scholarly journals An Empirical Relationship between Foreign Exchange Rate, Inflation and Interest Rate in Nigeria

2018 ◽  
pp. 1-9
Author(s):  
David Adugh Kuhe
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Foreign Exchange ◽  
Empirical Relationship ◽  
Granger Causality Test ◽  
Foreign Exchange Rate ◽  
Causality Test ◽  
Short Run

This paper investigates the empirical relationship between naira/US dollar exchange rate, inflation and interest rate in Nigeria. The study uses annual time series data from 1970-2017. Augmented Dickey-Fuller unit root test, Johansen cointegration, fully modified least squares; Error correction model and Granger causality test based on Toda-Yamamoto procedure were employed in this study as methods of analysis. The results reveal that all variables are integrated of order one and hence cointegrated. The study finds inflation as having negative and significant impact on exchange rate while interest rate was found to have positive and significant impact on the foreign exchange rate in Nigeria in the long-run. The economic impacts of inflation and interest rate on the exchange rate in the short-run are found to be low, temporal and not long lasting. The ECM model has identified a moderate speed of adjustment by 50.39% for correcting disequilibrium annually for achieving long-term equilibrium steady-state position. The Granger causality test result shows statistical evidence of unidirectional causality between exchange rate and inflation and between exchange rate and interest rate in the short-run. There is also a unidirectional causality that runs from interest rates to inflation meaning that inflation is Granger caused by interest rates in Nigeria. The study recommends that lowering the lending interest rate and targeting inflation to single digit is a better exchange policy strategy for Nigeria. 

scholarly journals ANALISIS KEBIJAKAN MONETER DALAM MENGENDALIKAN INFLASI DI INDONESIA

2012 ◽  
Vol 1 (2) ◽  
pp. 103
Author(s):  
Suriani Suriani
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Unit Root Test ◽  
Good Choice ◽  
Causality Test ◽  
Long Run ◽  
Short Run

The objective of this research is to analize the effects of the variables interest rate, and exchange as one of monetary mecanisme for controlling inflation. The correlation among those variables is cointgration in the long run and short run equilibrium analyzed. In Indonesia, the monetary policy is run by monetary instruments (i.e. interest rates or monetary aggregates) to achieve price stability. This research used Unit Root Test , Cointegration Test, Granger causality and VECM (Vector Error Correction Model) Test. The results of estimation showed that have cointegration among interest rate, exchange rate and inflation in the long run. Granger causality test showed that between inflation and interest rate have no causality relationship, but for inflation and exchange rate have two directions relationship of causality. It’s means, monetary of mecanisme transmition through exchange rate channel can be good choice in making monetary policy to control inflation in Indonesia.

The Analysis of the Effectiveness of the Shibor as a Market Benchmark Interest Rate

2013 ◽  
Vol 850-851 ◽  
pp. 1016-1019
Author(s):  
Zhi Hua Xu
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Response Function ◽  
Impulse Response Function ◽  
Granger Causality Test ◽  
Var Model ◽  
Causality Test ◽  
Variance Decompositions

In this paper, we established Granger causality test, VAR model, impulse response function and variance decompositions to observe Shibor whether possess of four properties as the benchmark interest rate of the marketability, stability, correlation ,fundamentality. Conclusion Shibor as money market benchmark interest rates on various aspects of the performance is better, however, compared with Chibor foundational aspects needs to be improved, and easily influenced by Exchange rate suggests that stability is insufficient.

scholarly journals Exchange rate and Export of Bangladesh: Does Marshall-Lerner condition holds?

2022 ◽  
Vol 10 (1) ◽  
pp. 09-16
Author(s):  
Shovon Roy ◽  
Jonaed
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Error Correction Model ◽  
Series Data ◽  
Causality Test ◽  
Correction Model ◽  
Short Run ◽  
The Exchange Rate

Export is expected to have a favorable impact on GDP growth, and the exchange rate is expected to have a major impact on export and thus export earnings. The relationship between exchange rate and export is a hotly debated topic in macroeconomics, and the goal of this research is to see if the Marshall-Lerner condition holds incase of Bangladesh that is if devaluation of domestic currency increase export earnings. Explanatory variables of the model in the study are the exchange rate, foreign income (WGDP), and domestic income (DGDP). Cointegration approaches; Error Correction model, Granger Causality test are used in this study to estimate the long and short-run impacts. With time series data from 1973Q3 to 2018Q2, we used the Error Correction Model and the Granger Causality Test. The findings of VECM support short-run exchange rate and export adjustments. The bidirectional causality between exchange rate and export is established using the Granger causality test.

scholarly journals Modeling The Relationships Between Export, Import, Inflation, Interest Rate, and Rupiah Exchange

2020 ◽  
Vol 3 (3) ◽  
pp. 247-262
Author(s):  
Nina Valentika ◽  
Vivi Iswanti Nursyirwan ◽  
Ilmadi Ilmadi
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Short Term ◽  
Variable Model ◽  
Causality Test ◽  
Significance Level ◽  
Long Run

This research was a modification of research by Catalbas (2016) and Pratikto (2012). The model that can separate long-term and short-term components are the Vector Error Correction Model (VECM). This study aimed to model export, import, inflation, interest rates, and the rupiah exchange rate using VECM and to test the causality between variables using the Granger Causality test. The inter-variable model obtained in this study was VECM with lag 2 using a deterministic trend with the assumption of none intercept no trend and two cointegrations. In export and import, there was an adjustment mechanism from the short-term to the long-term. This research model was appropriate to forecast the export and import where VECM with export and import as the target variables, the cointegration equation (long-run model) for  cointegration equation (long-run model) for Based on the Granger Causality test, it was found that there was a one-way relationship between exchange rates and inflation, export and interest rates, export and import, inflation and export, and import and the interest rate at the significance level of 5%.

scholarly journals PENGUJIAN KAUSALITAS ANTARA VARIABEL MAKROEKONOMI DENGAN RETURN PASAR DI BURSA EFEK INDONESIA : SEBUAH PENDEKATAN VECTOR AUTO

Media Ekonomi ◽  
2017 ◽  
Vol 19 (3) ◽  
pp. 23
Author(s):  
Anggi Hapsari Nurullita
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Granger Causality ◽  
Unit Root ◽  
Unit Root Test ◽  
Granger Causality Test ◽  
Causality Test ◽  
Market Return ◽  
Vector Auto Regression ◽  
Auto Regression

<p>Indicators of macroeconomic have major impact on capital markets in general and stocks in particular. Influence of these indicators can be positive or negative. Vector Auto Regression (VAR) is a method of analysis used to predict the time series variable and analyze the dynamic impact factor interference in a system variable. VAR analysis is very useful to assess the linkages between economic variables. This research aims to see the influence of iIndicators of macroeconomic such as the exchange rate (EXCHANGE), interest rate Bank Central of Indonesia Certificates (SBI) and rate of inflation (INFLATION) to market return (REIHSG) in Indonesian Stock Exchange in the period 2004:1-2011:10. Data obtained from the Monthly Stock Price Index Statistics JSX. This research appllying several stages of testing as follows: unit root test, the optimal lag test, Granger causality test and Vector Auto Regression model (VAR). The results of unit root test in this study suggests that the data used for processing in the first degree and VAR Granger test because only the stationary stock index return variable in zero degree (level). On the test results suggested the optimal lag is the lag 3. On the Granger causality test is known that the Granger test variable rate (EXCHANGE) has a one-way impact or the exchange rate (EXCHANGE) affect market return (REIHSG) interest rate of Bank Central of Indonesia Certificates (SBI) and the rate of inflation (INFLATION) has a two direction or impact mutual Causality. These results indicate that there is a weak Granger causality between interest rates Bank Central of Indonesia Certificates (SBI) and rate of inflation (INFLATION) to market return (REIHSG).<br />Keywords: Vector Auto Regressive (VAR), Macroeconomic, Granger Causality, IHSG stock return</p>

scholarly journals Economic Growth, Domestic Investment, Real Exchange Rate and Trade Openness in India: A multi-cointegration analysis

2016 ◽  
Vol 12 (3) ◽  
pp. 169-184
Author(s):  
Md. Samsur Jaman
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Granger Causality ◽  
Trade Openness ◽  
Granger Causality Test ◽  
Domestic Investment ◽  
Causality Test ◽  
Long Run ◽  
Short Run

This study examines the relationships between economic growth, gross domestic investment, real exchange rate and trade openness in Indian Economy using the Johansen –Juselius cointegration test and VEC Granger causality test. The results suggest that there exists a long-run relationship among the variables. All the estimated coefficients of the long-run equation have the correct positive signs and significant at least at the 5 per cent level. Specifically, in the long run, a 1% increase in Gross Domestic Investment (GDI) increases 0.066% in economic growth. Similarly, a 1% increase in trade openness leads to 0.082% increase in economic growth and a 1% increase in real exchange rate leads to 0.26% increase in economic growth. Thus, in the long run, Gross Domestic Investment (GDI), trade openness and real exchange rate have positively impact on economic growth. The results from the VEC Granger causality test suggest that in the short run only economic growth has short run impact on Gross Domestic Investment (GDI). The other variables have no short run impact on each other. Thus, there is a unidirectional causality from economic growth to GDI, but there is no feedback effect.

scholarly journals The Effect of Foreign Debt on The Exchange Rate and Its Impact on Monetary Policy in Indonesia

Media Trend ◽  
2019 ◽  
Vol 14 (1) ◽  
pp. 128-135
Author(s):  
Diah Wahyuningsih ◽  
Uun Primangesti Ningsih
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Granger Causality ◽  
Impulse Response ◽  
Foreign Debt ◽  
Granger Causality Test ◽  
Causality Test ◽  
The Exchange Rate ◽  
The Interest Rate

The objectives of this study are to analyze the effect of foreign debt on the exchange rate that seen from the foreign debt and the exchange rate, and add the variable of inflationary monetary policy and the interest rate of BI Rate to test its impact on monetary policy in Indonesia. The approach in this study is quantitative approach. Data that used are Time Series data from Asian Development Bank and Indonesian World Bank in 1986-2013. Variables that used are exchange rate, foreign debt, inflation and the interest rate of BI Rate. Method that used in this study is Vector Auto Regression (VAR) analysis. The stages that used in this study testing are stationary test, optimal lag test, Granger causality test, impulse response test, and variance decomposite test in Eviews 6 program. The results of Granger causality test of all variables in this study are unlikely to have a relationship and there are only two variables that give an effect.Based on the results of Granger causality, it shows that there is bidirectional between foreign debt variable that has an effect on the exchange rate in Indonesia and the exchange rate has an effect on the foreign debt in Indonesia. While the foreign debt has an effect on the interest rate of BI Rate. For the results of impulse response test show that the exchange rate variable gives the biggest respond to the shock of foreign debt variable, compared to inflation and the interest rate of BI Rate variables. The results of Variance decomposite show that the contribution which given by foreign debt variable on the exchange rate is relatively bigger compared to the contribution that given by inflation and the interest rate of BI Rate variables.

scholarly journals Kausalitas Ekspor Indonesia ke Tiongkok dengan Inflasi Indonesia, Suku Bunga Dasar Tiongkok, dan Nilai Tukar Indonesia

2018 ◽  
Vol 6 (4) ◽  
pp. 475-482
Author(s):  
Teddy Aldwin Leonard
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Granger Causality ◽  
Inflation Rate ◽  
Granger Causality Test ◽  
Test Results ◽  
Causality Test ◽  
Causality Relationship ◽  
The Exchange Rate

Tujuan penelitian ini adalah mengetahui hubungan kausalitas antara total nilai ekspor Indonesia ke Tiongkok dengan tingkat suku bunga Tiongkok, tingkat inflasi Indonesia, dan nilai tukar Rupiah Indonesia terhadap Yuan China. Penelitian ini menggunakan uji kausalitas granger dengan variabel total nilai ekspor Indonesia ke Tiongkok, tingkat inflasi Indonesia, tingkat suku bunga dasar Tiongkok, dan nilai tukar Rupiah Indonesia terhadap Yuan China untuk melihat hubungan kausalitas antar variabel. Hasil uji kausalitas granger menunjukkan hasil bahwa total nilai ekspor Indonesia ke Tiongkok memiliki hubungan satu arah dengan variabel tingkat suku bunga Tiongkok dan variabel nilai tukar Rupiah Indonesia terhadap Yuan China, namun tidak terdapat hubungan kausalitas dengan variabel tingkat inflasi Indonesia. Hubungan satu arah antara total nilai ekspor Indonesia ke Tiongkok dengan tingkat suku bunga Tiongkok adalah total nilai ekspor Indonesia ke Tiongkok menyebabkan perubahan tingkat suku bunga Tiongkok, sedangkan hubungan satu arah antara total nilai ekspor Indonesia ke Tiongkok dengan nilai tukar Rupiah Indonesia terhadap Yuan China adalah nilai tukar Rupiah Indonesia terhadap Yuan China menyebabkan perubahan total nilai ekspor Indonesia ke Tiongkok. The purpose of this study is to know the causality relationship between the total value of Indonesia's exports to Tiongkok with Tiongkok's interest rate, the inflation rate of Indonesia, and the exchange rate of Indonesian Rupiah against the Yuan China. This study uses granger causality test with total variable of Indonesian export value to Tiongkok, Indonesia inflation rate, interest rate of Tiongkok, and Indonesian Rupiah exchange rate to Yuan China to see the relation of causality among variables. Granger causality test results show that the total value of Indonesia's export to Tiongkok has unidirectional relationship with variable of Tiongkok interest rate and variable of Indonesian Rupiah exchange rate to Yuan China, but there is no causality relationship with Indonesian inflation rate variable. The unidirectional relationship between the total value of Indonesia's exports to Tiongkok and the Tiongkok interest rate is the total value of Indonesia's exports to Tiongkok causing a change in the Tiongkok interest rate, while the unidirectional relationship between the total value of Indonesia's exports to Tiongkok and the Indonesian rupiah against the Yuan China is the value The Indonesian rupiah exchange rate against the Yuan China led to a change in the total value of Indonesia's exports to Tiongkok

scholarly journals The Effects of the Interest Rate and Foreign Exchange Rates on Kyrgyzstan Export

2017 ◽  
Author(s):  
Fuat Sekmen ◽  
Galip Afsin Ravanoglu
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
National Currency ◽  
Foreign Exchange Rates ◽  
Causality Test ◽  
Balance Of Trade ◽  
The Interest Rate ◽  
The Relationship

In the Keynesian models, such as Mundell-Fleming model, it is accepted that there is a significant relationship between interest rates and the value of national currency. When interest rate increases, demand for assets in terms of national currency rises and the value of national currency ascends, but in this case because of diminishing exports, the balance of trade deteriorates. In this study, it is stressed that the value of national currency is determined by productivity and output increasing. This study analysis export, interest rate, exchange rate and inflation relationship for Kyrgyzstan economy for the period of 2002:1-2017:4 The VAR granger causality method is used to get the relationship among the variables used in this study. The result of VAR granger causality test shows that there is causality from exchange rate to inflation. Also, it has been found that there has been causality running from inflation to interest rate.

Interest Rate, Foreign Exchange Rate, and Stock Market Development in Nigeria

2018 ◽  
Vol 9 (3) ◽  
pp. 247-253 ◽  
Author(s):  
Edward Adedoyin Adebowale ◽  
Akindele Iyiola Akosile
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Market ◽  
Foreign Exchange ◽  
The United States ◽  
Ordinary Least Squares ◽  
Foreign Exchange Rate ◽  
Market Development ◽  
National Bureau ◽  
Stock Market Development

This research investigated the effect of interest rate and foreign exchange rate on stock market development in Nigeria. This research was centered on two research problems. First, it was whether interest rate had a significant effect on stock market development in Nigeria. Second, it was whether foreign exchange rate had a significant impact on stock market development in Nigeria. The scope of the research covered the period from 1981 to 2017. Data for this period were chosen because it covered pre and post-liberalization periods of Nigerian financial system. This research made use of ex post facto research design. Secondary data were sourced from Nigerian Stock Exchange reports, Central Bank of Nigeria statistical bulletins, and National Bureau of Statistics publications. Data were collected on Stock Market Capitalization (SMC), Prime Lending Rate (PLR) and Real Exchange Rate (RER) (Nigerian Naira in relation to American Dollars of the United States). Data analysis was carried out with Ordinary Least Squares (OLS) and Cochrane-Orcutt Iterative techniques. The findings reveal that interest rate has a significant negative effect, and foreign exchange rate has a significant positive effect on Nigerian stock market development during the period covered. It is suggested that monetary authorities should strive to formulate policies that will make interest and foreign exchange rates stable, competitive, and at a level that will stimulate the investment of funds in the stock market.

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