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Correlations between exchange rates are valuable for illuminating the dynamics of international trade and the financial dynamics of countries. This paper explores the changing interactions of the US foreign exchange market based on detrended cross-correlation analysis. First, we propose an objective way to choose a time scale parameter appropriate for comparing different samples by maximizing the summed magnitude of all DCCA coefficients. We then build weighted signed networks under this optimized time scale, which can clearly display the complex relationships between different exchange rates. Our study shows negative cross-correlations have become pyramidally rare in the past three decades. Both the number and strength of positive cross-correlations have grown, paralleling the increase in global interconnectivity. The balanced strong triads are identified subsequently after the network centrality analysis. Generally, while the strong development links revealed by foreign exchange have begun to spread to Asia since 2010, Europe is still the center of world finance, with the euro and Danish krone consistently maintaining the closest balanced development relationship. Finally, we propose a fluctuation propagation algorithm to investigate the propagation pattern of fluctuations in the inferred exchange rate networks. The results show that, over time, fluctuation propagation patterns have become simpler and more predictable. [ABSTRACT FROM AUTHOR]

Japan exports sophisticated capital goods. Since the Global Financial Crisis (GFC), Japanese companies have offshored the production of lower-end goods and parts and components to Asian countries. Because of this, several researchers argued that a weaker yen no longer stimulates machinery exports much because an increase in Japanese exports increases parts and components imports from overseas Asian subsidiaries. This paper finds that, after the GFC, a weaker yen no longer increases Japanese machinery exports to Asia but continues to stimulate exports outside of Asia. Thus, the weaker yen since 2020 does not help Asian firms to import vital Japanese capital goods but does increase the profitability of Japanese manufacturers and their exports to non-Asian countries. [ABSTRACT FROM AUTHOR]

This study brings novelty to the tourism literature by re-examining the role of exchange rate in the tourism-growth nexus. It differs from previous tourism-led growth narrative to probe whether tourism exerts a positive effect on economic growth when the exchange rate is accounted for. Using a moderation modelling framework, instrumental variables general method of moments (IV-GMM) and quantile regression techniques in addition to real per capita GDP, tourism receipts and exchange rate, the study engages data on 44 Asian countries from 2010 to 2019. Results from the IV-GMM show that: (1) tourism exerts a positive effect on growth; (2) exchange rate depreciation hampers growth; (3) the interaction effect is positive but statistically not significant; and (4) results from EAP and SA samples are mixed. For the most part, constructive evidence from the quantile regression techniques reveals that the impact of tourism and exchange is significant at lower quantiles of 0.25 and 0.50 while the interaction effect is negative and statistically significant only for the SA sample. These are new contributions to the literature and policy recommendations are discussed. [ABSTRACT FROM AUTHOR]

This paper describes the growth of local-currency bond markets in Emerging Asia and the institutional and policy challenges facing the region's economies for their further development. It presents an empirical analysis of the relationship between local-currency government bond (LCGB) market development and the components of financial development, using panel data for selected Emerging Asian economies. The analysis seeks to identify the key determinants for the development of LCGB markets. The results show that the depth of and access to both financial markets and financial institutions have a significantly positive impact on LCGB market development. Critical factors associated with local-currency bond market depth include macroeconomic variables, the exchange-rate regime, capital account openness and creditor rights. Based on these results, the paper offers policy directions for fostering the development of local-currency bond markets in the region. [ABSTRACT FROM AUTHOR]

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The economic growth of developing countries has been associated with their exports, and the existing research suggests that exchange rates significantly influence the exports. This study used panel data to investigate the potential nexus of gross domestic product (GDP), exports and exchange rates in Asian countries over the period of 1981–2016. The results portray that nexus between exchange rate and exports holds true for Export-led Growth (ELG) and Growth-led Exports (GLE) hypotheses. This study used the Wald test under Vector Error Correction Model (VECM) with all necessary specifications tests to identify the possible nexus of variables, and applied the fixed effects model along with control variables. The results imply that an undervalued currency enhances exports and has a significant impact on economic growth. Additionally, the results of Fully Modified Ordinary Least Squares (FMOLS) model with financial crises dummy suggested that the estimations are robust. Keeping in view the aforementioned findings, a timely and balanced policy can play a pivotal role in improving the long term nexus of exchange rates, exports and economic growth. [ABSTRACT FROM AUTHOR]

We examine the impact of US monetary policy uncertainty (MPU) on the dollar exchange rates of ten Asian economies between February 2006 and January 2019. Our results, which are based on an EGARCH model, indicate that MPU tends to increase the variance of exchange rates rather than affecting the level of exchange rates. The results may have significant implications for the ten economies' conduct of monetary policy. [ABSTRACT FROM AUTHOR]

The paper explores the macroeconomic impacts of foreign direct investment (FDI) and remittance inflows in developing Asia. Asian developing economies are identified as the highest receiver of remittances and the region has also been consistently performing well in receiving of FDI inflows. As an external source of capital formation, inflows of FDI and remittances affect foreign exchange rates and output. This study provides empirical evidence on the impact of FDI and remittances on real effective exchange rates and GDP in Asian developing countries using data over the period of 1981‐2015. Dynamic panel GMM technique is employed to overcome the endogeneity issue. Findings imply that both inflows of FDI and remittances have positive and significant impacts on exchange rates and GDP in developing Asia. Hence, remittances carry greater influence and significant impacts due to relatively stable inflows. [ABSTRACT FROM AUTHOR]

This paper investigates the determinants of external debt in 32 Asian developing and transitioning economies for the period 1995–2019. Estimation is carried out using the generalized method of moments (GMM), which is capable of dealing with potential endogeneity problems. The results show that in both the short- and long-run, economic growth and investment reduce external debt, whereas exchange rate, trade, and government expenditure increase external debt. Diagnostic tests confirm the reliability and consistency of our findings, which should be taken into account by policymakers for policy formulation and implementation. Based on our empirical findings, relevant policy implications, aimed at reducing external debt in the selected Asian developing and transitioning economies, are provided for policy consideration. [ABSTRACT FROM AUTHOR]

Copyright of Revista Evidenciação Contábil & Finanças is the property of Revista Evidenciacao Contabil & Financas and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Exchange rates and exchange rate regimes in a constantly changing economy have always attracted much attention from scholars. However, there has not been a consensus on the effect of exchange rate on economic growth. To determine the direction and magnitude of the impact of an exchange rate regime on economic growth, this study uses the exchange rate database constructed by Reinhart and Rogoff. This study also employs the GMM(GeneralizedMethod ofMoments) technique on unbalanced panel data to analyze the effect of the exchange rate regime on economic growth in Asian countries from 1994 to 2016. Empirical results suggest that a fixed exchange rate regime (weak flexibility) will affect economic growth in the same direction. As such, results from the study will serve as quantitative evidence for countries in the Asian region to consider when selecting a suitable policy and an exchange rate regime to attain high economic growth. [ABSTRACT FROM AUTHOR]

Background: Modeling exchange rate volatility has remained crucially important because of its diverse implications. This study aimed to address the issue of error distribution assumption in modeling and forecasting exchange rate volatility between the Bangladeshi taka (BDT) and the US dollar ($). Methods: Using daily exchange rates for 7 years (January 1, 2008, to April 30, 2015), this study attempted to model dynamics following generalized autoregressive conditional heteroscedastic (GARCH), asymmetric power ARCH (APARCH), exponential generalized autoregressive conditional heteroscedstic (EGARCH), threshold generalized autoregressive conditional heteroscedstic (TGARCH), and integrated generalized autoregressive conditional heteroscedstic (IGARCH) processes under both normal and Student's t-distribution assumptions for errors. Results and Conclusions: It was found that, in contrast with the normal distribution, the application of Student's t-distribution for errors helped the models satisfy the diagnostic tests and show improved forecasting accuracy. With such error distribution for out-of-sample volatility forecasting, AR(2)-GARCH(1, 1) is considered the best. [ABSTRACT FROM AUTHOR]

This paper examines exchange rate behaviour in the ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). It finds that for the last ten years, there is no evidence that their central banks target particular exchange rate levels against any currency or basket. Thus, contrary to some assertions, they do not belong to a dollar club, a yen club, a renminbi club, or an ASEAN club. At the same time, they clearly try to smooth short-term volatility, particularly vis-à-vis the U.S. dollar. The degree of smoothing declined noticeably after the Asian Financial Crisis and less obviously after the Global Financial Crisis, with heterogeneity across countries. Short-term smoothing without level targeting does not interfere with monetary policies aimed at price stability. [ABSTRACT FROM AUTHOR]

The article presents a study which analyzes the behavior of short-run exchange rate in the Asian market. It explores the central tendency relationship among selected Asian currencies by employing an eigenvector scaling technique in generating short-term trends in exchange rates. It reveals that the short-term forecasting is achievable by defining regional trends and the generation of wealth of exchange rate information can be accomplished in a short period of time.

This paper examines the impact of the conceptual complexity of central bankers on exchange rate volatility during the Asian Financial Crisis of the late 1990s. Theoretically, this paper develops a framework to study the cognitive style of individual central bankers in conjunction with the institutional features of the central banks they head. The paper also controls for a variety of other common explanations for exchange rate volatility during this time period, including the number of veto players representing the political system and underlying structural features of the Asian economies. Empirically, the cross-sectional time-series analysis finds that more conceptually complex central bankers were able to reduce exchange rate volatility during the crisis years, especially when they inhabited highly independent central banks. This paper concludes that linking the study of key individuals to macroeconomic outcomes in the global political economy is a promising area of research. [ABSTRACT FROM AUTHOR]

We investigate how efficiently the stock market participants incorporate the information contained in money supply changes into stock prices in an emerging economy like Bangladesh. Of particular interest is to test how the changes in monetary aggregates directly affect the stock prices through asset changes and indirectly through their effects on real economic activity. We have considered the monthly series of the real stock returns (P) and examine the relationship between stock returns and monetary aggregates from 1980 to 2008. We also include the exchange rate of US dollar against Bangladeshi Taka and industrial production index. The presence of cointegration between stock prices and monetary aggregates indicate long-run predictability of the Bangladesh stock market. The short-run dynamics between monetary aggregates and real stock return, relied on theoretically motivated long-run restrictions, are analyzed using an empirical structural VAR model. The dynamic response of the real stock returns to changes in macroeconomic variables (such as broad money supply, exchange rates), particularly its lagged responses to real economic activity generates inefficiency in the Dhaka Stock Exchange. The findings of this article indicate that informational inefficiency exists in the stock market of Bangladesh due to the presence of unidirectional causality. To be efficient, the infrastructure of the SEC should be modernized, revaluation of the net asset value of the companies should be audited by the affiliated firms of the SEC, demutualization should be done as early as possible, private placement, issue of preference share and book building methods must be under rule based. Insider trading should be strictly prohibited. [ABSTRACT FROM AUTHOR]

An estimated Markov-switching DSGE modelling framework that allows for parameter shifts across regimes is employed to test the hypothesis of regime-dependent credibility of Hong Kong's linked exchange rate system. The model distinguishes two regimes with respect to the time-series properties of the risk premium. Regime-dependent impulse responses to macroeconomic shocks reveal substantial differences in spreads. These findings contribute to efforts at modelling exchange rate regime credibility as a non-linear process with two distinct regimes. [ABSTRACT FROM AUTHOR]

Abstract: In this paper, we focus on the determinants of foreign direct investment and foreign portfolio investment. Applying static and dynamic panel data models of six Asian countries and seven Latin American countries in the period from 1981 to 2011, we find that the characteristic of capital flows has locality, and both domestic and global factors can explain the capital flows to emerging markets, such as GDP, trade openness, financial interrelations, and interest rates. The result also shows expectation is an important driving factor: FDI is more prone to be affected by economic expectation while FPI is exchange rate expectation. [Copyright &y& Elsevier]

This paper revisits the issue of exchange rate regimes in emerging Asia over the decade 1999–2009. It finds that while Asia is home to a wide array of exchange rate regimes, there are signs of gradual movement toward somewhat greater exchange rate flexibility in many of the regional countries. There appears to be evidence of an apparent “fear of appreciation” which is manifested in asymmetric exchange rate intervention—i.e., a willingness to allow depreciations but reluctance to allow appreciations. This policy of effective exchange rate undervaluation is rather unorthodox from a neoclassical sense, but is consistent with a development policy centered on suppressing the price of non-tradable goods relative to tradables (i.e., real exchange rate undervaluation). [ABSTRACT FROM AUTHOR]

This paper examines a productivity-based explanation of the long-run real exchange rate movements of six Asian economies. Using industry level data, we construct total factor productivities (TFPs) for the tradable and nontradable sectors. We find that (i) within each country the relative price of nontradable goods is cointegrated with the sectoral TFP differential, and (ii) the real exchange rates are cointegrated with the home and foreign sectoral TFP differentials. Using the predicted real exchange rate as a measure of the 'long-run equilibrium,' we find that most Asian economies' real exchange rates were overvalued before the Asian Financial Crisis. [ABSTRACT FROM AUTHOR]

The article analyzes the effect of worker remittances (WR) on the equilibrium real exchange rate (ERER) in recipient countries. It shows that in many countries, WR arrests official development assistance and private capital flows, which could cause macroeconomic problems by raising ERER. One conclusion drawn is that Dutch disease problems may not be a necessary side effect of remittance inflows, which are said to be larger in Asia and Latin America than in Africa and eastern Europe, mainly because countries such as India and Mexico receive more WR.

This paper examines whether or not the Northeast Asian economies, namely, China, Japan, Korea, and Taiwan, can form a currency union, where a single currency and a uniform monetary policy are adopted, or an exchange rate union where all the currencies are pegged to an internal or external currency or an optimum currency basket. The analysis of correlations of supply shocks, exchange rate shocks, monetary shocks, and demand shocks, which are estimated applying the structural VAR model with identification restrictions imposed, to the data for the period from 1970 through 2004, shows that shocks of these economies are not symmetric, in general, implying that the Northeast Asian economies are not ready yet to form a common currency union. However, it is found that the Northeast Asian countries can form an exchange rate union with a major currency basket, which consists of the U.S. dollar, the euro and the Japanese yen, as an anchor currency. The paper also examines the option of pegging to a basket of regional currencies, similar to the Asian Currency Unit (ACU), and discusses policy implications. [ABSTRACT FROM AUTHOR]

The article examines proposals for fostering monetary integration of Asian countries. It has been suggested that Asian countries should link their currencies to the dollar, or to a dollar, yen and euro basket, or establish a multilateral currency grid similar to the European Monetary System. This would result in exchange rate stability, which in turn would promote trade within the region, simplify investment planing, and encourage participation in local bond markets across borders. In addition, experience with establishing and maintaining such a system would prepare the region for the introduction of a single currency. As there are no incentives for economic unification in the region, a better strategy for the countries would be to create an Asian Currency Unit.

Testing purchasing power parity (PPP) in the black market has increased in recent years due to the apparent puzzle in the literature by which PPP is largely rejected in flexible exchange rate regimes. Many studies of PPP suffer from the problem of imposing symmetry and proportionality restriction and fail to address the issues of stationarity and exogeneity. We address these issues in this paper by using monthly data from eight developing Asian countries over a thirty-one-year period. Even though the variables are cointegrated in a Johansen-Juselius framework, it is found that the domestic price and the foreign price are not weakly exogenous in many countries, and a direct test provides the rejection of the PPP hypothesis. [ABSTRACT FROM AUTHOR]

This study tests for non-linearities in the behaviour of U.S. dollar real exchange rates of eleven Asian economies. For this purpose, logistic and exponential smooth transition regression models are applied to quarterly data over the sample period 1973Q2-2001Q1. There is evidence of non-linearities in the behaviour of four real exchange rates where, in three of these cases, non-linearities are captured by the logistic smooth transition autoregressive model. The extent of non-linearities varies across Asian countries with India and Singapore exhibiting the sharpest transition between regimes of appreciating and depreciating real exchange rates. [ABSTRACT FROM AUTHOR]

We study the impact of silver price changes on stock returns from seven small open economies that switched among silver, gold, and paper money standards at different times between 1873 and 1939. Silver exposure is a priced factor in monthly equity returns. Changes in silver prices forecast realized monthly equity risk premiums, suggesting that expected risk premiums varied with the price of silver. Changes in silver prices forecast annual indicators of trade flows, global business cycles, and inflation. The evidence suggests how corporate profits and stock market risk premiums are linked to exchange rates, trade, economic activity, and inflation. [ABSTRACT FROM AUTHOR]

This paper argues that a principal cause of the 1997 Asian currency crisis was large prospective deficits associated with implicit bailout guarantees to failing banking systems. The expectation that these future deficits would be at least partially financed by seigniorage revenues or an inflation tax on outstanding nominal debt led to a collapse of the fixed exchange rate regimes in Asia. We articulate this view using a simple model whose key feature is that a speculative attack is inevitable once the present value of fiiture government deficits rises. We present empirical evidence in support of the key assumptions underlying our interpretation of the crisis. [ABSTRACT FROM AUTHOR]

Presents a study which discussed the macroeconomic stabilization policies of China following the financial crisis in Asia. Reason for China to be able to maintain a constant exchange rate; Details on interest-insensitivity of its expenditures.

Presents information on a study which examined the behavior of real exchange rates using monthly data obtained from the black markets for foreign exchange of Asian developing countries. Description of the purchasing power parity hypothesis; Exchange rate regimes and real exchange rate volatility; Conclusion.

Discusses the bank liquidity crises in Asia, highlighting the concept of international illiquidity. Role of domestic banks in causing and transmitting situations of illiquidity; Description of the demand deposit system; Role of maturity of external debt and capital flows; Implications of adopting different exchange rate regimes; Relation between banking crises and real exchange rate movements.

Comments on Andres Velasco and Roberto Chang's (1990) study of bank liquidity crises in Asia. Criticisms on the modeling approach to bank liquidity; Causes of banking-currency crisis; Term-structure of bank lending; Policy implications of the relation between banking crises and exchange rates.

The article focuses on hedge funds and their participation in currency crisis. Hedge funds have come into prominence in the context of exchange rate volatility because they have been perceived to be responsible for precipitating the collapse of currencies in pegged exchange rate systems. Hedge funds are private investment limited partnerships. They were initiated in 1949 by Alfred Winslow Jones to serve wealthy Americans. Funds are not advertised. Investors in hedge funds are usually required to have a net worth of at least $U.S. 1 million and to be earning 6-figure incomes or better. A general partner on a fee-for-performance basis manages these funds. The manager usually receives a 1-2 percent management fee plus 15-20 per cent of the profits. Like all investment funds, hedge funds aim to generate high returns with acceptable risks. Traditionally, hedge funds derive their name from their two characteristic investment strategies, namely leverage and short sales. The former strategy speculates on a price rise, whilst the latter speculates on a price fall. The two strategies allow the funds to "hedge their positions" whichever way the market moves.

This paper examines whether small but continuous changes in effective exchange rates such as those encountered by nine Asian developing countries in the generalized floating period influenced their inflation rates. The empirical results show convincingly that exchange rate changes and excess money supply did not have a significant effect on inflation. The results show that much of the inflation in the Asian countries during the 1970s was imported. [ABSTRACT FROM AUTHOR]