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To resolve the issue of predicting the leak rate in proton exchange membrane fuel cells (PEMFCs) under long-term random vibration conditions. Considering the mechanism of bolt vibration loosening and rubber vibration relaxation, a leakage mechanism model of the PEMFC sealing structure under vibration conditions is proposed, and the validity of the model is verified by experimental comparison. The model clearly reveals the quantitative effects of structural parameters and material parameters on the leakage rate of PEMFC under vibration conditions. The research results show that under long-term random vibration conditions, the change of PEMFC leakage rate with time is mainly divided into three stages: response stage, stable stage, and leakage stage. Compared to bolt vibration loosening, the rubber vibration relaxation has a more significant impact on PEMFC leakage, the leakage rate of the fuel cell stack is 433ppm after 10,000 hrs of vibration. In addition, increasing the bolt preload, changing the bolt distribution, reducing surface roughness, and reducing gasket thickness can effectively suppress PEMFC leakage under random vibration conditions, the minimum leakage rate of the fuel cell stack can be reduced to around 170ppm per 10,000 hours. The proposed mechanism model provides an effective method for predicting the leakage rate of PEMFC sealing structures. [ABSTRACT FROM AUTHOR]

We test the impact of globalization on the inflation process (global slack hypothesis) for 15 emerging economies over the period (1996Q1-2019Q4). The novelty of this article lies in testing the impact of globalization on the inflation process. We introduce the smooth transition regression (STR) model of the Phillips curve to capture the gradual impacts of globalization on inflation dynamics. The main results are as follows. (i) The asymmetries in inflation exist that are not captured by the linear Phillips curve. (ii) The domestic output gap remains a main driving force of inflation. (iii) Globalization based on the trade weighted average of the domestic output gap does not affect the inflation process compared to other variables like the trade openness, import prices, real exchange rate and international oil prices. Our results yield important implications that the central banks of the emerging economies can stabilize inflation and output gap in an effective way, exploiting the inflation-output gap relationship. When economic expansion of the trading partners increases, the process of inflation dynamics changes in two economies (Brazil, and China). [ABSTRACT FROM AUTHOR]

Foreign investment can mitigate the foreign exchange constraint of developing countries. It can also influence the economy's international competitiveness through appreciating or depreciating exchange rates. The exchange rate impact of domestic investment is also not straightforward and depends on some critical factors. These issues of investment often pose a policy dilemma. Against this backdrop, this paper assesses the relative impacts of foreign direct investment (FDI), domestic investment (DI), and external debt on India's real effective exchange rate and the rupee/dollar real rate for the liberalized regime for trade, investment, and exchange rates. The autoregressive distributed lag bounds testing approach to cointegration, followed by its error correction representation, finds that real exchange rate variations are associated with FDI, debt, DI, and some control variables. FDI and debt depreciate real exchange rates, indicating that these have not exacerbated the economy's international competitiveness. However, DI causes real appreciation. These findings are consistent across estimations involving alternative specifications of control variables. Offsetting impacts of FDI and DI is an interesting finding. This can stabilize the exchange rates by undermining appreciating or depreciating exchange rate trends. [ABSTRACT FROM AUTHOR]

The Covid-19 Global Health Pandemic introduced a number of economic challenges to countries around the world. Notably, most policymakers implemented greater fiscal spending and monetary stimulus. For the first time, 15 emerging market economies experimented quantitative easing. Most were not constrained by the zero-lower-bound condition, and the degree of financial depth, central bank independence, and central bank transparency varied significantly. This research yields three critical findings. First, emerging markets experienced declines in capital flows and depreciation pressure stemming from quantitative easing. Second, quantitative easing in advanced economies had a more sizable and significant effect than domestic policies. Finally, the degree of financial development and central bank independence are key drivers in how quantitative easing impacts exchange rates specifically. More developed financial systems and greater central bank independence correspond to dampening the effect of quantitative easing on exchange rates. [ABSTRACT FROM AUTHOR]

This study assesses the global and cross-regional influence of China's currency, the renminbi (RMB). We first develop a theoretical framework to determine the channel through which progress in RMB internationalization can be mapped onto the market influence of the RMB exchange rate on that of other currencies. Using a volatility connectedness approach, we then construct a series of spillover indices reflecting the international influence of the RMB. We find that the RMB's influence is worldwide but is smaller than that of major international currencies, such as the US dollar. Overall, the RMB has basically become a peripheral currency in Greater China, Central Asia, Eastern Europe, and some South Asian economies. Because of the Belt and Road initiative, regionalization of the RMB has also progressed in developing economies; however, China still has far to go in fully achieving internationalization of its currency. [ABSTRACT FROM AUTHOR]

An increasing number of countries have launched their central bank digital currencies (CBDC) in recent years, but the economic impacts of CBDC adoption are underexplored. To empirically assess how CBDC adoption influences regional economic integration, this paper investigates the Greater Bay Area, where China carried out one of its first digital renminbi pilot programs. The Greater Bay Area provides a good example because the growing acceptance of digital renminbi in the area can potentially mitigate transaction costs and risks due to the exchange rate volatility of the Chinese renminbi, Hong Kong dollar, and Macao pataca. CBDC adoption can lead to greater real and financial integrations by facilitating cross-border trade in goods and services. This paper evaluates deviations from uncovered interest rate parity, purchasing power parity, and real interest rate parity across Guangdong, Hong Kong, and Macao based on monthly interest rate and price data from January 2016 to December 2022. The time series have mean values near zero, which validate the parity conditions and indicate high degrees of financial, real, and economic integrations. The Markov regime-switching regression model identifies three regimes: (1) pre-Covid, (2) post-Covid, and (3) post-CBDC. The Covid-19 outbreak brought lower integration and stability, but the launch of the CBDC restored some of the pre-Covid integration and stability. Regimes 1 and 2 are persistent, and transitions from Regime 3 back to Regime 1 are probable. Hence, this study finds evidence that CBDC adoption improves regional economic integration in the short and long run. [ABSTRACT FROM AUTHOR]

This paper studies the dynamic relationship between the parallel and official exchange rates of Chinese Yuan (CNY) to U.S. Dollar (USD). Motivated by recent evidence about Bitcoin as a major channel for capital flight from China, we construct a parallel exchange rate implied by Bitcoin prices in the Chinese and U.S. crypto exchanges. While the dual exchange rates are cointegrated, adjustment to long-run equilibrium is non-linear and depends on policy changes and state of the markets. Results from our Markov Switching Vector Error Correction model suggest the parallel exchange rate responds one-to-one in the long-run with respect to an official exchange rate innovation. However, an unexpected change in the parallel rate is countered by an opposite and state-dependent response in the official exchange rate, suggesting active exchange policy interventions by the Chinese monetary authority. [ABSTRACT FROM AUTHOR]

FX Open Forward is a derivative instrument where the contract holder has the obligation to purchase a specific amount of foreign currency under a fixed exchange rate by the contract expiry date. In contrast to a traditional forward contract, a distinctive feature of FX Open Forward is that the timing and notional size of the currency conversion can be freely chosen by the contract holder. Under a Black–Scholes model where interest rates can be negative, we provide a complete solution of the early exercise strategy of an FX Open Forward. When domestic rate and foreign rate are both positive (negative), the full contractual notional should be exercised when the spot FX level is sufficiently high (low). Unlike American options, the optimal waiting region of FX Open Forward is always connected even when interest rates are negative. [ABSTRACT FROM AUTHOR]

This study offers unique insights into the threshold-based influence of currency devaluation (CD) on external debt sustainability (EDS) in designated Sub-Saharan African (SSA) countries. The absence of evidence from this viewpoint, particularly in SSA, inspires this new assessment. On this premise, the study utilizes two innovative estimation procedures: smooth transition regression (STR) and multiple thresholds nonlinear ARDL (MTNARDL) to estimate the sign-based and magnitude-based asymmetric influence of CD on EDS. The outcomes indicate that first, an average CD threshold of 21.1% is consistent with EDS in the designated nations; second, a small CD significantly reduces the external debt–GDP ratio and improves sustainability, while a very high CD largely worsens the EDS problem; third, in the CD regime, devaluation has more detrimental effects on external debt burden; fourth, exceedingly large changes in exchange rate (whether positive or negative) essentially affect the countries’ EDS negatively; and fifth, the adverse effect of large depreciation on EDS is greater than that of large appreciation. The study recommends, amongst others, that heavily indebted countries with sizeable external debt denominated in foreign currency should, as a matter of urgency, avoid excessive and escalated large percentages of devaluation or exchange rate depreciation. [ABSTRACT FROM AUTHOR]

The present article analyses the balance sheet composition and the evolution of the operational framework of the Macedonian central bank. It shows that the compensating movements on its balance sheet could not be attributed exclusively to domestic liquidity management operations, as in the absence of substantial foreign currency inflows, the central bank has increased foreign reserves through the proceeds arising from the issuance of government bonds denominated in foreign currency on international financial markets. Despite retaining some of the characteristics of a currency board, the absence of a strict commitment to such a regime has allowed the central bank to employ a range of instruments of domestic liquidity management and to maintain relatively tight control over its policy rate. The level of the policy rate under a rigidly fixed exchange rate parity meant to be sustained over time, would however continue to depend on the ability of the authorities to ensure a sufficient level of foreign exchange reserves. [ABSTRACT FROM AUTHOR]

Exchange rate extreme shocks affect stock prices differently, depending on the sign and the magnitude of changes. This study, therefore, examines the asymmetric impact of multifarious exchange rate shocks on stock prices in sub-Saharan Africa between 1 March 2013 and 14 January 2023, using the novel, multiple thresholds nonlinear autoregressive distributed-lag (MTNARDL) model. This model estimates the effects of extremely small and extremely large positive and negative shocks in exchange rate on stock prices. The study partitioned the sample into pre-COVID-19 and COVID-19 era. The study's outcome indicates: first, exchange rate shocks below 25th percentile affect stock prices positively but above the 25th percentile and below the upper quantiles (75th percentile) the effects is mixed; second, at the upper quantiles (75th percentile), both exchange rate depreciation and appreciation adversely affect the value of stocks; third, the link between the series is highly sensitive to global shocks; fourth, causality result upholds the flow-oriented model in four out of the six countries. The policy implications are: (i) the responses of stock prices to exchange rates changes are sensitive to the sign and size of the shock, as well as sensitive to global shocks. Consequently, specific policy recommendations have been suggested. [ABSTRACT FROM AUTHOR]

Using the nonlinear autoregressive distributed lag (NARDL) method, the current study explores the effects of exchange rate variations on commodities trade between Pakistan and the United Kingdom. The current study contends that the limiting assumption of symmetry between the exchange rate and the trade flows may have hampered the empirical results, despite the fact that earlier studies primarily used the symmetric cointegration approach. From 1980 to 2020, the study examines the symmetric and asymmetries effects of exchange rate variations on 35 sectors in Pakistan that import from the UK and 35 industries that export to the UK. The findings suggest that there is evidence of a considerable influence of asymmetric exchange rate variations on trade flows in both the short and long term in over half of the importing and exporting industries that participate in trade with the UK. By highlighting the significance of taking into account asymmetry in the analysis and exposing the sector-specific effects of exchange rate changes on trade flows, the study adds to the body of current work. [ABSTRACT FROM AUTHOR]

India is one of the largest consumers of gold but remains largely unexplored and requires proper attention from investors, regulators and policymakers. Our study aims to uncover the relationship between policy uncertainty and gold prices in India, considering a timeline from 2004 to 2023. Using India EPU and geopolitical uncertainty-related index, the empirical estimation was performed in a time series framework using standard OLS and augmented regression using data from MCX-India and WGC prices. Our statistical investigation signals that policy uncertainty and gold prices in India are positively associated. This implies a higher degree of policy uncertainty and a higher gold price. Monetary policy uncertainty and interest rate changes shows an asymmetric impact on the gold price in India; the effects were more pronounced after 2015. Furthermore, policy uncertainty contains information explaining gold futures prices and has a two-month lag impact. Thus, gold trading in India is sensitive to the economic outlook of the economy and policy uncertainty. Gold imports in India have an adverse effect on gold prices. It is also reported that the INR/USD exchange rate plays a vital role in gold price setting. Hence, the study suggest that India's government should develop a healthy gold ecosystem and gold-policy. [ABSTRACT FROM AUTHOR]

AbstractThis paper evaluates the natural rate of interest (NRI) for Indonesia, Malaysia, Philippines, Singapore, South Korea, [Taipei, China], and Thailand and aggregates them using a GDP-weighted average. This paper discusses four key points. Firstly, to estimate the NRI in emerging Asian economies, this paper introduces a Time Varying Parameter Vector Autoregression (TVP-VAR) model that integrates exchange rates alongside conventional growth and inflation variables. Secondly, the results show that NRIs in the emerging Asia have been declining in trend since the 1990s. Thirdly, the behavior of the NRI for each economy is not uniform across crises—the Asian Financial Crisis, the Global Financial Crisis, and the COVID-19 pandemic. Fourthly, the findings reveal that the ascertained Asian NRI decreased to the vicinity of 0% during the COVID-19 pandemic period. [ABSTRACT FROM AUTHOR]

We present a novel procedure to diagnose model misspecification in situations where inference is performed using approximate Bayesian computation (ABC). Unlike previous procedures, our proposal is based on the asymptotic properties of ABC. We demonstrate theoretically, and empirically that our procedure can consistently detect the presence of model misspecification. The examples demonstrate that our proposal shows good finite-sample properties, outperforming existing approaches. An empirical application to modeling exchange rate log returns using a g-and-k distribution completes the article. Supplementary materials for this article are available online. [ABSTRACT FROM AUTHOR]

It is well-known that the presence of serial correlation may result in an inefficient or even biased estimation in time series analysis. In this paper, we consider testing serial correlation in a general d-factor model when the model errors follow the GARCH process, which is frequently used in modeling financial data. Two empirical likelihood-based testing statistics are suggested as a way to deal with problems that might come up with infinite variance. Both statistics are shown to be chi-squared distributed asymptotically under mild conditions. Simulations confirm the excellent finite-sample performance of both tests. Finally, to emphasize the importance of using our tests, we explore the impact of the exchange rate on the stock return using both monthly and daily data from eight countries. [ABSTRACT FROM AUTHOR]

Statistical process monitoring (SPM) offers an important toolkit used to monitor the stability of a process to improve the quality of outputs and/or services. More often, the design of control charts requires the estimation of the probability density function that involves selecting a common distribution that facilitates the estimation of the process parameters. The Bayesian approach is one of the most efficient techniques used in such instances. It incorporates informative and non-informative priors, i.e., uses information on past data and charting structures, to estimate parameters more efficiently than classical approaches. Bayesian approaches reduce the total expected cost over a finite horizon or the long-run expected average cost. This paper introduces a new Bayesian exponentially weighted moving average (EWMA) monitoring scheme for long runs based on an ARMA-GARCH model. The properties of the new monitoring scheme are investigated in terms of the run-length distribution. A case study on monitoring the USD to ZAR exchange rate is provided using the proposed Bayesian ARMA-GARCH EWMA monitoring scheme. [ABSTRACT FROM AUTHOR]

This study uses a panel of monthly data to investigate the effects of antidumping (AD) duties imposed on shrimp imports to the U.S. The results from the augmented gravity model show that initiating AD investigations and the final AD duty rate harm trade with the named countries. Distribution of AD duties among domestic industry producers stimulates a positive supply response. Rejection of imports by European countries for food safety reasons deflects trade to the U.S. The pass-through effects of the AD duty rate (and exchange rate) on import prices are small, indicating minimal adverse effects of AD policy on consumer welfare. [ABSTRACT FROM AUTHOR]

This study analyses and explains food imports from Peru: 1980-2021. The econometric method uses Autoregressive Distributed Lagged (ARDL) models. The result of the stationarity property of I (0) and I(1) of the variables suggests the use of the ARDL model. The Granger causality result shows that variables explain food imports. The bound test cointegration showed a long-run cointegration to exist between foot imports and income, the real exchange rate, relative prices, price of fertilizers, and institution. The short-run analysis shows positive effects of relative prices and the real exchange rate towards food imports. And in the long-run analysis, we have found a positive relationship between food imports and economic growth. Also, there is a negative relationship between food imports and the growth of the real exchange rate, the price of fertilizers, and the opening of the Free Trade Agreement. Policies for self-sufficiency are recommended through investment policies in human capital for research in fertilizers and alternative organic manures; in financial capital for access to credit for small producers; in social capital, with support for sectors with lower productivity in rural areas to reduce dependence on the international market and the growing demand for food imports that puts food security at risk. [ABSTRACT FROM AUTHOR]

We analyze the determinants of capital flight in three resource scarce MENA countries namely Egypt, Morocco, and Tunisia. Our methodology involves both the linear and nonlinear autoregressive distributed lag (ARDL) cointegration approaches, with a focus on asymmetric relationships between capital flight and the real exchange rate, to distinguish the impact of real appreciation and depreciation of domestic currency on capital flight. The results based on nonlinear ARDL approach using annual data between 1977 and 2019 indicate that in Egypt, financial openness is negatively related with capital flight, while real depreciation seems to increase it in the long run. Our findings also reveal that the real GDP growth rate, institutional quality as well as inflation are important factors affecting capital flight in Morocco, whereas financial openness and the real exchange rate influence capital flight significantly in Tunisia. [ABSTRACT FROM AUTHOR]

This study assesses the effect of USD-Rand exchange rate volatility on South African sectoral stock returns between 29 March 1996 and 28 July 2022. Using the quantile-on-quantile regression (QQR) technique, we uncover that, although each of the sectors exhibit important idiosyncrasies, there exists a single overarching relationship between exchange rate volatility and stock returns that persists across all sectors. We find that low levels of volatility in the exchange rate have a negative impact on stock returns. Conversely, high levels of exchange rate volatility have a positive impact on stock returns. The most important implication of the findings of this study is that investors should have a keen awareness of movements in both the exchange rate and stock markets. [ABSTRACT FROM AUTHOR]

This paper empirically examines the role of USD, EUR, and CNY as international payment currencies in Korea, China, and Japan. Our survey of business people in those countries finds that higher convertibility and stability of these currencies in the SDR enhance their acceptability and usability for international payments. However, even during times of instability, USD remains highly accepted and usable as a trade payment currency unlike the cases of EUR and CNY. Therefore, maintaining exchange rate stability is essential for improving the acceptability and usability of EUR and CNY as international payment currencies. [ABSTRACT FROM AUTHOR]

This paper compiles a market-based price index by accounting for the impact of price regulation. We then use the parallel market exchange rate and market-based price index to test Purchasing Power Parity (PPP) over a more extended period (1952–2019) in China. We find weak evidence support PPP when official data are used. However, we fail to find evidence against PPP when the parallel market exchange rate and the market-based price index are used. Moreover, the half-life of the RMB real exchange rate is approximately one year, substantially lower than the consensus estimates of 3–5 years. [ABSTRACT FROM AUTHOR]

This study investigates the long-run relationship between the exchange rate, interest rate, stock prices and output. The results demonstrate that a single restricted relationship is accepted when a structural break is incorporated into the cointegrating vector. Compared with the hypothesis tests on the single restricted relationship, the hypothetical structure comprising multiple relationships in the cointegrating vector is generally accepted in most countries, confirming the interaction between the relationships in the system. Our findings regarding the real exchange rate and stock price differentials appear to contradict the uncovered equity returns parity condition, whereas the relationship between the real exchange rate and interest rate differentials is consistent with the flexible price approach. [ABSTRACT FROM AUTHOR]

This paper studies the hypothesis testing problem where the null hypothesis is that a time series is an unit root process and the alternative hypothesis is that there is a change point so that the time series shifts from an unit root process to a long memory process or vice verse. We propose a residual based Dickey-Fuller type ratio statistic and derive its null distribution. We also establish the limiting distribution of the test statistic under the long memory process with no change point hypothesis. In particular, a sieve bootstrap method is designed to determine the critical value of the test statistic. Simulations show that the new test can control the empirical size well, even for the heavy-tailed long memory process. Our proposed test also gives competitive empirical power compared to the well known CUSUM of squares-based test. Finally, the validity of the new test is illustrated by a set of foreign exchange rate data between RMB and U.S. dollars. [ABSTRACT FROM AUTHOR]

We examine the long- and short-term effects of foreign exchange on Indonesia's external debts. Employing an autoregressive distributed lag (ARDL) bounds testing on quarterly data from 2010 to 2019 and testing for effect asymmetry, we found a long-run cointegrating relationship between the two variables. We also found a slow adjustment to an equilibrium state following a shock. Foreign exchange demonstrates a positive long-run effect on Indonesia's external debt, while in the short-run the effect is negative. Furthermore, we found an asymmetry in the elasticities of external debt with respect to rupiah-to-US dollar exchange rate fluctuations. The positive effect of Indonesian rupiah volatility on Indonesian external debt would be more severe when the rupiah appreciates against the dollar compared to a situation of rupiah depreciation. Therefore, although a depreciation of rupiah against the US dollar under a floating foreign exchange regime adopted by Indonesia since 1997 would in the long-run increase external debt, the impact is moderate. Any short-run movement of Indonesia's external debt following a shock would be pulled back to its long-run equilibrium path. We recommend that Indonesia should maintain a floating exchange regime and allow rupiah to depreciate at a moderate rate in the long-run. [ABSTRACT FROM AUTHOR]

Previous research that assessed the asymmetric impact of currency depreciation on domestic investment considered experiences of seven industrialized countries, six emerging economies, and eighteen countries from Africa. We add to this new literature by considering the experiences of eight Asian countries. Like previous studies, our asymmetric analysis that required estimating nonlinear models revealed much more significant outcome than the linear and symmetric models. It predicted short-run asymmetric effects of exchange rate changes on domestic investment in all eight countries that lasted into long-run asymmetric effects in Hong Kong, Indonesia, South Korea, Malaysia, and Singapore. Additional analysis revealed that currency depreciation has adverse long-run effects on domestic investment in all five countries. [ABSTRACT FROM AUTHOR]

This paper analyses the exchange rate pass-through effects (ERPT) into consumer prices in Vietnam with a pegged regime during 2001–2019 using a structural vector autoregressive approach. The model is identified based on the fit of data rather than a priori theorizing. Firstly, we find that the degree of ERPT in the country is higher than that in other emerging and developed economies. High and volatile inflation, a high degree of openness, and exchange rate regime are essential factors that explain the difference. Besides, we show that ERPT is positively correlated with the level and the volatility of inflation across sectors. Since the results are derived from a single country, the heterogeneity is more likely to be attributable to industry-specific rather than macro factors. [ABSTRACT FROM AUTHOR]

This article examines how the ongoing Ukraine-Russia war has affected the valuation of five European Union currencies: the Polish Zloty, Hungarian Forint, Czech Koruna, Swedish Krone, and Romanian Leu. Using high-frequency time series data and advanced statistical models, we analyze a 522-week period from 1 January 2013, to 24 February 2023, with 24 February 2022, as a key focal point. The Russia-Ukraine war had varying effects on the currencies of non-Eurozone countries. Poland, Hungary, and Sweden experienced significant impacts, while Czechia and Romania remained relatively stable. Our research also highlights the stability of the Euro as a reserve currency, which attracts investors during times of crisis and protects participating economies from currency fluctuations. Additionally, our analysis underscores the distinct impact of war on these currencies, influenced by their unique political, economic, and financial structures and strengths. [ABSTRACT FROM AUTHOR]

In this paper, we investigate the predictive value of time-varying higher moments and time-varying risk aversion (RA) for the RMB exchange rate volatility. To do so, we develop a threshold GARCH-MIDAS model with skewness and kurtosis (henceforth TGARCH-MIDAS-SK model). Our empirical results indicate the presence of significant reverse leverage effect and time-varying skewness and kurtosis in the RMB exchange rate returns. The RA has a significant negative impact on the RMB exchange rate volatility. Moreover, we observe that incorporating leverage effect, time-varying higher moments and RA improves the in-sample fitting and out-of-sample forecasting performance of the model. [ABSTRACT FROM AUTHOR]

The aim of this study is to analyse the existence of a long-term relationship between residential property prices and indicators such as gross domestic product growth rate, inflation rate, foreign direct investment as percentage of GDP, household income, population, exchange rate, total credits to households as percentage of GDP, employment rate and gold price index in Turkey. For this, annual data covering the years 1971–2019 were used in the relevant variables. Cointegration analyzes were performed to determine the long-term balance between residential property prices and variables. Vector error correction model (VECM) is applied to see the possible imbalances in the long run. Granger causality analysis was used to determine causality from variables to residential property prices and vice versa. According to the empirical findings of the study, it has been observed that there is a long-term positive relationship between residential property prices and gold price index, inflation rate, foreign direct investment, household income and population in Turkey. It has been found that there is a negative relationship between the gross domestic product growth rate, exchange rate, employment rate, total credits to households and residential property prices in the long run. [ABSTRACT FROM AUTHOR]

Using a comprehensive dataset, this paper estimates a hazard model to examine whether central bank independence matters for the sustainability of fixed exchange rate regimes. The findings suggest that fixed exchange rate regimes are more likely to have a longer duration under more independent central banks; a result that holds true whether an exit from such a regime is orderly or disorderly. Thus, a more independent central bank is more likely to facilitate a more durable fixed exchange rate regime. [ABSTRACT FROM AUTHOR]

We analyse how financial market analysts' expectations in the Czech National Bank's Financial Market Inflation Expectations survey perform relative to the random-walk forecast when it comes to predicting five financial variables. Using data from 2001 to 2022, our results indicate that the analysts are able to significantly outperform the random-walk forecast in terms of forecast precision for the repo rate and Prague Interbank Offered Rate at the one-month forecasting horizon. For the five- and ten-year interest rate swap rates, the random walk significantly outperforms the analysts at both the one-month and one-year forecasting horizons. For the CZK/EUR exchange rate, the random-walk forecast has a lower root mean squared forecast error than that of the analysts' forecast at the one-month horizon whereas at the one-year horizon the opposite is found; however, none of these differences are statistically significant. [ABSTRACT FROM AUTHOR]

This article presents a complete macroeconomic (SFC) model to study income and wealth distribution in an open economy. We argue that exchange rates and the stock of foreign debt play a major role in shaping inequality across and within countries. Using the 'relative income hypothesis', we show that debt-financed consumption of low-income households can affect both total income and the disposable income of high-income households in the medium run. In addition, while higher inequality is detrimental to the domestic economy, it can benefit trading partners. [ABSTRACT FROM AUTHOR]

In this article, the foreign equity price and the foreign exchange rate are supposed to follow the regime-switching multi-scale jump-diffusion processes. In addition, the correlations of the two processes are not only manifested in the diffusion parts but also in the jump components. First, the Esscher transform is used to identify an equivalent martingale measure since the financial market is incomplete. Then, some pricing problems of foreign equity options are studied and the analytic solutions of pricing formulae are derived by using Fourier transform method. Numerical results are given by the fast Fourier transform algorithm and analysis are also presented. Moreover, the numerical result shows that the economic states and model's parameters have significant effects on the values of these different kinds of foreign equity options. Finally, empirical studies are provided to illustrate the practical implementation of the proposed pricing model. [ABSTRACT FROM AUTHOR]

Continuous-time time series are widely used for modeling the realizations of those phenomena where it is theoretically possible to have observation at any point of the sampling domain. However, technical restrictions cause to see the realizations of such processes as discrete-time sample paths. We project time-domain observations into frequency-domain periodograms and employ the Whittle's likelihood approximation to make the inference about the parameters of CARMA processes. The inference is given under the Bayesian paradigm and some scenarios about the prior distributions are discussed. We show that our proposed estimator is robust for a large family of Lévy-driven distributed noises under some mild conditions. The Bayes estimates of parameters are obtained using a fast MCMC algorithm and they are examined numerically for the non-informative priors. The mean squared errors of the presented estimates are also compared to two other likelihood-based estimators, numerically. We also examine the performance of this Bayes estimate in prediction procedure of exchange rate data as a real dataset. [ABSTRACT FROM AUTHOR]

This paper builds an open country theoretical model to analyse the spillover impact of the US monetary policy tightening shock on China's economy. GVAR empirical model is employed combined with 22 countries and obtain three main results. First, the US monetary tightening shock causes the rise of the international risk index and the bilateral real exchange rate (the appreciation of the US dollar and the depreciation of the RMB). Second, both China's current account and China's capital outflow show the increased trends combined with the weighted role of foreign economies. Third, as the negative effect of China's capital outflow is higher than the positive effect of China's current account, China's real output declines caused by the US monetary tightening shock. [ABSTRACT FROM AUTHOR]

As an emerging economy, Turkey has experienced a significant structural transformation in the last twenty years. Within this period, Turkey has increased to the eleventh rank for international tourist arrivals in the world (UNWTO 2023). However, in recent years, there has been a rapid depreciation of the national currency, raising the question of how this affects the tourism trade. Using bilateral data and considering non-linearities, we investigate the exchange rate-tourism balance nexus for Turkey and its most tourist sender partners by applying ARDL and NARDL modelling. We find that (i) when the Turkish Lira (TL) appreciates, the tourism balance is positively affected in the German and UK models in the short-run and in the Russian and Netherlands models in the long-run; (ii) the depreciation of the TL, on the other hand, has a positive effect on the tourism balances for France and the UK in the short-run. Therefore, either the increase or decrease in the exchange rate (except for Russia in the short-run) affects the tourism balance insignificantly or positively. These findings imply that policymakers should focus more on country-specific tourism policies to attract more tourists to the country rather than on exchange rate policies to manage the tourism balance. [ABSTRACT FROM AUTHOR]

The sheer size of remittances has fostered an interest in investigating the consequences of these flows, particularly in remittance-dependent economies. This study relies on monthly data from 1995M01 to 2021M05 and uses both frequency-domain and time-varying causality approaches to investigate the asymmetric causality relationships between real effective exchange rates and remittances in Mexico. Two key results are obtained. First, according to the frequency domain causality test results, positive shocks to remittances lead to appreciation in the Mexican peso in the medium- and long-run cycles, but negative shocks to remittances do not lead to depreciation in the Mexican peso, thus suggesting non-asymmetry. Second, the results of time-varying causality based on heterogeneous errors support asymmetric behavior between real effective exchange rates and remittances, underscoring the importance of allowing asymmetries when investigating the causal relationship. [ABSTRACT FROM AUTHOR]

This article proposes a vector error correction framework for constructing large consistent spillover networks of nonstationary systems grounded in the network theory of Diebold and Y ilmaz. We aim to provide a tailored methodology for the large nonstationary (macro)economic and financial system application settings avoiding technical and often hard to verify assumptions for general statistical high-dimensional approaches where the dimension can also increase with sample size. To achieve this, we propose an elementwise Lasso-type technique for consistent and numerically efficient model selection of VECM, and relate the resulting forecast error variance decomposition to the network topology representation. We also derive the corresponding asymptotic results for model selection and network estimation under standard assumptions. Moreover, we develop a refinement strategy for efficient estimation and show implications and modifications for general dependent innovations. In a comprehensive simulation study, we show convincing finite sample performance of our technique in all cases of moderate and low dimensions. In an application to a system of FX rates, the proposed method leads to novel insights on the connectedness and spillover effects in the FX market among the OECD countries. [ABSTRACT FROM AUTHOR]

Paul Davidson (1930–2024) was a prominent figure in Post Keynesian economics. He co-founded and served as the editor of the Journal of Post Keynesian Economics and organized the Post Keynesian International Workshop. Davidson's intellectual contributions include a focus on non-neoclassical uncertainty and its relation to money, liquidity, and liquidity preference, as well as the role of government in the economy. He also made significant contributions to the understanding of asset choice, the interaction between financial and goods markets, and the determination of asset liquidity. Davidson's work extended Post Keynesian macroeconomics to the global economy and he proposed reforms to the international monetary system. While he drew heavily on Keynes's writings, he did not explore the connections between The General Theory and Keynes's A Treatise on Probability. Davidson's contributions to Post Keynesian economics were significant, although there were some disagreements among scholars regarding certain aspects of his work. [Extracted from the article]

Economic policy uncertainty (EPU) reflects more information related to exchange rate volatility than traditional macroeconomic variables do, and thus may have stronger predictive power in forecasting exchange rate volatility. Based on data from developed and developing economies (including Japan, the United Kingdom, the Euro Area, Brazil, the Russian Federation, India, and China), this paper provides in- and out-of-sample evidence that the EPU differential between two economies outperforms several macroeconomic predictors (for example, GDP growth and volatility of inflation growth) in forecasting exchange rate volatility, which is also supported by a Monte Carlo experiment. Moreover, the mechanism analysis shows that increased EPU differential is associated with increased foreign exchange trading activities and reduced bilateral trade, which helps explain the predictive power of EPU for exchange rate volatility. Furthermore, we find that EPU can predict both long- and short-run components of exchange rate volatility. Our main findings are robust after using alternative empirical proxies or controlling for endogeneity. [ABSTRACT FROM AUTHOR]

For developing economies, exporting broadens the horizon for facilitating effective integration into the global economy and improving overall competitiveness. While small developing states are particularly at high risk given their fundamental characteristics, the expected impact of these exogenous shocks on small resource dependent economies are amplified given the high possibility of lower levels of diversification. This paper therefore assesses the determinants of exports and exporting potential of SIDS (small island developing states) with a focus on Caribbean resource-based countries. Using non resource exports, in an aggregate and disaggregate form, as the dependent variable, the traditional gravity model was augmented to include a revealed comparative advantage (RCA) index, the real effective exchange rate (REER) of the exporter and the export sophistication (EXPY) index. The main findings indicate that an appreciation of the REER has an inverse impact on exports of non-resource commodities and that trade according to comparative advantage and differences in export sophistication occurs mainly in the agricultural sector. [ABSTRACT FROM AUTHOR]

This paper takes stock of the literature on the monetary transmission mechanism in currency boards and analyzes the process of monetary transmission in Bosnia and Herzegovina. The transmission of monetary signals through the economy is based on the automatic adjustment mechanism of the currency board. Three channels of monetary transmission are discussed in this paper: the interest rate channel, the narrow credit channel, and the exchange rate channel. The empirical analysis shows how exogenous monetary shocks are transmitted through different channels and how long it takes for the automatic adjustment mechanism to restore equilibrium in the economy. [ABSTRACT FROM AUTHOR]

We analyze the impact of the Covid-19 pandemic on emerging market real exchange rates using a Behavioral Equilibrium Exchange Rate approach augmented by pandemic variables. We show that behavioral factors related to Covid-19 played a significant role in explaining the behavior of emerging market real exchange rates during the first wave of the pandemic. The real exchange rates were driven by the number of new Covid-19 deaths rather than by the number of new infections. These results are robust for different country samples. [ABSTRACT FROM AUTHOR]

This study examines the impact of exchange rate volatility on China-Pakistan trade flows from 1980 to 2020. Using data from 42 import industries and 34 export sectors, bilateral trade between China and Pakistan is analyzed, with the US as the third country. Cointegration analysis reveals a strong relationship between Pakistan-China trade flows and exchange rate volatility. The yuan/dollar exchange rate negatively affects 22 import and 24 export industries in Pakistan, while the rupee/dollar exchange rate negatively impacts 31 import and 17 export industries. Findings suggest that the exchange rate volatility of the third country hampers bilateral trade between Pakistan and China. [ABSTRACT FROM AUTHOR]

Two studies have assessed the link between the exchange rate and trade in services. While one study concluded that the U.S. insurance and financial service trade is not affected by the exchange rate, another study reversed that finding by applying a non-linear method. We add to this literature by considering Singapore's experience. After estimating the linear and non-linear ARDL models using Singapore's imports and exports of insurance and financial service trade, we conclude that changes in the real effective value of the Singapore dollar have both short-run and long-run effects on Singapore's trade in both services. [ABSTRACT FROM AUTHOR]

This work examines the elasticities of the Brazilian agricultural trade balance in a dynamic, or non-linear, perspective since emerging economies such as Brazil are quite susceptible to internal and external shocks that can produce asymmetries in these elasticities. To this end, data from January 2000 to July 2019 are used, along with a time-varying cointegration analysis. The results suggest that the elasticities of the net exports in relation to the real exchange rate and foreign income were positive and elastic in practically the entire period considered. Domestic income had a negative influence, but with inelastic impacts and less variability. [ABSTRACT FROM AUTHOR]

Commercial banks and currency kiosk bureaus provide exchange services throughout Ciudad Juarez. This study employs newspaper data to examine how the bank and kiosk sell-buy spreads are affected by border crossings, the bilateral peso per dollar exchange rate, and 90-day Mexico – U.S. treasury yield differentials. Sample data are from January 2009 through June 2016. Parameter estimation is carried out using a GLS ARMAX procedure. Empirical results indicate that bank spreads increase as the peso weakens. Exchange bureau spreads decrease as cross-border traffic flows increase. Currency kiosk spreads tend to widen as 90-day yield gaps become larger. [ABSTRACT FROM AUTHOR]

This study examines the asymmetric impact of the nominal effective exchange rate (NEER) on the trade balance in GCC countries over the period of 2000:Q1 to 2017:Q4. The empirical findings of the nonlinear pooled mean group (PMG) estimator reveal the presence of a J-curve shape where an increase in NEER (currency depreciation) deteriorates the trade balance in the short run and improves it in the long run. Findings also prove that the trade balance's response to NEER positive changes is greater compared to negative changes. The policy implication of these findings reveals that NEER is a useful tool to sustain the trade balance. [ABSTRACT FROM AUTHOR]