Analysing the Exchange Rate Volatility Relative to Trade Balance: The Case of SACU Countries

The term exchange rate volatility is widely used in the financial market. The exchange rate is determined in the foreign exchange market, which is said to be the largest market in the world and it trades in financial assets. The main focus of this study is to analyse the nature of the relationship between exchange rate and trade balance in the selected member states of the SACU region in which the selected countries are Botswana, Namibia, Swaziland and South Africa. This study uses time series data from the period of 1986 to 2016. The Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model, the impulse response functions and variance decompositions are used in the analysis. Results show that there is a short-run relationship between exchange rate volatility and trade balance. It was found that there is a positive and negative impact between these two variables, with high volatility. Furthermore, this study recommends all Central Banks in the SACU region to intervene in order to mitigate exchange rate volatility.

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

Agro-Science ◽

10.4314/as.v21i1.1 ◽

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.

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THE IMPACT OF EXCHANGE RATE VOLATILITY ON ECONOMIC GROWTH IN NIGERIA: A DYNAMIC ECONOMETRIC APPROACH

African Journal of Business and Economic Development ◽

10.46654/ajbed.1533 ◽

2021 ◽

pp. 16-40

Author(s):

Comfort Akinwolere Bukola ◽

Keyword(s):

Economic Growth ◽

Exchange Rate ◽

Time Series Data ◽

Negative Impact ◽

Positive Impact ◽

Exchange Rate Volatility ◽

Series Data ◽

Balance Of Trade ◽

Econometric Approach ◽

The Impact

This study examined the impact of exchange rate volatility on economic growth in Nigeria. The study covers the period of 1986 to 2019. Using time series data, the methodology adopted is the Vector Error Correction Mechanism to explore the impact of exchange rate volatility on the selected macroeconomic variables. The result indicated that exchange rate volatility has a significant impact on economic growth, specifically it has a positive impact on inflation, unemployment and balance of trade. On the other hand it has a negative impact on economic growth and investment. The recommendations made include; that relevant authorities should try to avoid systematic currency devaluations in order to maintain exchange rate volatility at a rate that allows adjustment of the balance of payments.

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

International Journal of Economics and Finance ◽

10.5539/ijef.v7n11p121 ◽

2015 ◽

Vol 7 (11) ◽

pp. 121 ◽

Cited By ~ 2

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.

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Linear and Nonlinear Dynamics of the Turkish Trade Balance

International Journal of Economics and Finance ◽

10.5539/ijef.v8n2p70 ◽

2016 ◽

Vol 8 (2) ◽

pp. 70 ◽

Cited By ~ 2

Author(s):

Huseyin Karamelikli

Keyword(s):

United States ◽

United Kingdom ◽

Exchange Rate ◽

Trade Balance ◽

Bilateral Trade ◽

Time Series Data ◽

Series Data ◽

Long Run ◽

J Curve ◽

Short Run

This study empirically analyses bilateral trade of Turkey with her main trade partners using monthly time series data over the period of 2000 to 2015. J-curve theory and short-run dynamics of bilateral trade is tested by linear ARDL and Non-linear ARDL approaches. The empirical results indicate that there is no J-curve effect during short-run for United States and for France; it symmetrically exists to Germany and asymmetrically to United Kingdom. Also long-run relationship between exchange rate and trade balance has mixed results. Asymmetric long-run relationship between exchange rate and trade balance for United States exists where it is symmetrically most appropriate for Germany. In the other hand this study failed to verify any long-run relationship between exchange rate and trade balance for France and for United Kingdom.

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Effects of exchange rate volatility on export volume and prices of forest products

Canadian Journal of Forest Research ◽

10.1139/x10-150 ◽

2010 ◽

Vol 40 (11) ◽

pp. 2069-2081 ◽

Cited By ~ 3

Author(s):

Sijia Zhang ◽

Joseph Buongiorno

Keyword(s):

Exchange Rate ◽

Time Series Data ◽

Export Price ◽

Policy Issue ◽

Exchange Rate Volatility ◽

Forest Products ◽

Series Data ◽

Short Run ◽

Exchange Rate Level ◽

Over Time

The relative value of currencies varies considerably over time. These fluctuations bring uncertainty to international traders. As a result, the volatility in exchange rate movements may influence the volume and the price of traded commodities. The volatility of exchange rates was measured by the variance of residuals in a GARCH(1,1) model of the exchange rate. We estimated the effect of this exchange rate volatility on export quantity and price with autoregressive distributed lag models based on monthly data of US exports and prices to 14 countries for eight commodity groups. The most general and statistically significant results were obtained by pooling the time series data across destination countries and products. They suggested that an increase in exchange rate variability of 1% led to a short-run decrease in export quantity of 0.3%–0.4% and to a short-run decrease in export price of 0.1%. Both the quantity and the price effect faded away over time. The effects were less systematic and statistically significant for specific export destinations or individual products. Thus, in contrast with exchange rate level, exchange rate volatility may not be a major policy issue for US forest product exports.

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Estimasi model neraca perdagangan Indonesia dalam periode 1998-2017

e-Journal Perdagangan Industri dan Moneter ◽

10.22437/pim.v7i3.7206 ◽

2019 ◽

Vol 7 (3) ◽

pp. 123-136

Author(s):

Liza Azizah ◽

Syamsurijal Tan ◽

Emilia Emilia

Keyword(s):

Exchange Rate ◽

Interest Rates ◽

Trade Balance ◽

Time Series Data ◽

Series Data ◽

Estimation Model ◽

The Exchange Rate ◽

Quantitative Descriptive ◽

Balance Dynamics ◽

Descriptive Method

This study aims to analyze Indonesia's trade balance dynamics and the factors that influence fluctuations in Indonesia's trade balance in the period 1998-2017. The method used in this study is a quantitative descriptive method. The data used in this study is time-series data on Indonesia's trade balance, exchange rate, GDP, inflation, and interest rates from 1998-2017. The data is processed through multiple regression analysis and development model analysis. The results showed that the variables of the exchange rate, GDP, inflation, and interest rates simultaneously significantly affected Indonesia's trade balance. Partially, the exchange rate, GDP, and interest rates have a significant effect on Indonesia's trade balance. In contrast, inflation does not substantially impact Indonesia's trade balance during the study period. R-square is 0.6882 or 68.82%, which means that Indonesia's trade balance for 1998-2017 is influenced by exchange rates, GDP, inflation, and interest rates, while other factors outside the estimation model influence the remaining 31.18%. Keywords: Trade balance, Exchange rate, GDP, Inflation, Interest rates.

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Nigeria’s Fiscal Performance: Exploring the Role of Exchange Rate

American Finance & Banking Review ◽

10.46281/amfbr.v5i1.510 ◽

2020 ◽

Vol 5 (1) ◽

pp. 17-26

Author(s):

Fisayo Fagbemi ◽

Olufemi Solomon Olatunde

Keyword(s):

Exchange Rate ◽

Public Debt ◽

Time Series Data ◽

Cointegration Analysis ◽

Series Data ◽

Exchange Rate Movement ◽

Fiscal Performance ◽

Long Run ◽

Short Run ◽

The Exchange Rate

The paper offers empirical justifications for the instrumentality of external sector in influencing the fiscal position of a country through the exchange rate. In the study, ARDL bounds test approach to cointegration analysis is adopted to examine the long run and short run relationship between exchange rate and fiscal performance in Nigeria. The validity of the findings is based on time series data between 1981 and 2017. The emerging evidence reveals that the exchange rate movement has a substantial influence on the fiscal performance, as there exists a significant adverse relationship between exchange rate and fiscal deficit in the long run as well as in the short run, while the association between exchange rate and public debt is found to be significantly positive in both periods. Empirical elucidations posit that an appreciation of the exchange rate could lead to decreasing fiscal deficits. However, the exchange rate appreciation might not induce a reduction in public debt, as it could stimulate demand for loanable funds by the government, although such effect could be mitigated through strategic investment policy and subsidized funding schemes to aid domestic production. Given that fiscal performance is considerably driven or constrained by the exchange rate movement, the study suggests that developing a strategic framework for ensuring a realistic exchange rate and the mitigation of regular fluctuations or correcting inappropriate exchange rate is crucial.

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The Dynamics of The Rupiah Exchange Rate in 2017-2020

AFEBI Economic and Finance Review ◽

10.47312/aefr.v5i02.472 ◽

2020 ◽

Vol 5 (2) ◽

pp. 1

Author(s):

Muhammad Arief Aldila Susanto ◽

Rr. Retno Retno Sugiharti

Keyword(s):

Exchange Rate ◽

Interest Rates ◽

Money Supply ◽

Foreign Exchange ◽

Time Series Data ◽

Series Data ◽

Foreign Exchange Reserves ◽

Long Run ◽

Short Run ◽

The Exchange Rate

The exchange rate is one of the most important indicators in the economy. Moreover, with the increasing intensity of trade between countries, commonly referred to as international trade, this economic indicator becomes important for every country, including Indonesia. The change in the Indonesian exchange rate system to a free-floating system has made the exchange rate fluctuations more dynamic. The fluctuations are influenced by various factors, both internal and external. This study aims to determine the effect of the money supply (M2), foreign exchange reserves, SBI interest rates and world crude oil prices on the rupiah/dollar exchange rate in 2017-2020 both in the short run and in the long run. The data used is monthly time series data from 2017-2020. The analytical method used in this study is the Error Correction Model (ECM). The results in this study indicate that in the short run and long run the money supply and foreign exchange reserves variables have a significant effect on the rupiah exchange rate in 2017-2020.

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Economic Determinants of Unemployment in Malaysia: Short – and Long – Run Causality

Journal of Public Administration and Governance ◽

10.5296/jpag.v11i1.17794 ◽

2021 ◽

Vol 11 (1) ◽

pp. 251

Author(s):

Jason Freedline Baba ◽

Dayang Haszelinna Binti Abang Ali

Keyword(s):

Time Series Data ◽

Negative Impact ◽

Positive Impact ◽

Series Data ◽

Impulse Response Functions ◽

Macroeconomic Factors ◽

Long Run ◽

Integration Test ◽

Short Run ◽

Determinants Of Unemployment

The problem of unemployment has become a worrisome issue over the past few years as it is growing at an alarming state in many countries throughout the world particularly in developing countries such as Malaysia. There are numerous factors that cause this phenomenon. Therefore, the aim of this study is to empirically investigate the determinants of unemployment in Malaysia as well as the relationship between unemployment and the chosen fundamental macroeconomic factors such as gross domestic product, foreign direct investment, inflation, and population. This study utilized the annual time series data of 31 year period starting from the year 1985 to the year 2015. The methodology of econometric analysis have been applied in this study such as unit root tests, co-integration test, vector error correction model, variance decompositions, and impulse response functions analysis. The findings showed that there are presences of short run causality among the variables and also a presence of long run only when population act as the dependent variable in the model. Besides, the findings indicate that GDP has a significant negative impact whereas FDI has a significant positive impact on unemployment in Malaysia. Overall, the conclusion of this study suggests that demand side policies and supply side policies are the most excellent and suitable approach in overcoming the problem of unemployment in Malaysia.

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The Asymmetric Impacts of Crude Oil Prices, Inflation, the Exchange Rate, Institutional Quality, and Trade Balance on Tourist Arrivals in Bangladesh: A Nonlinear ARDL Model Approach

Pertanika Journal of Science and Technology ◽

10.47836/pjst.30.1.43 ◽

2022 ◽

Vol 30 (1) ◽

pp. 781-800

Author(s):

Rehana Parvin

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Time Series Data ◽

Institutional Quality ◽

Oil Prices ◽

Series Data ◽

Tourism Demand ◽

Distributed Lag ◽

The Exchange Rate ◽

Bound Test

The nonlinear interaction of oil prices, inflation, the exchange rate, institutional quality, and trade balance on tourist arrivals in Bangladesh is scrutinized in this study. The technique utilized in this study, Nonlinear Autoregressive Distributed Lag (NARDL), is a novel co-integrating strategy. The yearly time series data used in this study spanned 1995 to 2019. The NARDL bound test is performed to assess if variables like oil prices, inflation, the exchange rate, institutional quality, and trade balance on tourist arrivals are co-integrated. Oil prices and exchange rates, according to the findings, have a long-run negative and significant impact on tourism demand, whereas improvements in institutional quality are positively associated with tourist arrivals. Moreover, the study’s findings revealed a nonlinear kinship between the trade balance, inflation, and tourism demand across time. The asymmetric results obtained could enable Bangladeshi policymakers to make more precise decisions.

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