Analysis of factors influencing Thai rice trade based on Gravity model

The purpose of this study is to analyse what factors influencing Thai rice export including importers’ GDP, exporters of GDP, distance of the countries, international rice prices, production and exchange rates by using the gravity model approach. The results show that the factors that influence rice exports in Thailand include the GDP of the importing country, the GDP of the exporting country, distance, international rice prices, production and the real exchange rate. Factors that have positive coefficients are importers’ GDP and real exchange rates, while those with negative coefficients are exporters’ GDP, rice prices, production and distance. Positive coefficients include importer’s GDP and Real Exchange Rate. The GDP of the importing country has a positive coefficient of 0.73 and the real exchange rate or RER (Real Exchange Rate) has a positive coefficient of 0.73. In addition, the negative coefficient values include exporters’ GDP, rice prices, production and distance. The exporting country’s GDP has a negative coefficient of 0.98, prices have a negative coefficient of 1.37 and production has a negative coefficient of 0.23 and distance has a negative coefficient of 0.3.

The Impact of Currency Misalignment on Trade Balance of Emerging Market Economies

This study is an attempt to examine the impact of currency misalignment on the trade balance of emerging market economies from 1980 through 2016. It firstly measures the equilibrium RER and corresponding misalignment series of 21 EMEs separately adopting a single equation approach and then includes them in the trade regression together with undervaluation and overvaluation to estimate the dynamic relationship between the trade balance and real exchange rate misalignment employing the system generalized method of moment estimation approach. The study suggests that, being a composite series of undervaluation and overvaluation, higher real exchange rate misalignment helps recover trade imbalances. It also identifies that undervaluation improves trade balance, while overvaluation cuts it down. The study identifies that the misalignment series of RER for most of the EMEs are substantially dominated by overvaluation episodes, and hence the opposing impact of undervaluation and currency misalignment on the trade balance of EMEs is not surprising. From the policy perspective, competitiveness achieved through currency movements helps emerging market economies not only to improve trade balance but also to withstand vulnerability that arises from huge external borrowings creating a strong external payment position.

Decomposition of the Sources of Real Exchange Rate Misalignment in Egypt: Evidence from the ARDL Model

This paper examines the behavior of the real exchange rate in Egypt over the period 1965–2018 by attempting to pursue three interrelated purposes. The first is to investigate the extent of deviations between the actual exchange rate and its equilibrium level and illustrate the magnitude of any currency misalignments. The second is to search for the different phases of over- and undervaluation of the local currency and explain the accompanying economic policies and/or factors leading to them. The third and ultimate purpose is to explore the role of transitory and permanent factors in deviating the actual real exchange rate from its equilibrium level. Understanding these factors should help in the design of economic policies directed to address the misalignment of the local currency. An autoregressive distributed lag (ARDL) bound test approach is used and conducted for both the bilateral and effective real exchange rates to achieve these three purposes during the selected period. To derive the equilibrium exchange rate estimate, the behavioral equilibrium exchange rate (BEER) approach is adopted. The findings reveal that the Egyptian pound was misaligned from its equilibrium value during most of the examined period. The results confirm the relative importance of the terms of trade and degree of openness variables in determining the equilibrium real exchange rate in Egypt followed by investment ratio and government consumption variables. The local currency witnessed a recent phase of overvaluation, which began in 2009, until the free float of the local currency in November 2016, after which, the Egyptian pound was found to have experienced a new phase of undervaluation till the end of the period examined. The findings show a considerable relative impact of fundamental-based factors over a prolonged period spanning from 1986 to 2003 and at the end of the period examined as well. Moreover, the documented results lend general support to the fact that both permanent or fundamental-based factors and short-run shocks prove to be important influential factors impacting currency misalignment in Egypt.

Economic and Monetary Integration in ECOWAS Countries: A Panel VAR Approach to Identify Macroeconomic Shocks

This paper studies the impact of output, exchange rate, price, and economic policies (fiscal and monetary) shocks to Economic Community of West African States (ECOWAS) economies over the period 1977-2019. The results of the impulse response functions obtained from the panel VAR show that monetary policy shocks stimulate economic activity, whereas fiscal shocks lead to a contraction. Moreover, these economic policy shocks lead to an increase in the price level. Finally, they have opposite effects on the real exchange rate: a monetary policy shock leads to an appreciation of national currencies against the US dollar, while a fiscal innovation leads to a depreciation of these currencies. As for exchange rate and price shocks, they create inflation and consequently a decline in economic activity. Furthermore, the forecast error variance decomposition reveals that real exchange rate shocks contribute the most to future fluctuations in macroeconomic variables in ECOWAS countries. Moreover, a comparison of the impact on the two currency areas, West African Economic and Monetary Union (WAEMU) and West African Monetary Zone (WAMZ), shows the degree of asymmetry between the two areas. The analysis shows, on the one hand, that shocks are more persistent and significant in the WAMZ and, on the other hand, that except for real exchange rate shocks, the two zones respond asymmetrically to shocks emanating from the other variables.

Does exchange rate volatility influence import commodities of India-US? Evidence from ARDL approach

PurposeThe aim the study is to explore the impact of real exchange rate volatility and other macroeconomic variable such as price of import, industrial production and real exchange rate on 45 import commodities, considering global financial crisis period on India's import from the US. The empirical analysis at disaggregate level of import indicates the existence of both short-run and long-run effect in one-third importing commodities. The results show both positive and negative effect and causality among variables.Design/methodology/approachThe study uses E-GARCH model to gage the real exchange rate volatility, an autoregressive distributive lag (ARDL) bound test technique to discover the adequate short- and long-run relationships and Toda-Yamamoto causality method to analyze the causality among variables. The study uses the time period from 2002:M09 to 2019:M06.FindingsThe empirical analysis at disaggregate level of import indicates the existence of both short-run and long-run effect in one-third importing commodities. The results show both positive and negative effects and causality among variables.Practical implicationsThe finding of the study suggests that macroeconomic variables have significant role and could be important to undertake the small and medium scale industries in policymaking. Government may need to make decision for micro, small and medium enterprises (MSMEs) as their performance can bring change in the trade to compete globally by increasing and controlling the price of the import and defending the domestic competitiveness.Originality/valueThe study uses additional variable namely price of import and includes the global financial crisis period to measure dampening effect on each commodity by using robust econometric technique in context of emerging nation like India.

A Dependent Economy Model of Employment, Real Exchange Rate and Debt Dynamics: Towards an Understanding of Pandemic Crisis

Given the unforeseen and uncertain circumstances during the pandemic, the role of government expenditure becomes extremely relevant in sustaining lives and livelihoods of the masses. This brings forth public sector deficit as a key issue of macroeconomic policy debate. This article aims at investigating the effects of an unanticipated adverse shock like COVID-19, on the real value of public debt, in a small open economy, consisting of traded and non-traded sectors, along with proposed management of such crisis with fiscal and monetary expansion. The results of policy-induced and exogenous shocks depend on the difference in the speeds of adjustments in real exchange rate, interest rate and real value of debt, and the associated multitudes of cross effects. While an unanticipated adverse shock like COVID-19 causes contraction of both traded and non-traded sectors and reduces consumption expenditure, investment expenditure and level of employment and real value of aggregate income in the short run, fiscal expansion causes higher real value of debt and lower real exchange rate. JEL Codes: E12, E62, H63