THE EFFECT OF INFLATION, BI RATE AND EXCHANGE ON PROFITABILITY IN SHARIA BANKING IN INDONESIA PERIOD OF 2009-2019

This study examined the effect of inflation, BI Rate, and exchange rate on profitability in Islamic banking in Indonesia during 2009-2019. The population and sample in this study were all Islamic banking in Indonesia obtained by purposive sampling technique. This study used quantitative secondary data sourced from financial statements accessed on the official website of Bank Indonesia and the Financial Services Authority. The data analysis method used was Vector Auto-Regressive (VAR) analysis with the help of Eviews 10. The results of the Variance Decomposition (VD) test showed that inflation could affect Return on Assets (ROA) of 0.62%. It indicated that inflation had a low or insignificant effect on the Return On Assets (ROA) of Islamic banking. BI Rate could affect the Return on Assets (ROA) of 0.13%, which indicated that inflation had a low or insignificant effect on the Return On Assets (ROA) of Islamic banking, while the exchange rate could affect the Return on Assets (ROA) of 1.89%, which indicated that the exchange rate had a significant effect on the Return On Assets (ROA) of Islamic banking. Based on the results of this study, it concluded that the exchange rate was more dominant in influencing the Return on Assets (ROA) of Islamic banking in the short and long term.

How Does COVID-19 Affect the Volatility Spillover Between the Exchange Rate and the Export-oriented Businesses in Iran?

This study concentrates on examining the volatility spillover effects between the exchange rate (IRR to USD) and the leading export-oriented industries (i.e., petrochemical, basic metals and minerals) in Tehran Stock Exchange before and after the COVID-19 pandemic. Using DCC- and asymmetric DCC-GARCH approaches, the data sample (from 15 December 2018 to 24 April 2021) has been partitioned into two sub-samples: before and after the official announcement of COVID-19 outbreak. The results demonstrate that from the pre- to post-COVID-19 periods, first, the average returns of all industries have sharply fallen; second, the volatility of all variables has been significantly augmented in different horizons; third, for all industries, not only has the fractal market hypothesis approved in both separated periods, but also analysing the values of the fractional difference parameter, together with the outcomes of GARCH models, supports in the higher-risk post-COVID-19 period, wherein the effects of exogenous shocks last longer than their impacts in the alternative lower-risk period. Furthermore, our investigations demonstrate that the asymmetric spillover (based on the ADCC-GARCH models) in both pre- and post-COVID-19 periods are confirmed in all three industries, except for minerals after the novel coronavirus.Ultimately, the results not only corroborate the increase in the volatility spillover effects right after the COVID-19 but also substantiate that the exchange rate contributes most of the spillover effects into the petrochemical and minerals industries, which have been almost twice as much as those of the basic metals.

External Debt and its Impact on Exchange Rates in the Philippines

The exchange rate is a crucial macroeconomic factor within emerging and transition economies. External debt is a driving force for the growth of an economy. This study then aims to determine the impact of external debt on the exchange rate of the Philippines by examining the impact of external debt accumulation on the Philippines' exchange rates. The researcher applies a correlational time series analysis in order to capture the impact of external debt, debt services on external debt, and foreign reserves on the exchange rate of the Philippines within the period from 1980 to 2019. The relationships between variables based on the developed theoretical framework are analyzed through multiple regression analysis. Empirical results show that external debt and debt services positively impact the exchange rate, while foreign reserves exhibit a negative relationship. The corresponding coefficients indicate that a change in any of the independent variables will cause significant but marginal fluctuations in the exchange rate in the case of the Philippines. The author concludes that external debt encourages the growth of exchange rates in the long run in the case of the Philippines due to its positive relationship. This implies that the Philippine government should aim to focus on more efficient external debt management strategies to enhance the value of the exchange rate of the Philippine Peso relative to other countries. Accordingly, the researcher recommends that the government take the necessary means to reduce the country's external debt to better the economy.

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

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.

Does External Debt Service Devalue Local Currency in the Long Run? Empirical Evidence from Egypt

The aim of this study is to identify the extent to which there is an effect of external debt service on the exchange rate in Egypt in the long run, where the change in the exchange rate has great importance in changing currency value and thus affecting its function as a store of value and a standard for forward payments and then in the redistribution of income and wealth, It also has an effect on some macroeconomic variables, such as inflation, exports, imports, and thus the current account. The study examines the estimation of the long-run relationship between the external debt service and the exchange rate in Egypt in the period 1980-2019 and relies on the exchange rate of the dollar against the Egyptian pound as a dependent variable, while the explanatory variables were the external debt service, gross capital formation, broad money growth, deposit interest rate, household final consumption expenditure, gross savings, and terms of trade adjustment. The methodology is based on Vector Error Correction (VEC) and the study concluded that there is a significant long-term relationship between the value of the Egyptian pound and all the variables explained in the study, as the error correction coefficient is negative and significant. Also, there is an inverse statistically significant relationship between the value of the Egyptian pound and each of the external debt service, the deposit interest rate, and gross savings; any change of 1% in the external debt service, the deposit interest rate, and gross savings leads to a devaluation of the Egyptian pound against the dollar by 4.8%, 0.04%, and 0.05%, respectively. The study also concluded that there is a positive, statistically significant relationship in the long term between the value of the Egyptian pound and each of gross capital formation, broad money growth, households' and NPISHs' final consumption expenditure, and terms of trade adjustment, as any change of 1% in these variables leads to an increase in the value of the Egyptian pound by 0.16%, 0.05%, 0.27%, and 6%, respectively. This study recommends that decision makers consider all the reasons that would reduce the external debt service in order to preserve the value of the Egyptian currency in the long run.

Exchange Rate Volatility and Monetary Policy Shocks

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.

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

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.

On Foreign Direct Investment from the ASEAN-8 Countries: A Panel Data Estimation

This paper examines how capital flight, loan interest rates, inflation, exchange rates and economic growth influence foreign direct investment in the ASEAN-8 countries. We apply fixed effect estimation to panel data for data belonging to eight countries from the period 1994 to 2018. The results show that capital flight and economic growth have a positive and significant effect on foreign direct investment. An increase in capital flight, capital retain from sources of funds which greater than the use of funds, has encouraged foreign direct investment to increase. Furthermore, increased economic growth has stimulated foreign direct investment. We find that an increase in loan interest rate (SIBOR), inflation and depreciation of the exchange rate triggers a significant decline in foreign direct investment. This finding implies that capital retention from capital flight and economic growth are the main factors that create an increase in foreign direct investment in the ASEAN-8 countries. Meanwhile, loan interest rates (SIBOR), inflation and depreciation of the exchange rate are the risk factors that investors need to consider when investing in those particular countries. This paper is useful for policy makers in the ASEAN-8 countries to consider these five variables, as the important factors that significantly influence foreign direct investment in the ASEAN-8 countries.

Potential for Further Evolution of CRDs

Although Grondona prepared detailed guidelines that his system should be implemented in relation to durable, essential, basic imported commodities, he also understood that, once established successfully, CRDs' operations could evolve in various ways in order to achieve greater benefits. For example, the inclusion of precious metals such as gold and silver, albeit on a somewhat different basis than industrial commodities, is an interesting possibility. Grondona also recommended that other products such as basic manufactured components like standardised steel or aluminium strip could be included. Another potential evolution is a CRD's role in a currency crisis: a sudden change in the exchange rate would be countered to some extent by a CRD being asked to sell or buy commodities, which would tend to resist the initial change. A CRD's terms of operation might be adjusted in order to strengthen its influence as such a countermeasure.

Effect of Exchange Rate Misalignment on Bilateral Trade Between Kenya and European Union: 2000-2016

The exchange rate is an important variable in international trade because a country's competitiveness is determined by the expectations on how trade reacts to its movements. To orient the economy outwards, Kenya has pursued various measures from the 1990s to the 2000s. Kenya also signed up for nonreciprocal trade with the European Union under the Cotonou agreement. Despite the export-oriented efforts, Kenya's trade has remained skewed towards imports and a widening trade deficit which seems to follow the weakening of the Kenya shilling. The main policy dilemma therefore, is how imports accelerated in an environment of unhindered European Union market access, hence the motivation of this study. The study adopted a dynamic modeling approach since previous and present values affect exchange rate and trade. The results show that the economic fundamentals drive the real exchange rate. In terms of misalignment, the exchange rate is overvalued to a maximum of 5.9 percent and undervalued up to 5.2 percent. The estimated misalignment hurts imports but has a positive, statistically insignificant effect on exports. The results of this study suggest that the monetary authority should ensure the exchange rate remains stable and within the 6 percent range while monitoring all the underlying determinants. Additionally, hedging instruments should be made available and affordable to traders.