Measuring The Sources of Inflation in The Iraqi Economy Using a Model Self-Regression of Slowed Distributed Time-Laps (ARDL) Duration (1970-2018)

Inflation posed a challenge to the Iraqi economy and its effects on economic activity and growth rates. This study investigates the sources of inflation in the Iraqi economy during the period (1970-2018) within the framework of the aggregate supply and aggregate demand model using the Self-Regression of Slow Distributed Gaps (ARDL) model. The results of the study showed that the inflation rate in Iraq is affected by the following variables: (money supply, parallel market exchange rate, consumer spending, the oil sector’s contribution to GDP and the degree of economic openness) and all are related to an inverse relationship with the rate of inflation except for money supply and consumer spending, as It has a direct relationship with it, and there is a long-term equilibrium relationship (co-integration) between the studied variables according to the Bound Test methodology. Through the value of the error correction vector coefficient (1.35%) of the short-term errors are automatically corrected during the unit time (year) to reach the equilibrium in the long term.

Recognizing Reality—Unification of Official and Parallel Market Exchange Rates

Some central banks have maintained overvalued official exchange rates, while unable to ensure that supply of foreign exchange meets legitimate demand for current account transactions at that price. A parallel exchange rate market develops, in such circumstances; and when the spread between the official and parallel rates is both substantial and sustained, price levels in the economy typically reflect the parallel market exchange rate. “Recognizing reality” by allowing economic agents to use a market clearing rate benefits economic activity without necessarily leading to more inflation. But a unified, market-clearing exchange rate will not stabilize without a supportive fiscal and monetary context. A number of country case studies are included; my thanks to Jie Ren for pulling together all the data for the country case studies, and the production of the charts.

COVID-19, Stock Market, Exchange Rate, Oil Prices, Unemployment, Inflation, Geopolitical Risk Nexus, the Case of the BRICS Nations

This chapter attempts to study the impact of the COVID-19 pandemic on the stock markets of the BRICS nations. Such an exercise will have an important bearing on portfolio allocation in the context of the BRICS. The major contribution of the chapter in the extant literature is to examine based on the multifactor model of the capital asset pricing theory, how uncertainty owing to the pandemic interplay with the geopolitical index to impact the stock market of the BRICS. Further, the major macroeconomic factors are used as control variables. The daily observations were used from 31 December 2019 to 30 December 2020. The results based on the quantile regression model demonstrate the asymmetric response of the stock market to the pandemic. The policy implication that follows from this study is the need for strategic intervention of the central bank to ease the liquidity challenges in the crisis period.

Shining a Light on Purchasing Power Parities

We use satellite-recorded nighttime lights as an independent benchmark of economic activity in order to generate three findings in the study of PPP-adjusted estimates of GDP. First, PPP-adjusted estimates better describe poor economies than do market exchange rate-based estimates today, although this was not the case in the late 1990s. Second, estimates of PPPs have been steadily improving from one price survey round to the next. Third, it has tended to be optimal to only use the latest price data and to revise existing PPP-adjusted estimates whenever a new price survey is released. (JEL E23, E31, F31, O11, O57)

Productivity Bias Hypothesis: New Evidence from Parallel Market Exchange Rate

Aim/Purpose: The purpose of this study is to investigate Productivity Bias Hypothesis (PBH) in Nigeria using parallel (black) market exchange rate.Design/Methodology/Approach: The study focused on Naira-Dollar (N/$) parallel market exchange rate. Quarterly data from 1995 to 2018 were used. Data on domestic productivity and parallel market exchange rate were sourced from Central Bank of Nigeria (CBN) statistical bulletin, 2018 edition. US productivity data was sourced from Federal Reserve Economic Data. Autoregressive Distributed Lag (ARDL) was used as the estimation technique.Findings: The result reveals that parallel (black) market exchange rate support the presence of productivity bias hypothesis in Nigeria. Furthermore, the purchasing power parity hypothesis was rejected using the conventional unit root test. This implies that using official exchange rate, the study rejects the productivity bias hypothesis.Research Implications/Limitations: The implication of the study is that exchange rate in Nigeria should be determined freely in the foreign exchange market.Originality/Value/Contribution: Previous studies have used official exchange rate to test the validity of the productivity bias hypothesis, and the results can be basically described as mixed. Hence, this study differs from extant studies as it examined productivity bias hypothesis using parallel market exchange rate.

Forming of Organizational and Economic Mechanism of the Cryptocurrency Market for the Countries with Position of Anticipation

The article reveals the economic essence of cryptocurrency as an information and technological innovation. The authors have determined that cryptocurrency is a universal global means of payment, exchange, and investing, which exists in the form of a highly protected software code and is characterized by a free market exchange rate. Having considered technical, technological, and organizational aspects of using cryptocurrencies, the authors carried out the comparison of electronic money and cryptocurrency. The done analysis of markets and types of cryptocurrencies has enabled to form a ranking of cryptocurrencies by level of capitalization. The article describes the dynamics of the growth of cryptocurrency market capitalization and the domination of a Bitcoin’s market share. The authors have ascertained strengths of Bitcoin, which had allowed this cryptocurrency to become a useful international means of payment with the high investment potential. The article examines weaknesses of the exchange of cryptocurrency both ordinary consumers and governments. The authors have proven that institutionalization ensured by the formal and informal establishment of rules for functioning of cryptocurrency is necessary for effective functioning of cryptocurrency. The authors have substantiated three positions of institutional support describing the attitude of countries to functioning of a cryptocurrency market: a loyal position, categorical position, and position of anticipation. The authors have developed an organizational and economic mechanism for forming a cryptocurrency market based on functions, methods, and tools of management and suggested directions for undertaking a policy in the sphere of functioning of a cryptocurrency market for countries with the position of anticipation. The process of virtualization of modern society is inevitable. Сountries with the position of anticipation should support the course on innovation by solving a range of regulatory, technical and information issues on the development of the cryptocurrency market, based on leading international experience. The primary tasks should be: granting the legal status of cryptocurrency and developing rules for its circulation, introduction of technological innovations with the participation of the state, large corporations and venture funds, creation of an open ecosystem for interaction of all participants, as well as wide information support at all levels.

The Determinants of the Expansion of the Exchange Rate on The Black Market in The Maghreb

The shadow economy has recently grown significantly in the overall national economy. In the Maghreb countries (Morocco, Algeria, Tunisia, Libya, Mauritania), the informal economy is the result of the introduction of a managed economy, which gradually forms the prerequisites for the emergence of a monetary deficit in these countries. Since the early 1990s, after the institutional changes in the market economy, a black currency exchange has taken a significant turn, which was accompanied by a large gap between the black market and official currency exchange. The relevance of this study is to determine the leverage of the exchange rate on the black market, which will determine the causes and factors of the expansion of this market. The purpose of the paper is to analyze the key determinants of determining the nature and dynamics of the black market exchange rate, as exemplified by the Maghreb countries in the context of long-term relations. The methodological support of the study includes the grouped mean group method and the Granger causality test. The author substantiates the following determinants of the shadow market exchange rate: the official exchange rate, the official real exchange rate, the differential expected rate of return, money supply, the level of reserves and prices. The study empirically confirms that the official exchange rate is the most significant variable that most influences the exchange rate in the shadow market, the official real exchange rate plays a secondary role in determining the black market exchange rate. These results are confirmed in the Granger causality test, which revealed the existence of unidirectional causality between the dependent black market exchange rate and the independent variables – the official rate, the official real currency rate, and the differential expected rate of return. Based on the conducted research, the author has identified the following recommendations for public authorities: 1) managing the shadow currency exchange market is possible in the context of adopting a complex of measures to diversify the sources of currency and implementing a monetary policy on the interest rate based on external rates; 2) the formation of a price control mechanism that will help reduce dependence on the international market. The paper focuses on the further use of the currency hedging instrument in the financial practice of the Maghreb banking system. The author emphasizes the need for the Central Bank to establish appropriate instructions for commercial banks on the organization and functioning of the interbank foreign exchange market in foreign trade operations. Keywords: currency exchange; the black market; Granger causality; heterogeneity; money supply; official course.