) ◽  
pp. 1-6
Author(s):  
A. Kabayiza ◽  
R. Muhire ◽  
S. Nsabimana ◽  
M. Kabarungi ◽  
Y.B. Ningabire ◽  
...  
Keyword(s):  
Exchange Rate ◽  
Time Series Data ◽  
Export Price ◽  
Exchange Rate Volatility ◽  
Real Income ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
The Exchange Rate ◽  
Coffee Price

The main strategy of Rwanda for having a steady growth in coffee export value and revenues was increased sales of speciality coffee. However, global coffee prices are often volatile and Rwanda has little control over the fluctuating global prices. This paper analysed the effect of exchange rate volatility on the price and exports of Rwanda coffee. In order to respond to this question, the monthly time series data on bilateral Rwanda coffee exports and real effective exchange rates from January 2001 to December 2016 were analysed. The cointegration methods and error correction model using the autoregressive distributed lag procedure andGlosten, Jagannathan, and Runkle-Generalized Autoregressive Conditional Heteroskedasticity (GJR-GARCH) model were used to analyse the data. The findings showed that the exchange rate volatility resulted in an increase in Rwandan coffee export price in the long run by 1.5% and a decrease in the short run by 0.2%. The findings also showed that the exchange rate volatility affected coffee export volumes in the long run and the short run by 44.4% and 3.8%, respectively. The real income in importing countries increased coffee prices in the long run by 3.0% and coffee export volumes in the long run and the short run by 26.9% and 38.5%, respectively. A review of monetary policy to address the issue of volatility and hedging system adoption in the Rwanda coffee sector should be done in order to stabilize the exchange rate and to consequently avoid its bad effects on coffee price and export volumes.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

Non-Performing Loans, Banking System and Macroeconomy

2018 ◽  
Vol 63 (2) ◽  
pp. 67-86
Author(s):  
Akinola Morakinyo ◽  
Colette Muller ◽  
Mabutho Sibanda
Keyword(s):  
Exchange Rate ◽  
Serial Correlation ◽  
Banking System ◽  
Impulse Response Function ◽  
Credit Market ◽  
Variance Decomposition ◽  
Structural Var ◽  
Long Run ◽  
Correlation Tests ◽  
The Exchange Rate

Abstract The study builds on previous studies of the consequences of non-performing loans on an economy. Using a seven-by-seven matrix in the impulse response function (IRF) of the structural autoregressive model, we find a long-run impact of an impulse to non-performing loans on the banking system and the macroeconomy in Nigeria. Conversely, non-performing loans also respond to the innovation of all macro-banking variables aside from the exchange rate and the growth rate to GDP. Also, the level of non-performing loans grows in influence in relation to the changes to the exchange rate using the variance decomposition tool of Structural VAR. Hence, a prominent role is assigned to the level of NPLs in linking the friction in the credit market to the susceptibility of both the banking system and the macroeconomy. This study passes the serial correlation tests and the three tests of normality.

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