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Journal articles on the topic 'Foreign currency reserve'
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1
Rajan, Ramkishen S., and Sasidaran Gopalan. "India's International Reserves: How Large and How Diversified?" Global Economy Journal 10, no. 3 (October 6, 2010): 1850202. http://dx.doi.org/10.2202/1524-5861.1623.
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Asymmetric foreign exchange intervention by the Reserve Bank of India (RBI) has resulted in a sustained accretion of India’s foreign exchange reserves. The reserve buildup in India has certainly been impressive, rising from around US$5-6 million in 1991, to nearly US$300 billion in mid 2008. In addition to addressing the issues of reserve adequacy, this paper examines the forms the reserves have taken (asset and currency composition), and the extent to which India’s reserve holdings are diversified. The issue of reserve adequacy was made apparent during the 1990s and early 2000 when rapid reserve depletion became a defining and determining feature of the series of currency crises that hit emerging economies. In order to assess the adequacy of India’s stock of international reserves, the paper considers a few standard measures used in literature and finds that India’s reserve stock is more than adequate, placing them in a much better position than many other emerging economies. The paper goes on to examine the asset and currency composition of such reserves. More than 50 percent of India’s reserve holdings have been in the form of foreign currencies and deposits as cash, followed by investments in foreign securities and gold deposits, in that order, reflecting a high degree of risk aversion by the RBI in the management of the reserves. While data on asset composition are available, the currency composition of reserves is a well-guarded secret. Hence the paper undertakes some simulation exercises to arrive at some reasonable guesstimates of such a composition. The paper also makes use of the Treasury International Capital Reporting System (TIC) data to track India’s investments in the U.S. securities, thereby assessing the weight of U.S. dollar assets in India’s reserve holdings.
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Eichengreen, Barry, Arnaud Mehl, and Livia Chiţu. "Mars or Mercury? The geopolitics of international currency choice*." Economic Policy 34, no. 98 (April 1, 2019): 315–63. http://dx.doi.org/10.1093/epolic/eiz005.
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SummaryWe assess the role of economic and security considerations in the currency composition of international reserves. We contrast the ‘Mercury hypothesis’ that currency choice is governed by pecuniary factors familiar to the literature, such as economic size and credibility of major reserve currency issuers, against the ‘Mars hypothesis’ that this depends on geopolitical factors. Using data on foreign reserves of 19 countries before World War I, for which the currency composition of reserves is known and security alliances proliferated, our results lend support to both hypotheses. We find that military alliances boost the share of a currency in the partner’s foreign reserve holdings by about 30 percentage points. These findings speak to the implications of possible US disengagement from global geopolitical affairs. In a hypothetical scenario where the United States withdraws from the world, our estimates suggest that long-term US interest rates could rise by as much as 80 basis points, assuming that the composition of global reserves changes but their level does not.
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Chernilevskaya, Klavdiya E. "Internationalization of Renminbi as a Function of China’s Foreign Exchange Policy." RUDN Journal of Political Science 23, no. 2 (December 15, 2021): 233–42. http://dx.doi.org/10.22363/2313-1438-2021-23-2-233-242.
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This article discusses the prospects of the Chinese renminbi (RMB) to expand its sphere of influence and become a full-scale reserve world currency. The methods used in the article are retrospective analysis and graphic analysis. The work is divided into three sections. The first section provides a broad overview of modern reserve currencies. The second part characterizes RMBs shaping as a reserve currency, as well as inner and outer factors that influence its status. The third section includes information about RMBs current status and its perspectives for being a reserve currency in the future. The article argues that currently RMB has already become a regional reserve currency in Asia-Pacific. Chinese government continues to make steps towards international expansion of RMB, yet these steps cannot make RMB one of the leading world currencies together with USD and EUR in the nearest decade.
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Orăștean, Ramona. "The Official Use of International Currencies – Assessments and Implications." Studies in Business and Economics 10, no. 3 (December 1, 2015): 71–80. http://dx.doi.org/10.1515/sbe-2015-0037.
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Abstract The paper analyses the official use of international currencies as reserve currency (store of value) and anchor currency (unit of account). Examining the role as a reserve currency we note that the US dollar is the main reserve currency even if it recorded a decline given the decrease of the value of the US dollar reserve holdings and the gradual diversification of the currencies used. Since 2010, the euro's share decreased continuously may be due to the Eurozone crisis and the euro's depreciation against the US dollar. Then we show that the US dollar dominates as an anchor currency, though it was temporary abandoned during crisis time, having more than a regional dimension. At the same time, the use of the euro in exchange rate arrangements appears mainly in the regions that have close links with the euro area. Over the last few years, we have witnessed a gentle orientation towards a multimonetary world, especially regarding the use of the international currencies as reserve currency given the diversification of the currencies in which central banks understand to hold international reserves and the increasing share of the nontraditional currencies in total foreign exchange reserves.
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Obstfeld, Maurice, Jay C. Shambaugh, and Alan M. Taylor. "Financial Stability, the Trilemma, and International Reserves." American Economic Journal: Macroeconomics 2, no. 2 (April 1, 2010): 57–94. http://dx.doi.org/10.1257/mac.2.2.57.
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The rapid growth of international reserves, a development concentrated in the emerging markets, remains a puzzle. In this paper, we suggest that a model based on financial stability and financial openness goes far toward explaining reserve holdings in the modern era of globalized capital markets. The size of domestic financial liabilities that could potentially be converted into foreign currency (M2), financial openness, the ability to access foreign currency through debt markets, and exchange rate policy are all significant predictors of reserve stocks. Our empirical financial-stability model seems to outperform both traditional models and recent explanations based on external short-term debt. (JEL E23, E43, E44, F31, F32, F34)
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Gopinath, Gita, and Jeremy C. Stein. "Trade Invoicing, Bank Funding, and Central Bank Reserve Holdings." AEA Papers and Proceedings 108 (May 1, 2018): 542–46. http://dx.doi.org/10.1257/pandp.20181065.
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We develop a model that shows how the currency denomination of a country's imports influences the funding structure of its banking system, and in turn, the currency composition of its central bank's reserve holdings. The link between the dollar's role in bank funding and its role as a central bank reserve currency is stronger when the country's fiscal capacity is limited, and when exchange rates are volatile. In the data, there is a pronounced cross-country relationship between the fraction of imports that are dollar invoiced, and the fraction of central-bank foreign-exchange reserves that are held in dollars.
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Tskhovrebov, M. P. "Expanding the use of the ruble in international settlements." Management and Business Administration, no. 3 (October 19, 2022): 54–63. http://dx.doi.org/10.33983/2075-1826-2022-3-54-63.
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The freezing of Russian assets and the continued risk of new sanctions creates incentives for abandoning the currencies of unfriendly countries and expanding the use of the ruble in cross-border settlements. In addition to prestige, the advantage of the internationalization of the national currency is the reduction of transaction costs and foreign exchange risks of foreign trade participants, which will contribute to the development of foreign trade. An increase in external demand for financial assets denominated in rubles will help increase the depth of the market and reduce the cost of borrowing. The need for additional international reserves will decrease, the storage of which may be associated with the costs of depreciating the reserve currency, obtaining negative real returns on assets denominated in reserve currencies, as well as with sanctions risks.
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Schularick, Moritz. "Touching the Brakes after the Crash: A Historical View of Reserve Accumulation and Financial Integration." Global Economy Journal 9, no. 4 (October 2009): 1850185. http://dx.doi.org/10.2202/1524-5861.1585.
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Over the past decade emerging markets accumulated foreign currency reserves to insure against the risks of global financial integration. They were wise to do so. Countries with large reserves have fared better in the crisis of 2008/09. Yet collectively reserve accumulation had unintended consequences. It has contributed to the build-up of global imbalances and financial distortions that helped create the macroeconomic backdrop for the crisis. This article looks at recent patterns of global capital flows from the perspective of economic history, trying to set events in a longer term perspective. It argues that the crisis could mark the end of the latest attempt to manage the financial stability risks of capital market integration. Emerging markets will not consent to facing global financial flows without large foreign currency reserves, but a return to currency interventions and reserve accumulation would be equally problematic. Historically, the ups and downs of global capital market integration have been driven by varying assessments of the benefits of capital mobility. With the recent crisis the time for such a reassessment might have come.
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Son, Byunghwan. "Democracy and Reserves." Foreign Policy Analysis 16, no. 3 (August 12, 2019): 417–37. http://dx.doi.org/10.1093/fpa/orz020.
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Abstract Does democracy affect foreign exchange reserves? This paper identifies four possible explanations for the determinants of foreign exchange reserves. Using the relationship between public goods provision and political regime types as a conceptual centerpiece, it offers a theoretical framework in which these four arguments are pit against each other. The “insurance” and “social cost” arguments posit monotonously positive and negative relationships between democracy and reserves, respectively, each citing democratic governments’ propensity to provide public goods such as financial stability and public spending. The mercantilist and rentier state arguments together put forth a conditional hypothesis that autocracies serve particularistic interests of outwardly (inwardly) oriented elites more than democracies do through weak-currency/large-reserve (strong-currency/small-reserve) policies. Utilizing panel data covering 127 countries from 1975 to 2012, I find that more democratic regimes are associated with larger (smaller) volumes of reserves when the size of exporting sectors is considerably small (large).
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Moiseev, S. "Russian Ruble as an International Reserve Currency." Voprosy Ekonomiki, no. 9 (September 20, 2008): 4–21. http://dx.doi.org/10.32609/0042-8736-2008-9-4-21.
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Can the Russian ruble become an international reserve currency? By identifying the key determinants of the international status of national currency this paper estimates possibilities of the ruble. The significant determinants include: the size of the home country, inflation rate, exchange rate volatility, the size of the relevant home financial market, and network externality. The author believes that several factors are in favor of the Russian currency, in particular the turnover and liquidity of foreign exchange market, the size of foreign trade, the development of international market of debt securities in Russian ruble. The paper discusses some important policy implications of internationalization of the ruble for the Bank of Russia and the Russian economy in general.
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Joof, Foday, and Alieu S. Ceesay. "Impact of Foreign Reserves and Economic Growth on Money Supply: Evidence from the WAMZ Countries." Journal of Contemporary Research in Business, Economics and Finance 3, no. 4 (December 23, 2021): 158–67. http://dx.doi.org/10.33094/26410265.2021.34.158.167.
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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.
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Shubbar, Haidar Diphil, and Andrey Vladimirovich Girinsky. "Reserve assets as sources of replenishing resource base of banking sector and improving its stability." Vestnik of Astrakhan State Technical University. Series: Economics 2019, no. 4 (December 16, 2019): 130–36. http://dx.doi.org/10.24143/2073-5537-2019-4-130-136.
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The paper focuses on the importance of using reserve assets in order to increase the bank financial stability and the banking system as a whole. The essential requirements for reserving commercial banks have been presented. The methods of regulating the required reserves have been studied. The specific features of applying the required reserves in banking activities (reserve requirements and liquidity, monetary policy, reserve requirements as a monetary tool, reserve requirements as a fiscal tool) have been revealed. The schedule of averaging periods of required reserves for 2019 is being considered. The general principles which credit organizations are guided by when creating reserves are the following: obligatory availability of reserves for all credit organizations throughout their existence; forming reserves in relation to liabilities to legal entities and individuals; possibility of removing from the list obligations for which reserves have been created. It has been mentioned that the main objectives of the reserve requirement system are to provide banks with sufficient liquidity and to regulate the money supply. Particular attention is paid to the Central Bank as a reserve requirements regulator. In accordance with the changes of the Central Bank of July 1, 2019, the established standards on reserve requirements for deposits in national currency are set at 4%, in foreign currency at 14%. Manipulating the required reserve rate will provide the Central Bank with the opportunity to adjust the liquidity and solvency both of an individual bank and the entire banking system. The method of averaging required reserves includes the possibility for a commercial bank not to transfer reserves to the Central Bank based on a certain sum
of money. The averaging coefficient is set at 0.25 to the standard volume of required reserves
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Rahmawati, Surya, and Suriani Suriani. "The Impact of Macroeconomic Indicators on Indonesia’s Foreign Exchange Reserve Position." Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan 23, no. 1 (June 30, 2022): 19–30. http://dx.doi.org/10.23917/jep.v23i1.17673.
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A country’s foreign exchange reserves are its foreign currency savings that can be utilized to finance international transactions. The purpose of this study is to determine how macroeconomic indicators (exports, imports, exchange rates, inflation rates, and foreign debt) influence Indonesia’s foreign currency reserves. The researchers used secondary data in the form of monthly time series, as well as quantitative analysis using multiple linear regression. The model that was used was the Vector Error Correction Model (VECM). According to the research, future exports and external debt have a positive impact on Indonesia’s foreign exchange reserves. Indonesia’s foreign exchange reserves are negatively impacted by imports and predicted inflation rates, whereas the rupiah exchange rate has no effect. In the model, there is a short-run to long-run equilibrium relationship. The IRF results show that shocks from other independent variables have little effect on foreign exchange reserves and that the foreign exchange reserves variable contributes the most to the shocks that occur
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PARSHINA, Lyubov' N., and Nina V. BORISOVSKAYA. "Gold in the international reserves of countries." Finance and Credit 27, no. 4 (April 29, 2021): 763–84. http://dx.doi.org/10.24891/fc.27.4.763.
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Subject. The article addresses the enhanced position of gold as the main international reserve asset of countries. Objectives. The purpose is to prove the increasing role of gold as the main financial asset in the international reserves of countries throughout periods of economic volatility. Methods. The study rests on economic analysis, statistical, economic, and systems approach. Results. Annual changes in the structure of international reserves of the Russian Federation show a decrease in reserve assets denominated in foreign currency. The reserve position in the IMF makes up about 1% of the country's total assets, and SDR-denominated reserve accounts – from 1 to 2 percent. The share of monetary gold has increased; the overall increase in Russian gold reserves amounts to over 14%, in USD. Conclusions and Relevance. Currently, the reserves of six largest leading countries in terms of gold reserves amount to over 20 thousand tonnes of the precious metal. However, the presence of large gold reserves does not always allow the gold to occupy a leading position in the structure of international reserves of countries. This is evidenced by statistics from China, Switzerland and other countries. The U.S. reserves contain the largest amount of physical gold, its value at the official price that was established after the dollar devaluation in 1973 is as follows: one Troy ounce of the precious metal (31.1 grams) is equivalent to 42.2 USD.
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McGrath, Liam F. "Insuring Against Past Perils: The Politics of Post-Currency Crisis Foreign Exchange Reserve Accumulation." Political Science Research and Methods 5, no. 3 (February 18, 2016): 427–46. http://dx.doi.org/10.1017/psrm.2016.9.
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In the aftermath of financial crises, governments can use economic policy to minimize the risk of future recurrence. Yet not all do so. To explain this divergence in responses I develop a theory of economic policy choice after financial crises. I argue that past financial crises provide information to future governments about the political costs of financial crises. This subsequently informs the need to use economic policy to insure against such crises. Focusing on the accumulation of foreign exchange reserves after currency crises, I find that when past currency crises led to political changes future governments accumulate higher levels of reserves to prevent another crisis from occurring. This effect is stronger when political change occurred in situations where governments would not expect to be held accountable, and when reserve sales were shown to be effective in preventing political change. The theory and empirical results provide an answer as to why countries experiencing a similar form of financial crisis can, nevertheless, vary in their attempts to prevent future recurrence.
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ORHAN, Mehmet, and Halil Ä°brahim ÇELÄ°KEL . "The Spillover Effects of Fed’s Policies with Emphasis to the Fragile Five." Journal of Economics and Behavioral Studies 6, no. 12 (December 30, 2014): 1011–20. http://dx.doi.org/10.22610/jebs.v6i12.557.
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Since the Bretton Woods Agreement, the U.S. dollar has played the role of dominant global currency. As a result, the Federal Reserve Bank has many privileges such as the ability to run trade deficits without foreign exchange reserves. In the world, foreign exchange rates of currencies are quoted against the dollar, and majority of currency trading involves the dollar. Besides, international trade in primary commodities, such as oil, wheat, gold and coffee are bought and sold in U.S. dollar. The central banks of countries hold major positions of their international reserves in dollars. Any changes in its interest rates automatically alter the revenues of all world assets. With deregulated financial markets, the spillover effects of the Federal Reserve Bank’s decisions have increased. In this paper, we examine the impacts of Federal Reserve Bank policies over the Fragile Five that is a sub group of the weaker emerging markets namely Brazil, India, Indonesia, South Africa and Turkey. We are mainly focusing on the consequences of changes in Fed’s policies on the fragile five’s basic indicators; exchange rate, interest rate, and the stock exchange indices. All Fragile Five currencies have been depreciated by about 10 to 25% after the Fed tapering decisions. In addition we test for mean and volatility spillover of Wall Street on stock exchange indices of the Fragile Five in GARCH in mean framework and document the existence of such spillovers in almost all cases.
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Radukanov, Sergey. "Specifics in Introduction and Functioning of the Currency Board in Bulgaria." Journal of Applied And Theoretical Social Sciences 4, no. - (May 3, 2022): 1–11. http://dx.doi.org/10.37241/jatss.2022.52.
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The article studies two main aspects of functioning of the currency board in Bulgaria: its characteristics and its specifics and peculiarities.
Concerning the characteristics of the currency board in Bulgaria, the attention is focused on several theoretical matters of the nature of the currency board: mechanism for introduction of the currency board; choosing the foreign currency, to which the local monetary unit is to be fixed; financing the initial currency reserve, in order for the currency board to start functioning; setting the fixed exchange rate to the reserve currency; establishing the amount of coverage of the quantity of cash in circulation by the currency reserves; administration of the currency board; implementation of the function “lender of last resort” in cases of liquidity crisis; supervision of the commercial banks’ operation.
Each country is characterized by its specifics in terms of management of public finances, condition of the real (non-financial) sector, service sector, monetary and banking system. These specifics are reflected in the monetary boards, introduced in the individual countries.
The article provides a detailed analysis of the specifics of the currency board in Bulgaria.
The options for an independent monetary policy of the central bank are heavily restricted, and on the other hand, the currency board attained the goal of its policy – ensuring of price stability. As of the present moment, Bulgaria joined the exchange rate mechanism (ERM II) in 2020 and makes every effort to cover the criteria for real convergence.
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Artemov, N. M., and S. V. Sergeev. "Liberalization of foreign exchange regulation and control in the Russian Federation: status and trends." Courier of Kutafin Moscow State Law University (MSAL)), no. 9 (December 24, 2021): 135–44. http://dx.doi.org/10.17803/2311-5998.2021.85.9.135-144.
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. At present, due to the changing economic situation, in particular, against the backdrop of the COVID-19 pandemic, the question of the need for further liberalization of foreign exchange regulation and control in order to encourage real investment in Russia remains relevant. The liberalization process is the removal of restrictions on foreign exchange transactions between Russian currency residents and non-residents. When carrying out liberalization, the interests of society and the state should be taken into account in terms of national security and welfare.Since the adoption of the legislation on currency regulation and currency control, currency restrictions have been weakened (in particular, the obligation to reserve currency and issue passports of transactions in cross-border transactions has been canceled). Liberalization of foreign exchange legislation continues systematically at the present time. At the same time, against the background of liberalization, more and more noticeable is the increasing attention of the state to the property and income of foreign currency residents abroad in order to “whitewash” the economy.
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Ilhéu, Fernanda. "Chinese Outward Foreign Direct Investment." International Journal of Asian Business and Information Management 1, no. 4 (October 2010): 43–56. http://dx.doi.org/10.4018/jabim.2010100104.
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In past years, China recorded a fast sustainable economic growth with an estimated average GDP growth rate of 9.7% in the period of 1980-2008, turning China into the world’s second largest economy. With an export oriented economic model, China is the most attractive developing country for FDI flows, both short and long term. In this regard, China has been able to achieve a foreign exchange reserve of US$ 2.2 trillion, the world´s largest reserve currency. Around 50% of this huge reserve is being applied in American bonds, while the remaining supports Chinese health and social security systems, bank solvability, internationalization of their economy, investment in geostrategic positioning, and making foreign aid available to other developing countries. During the 2008 global crisis, China was able to resist better than other major world economies, benefitting from this downturn to implement policies to reduce its economic imbalances. One of these imbalances is the gap between Chinese FDI and OFDI, which is now progressively narrowing. In the near future, OFDI is expected to be larger than FDI, and in this paper, the authors research whether Chinese OFDI can be explained by existing theories or if a new theory is required.
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Weiss, Colin. "Geopolitics and the U.S. Dollar's Future as a Reserve Currency." International Finance Discussion Paper 2022, no. 1359 (October 18, 2022): 1–37. http://dx.doi.org/10.17016/ifdp.2022.1359.
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I survey the role of geopolitics and sanctions risk in shaping the U.S. dollar's status as the primary currency used for international reserves. Without changes in the economic incentives for holding FX reserves in U.S. dollar assets, an increased threat of sanctions is unlikely to drastically reduce the dollar share of FX reserves. Currently, around three-quarters of foreign government holdings of safe U.S. assets are by countries with some military tie to the U.S. Even a reduced reliance on the U.S. dollar for trade invoicing and debt denomination by a large bloc of countries less geopolitically aligned with the U.S. would be unlikely to end U.S. dollar dominance.
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Castillo Polanco, Luis Alfredo, and Ted P. Ted P. "The process of endogenous liquidity in developing economies: the case of Mexico." Review of Keynesian Economics 7, no. 3 (July 2019): 369–87. http://dx.doi.org/10.4337/roke.2019.03.07.
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The Post-Keynesian theory of endogenous money is typically used to explain the operations in advanced economies like the US. While the core ideas are relevant for all market economies, developing economies have additional features which complicate the process. These may include: the local currency is not accepted as a means of payment for international transactions, so the banking system (including the central bank) requires foreign currency reserves (balance-of-payments constraint); hard currency reserves are needed to provide ‘credibility’ for circulation of domestic currency; stock and bond markets are not well developed, so other financial instruments are necessary to complete the finance-funding process; and institutional differences regarding monetary control. We use the case of Mexico to show how these features of developing economies can complicate the endogenous-money process. For Mexico the process is constrained by the use of the US dollar as both a store of value and a reserve for the banking system. As a consequence, the interest rate is determined by the demand for the alternative sources of liquidity creation, and therefore a credit-financed expansion will necessitate an increase in the interest rate which can lead to a recession or other crisis scenarios.
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Polivach, A. "Renminbi and Rouble in the Central Asia Economies." Russia and New States of Eurasia, no. 4 (2020): 87–102. http://dx.doi.org/10.20542/2073-4786-2020-4-87-102.
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This article reviews usage of Russian and Chinese currencies in the economies of the five Central Asia countries (CA5) – for trade payments, intergovernmental and commercial loans and also in the official foreign exchange reserves. Information on these matters, unfortunately, is non-regular and very fragmented. However, based on the analysis of available data the author makes the following conclusions. Both the Renminbi and the Rouble are used in the CA5 economies in small scale, while the US Dollar absolutely dominates. Currently the Rouble is more popular than the Renminbi. It is especially visible in those countries, which are the members of the Eurasian Economic Union. Most likely relationship between the US Dollar, the Rouble and the Renminbi in the CA5 economies will not significantly change in the near future. However the usage of the Renminbi may substantially increase, if China removes all restrictions for trans-border capital movements. Also the usage of the Rouble may significantly increase, if Russia takes actions transforming its currency into a regional reserve currency.
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Kudrin, A. "The Influence of Oil and Gas Exports on Russia’s Monetary Policy." Voprosy Ekonomiki, no. 3 (March 20, 2013): 4–19. http://dx.doi.org/10.32609/0042-8736-2013-3-4-19.
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The article studies the problems of implementing monetary policy in the environment of a significant inflow of foreign currency revenues from exports of commodities into the country. It shows that in the conditions of strong balance of payments the Central Bank is forced to accept either the appreciation of the ruble or inflation. Only the government of Russia has at its disposal a powerful tool that allows both to prevent the appreciation of the local currency and to contain inflation at the same time. This dual task is solved by means of saving some part of oil and gas revenues in reserve funds during favorable situations on foreign markets. Such a policy lays the foundation for macroeconomic stability and ensures investment attractiveness of the Russian economy.
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Hui, Cho-Hoi, Chi-Fai Lo, and Chi-Hei Liu. "Modelling Foreign Exchange Interventions under Rayleigh Process: Applications to Swiss Franc Exchange Rate Dynamics." Entropy 24, no. 7 (June 28, 2022): 888. http://dx.doi.org/10.3390/e24070888.
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This paper models the foreign exchange intervention policy following the Rayleigh process derived from the standard flexible-price monetary framework. The exchange rate dynamics associated with the interventions are more sensitive to the change in the economic fundamental when a currency’s money supply is ample and its appreciation expectation cannot be offset by lower interest rates that have fallen to the zero lower bound, suggesting that more intensive interventions are required to counteract currency appreciation pressure and resulting in foreign reserve accumulation. The empirical results using market data during January 2015–February 2020 demonstrate that the model can describe the dynamics of the Swiss franc exchange rate. The accumulation of foreign reserves through interventions is negatively co-integrated with the exchange rate volatility and the value of the mean level of the Swiss franc exchange rate in the dynamics, to some extent indicating a reasonably high degree of effectiveness of the Swiss National Bank’s interventions. The transition between the target-zone and floating-rate regimes in 2015 caused changes in the level of exchange rate volatility but not its dynamical structure, suggesting that transitions between the floating-rate and target-zone regimes do not seem to have material consequence in this regard.
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Mishra, Amritkant. "Investigation of volatility and spillover in foreign ex-change return in Indian Chinese & Malaysian market." International Journal of Accounting and Economics Studies 5, no. 2 (October 5, 2017): 150. http://dx.doi.org/10.14419/ijaes.v5i2.8302.
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In this paper it is tried to make the comparison the foreign exchange return volatility in the three emerging economies of Asia. It is also endeavored to investigate the return co-movement and the volatility spillover between the foreign exchange markets of India, China and Malaysia with reference of US dollar, Indian Rupees, Chinese Yuan and Malaysian Ringgit in each other foreign exchange market to. The daily data have collected from Federal Reserve data base from April 2012 to March 2017. For analysis MGARCH model, the GARCH DCC as well as VAR model applied. The empirical result of volatility spillover effect shows that in Indian and Malaysian foreign exchange market the US dollar seems as shock transmitter. It also shows that the influence of US dollar in Chinese foreign exchange market is very low as compare to the Indian and Malaysian exchange rate market. In Chinese market Malaysian ringgit is dominant currency and it transmits the shocks to the US dollar. The conditional volatility result shows that among all the foreign exchange market, Indian market has high volatility return of foreign currency as compare to other market.
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Aries, Morgan, Gianfranco Giromini, and Gunter Meissner. "A Model for a Fair Exchange Rate." Review of Pacific Basin Financial Markets and Policies 09, no. 01 (March 2006): 51–66. http://dx.doi.org/10.1142/s0219091506000641.
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Financial markets have developed formulas and models to derive fair values for bonds, futures, swaps, options and other securities. This model derives a fair value of an exchange rate, which might be used as a benchmark for a long-term equilibrium level to stabilize currency markets. The model is based on the value-added tax adjusted purchasing power parity exchange rate. This rate is then modified by five components: the macro-economic component, the foreign currency reserve component, the debt component, the interest rate component, and the political stability/leadership component. With respect to the American dollar, the model shows that the Euro and the Japanese Yen are overvalued compared to its current exchange rate, while the Brazilian Real, the Russian Ruble, the Chinese Yuan and the Australian dollar are currently undervalued.
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Kovanen, Arto. "Reserve Requirementson Foreign Currency Deposits in Sub-Saharan Africa: Main Features and Policy Implications." IMF Working Papers 02, no. 65 (2002): 1. http://dx.doi.org/10.5089/9781451848694.001.
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Khawaja, M. Idrees. "Exchange Market Pressure and Monetary Policy: Evidence from Pakistan." LAHORE JOURNAL OF ECONOMICS 12, no. 2 (July 1, 2007): 83–114. http://dx.doi.org/10.35536/lje.2007.v12.i2.a5.
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The study employs the Girton and Roper (1977) measure of exchange market pressure (defined as the sum of exchange rate depreciation and foreign reserves outflow), to examine the interaction between exchange market pressure and monetary variables, viz. domestic credit (Reserve Money) and the interest rate. Evidence from impulse response functions suggests that domestic credit has remained the dominant tool of monetary policy for managing exchange market pressure. The increase in domestic credit upon increases in exchange market pressure (during 1991-98) was imprudent. The results suggest that fiscal needs/growth objectives might have dominated external account considerations during this period. Post 9/11 there is evidence of sterilized intervention in the forex market. The interest rate has also weakly served as the tool of monetary policy during the hay days of foreign currency deposits (1991-98). The finding implies that, for the interest rate to work as tool of monetary policy vis-a-vis exchange market pressure, a reasonable degree of capital mobility is called for.
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Akalin, Gurkan I., and Edmund L. Prater. "The Global Crisis of the Late 2000s and Currency Substitution: A Study of Three Eastern European Economies Russia, Turkey and Ukraine." Journal of Central Banking Theory and Practice 4, no. 2 (May 1, 2015): 5–22. http://dx.doi.org/10.1515/jcbtp-2015-0006.
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Abstract For the last two decades, most of Eastern European countries moved towards open economies, including Baltic Countries, Ukraine and Russia. Some of these countries adopted the euro such as the case of Montenegro in 2002, Slovakia in 2009, Estonia in 2011, and finally Latvia in 2014. Adoption of the new currency helped these countries further integrate into a larger market, the Eurozone, and stabilize their economies against heavily fluctuating exchange rates. The governments of Ukraine and Russia, on the other hand, did not show interest to join the Eurozone and followed more independent currency policies along with the limited economic liberalization during the period of the 90s and the early 2000s. Similarly, Turkey, not a former Eastern Bloc country, but located geographically very close to these two countries did not peg its currency to the euro or the US dollar. All of these three economies in Eastern Europe had multiple deep financial crises, inflation, devaluations, and weak governments in the last two decades of the 90s and the 2000s (Lissovolik, 2003). For instance, Turkish lira depreciated from 13 TL/$ in 1973 to 1.5 million TL/$ in 2004 (Bahmani-Oskooee, 1996). As a result, of these negative experiences, local people of these countries developed a tendency to keep at least a portion of their savings in a foreign currency (Civcir, 2003). In the case of Turkey, the ratio of reserves held in the foreign currency over the local currency, which is a de facto measure of US dollarization, showed a steady rise during the period from 1983 to 1993, remained steady high around 50% until 2001 and decreased afterwards (Metin-Özcan, 2009). In short, these countries are examples of highly US dollarized countries (Havrylyshyn & Beddies, 2003; Kaplan, 2008). This paper is to investigate the changes in the currency substitution during and after the global financial crisis between 2007 and 2010 in Russia, Turkey and Ukraine. These three countries with large economies, recent strong US dollarization experience in the last two decades, and relatively open markets, provide good cases for understanding the global trend in the currency substitution and the status of the US dollar as a reserve currency
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Twarowska, Katarzyna. "THE IMPACT OF THE RENMINBI INTERNATIONALIZATION ON THE GLOBAL MONETARY ORDER." SWS Journal of SOCIAL SCIENCES AND ART 1, no. 2 (November 21, 2019): 13–30. http://dx.doi.org/10.35603/ssa2019/issue2.02.
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Background and the purpose: The Chinese economy is the fastest growing and changing economy in the modern world. The importance of the renminbi as an international currency is not relevant to China's economic potential and role in the global economy, however, many scientific studies indicate that the position of that currency in the functions of international money will become stronger in the future. This encouraged the author to assess the consequences of the renminbi internationalisation, in particular the impact on the stability of the international monetary system. An additional aim of the paper is to present the possible scenarios for reform of the international monetary system and assess whether the Chinese currency has a chance to become a global currency.
Methods: The assessment of the renminbi’s role in global foreign exchange relations was carried out by analysing the use of Chinese currency in the main functions of international money in official sector (reserve currency, intervention currency, anchor currency) and private sector (investment currency, vehicle currency in international trade and on the foreign exchange market, invoicing and quotation currency) using the Cohen matrix. The author also assessed the benefits for the stability of the international monetary system, resulting from the transition from a system based on the dominance of the US dollar to a multi-currency system, including the renminbi. The study included theoretical research (analysis of the literature and research reports) and empirical research (analysis of statistical data).
Results and conclusions: The author confirmed the research hypothesis: An increase in the use of renminbi in the functions of international currency will increase the stability of the international monetary system by reducing the dependence of this system on the single currency, which is the US dollar.
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M. Karimo, Tari. "Impact of Interest Rate Differential and Exchange Rate Movement on the Dynamics of Nigeria’s International Private Capital Flows." Central Bank of Nigeria Journal of Applied Statistics, Vol. 11 No. 2 (April 8, 2021): 29–63. http://dx.doi.org/10.33429/cjas.11220.2/8.
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The study examines the impact of interest rate differential and exchange rate movement on the dynamics of Nigeria’s international private capital flows from 2010Q1 to 2019Q4. It uses the interest rate parity theory and the Markov Switching Time Varying Transition Probability Modelling approach. Findings show that interest rate differential does not explain the dynamics of aggregate capital and Foreign Direct Investment (FDI) flows, but significantly explains Foreign Portfolio Investment (FPI) flows. Also, Movement in real exchange rate is significant in explaining outflows and inflows in FPI, and inflows in FDI, but neutral to aggregate capital flows. The study concludes that deviations from interest rate parity provides opportunities for interest rate and currency arbitrage in Nigeria but using aggregate capital flows mask this evidence. The study therefore recommends that the CBN should focus on exchange rate stabilization policies, so as not only to discourage FPI reversal but to also enhance FDI inflow. This can be done by putting in place foreign reserve accretion measures to boost the ability of the CBN to defend the Naira. The new policy initiative on remittances is a right step in the right direction as it could boost external reserve.
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Svatiuk, Oksana. "The influence of factors on the security management of the foreign exchange market in Ukraine." Management and Entrepreneurship in Ukraine: the stages of formation and problems of development 2021, no. 2 (December 2021): 315–27. http://dx.doi.org/10.23939/smeu2021.02.315.
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The article analyzes the principles of development and security management of the foreign exchange market of Ukraine. Substantiates the influence of factors on the functioning of the foreign exchange market such as: improvement of the regulatory framework; monetary policy on the stabilization of the floating exchange rate regime; lending to the National Bank of Ukraine within the current 18-month stand-by program from the International Monetary Fund; replenishment of the market currency through the purchase and sale of government bonds; the influence of international and domestic factors on the liberalization of the foreign exchange market in Ukraine; receipt of a share of currency more than 10% of the population working abroad; restoring the confidence of individuals and entrepreneurs in the national currency. The structure and analysis of the process and dynamics of the foreign exchange market of Ukraine are characterized. The author evaluates the security management of currency regulation of the floating exchange rate regime, which directly affects the state of the foreign exchange market (Fig. 1). The state of exchange rate regulation and its impact on the foreign exchange market on the basis of personal observation during 2015-2021 are studied. The main advantage of this article is the clarification of the elements of the mechanism of currency regulation, which is due to the negative impact of a wide range of external and internal factors on the tools (Fig. 2). This mechanism is a powerful lever of state management of economic security and regulation of foreign exchange market liberalization in the context of a significant deterioration of the crisis situation in Ukraine in recent years. The main areas of security management of the mechanism of functioning of the foreign exchange market of Ukraine are the following. The first is optimization of the procedure of foreign exchange interventions of the NBU – schedule, parameters of interventions. This will increase the transparency and predictability of NBU operations in the foreign exchange market. NBU managers should abandon discriminatory approach to ensure all banks have equal access to interventions. The second is increasing of the digitization and disclosure of communication policies with actors. Its deterioration is due to negative comments addressed to banks regarding speculative actions on exchange rate formation, non-compliance with the requirements of the NBU in lending, security management and customer distrust. The third is strengthening of the reserve requirements for bank security management in order to reduce the excessive liquidity of the banking system.
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Sheludko, S., and T. Babych. "Dollarization in Central and Eastern European countries: essence, genesis, interrelation." Galic'kij ekonomičnij visnik 67, no. 6 (2020): 149–60. http://dx.doi.org/10.33108/galicianvisnyk_tntu2020.06.149.
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The paper is devoted to scientific-theoretical and econometric analysis of dollarization on the example of Central and Eastern European countries. The views of scientists on the essence of the investigated category are generalized; the presence of high degree pluralism, particularly among Ukrainian researchers is determined. The authors’ definition, according to which the necessary conditions for dollarization in the economy such as: the recognition by residents the ability of foreign currency to perform one or more national money’s functions and systematic use of such currency in cash and/or non-cash circulation is given. Three-dimensional classification of dollarization, consistent with the modern money theory, according to the criteria of penalty, state recognition and performance of specific money’s functions is presented. Genesis and manifestations of inferred types are investigated. The global level of commitment to the U.S. dollar as the most common settlement and reserve currency is defined according to the global statistics of cross-border payments and the currency composition of the official central banks’ reserves. Methodological approaches for determining the level of dollarization of the economy, the most common of which – dollarization of money supply according to IMF and external debt–to–GDP ratio illustrated by statistics of 9 Central and Eastern European countries with own currencies are analyzed. It is determined that the high level of dollarization indicates the substitutionary competition between national and foreign money, where the latter are considered as a key factor for entering the global financial and commodity markets. According to the results of construction, estimation and re-estimation of BVAR dollarization model of Ukraine, Belarus, Poland and Russia, the significant causal relationship between the share of the currency component in the money supply of Russia and Poland and the corresponding indicators of Belarus and Ukraine is proved. This substantiates the previous conclusions about the unity of the dollarization evolutionary logic in historically close economies. The need for further empirical research of provoking and restraining factors of dollarization in Central and Eastern European countries is emphasized.
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Tiwari, Saraswoti. "Money Supply Determinants in Nepal: A Macro Analysis." Economic Literature 13 (February 8, 2018): 55. http://dx.doi.org/10.3126/el.v13i0.19151.
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<p>This paper analyzes the major money supply determinants in Nepal in the past 10 years from FY 2004/05 - FY 20014/15. In this study monetary base is determined by two explanatory variables (i.e. NFA and NDC) and are called the 'proximate' determinants of the base money. Among the explanatory variables, the net foreign asset (NFA) is found as better determinant than net domestic assets (NDA) in Nepalese economy. For the analysis of determinants of money multiplier (MM), the three explanatory variables i.e., reserve to total deposits ratio (r), time deposits to demand deposits ratio (t) and currency to demand deposits ratio (c) have been used. The model applied in this study shows that explanatory variable of time deposits to demand deposits ratio is the best determinant of money multiplier. The reserve money (RM) is analyzed as the best determinant of money supply, net foreign assets (NFA) is the major determinant of reserve money and time deposits to demand deposits ratio is the significant determinant of money multiplier.</p><p> <strong><em>Economic Literature</em></strong><em>, </em>Vol. XIII August 2016, page 55-60</p>
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Hatase, M., and M. Ohnuki. "Did the structure of trade and foreign debt affect reserve currency composition? Evidence from interwar Japan." European Review of Economic History 13, no. 3 (December 1, 2009): 319–47. http://dx.doi.org/10.1017/s1361491609990141.
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Mingqi, Xu. "Central Bank Currency Swaps and Their Implications to the International Financial Reform." China Quarterly of International Strategic Studies 02, no. 01 (January 2016): 135–52. http://dx.doi.org/10.1142/s2377740016500044.
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Since the outbreak of the global financial crisis, a series of currency swap arrangements among central banks have been reached, and many short-term ad hoc mechanisms have been later transformed into permanent institutions, with the decentralized role of the USD and increasing significance of other currencies. It is important to note, however, that currency swaps by Western countries are generally not intended to reform but to maintain stability of the U.S.-dominated international financial system and the USD hegemony. The comprehensive currency swap arrangements made among six major developed economies since the financial crisis exemplify their resistance to the international financial reform. Meanwhile, developing countries have also laid out their own blueprints, highlighted by China’s currency swap arrangements with 33 foreign central banks and the accelerating RMB internationalization. The currency swaps promoted by the People’s Bank of China (PBOC) between the RMB and other currencies would inject supplementary liquidity to a turbulent market and offset impact from the selective currency swaps of the U.S. Federal Reserve, thus proving beneficial to developing countries. While such currency swaps are far from replacing the IMF’s role in stabilizing the global financial market, they are posing both challenges and new opportunities to the reform of the international financial system.
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Proskunov, Sergei S., Vladimir V. Volkov, Igor A. Kokorev, Vladimir V. Velikorossov, and Xin Cheng. "CROSS-BORDER INTERBANK PAYMENT SYSTEM (CUPS) AND ITS ROLE IN THE PROCESS OF INTERNATIONALIZATION OF THE NATIONAL CURRENCY SYSTEM OF THE YUAN." EKONOMIKA I UPRAVLENIE: PROBLEMY, RESHENIYA 10/2, no. 130 (2022): 116–25. http://dx.doi.org/10.36871/ek.up.p.r.2022.10.02.009.
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Since the beginning of the global financial crisis of 2008-2009, which highlighted the weakness of the international monetary system due to its complete dependence on the US dollar as the main world currency, the leadership of the People’s Republic of China, like many other states, felt its dependence and, taking advantage of the situation, used the full potential of opportunities and efforts to raise the status of the yuan to the level of the international reserve currency currencies and put an end to the dominance of the dollar. The PRC’s efforts were aimed at promoting the yuan in international payments, creating its own global financial infrastructure and networks in yuan and reforming the international monetary system. The creation of China’s own cross-border interbank payment system (CIPS) has become an integral part of building a global financial infrastructure in yuan. Combined with other anti-crisis measures to internationalize the yuan, CIPS helped achieve a sharp increase in the use of the yuan as an international payment currency in less than two years after the system was fully launched in 2018. CIPS is designed in the likeness of the existing market-leading payment systems CHIPS and SWIFT, uses their operational functions that are deeply embedded in the global financial system. Based on key literature in English and Chinese, assessing historical precedents and economic data, the authors try to assess the role of the CIPS system and the yuan in international foreign exchange reserves and payments, the problems of finding global recognition and prospects for improving the supranational use of the Chinese currency
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Brodunov, Andrey, Natalia Bushueva, Alexander Averin, and Ekaterina Berezina. "The Budget rule: reducing oil dependence." E3S Web of Conferences 164 (2020): 11041. http://dx.doi.org/10.1051/e3sconf/202016411041.
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The article explores a way to reduce the dependence of the national currency on oil prices. A retrospective analysis of the data showed a close correlation between the ruble, the US dollar and the price of oil in the international market. Since 2004, a budget rule has been in effect in Russia, imposing a long-term restriction on budget policy through quantitative restrictions on budget indicators. The study analyzes the limitations of the budget rule in the Russian Federation in various periods and its results. The authors conducted a comparative analysis of foreign experience in reducing dependence on petrodollars on the basis of five reserve funds. The study demonstrates that the budget rule could be one of the possible measures to reduce the dependence of the national currency on oil prices.
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Shapovalov, V. "Yuan Internationalization: Status and Perspectives." International Trends / Mezhdunarodnye protsessy 18, no. 3 (2020): 85–95. http://dx.doi.org/10.17994/it.2020.18.3.62.4.
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The article provides information about renminbi internationalization stages, actions taken by Chinese authorities in this field as well as suggests possible ways for further increasing usage of the currency in international operations. The analysis is based on international currency criteria used by IMF and SWIFT and well as suggestions of Russian and foreign researchers. Launching the process of renminbi internationalization China was looking to achieve a number of economic and political goals. Usage on the national currency in international operations increases the country’s prestige in the world, facilitates international transaction for domestic economic actors and allows influencing foreign counterparts. China achieved significant success in internationalizing its national currency in the past decade. Yuan has been part of IMF reserve currencies for more than three years. However, the share of renminbi in global settlements and investments is still moderate and does not correspond to the size of the country’s economy. The USA maintains their dominant role in the world’s financial system and is not interested in allowing China to increase its global influence. China is inviting its key trading partners to create yuan based international transactions system as an alternative to the US dollar. Despite the scale of the economy, volume of foreign investments and size of the internal securities market – international participants show relatively low interest for renminbi usage. Comparison of the anticipated goals and actions taken and with the current outcomes allows suggesting conceding amendments to the strategy of increasing renminbi usage in the world. This can be achieved by removing restrictions for international capital movements and facilitating access to yuan liquidity and instruments for international participants.
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Ismailov, Alisher. "MAINTENANCE OF THE MONETARY SYSTEM STABILITY IN UZBEKISTAN." European Journal of Business and Economics 8, no. 3 (October 10, 2013): 1. http://dx.doi.org/10.12955/ejbe.v8i3.385.
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During the years of independence, the Republic of Uzbekistan has succeeded in building the modern monetary system. The national currency was introduced, monetary and currency markets have been developed along with the provision of independence of the Central Bank. However, the stability of national monetary system has not been ensured yet. In particular, the monetization level of the economy remains low, while the GDP deflator is rather high. In addition, high level of national currency devaluation is observed in recent years.Eventually all these urgent problems will negatively influence the stability of macroeconomic growth. The relatively high level of the GDP deflator (GDP deflator reflects a more realistic rate of inflation) has led to the significant growth of the money supply, which resulted in a strong devaluation of the national currency of Uzbekistan. For example, in 2012 the devaluation level of the national currency against the U.S. dollar was 10.5%. In addition, because of the low monetization coefficient, a crisis of defaulted payments among business entities has arisen.The author proposes to increase the volume of foreign currency swap and Gold Swap operation of the Central Bank of Uzbekistan in order to decrease the devaluation of the national currency. The author also suggests increasing the flexibility of monetary policy instruments such as an open market policy and reserve requirements to ensure the stable growth of the money supply.
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Wigmore, Barrie A. "Was the Bank Holiday of 1933 Caused by a Run on the Dollar?" Journal of Economic History 47, no. 3 (September 1987): 739–55. http://dx.doi.org/10.1017/s0022050700049081.
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International, rather than domestic, causes of both the Bank Holiday of 1933 and the calm in the banking system that followed are emphasized here. New information on gold losses by the New York Federal Reserve, rather than domestic currency hoarding, serve to explain the Bank Holiday's specific timing. Expectations that Roosevelt would devalue the dollar stimulated much of the gold loss. I also argue that Roosevelt's restrictions on gold holdings and foreign exchange dealings and his devaluation of the dollar by 60 percent were more important to the stability of the banking system after the Bank Holiday than was deposit insurance.
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Jović, Dragan. "Business cycle synchronization and monetary policy in Bosnia and Herzegovina." Bankarstvo 50, no. 2 (2021): 8–20. http://dx.doi.org/10.5937/bankarstvo2102008j.
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By adopting the currency board at the end of the last century, and by pegging its exchange rate to the Euro, a quarter of a century ago, Bosnia and Herzegovina surrendered a great part of its monetary policy in the hand of European Central Bank in the hope that the synchronization of the business cycle will make foreign monetary policy completely suitable for Bosnia and Herzegovina. At the same time during these two decades, the Central Bank of Bosnia and Herzegovina has been developing and using reserve requirement and remuneration as discretionary instruments of monetary policy. The research shows that the domestic business cycle and the foreign one are relatively weakly synchronized compared to other countries' degree of synchronization, and by this findings current discretionary monetary policy and its further development and enrichment with new instruments is fully justified. Bosnia and Herzegovina must continue with developing its own discretionary monetary policy without relying on foreign monetary policy.
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Zharikov, M. "The Instruments to Reform the World System of Currencies: Internationalising the Currencies of the BRICS." Review of Business and Economics Studies 6, no. 3 (September 30, 2018): 19–28. http://dx.doi.org/10.26794/2308-944x-2018-6-2-19-28.
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The general outcomes of this article come from a hypothesis that expanding the BRICS currencies in the contemporary World System of Currencies (WSC) is going to be a major driver of reinforcing financial stability and transforming the WSC by means of the internationalisation process as a result of direct international settlements as well as through purchasing them using currency vehicles at the national foreign exchange markets. As a result there emerges a need to analyse the BRICS currencies’ circulation abroad, identifying the stages and directions of their internationalisation, considering the role they may play in the future development of the economies and near-by regions, their cooperation in mutual trade, investment flows, technology exchange, research and development, energy, financial stability and economic security. The article is especially time-relevant since the yuan is becoming a world reserve currency that may change the structure and the mechanism of the WSC.
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Kunal, Kunal, and B. V. Phani. "FDI Inflow, Stock Market Performance and Exchange Rate: Indian Scenario." International Journal of Accounting and Financial Reporting 7, no. 2 (November 12, 2017): 148. http://dx.doi.org/10.5296/ijafr.v7i2.11868.
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In this research work, macro level analysis has been conducted to assess impact of foreign direct investment (FDI) capital inflow in Indian economy. This study is focused on causality relationship between FDI inflow, stock market performance and foreign exchange rate. This framework is used for policy implications of relationship between three variables. These macro-economic variables are linked with different policies. Causality tests performed on these variables are further used for policy implications. Impact of change in exchange rate on changes in FDI inflow is the least significant followed by impact of changes in FDI inflow on changes in sensitivity index of stock exchange (SENSEX). The third least significant relationship is observed between changes in FDI inflow on change in exchange rate. These relationships are implied to ‘Impossible Trinity’ framework to assess preference for monetary, fiscal and foreign exchange rate policies. It is observed that improving performance of stock market (SENSEX) should be on priority followed by exchange rate. These finding have implications on fiscal policy, monetary policy and exchange rate. The increase in return of stock market and favourable exchange rate will help in increasing FDI inflow in Indian economy. Stock market performance depends on daily transactions by investors and they are regulated only, not controlled. Supply of foreign currency in India is controlled by the Reserve Bank of India (RBI), who assesses the supply conditions of the market and attempts to manage exchange rate in favour of Indian economy. In other words, the exchange rate can be controlled by having control on supply of foreign currency in domestic market. Hence, there is possibility of having fixed exchange rate and target band of exchange rate.
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Lelissa, Tesfaye Boru, and Abdurezak Mohammed Kuhil. "Are Regulatory Measures Influencing Bank Performances: The Ethiopian Case." GIS Business 13, no. 5 (September 11, 2018): 1–11. http://dx.doi.org/10.26643/gis.v13i5.3267.
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The study has explored the impact of selected regulatory variables on performances applying a panel regression on 18 commercial banks in Ethiopia for the period 1999-2015. The variables used in the model are directly derived from the extant regulatory approach used by the Central Bank to regulate the banking business. The literature review also shows that most of them are enacted in other countries with few exceptions and mainly related to bill purchase requirements. The model constructed, therefore, has established and finds a statistically significant relationship in some of the regulatory variables with performance measures. The most important findings of this study relate to the negative affect of some of the recent policy directions from the regulator on performances. For instance, branch growth and bill purchases have a statistically significant negative relationship with bank performances. This should be one of the areas requiring policy flexing from the regulatory side in the future. Nevertheless, other policy direction such as capital growth requirement remains a positive contributor to performances. More specifically, the study finds that exchange rate has a positive and statistically significant relationship with the profit models. Despite the benefit of a depreciating local currency and a stable foreign currency type to shield them from currency fluctuation, it allowed banks to earn a policy profit. The depreciation of Birr permitted banks to enjoy a profit from their foreign currency holdings in the form of daily asset revaluations. Nevertheless, many of the variables (prudential regulatory variables) used in this study (interest rate, reserve rate, number of new entrant banks, and level of entry capital) are not statistically significant to influence on bank performances.
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Ofurum, Clifford Obiyo, Solomon Egbe, and Morris Ebikeniye Sawyer. "Debt Management and Economic Development: Evidence from Nigeria." Archives of Business Research 10, no. 9 (September 26, 2022): 168–84. http://dx.doi.org/10.14738/abr.109.13145.
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The study examined Nigeria's public debt management and economic development. Specifically, the study aims to establish a nexus between domestic debt management and two dimensions of economic development, the human development index and foreign currency reserve. The study adopted positivism as a philosophical basis and used time series data from 1981 to 2021. This study employs the Autoregressive Distributive Lag (ARDL) model, and E-view were used for analyses. The result did not reveal a meaningful relationship between domestic debt management and economic development. The study concludes that the large variability in economic development observed in Nigeria can only be related to the combined effects of the public debt management variables and not their individual effects. The study recommends that the government ensure that it operates a productive rather than a consumer economy, moderate external borrowing, and create an environment conducive to foreign investment.
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Venkatesan, Thilak, and M. S. Ponnamma. "An Analysis of Macroeconomic Factors Affecting Foreign Exchange Rate." SDMIMD Journal of Management 8, no. 1 (April 17, 2017): 21. http://dx.doi.org/10.18311/sdmimd/2017/15716.
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The Indian Rupee is launching its foot print in global market, which can be characterized by the fact that Bhutan and Nepal peg their currencies to Indian Rupee. The Indian economy contributes a higher GDP growth compared to other emerging economies. The increase in the GDP, aids well for a strong foreign exchange along with other economic factors such as gross domestic savings, forex reserve, inflation and so on. The various initiatives taken by the government recently to attract more foreign capital through various investment schemes and reduce interest rate as well assists to achieve a stabilized exchange rate in India. The RBI is focused for capital account convertibility, with various measures to achieve a freely floating currency from the present managed float in India. In view of recent appreciation of Chinese Yuan, it became tough for policy makers to take up an immediate action in supporting the home-grown industries. In this context, the research focuses to find and evaluate the various macroeconomic factors affecting the exchange rate and to model the factors using Auto Regressive Distributive Lag, to enable to forecast the exchange rate. The research focuses on finding the significant factors influencing the volatility of the exchange rate.
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Jamil, Muhammad Naveed. "Impact the choice of Exchange Rate Regime on country Economic Growth: Which anchor currency leading the 21st Century." Journal of Environmental Science and Economics 1, no. 1 (January 13, 2022): 18–27. http://dx.doi.org/10.56556/jescae.v1i1.8.
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This study provides a comprehensive currencies history of the exchange rate arrangement of 195 countries; exchange rate regime impacts on countries' growth and macroeconomic stability period of 1961 to 2020. New measurements of foreign exchange regimes and under controlling the income level of high, upper-middle, middle, and lower-middle economies; This Study adopt Generalized Method of Movements (GMM) to investigate the impact of exchange rate regimes on the economies and macro-economic stability through Per Capita GDP, GDP growth, Inflation and Foreign Trade. The U.S. Dollar dominated the currency in world with a high margin. World countries desire to stabilize exchange rates, reduce exchange restrictions and currencies influence. We find that post Bretton woods transition from fixed to flexible management: Strong relations exist among the choice of exchange rate regime and countries growth. Policy implications are clear; the choice of exchange rate arrangement prevails no impact showing on the long-term countries growth, exchange rate anchor currencies of US Dollar, British Sterling Pound, Euro, Chinese Yuan, French franc, Deutschmark, and Basket currencies have a highly significant impact on countries growth of different income level. Suggest Chinese Yuan may consider alternate anchor currency for World and new measure of exchange rate controls developed. Central banks may be secure advanced country bonds, safe assets, and multi-currencies pegged systems adopted for the reserve to overcome the declining effectiveness of exchange controls.
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Keefe, Helena G., and Erick W. Rengifo. "Currency Options, Implied Interest Rates and Inflation Targeting." International Journal of Economics and Finance 11, no. 2 (January 15, 2019): 119. http://dx.doi.org/10.5539/ijef.v11n2p119.
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The currency option price is a powerful tool used regularly to determine market expectations on volatility in currencies using the implied volatility measure. This research tests and analyzes whether similar inferences can be made regarding interest rate and inflation expectations. Using historical options data, we derive and analyze implied interest rates during non-inflation targeting (non-IT) and inflation targeting (IT) periods for Australia, Canada, and the United Kingdom. We compare the results to a control group of countries that had not yet adopted inflation targeting during the period under study: Germany, Japan and Switzerland. Our results show that options prices can provide insights on market expectations on interest rates, that the adoption of inflation targeting strengthens the relationship between market expectations and inflation, and that shocks in interest rates and inflation lead to higher implied interest rates. In determining the potential uses of implied interest rates derived from currency options prices, our goal is not to replace the Federal Funds futures or equivalent tools in advanced economies, rather to present the usefulness of currency options as a tool to provide information to policymakers in emerging market economies. Central banks, such as the Banco Central de Colombia and Banco de Mexico, have been using currency options as tools for foreign exchange intervention or reserve accumulation/decumulation since the early 2000’s, and options markets in these economies have grown rapidly since then. Therefore, establishing the usefulness of implied interest rate measures derived from currency options prices may provide insights to policymakers and practitioners alike.
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Fituni, Olga L. "Internationalization of the yuan and cross-border settlements between China and Africa." Asia and Africa Today, no. 7 (2022): 57. http://dx.doi.org/10.31857/s032150750020976-5.
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One of many manifestations of the ongoing deep transformation of the world system can be seen in the current relative weakening of the role of the US dollar and other traditional reserve currencies in the world economy and the increasing role of the Chinese yuan. The objective cause for this phenomenon is the ascent of the economic power and international influence of the PRC and the country's position in international trade, investment and filling financial flows. Objective factors are combined with China’s purposeful and smart state policy in the field of internationalization of the yuan (IY). The strategy of IY has gone from the “old triad” scheme (yuan settlements of cross-border trade and investment + establishing offshore yuan financial centers + growth of bilateral local currency swaps) to a new “triad” (trading yuan-nominated oil futures + speeding up the opening of domestic financial markets + encouraging the use of the yuan along the “Belt and Road”, the strategy has also changed from fully developing the offshore financial market to encouraging the opening of the onshore market. Taking into account the role of the PRC in foreign trade and investment process in Africa, this geographic vector of IY is one of the most successful. IY here develops in two aspects: removing, through mutual settlements in the national currency, the bottlenecks of cooperation arising from the shortage of foreign currency in African economies and the introduction of new financial instruments and solutions to take the settlements out of the control of US dollar, as well as away from other clearing schemes controlled by the West.