Impact of Foreign Reserves and Economic Growth on Money Supply: Evidence from the WAMZ Countries

This paper analyzes the impact of foreign currency reserve and economic growth on money supply using panel data from five West African Monetary Zone (WAMZ) member states from 2001-2019. The study employed the dynamic technique, fully modified ordinary least squares and dynamic ordinary least squares (FMOLS and DOLS), and the static method (fixed effect model) for the robustness check. The long run results showed that foreign currency reserves (FCR) have a positive impact on money supply, implying that a one percent increase in FCR augments money supply (M2) by 2.87%, 0.44% and 0.08%, respectively, in the long run. Similarly, economic growth is associated with an increase in money supply in both models. Furthermore, the Dumitrescu & Hurlin (2012) estimation revealed a feedback association between foreign currency reserve and money supply. This means that foreign reserves and money supply are complementary. Conversely, a unidirectional causality moving from economic growth to M2 is observed, demonstrating that economic growth causes M2. This outcome is explained by the quantity theory of money (QTM) in which the velocity of money is a positive function of total money supply. As money circulates in the economy as a result of a surge in investments, this consequently increases money stock. Similarly, investment opportunities that are being exploited day-by-day explains the growing money stock (WAMI, 2018). Central banks should endeavor to monitor the expansionary influence of net foreign assets (NFA) on money supply growth in the WAMZ by establishing suitable methods to sterilize foreign exchange infusions into the economy.

Toward the Modeling of Russia's Monetary System

The paper explains the dynamics of monetary aggregates in Russia with the help of country's trade balance, the creation of deposits by commercial banks and cross-border flows of rubles and (foreign) currency. The volumes of deposits and flows, in turn, depend on changes the currency/ruble exchange rate and favorable external economic conditions. The model was estimated by the Kalman filter, the adequacy was confirmed by stimulation. Monthly money supply forecasts have an accuracy of ~ 1%. It was found that the volume of additional deposits created per month is ~ 300 billion RUB (this leads to real inflation of 9.5% per annum), money flows that are not related to payments for goods: rubles inflow from abroad ~ 100 billion RUB, currency goes abroad ~ $ 15 billion. With the growth / fall of the dollar exchange rate by 1 RUB per month, during the same month, the creation of additional ruble deposits and the arrival of rubles from outside decreases / increases by $ 0.114 billion. The increase of the Currency Reserve Assets of Russia is accompanied by going abroad ~ 5% of the increase.

Macroeconomic variables for predicting bear stock markets of Taiwan and China

PurposeThis research examines how macroeconomic variables can precisely predict bull/bear stock markets in China and Taiwan.Design/methodology/approachThis paper adopts a two-state Markov switching model to characterize the bull and bear markets spanning from 1994 to 2019 and then conduct a bear stock market predictability test by running regressions between the filtered probabilities of bear markets and a series of macroeconomic variables in turn at different horizons of 1, 3, 6, 12 and 24 months.FindingsThis paper shows that inflation rates, changes in real exchange rates, and foreign currency reserve growth are key predictors of bear markets in China, while term spreads, unemployment rates and foreign reserve growth are major factors that can predict bear markets in Taiwan. Remarkably, industrial production growth does not have predictive power for bear markets, which may suggest emerging markets are driven by fund flows rather than real economic activities. Besides, the impact directions of foreign currency reserve growth are opposite, which may be due to different proportions of the financial accounts in their balance of payments.Practical implicationsIn practical respect, this paper provides market participants the usefulness, impact direction and implications of bear market predictors when building their market-timing strategies in China and Taiwan stock markets. The government institutions may also thereby make appropriate policies to prevent huge stock market downturns and serious drawbacks.Originality/valueIt highlights the “fund-driven market hypothesis” and “foreign currency reserve effects” that commonly dominate Taiwan and China stock markets since both are highly affected by international funds.

Trade in Gold and Silver: The Yokohama Specie Bank

Although the political and military aspects of Japanese imperialism have received ample attention from historians, other dimensions of the country’s expansionist experiment with total war have been left largely untouched. Nevertheless, technologies of “soft” power played a very substantial role; in many ways, they predated and prefigured many of the repressive and militarist hallmarks of Japanese expansionism. Gold standard adoption, for instance, was directly related to Japan’s geopolitical positioning. It was a tool for projecting financial power abroad and establishing enclave economies in the colonies, for example through the creation of gold-exchange standards, the direction of the colonies’ central banks and financial institutions, and so on. Nevertheless, the adoption of the gold standard was not an aim in itself. It was a means to a yet higher end: the very establishment of the yen as a “vehicle currency” comparable to the British pound or, after World War I, the American dollar. For that reason, policymakers in Tokyo fostered distinctly mercantilist ideas about trade and, in particular, the share of Japan’s banking institutions and the Japanese yen in financing international trade and settling international trade transactions. The institution in the vanguard of this project was the Yokohama Specie Bank (hereafter: YSB), a bank with the explicit mandate of insuring trade among regions or countries on different currencies and, by extension, different metals (gold and silver). Soon after its creation in 1879, it was made to team up with the Bank of Japan (hereafter: BOJ) and put in charge of the international aspects of the country’s financial and monetary policy. In that role, 1. It financed the bulk of Japanese imports and exports. 2. It collected specie, part of which was added to the BOJ’s currency reserve. 3. It underwrote Japan’s sovereign loan issues. 4. It represented the BOJ abroad. 5. It even issued currencies in Japan-occupied territories before and during World War II. In view of its controversial role in Japanese imperialism (especially because of point 5), the General Headquarters of the Supreme Commander for the Allied Powers (SCAP) ordered its dismantling in 1946. Its assets were transferred to the newly formed Bank of Tokyo. Although it is still heavily understudied in both Japanese and Western languages, it is key to understanding in the vanguard of Tokyo’s expansionist economic project(s)

Impacts of Macroeconomic Variables on the Stock Market Returns of South Asian Region

This paper is intended to find out whether macroeconomic variables may impact on the stock market as well as whether such impact has any country specific pattern. The stock market return was taken as the dependent variable and real interest rate, inflation rate, GDP growth rate, foreign currency reserve growth rate, fiscal deficit, FDI to GDP ratio, exchange rate were taken as independent variables. Data-set was covered from 1993 to 2019 for five South Asian countries which were Bangladesh, India, Pakistan, Sri Lanka, and Nepal. The pattern of the stock market, as well as macro conditions of these countries, was observed and it was found that some relationships exist between the stock market returns and these chosen independent variables. Unit root test, Heteroscedasticty test, autocorrelation test, Hausman test is conducted to authenticate and clarified data to investigate relationship nature. Granger Casualty test indicated that there exist cause and effect relationship between GDP growth rate, exchange rate, and stock market returns. Finally, the regression test reveals that the inflation rate and foreign currency reserve growth rate have a significant impact on the stock market returns. It was expected to have the unique nature of different countries having versatile impact on dependent, so additionally fixed effects model and random effects model were run and it was found that the random effects model is statistically appropriate through conducting the Hausman test. The test reveals that GDP growth rate, foreign currency reserve growth rate, and fiscal deficit positively impact the stock market returns and these also support the literature review. Interest rates, inflation rate, FDI to GDP ratio, and exchange rate have negatively impacted the stock market return where only interest rate, inflation rate & exchange rate.

A Conceptual Framework to Measure Economic Growth of Afghanistan

Afghanistan is the least developed country in Asia which is under war from the previous 20 years. After the end of the partial war, many aspects of Afghan economy are improving, for instance, the GDP has advanced 2.5% from 2016 to 2017. However, Per Capita Income is very low, safety, health and education are the areas which needs improvement. The exports of Afghanistan are on the decline. The natural currency reserve of Afghanistan is decline despite having many mineral assets. One of the core apparent behind all these decline aspects is corruption in Afghanistan. As transparency international the corruption of Afghanistan has increased in 2017 compared to 2016. It is of the most corrupt countries in the world. Due to war and less developments Afghanistan is least studied country. To fill this gap in this study the research has explored multiple secondary data source to review existing economic situation in Afghanistan. After exploring the economy of afghanstan the study also provides a conceptual framework for future reseachers to review economic growth of afghanistan using given framework. The study is useful for the policy makers to improve policies and prosperity of the country by identifying the role of crime.

The Provision of Global Liquidity

This chapter starts by analysing three major problems of the current international monetary system: the asymmetric-adjustment problem, dependence on the monetary policy of the main reserve-issuing country, and the large demand for self-insurance by developing countries. It then explores two basic alternatives to reform the system: one route would involve a fully-fledged multi-currency reserve system; the alternative route would be to design an architecture based on the IMF’s Special Drawing Rights (SDRs), the world’s only truly global reserve asset. These two alternative routes could be mixed in a number of ways, and in fact their complementary use may be the only possible way forward. Under such a mixed system, SDRs would become a major global reserve asset and the source of financing for IMF lending, but national/regional currencies would continue to be used as international means of payment and stores of value.