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Green growth means decoupling economic growth and carbon footprints, and its role cannot be overlooked in attaining sustainable development objectives. The exchange rate is a key macroeconomic variable that has impacted almost every sector of the economy; thus, understanding the nexus between exchange rate volatility and green growth is important. To date, no empirical study has estimated the asymmetric impact of exchange rate volatility on green growth in China. This analysis fills the gap by estimating how green growth responds to asymmetric exchange rate volatility. To that end, the analysis employs linear and nonlinear autoregressive distributed lag (ARDL) estimators. The linear model findings reveal that exchange rate volatility hurt green growth in the long-run. On the other hand, the nonlinear model shows that a rise in exchange rate volatility hinders green growth in the short and long run, while a lower level of volatility does not significantly impact green growth. In addition, green investment, human capital, environmental technology, and financial development promote long-run green growth in both linear and nonlinear models. The policymakers in China should focus on the development of a robust forex market that can control the volatility of the renminbi against other currencies. [ABSTRACT FROM AUTHOR]

Purpose – This paper examines the extent to which exchange rate volatility (ERV) is crucial for small island economies. These economies by their very nature and size tend to be net importers and highly dependent on trade for their economic survival. The island of Mauritius is used as a case study. Design/methodology/approach – A GARCH model has been utilized using yearly data for the period 1993–2022. The ARDL bounds cointegration approach has been used to determine the long run relationship between exchange rate volatility and the performance of exports. The ECM-ARDL model has been used to estimate the short-run relationships, that is the speed of adjustments between the variables under consideration. Findings – The findings reveal that exchange rate volatility has a positive and significant effect on exports in the short run as well as in the long run. The study also finds out that export has a long-term relationship with world GDP per capita. Both the presence and degree of exchange rate volatility are important aspects for consideration in policy making. Originality/value – The literature gap that this study attempts to close is one related to global impacts within the recent time horizon. Recently, numerous important events shaped the financial and economic landscape globally, including but not limited to the financial crisis of 2008 and the COVID-19 pandemic in 2019. Both these events stressed the global volume of trade and the exchange rate markets, and these events affects small islands comparatively more given their heavy dependence on international trade for economic development, albeit economic survival.

We investigate the impact of exchange rate volatility on exports and imports between South Africa and its main trading partners, namely the United States and China, across 22 import and export industries. The study employs the quantile autoregressive distributive lag (QARDL) model using quarterly data from the period spanning from 1994Q1 to 2022Q4. Our initial ARDL estimates establish that currency volatility does not significantly harm most trade sectors with both countries. In fact, many industries exhibit an insignificant or positive correlation with currency volatility. Nevertheless, upon re-estimating the regressions using the QARDL model, we uncover 'hidden cointegration' relationships existing at quantiles beyond the mean and median estimates, which are undetectable by traditional ARDL models. By considering these location-based asymmetries, we conclude that trade activities with China benefit more from exchange rate volatility compared to those with the United States. Overall, our findings imply that monetary authorities may not need to intervene in currency markets to stimulate trade with the top trading partners, as firms appear to be willing to bear the currency risks associated with the volatile Rand exchange rate. [ABSTRACT FROM AUTHOR]

This study investigates the influence of exchange rate fluctuations on the informal economy within the BRICS countries from 2010 to 2019. Employing linear and nonlinear analytical methods, this research utilizes linear autoregressive distributed lag (ARDL) models to analyze the relationship between exchange rate variations and the shadow economy in each BRICS nation. The study consistently reveals significant evidence of the impact of exchange rate fluctuations on the informal economy across both short-term and long-term timeframes. Moreover, employing a nonlinear ARDL model uncovers distinct and uneven effects of exchange rate volatility among the BRICS nations, emphasizing the varied characteristics of currency fluctuations in the clandestine economy. The findings underscore the need for BRICS member states to develop and implement tailored fiscal strategies to mitigate the risks associated with exchange rate volatility. Recognizing these dynamics is crucial for policymakers and stakeholders to effectively address the unequal ramifications of the informal sector within each country. Considering these findings, policymakers must devise economic policies that account for the diverse attributes of each nation’s informal economy. Implementing measures to reduce and manage the impacts of exchange rate fluctuations can foster stability and resilience within the informal sector, ultimately contributing to broader economic development objectives. This study contributes to the existing literature by employing linear and nonlinear methodologies to explore the relationship between currency exchange rates and the informal economy within the BRICS context. The identification of varied impacts across nations underscores the importance of tailored policy responses to address the unique challenges of exchange rate volatility on informal economic activities. [ABSTRACT FROM AUTHOR]

In this study, we have empirically investigated the role of interest rate on the volatility of the exchange rate using monthly data starting from January 2011 to January 2020. The conditional standard deviation of the GARCH (1,1) based on the ARIMA (1,1,0) model is used as a proxy for exchange rate volatility. To test the causal effect of the interest rate on the exchange rate volatility, we employed the Granger causality test, Shannon's transfer entropy causality test, and the bootstrap impulse response function. Each test is performed with two separate lag lengths. The results of the study suggest that the interest rate has a positive causal effect on the exchange rate volatility unanimously supported by the Granger causality test and Shannon Transfer Entropy causality test. The IRF revels that a shock in the interest rate positively influences the exchange rate volatility between a lag of two to four months. [ABSTRACT FROM AUTHOR]

This study examines the long-run volatility between forex and stock markets and the role of financial globalization in this relationship in Africa, during the COVID-19 pandemic period, using panel Fully Modified Ordinary Least Squares (FMOLS) and panel Dynamic Ordinary Least Squares (DOLS) approaches. Our empirical outcomes revealed bi-directional long-run volatility between the two financial markets in the COVID-19 pandemic period. The results further established that, financial globalization reduces forex markets’ volatility effects on stock markets’ volatility, whilst it heightens stock markets’ volatility effects on forex markets’ volatility in Africa, during the COVID-19 pandemic period. The implications of this study, include the need to harness the stabilising potential of financial globalization in the long-run volatility between forex and stock markets, primarily through asset diversification, enhanced information flow, and market efficiency in African financial markets.

AbstractNinety-five percent of Kenyan coffee is exported as green coffee in the international market in Europe. As a spot market, this presents a problem in that the currency of the foreign market differs from that of the domestic country (Kenya), resulting in an exchange rate problem. Kenya has a floating exchange rate system, which means that the country’s exchange rate is decided by the forces of demand and supply for domestic currency. This means that there is a comovement of domestic currencies against other global currencies; in this case, the currencies of Kenya’s key coffee market. Therefore, this study examines the influence of currency volatility on Kenyan coffee exports. According to recent figures from the Central Bank of Kenya, Kenya’s real exchange rate fluctuated from 2001 to 2020 and the country recorded a negative trend in coffee exports during the same period. This begs the question of whether real exchange rate volatility had an impact on coffee exports during this period. Data was sourced from the Coffee Directorate, the International Coffee Exchange, and the Central Bank of Kenya and was analyzed using the gravity model. The exchange rate volatility was estimated using Purée and Steinherr’s model. The findings show that exchange rate volatility hurts Kenyan coffee exports. Similar results were obtained through robustness checks by quantile regression. Consequently, this study advises that monetary and fiscal policy measures should be tailored to reduce exchange rate volatility, while still promoting agricultural exports and overall macroeconomic stability.

AbstractThis article evaluates the asymmetric impact of exchange rate volatility on the exports of nine ECOWAS countries to the Eurozone. By comparing Autoregressive Distributed Lag (ARDL) and Nonlinear ARDL (NARDL) models, the study concludes that the effect of volatility on ECOWAS-Eurozone exports (EEE) is asymmetric. The study also investigates the impact of foreign income and prices on the EEE and categorises the goods and services that make up the EEE for each country based on their coefficients. The results show that exchange rate volatility has an asymmetric effect on the EEE, which comprise both substitute and inferior goods. The study recommends that ECOWAS authorities avoid using proportional policies to address increased and decreased volatility, as their impact on trade is asymmetric. The long-run coefficients of income for Nigeria, Togo, and Benin are -1.29, -4.67, and -2.64 respectively, indicating that their exports are dominated by inferior goods. The long-run coefficients of foreign price for Nigeria, Niger, and Burkina Faso are 5.32, 7.87, and 1.91 respectively, suggesting that their exports are mainly substitute goods. The authors confirm long-run asymmetry for three out of nine countries and short-run asymmetry for five countries. Only three countries have an asymmetric trade-volatility relationship in both the short and long run. The study suggests that Nigeria, Togo, and Benin diversify their economies, as their exports to the Eurozone are dominated by inferior goods and services. Additionally, the study recommends that the governments of Nigeria, Niger, and Burkina Faso provide support, as their goods and services are substitutes.

AbstractThis study evaluates the relationship investor sentiment, exchange rate volatility, net foreign portfolio investment and the country index crash risk. The moderating variable, net foreign portfolio investment, is introduced. While previous crash risk studies typically focus on individual firms, this study takes a country-level perspective. CRASH, NCSKEW and DUVOL represent the Country Index Crash risk. The data will be analyzed using EViews software, including panel data from logistic regression and OLS regression using a two-dimensional clustered standard error method. The findings demonstrate the importance of exchange rate fluctuations and investor mood in affecting the country index crash risk. The influence of Net Foreign Portfolio Investment on the crash risk is negligible. Moreover, the study reveals that higher Net Foreign Portfolio Investment does not strengthen the impact of Investor Sentiment but weakens its influence in conjunction with Exchange Rate Volatility on the country index crash risk.

Low and stable inflation and exchange rates are the main objectives of inflation-targeting monetary policy. The internal and external stabilities are prerequisites for promoting economic growth. Using a two-stage GARCH, we investigated the effect of inflation instability and exchange rate unpredictability on the economic growth uncertainty in the case of Indonesia over the period 2000(1)– 2022(12). It was evident that both inflation instability and exchange rate unpredictability hurt output growth. The impact of inflation instability was higher than that of exchange rate unpredictability. While the output growth was higher in the post inflation-targeting regime adoption, the effect of real exchange rate instability was greater than that of nominal exchange rate unpredictability. Those findings suggested that the monetary authority should strengthen their commitment to achieve the inflation target range. The sharper focus on the inflation stability might avoid the monetary authority conducting twofold targets of inflation and exchange rate stability to stimulate economic growth.

Bu çalışmada özellikle gelişmekte olan ülkelerin iç ve dış denge amaçları açısından son derece önemli olan finansal dışa açıklık ve faiz oranının döviz kuru oynaklığı üzerindeki etkileri araştırma konusu yapılmıştır. Bu amaçla çalışmada; Türkiye için finansal açıklık, faiz oranları ve EGARCH yöntemi ile tespit edilen döviz kuru oynaklığına ilişkin 2002Q1-2023Q1 dönemine ait çeyreklik veriler kullanılmıştır. Çalışmada, geleneksel ADF birim kök testinin yanı sıra yeni nesil zaman serisi analizleri olan F-Kruse birim kök ve Fourier-Shin eş-bütünleşme testleri kullanılmıştır. Ayrıca uzun dönem katsayısı belirlemek için DOLS modeli tahmin edilmiştir. Yapılan analizlerin sonuçları, Türkiye’de döviz kuru oynaklığı üzerinde finansal dışa açıklıktaki ve faiz oranlarındaki artışın sırasıyla negatif ve pozitif etkileri olduğunu göstermektedir. Söz konusu bulgular, Türkiye’nin dış borçlanmaya ihtiyacı olan bir ülke konumunda olduğuna, faizlerin yanı sıra finansal istikrara da önem verilmesi gerektiğine işaret etmektedir.

This study explores the pass-through of unanticipated movements in growth and variance of exchange rate to inflation. First, it quantifies the volatility of the exchange rate by using the GARCH-X model. Foreign exchange reserves are considered as an exogenous variable that plays an instrumental role in stabilising the exchange rate. Second, the SVAR model is estimated to identify the responses of inflation to unanticipated shocks. The results indicate that there is a direct relationship between exchange rate volatility and inflation in the economies where the volatility is relatively high, such as Pakistan, India, Indonesia, the Philippines, and Turkiye. While, in economies with flexible exchange rate regimes and less volatile exchange rates, volatility tend to have either a negative or minimal effect on inflation. The findings on the effect of unexpected exchange rate fluctuations on inflation align with economic theory. Countries like Pakistan, India, Indonesia, Malaysia, Hungary, Egypt, Georgia, and Poland, which experience greater exchange rate volatility, exhibit a positive pass-through to inflation. Consequently, the study concludes that exchange rate stability is crucial for controlling inflation in emerging economies. Additionally, the study suggests that these countries should prioritize building adequate foreign exchange reserves, and emphasizes the importance of central bank independence in monetary policy decision-making. [ABSTRACT FROM AUTHOR]

In this study, the effects of financial openness and interest rate on exchange rate volatility, which are important especially for the internal and external balance purposes of developing countries, were investigated. For this purpose, quarterly data for the period 2002Q1-2023Q1 regarding financial openness, interest rates, and exchange rate volatility determined by the EGARCH method for Turkey were used in the study. In the study, ADF unit root test and the new generation time series analyses, F-Kruse unit root and Fourier-Shin cointegration tests, were used. Furtermore, DOLS model was estimated to determine the longterm coefficients. The results of used analyzes showed that the increase in financial openness and interest rates had respectively negative and positive effects on exchange rate volatility in Turkey. These findings have pointed that Turkey is a country in need of external borrowing, and it should be given importance financial stability as well as interest rates. [ABSTRACT FROM AUTHOR]

Understanding which factors influence exchange rate movements is important for understanding economic development, trade patterns, investment decisions, and for designing economic policies. In this study, we allow for monetary, domestic and global financial variables to assess the relevant importance of each of the variables to exchange rate volatility in the case of Turkey. The paper investigates the dynamics of exchange rate volatility of the Turkish lira in a complementary perspective by employing both Generalized autoregressive conditional heteroskedasticity (GARCH) method and Lyapunov exponents over the period from March 1, 2019 to November 11, 2021. Firstly, decomposing the impact of domestic and global financial variables, the results of the GARCH model indicate that the exchange rate volatility is affected by Volatility index (VIX) and Credit default swaps (CDS). This result suggests that the exchange rate shocks experienced are mainly caused by global factors, therefore policymakers should focus on volatility spillovers caused by global financial markets. Secondly, detected positive maximal Lyapunov exponent shows that complexity in foreign exchange markets has been increased, market expectations lead to multiple-equilibria and diverging volatility eventually will generate recurrent spikes in currency value. These complementary findings have important implications for interventions of Central banks and preventing systemic risks, as well as portfolio and risk management. [ABSTRACT FROM AUTHOR]

Low and stable inflation and exchange rates are the main objectives of inflation-targeting monetary policy. The internal and external stabilities are prerequisites for promoting economic growth. Using a two-stage GARCH, we investigated the effect of inflation instability and exchange rate unpredictability on the economic growth uncertainty in the case of Indonesia over the period 2000(1)– 2022(12). It was evident that both inflation instability and exchange rate unpredictability hurt output growth. The impact of inflation instability was higher than that of exchange rate unpredictability. While the output growth was higher in the post inflation-targeting regime adoption, the effect of real exchange rate instability was greater than that of nominal exchange rate unpredictability. Those findings suggested that the monetary authority should strengthen their commitment to achieve the inflation target range. The sharper focus on the inflation stability might avoid the monetary authority conducting twofold targets of inflation and exchange rate stability to stimulate economic growth. [ABSTRACT FROM AUTHOR]

We investigate the impact of exchange rate volatility on exports and imports between South Africa and its main trading partners, namely the United States and China, across 22 import and export industries. The study employs the quantile autoregressive distributive lag (QARDL) model using quarterly data from the period spanning from 1994Q1 to 2022Q4. Our initial ARDL estimates establish that currency volatility does not significantly harm most trade sectors with both countries. In fact, many industries exhibit an insignificant or positive correlation with currency volatility. Nevertheless, upon re-estimating the regressions using the QARDL model, we uncover ‘hidden cointegration’ relationships existing at quantiles beyond the mean and median estimates, which are undetectable by traditional ARDL models. By considering these location-based asymmetries, we conclude that trade activities with China benefit more from exchange rate volatility compared to those with the United States. Overall, our findings imply that monetary authorities may not need to intervene in currency markets to stimulate trade with the top trading partners, as firms appear to be willing to bear the currency risks associated with the volatile Rand exchange rate.

This study investigates the relationship between the real effective exchange rate (REER) and its volatility with the net inflow of foreign direct investment (FDI) to Canada, placing a novel emphasis on sector-level analysis. The study utilizes time series data from 2007 to 2022 and employs the autoregressive distributed lag (ARDL) approach to assess short-run and long-run relationships between the said variables. The findings reveal significant impacts of changes in REER, its volatility, and GDP on net FDI in the short run, with lasting effects of REER and its volatility, lagged GDP, and trade openness on FDI in the long run. At the sectoral level, FDI inflows in energy and mining, manufacturing, finance, and insurance exhibit significant sensitivity to changes in REER. Simultaneously, the volatility of REER has a significant impact on FDI inflows in manufacturing industries and the finance and insurance sector in the short run. In the long run, REER exerts a significant influence on the net FDI inflows in energy and mining, as well as manufacturing industries. The asymmetry in findings suggests a need for sector-specific attention to retaining and attracting FDI to Canada. [ABSTRACT FROM AUTHOR]

The main goal of this work is to develop an empirical investigation on the occurrence of a sanitary crisis with data of cases and deaths of Covid-19, and their possible impact on the exchange rate volatility for the BRICS with daily data from February 20, 2020, to February 28, 2022, using ARDL, FMOLS and DOLS models. The results indicate that increases in the number of confirmed cases and deaths are associated with lower levels of exchange rate volatility, indicating that monetary and fiscal policies were inefficient in the context of a generalized health crisis in directing capital flows, and since the Covid-19 crisis is a global one, during the period of analysis there was a relative exchange rate stability, in other words, a lower exchange rate volatility. [ABSTRACT FROM AUTHOR]

Ninety-five percent of Kenyan coffee is exported as green coffee in the international market in Europe. As a spot market, this presents a problem in that the currency of the foreign market differs from that of the domestic country (Kenya), resulting in an exchange rate problem. Kenya has a floating exchange rate system, which means that the country's exchange rate is decided by the forces of demand and supply for domestic currency. This means that there is a comovement of domestic currencies against other global currencies; in this case, the currencies of Kenya's key coffee market. Therefore, this study examines the influence of currency volatility on Kenyan coffee exports. According to recent figures from the Central Bank of Kenya, Kenya's real exchange rate fluctuated from 2001 to 2020 and the country recorded a negative trend in coffee exports during the same period. This begs the question of whether real exchange rate volatility had an impact on coffee exports during this period. Data was sourced from the Coffee Directorate, the International Coffee Exchange, and the Central Bank of Kenya and was analyzed using the gravity model. The exchange rate volatility was estimated using Purée and Steinherr's model. The findings show that exchange rate volatility hurts Kenyan coffee exports. Similar results were obtained through robustness checks by quantile regression. Consequently, this study advises that monetary and fiscal policy measures should be tailored to reduce exchange rate volatility, while still promoting agricultural exports and overall macroeconomic stability. Impact statement: One of the most contentious issues in international trade today is the impact of exchange rate volatility on imports and exports. Thus, it is important to understand how Kenya's coffee exports are impacted by changes in exchange rates. For example, there are studies that report positive or negative effects, but there is a dearth of research on coffee exports from Sub-Saharan Africa, particularly from Kenya. The study's conclusions suggest that Kenyan coffee exports are negatively impacted by fluctuations in exchange rates. This finding may be helpful in reevaluating macroeconomic strategies to boost agricultural exports in nations with economies that are comparable to Kenya's. [ABSTRACT FROM AUTHOR]

This article evaluates the asymmetric impact of exchange rate volatility on the exports of nine ECOWAS countries to the Eurozone. By comparing Autoregressive Distributed Lag (ARDL) and Nonlinear ARDL (NARDL) models, the study concludes that the effect of volatility on ECOWAS-Eurozone exports (EEE) is asymmetric. The study also investigates the impact of foreign income and prices on the EEE and categorises the goods and services that make up the EEE for each country based on their coefficients. The results show that exchange rate volatility has an asymmetric effect on the EEE, which comprise both substitute and inferior goods. The study recommends that ECOWAS authorities avoid using proportional policies to address increased and decreased volatility, as their impact on trade is asymmetric. The long-run coefficients of income for Nigeria, Togo, and Benin are -1.29, -4.67, and -2.64 respectively, indicating that their exports are dominated by inferior goods. The long-run coefficients of foreign price for Nigeria, Niger, and Burkina Faso are 5.32, 7.87, and 1.91 respectively, suggesting that their exports are mainly substitute goods. The authors confirm long-run asymmetry for three out of nine countries and short-run asymmetry for five countries. Only three countries have an asymmetric trade-volatility relationship in both the short and long run. The study suggests that Nigeria, Togo, and Benin diversify their economies, as their exports to the Eurozone are dominated by inferior goods and services. Additionally, the study recommends that the governments of Nigeria, Niger, and Burkina Faso provide support, as their goods and services are substitutes. [ABSTRACT FROM AUTHOR]

This study evaluates the relationship investor sentiment, exchange rate volatility, net foreign portfolio investment and the country index crash risk. The moderating variable, net foreign portfolio investment, is introduced. While previous crash risk studies typically focus on individual firms, this study takes a country-level perspective. CRASH, NCSKEW and DUVOL represent the Country Index Crash risk. The data will be analyzed using EViews software, including panel data from logistic regression and OLS regression using a two-dimensional clustered standard error method. The findings demonstrate the importance of exchange rate fluctuations and investor mood in affecting the country index crash risk. The influence of Net Foreign Portfolio Investment on the crash risk is negligible. Moreover, the study reveals that higher Net Foreign Portfolio Investment does not strengthen the impact of Investor Sentiment but weakens its influence in conjunction with Exchange Rate Volatility on the country index crash risk. [ABSTRACT FROM AUTHOR]

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This paper examines the impact of central bank intervention on the exchange rate fluctuations within the framework of inflation-targeting. Focusing on Indonesia, the Philippines, and Thailand from 2005(7) to 2022(12), empirical analysis using quantile regression demonstrates that the central bank intervention mitigates real exchange rate volatility. However, there is a discernible upward linear trend in the coefficient related to market intervention. While overall behavior tends to be symmetrical, selling intervention and interventions during depreciation periods differently affect real exchange rate volatility across quantiles. Those results underline the importance for monetary authorities to consider shifts in exchange rate expectations over the medium term. Accordingly, the selective implementation of market intervention, tailored to the dynamics of real exchange rate volatility, is essential for upholding the credibility of inflation-targeting monetary policy [ABSTRACT FROM AUTHOR]

This study aims to determine the symmetric and asymmetric effects of exchange rate volatility and other explanatory variables (real exchange rate, industrial production index, and COVID-19) on sixteen (16) food products traded between Indonesia and the United States, Indonesia and China. The study used the ARCH/GARCH approach and estimate the volatility of the exchange rate. Linear and nonlinear autoregressive distributed lag (ARDL) were applied to estimate the short- and long-run effect for the period 2009:M1–2020:M12. Findings from the ARDL method indicate that, in the short-term exchange rate volatility has a significant positive/negative effect on many products exported and imported throughout the study period. Different results were found in the Nonlinear ARDL method where a significant effect occurred especially on the food products import. The result further indicates that exchange rate volatility has a more negative effect symmetrically or asymmetrically. These results imply that most Indonesian traders to the United States and China tend to behave as risk-averse in the long run when responding to the phenomenon of exchange rate volatility. As a measure of robustness, a quantile regression further confirms that exchange rate volatility consistently affects food product trade. With this, therefore, stable exchange rate policies are needed to lessen the harmful effect of volatility on trade flows and balance the risk-taking behaviour among importers and exporters.

Decisions of central banks on foreign exchange rates are based on the comovement of foreign exchange (FOREX) in mature markets such as US dollar rates to the British pound, euro, Chinese yuan, Japanese yen and Australian dollar. We investigate the long-run movement and dynamic quantile connectedness of volatility among pairs of these exchange rates. The updated residual-based fractional cointegration testing framework using narrow-band frequency domain least squares estimator is used to obtain the residual series for fractional cointegration. Quantile dynamic connectedness framework for volatility spillovers at different market conditions, depicted by quantiles, are used. We find evidence of long memory cointegration in seven pairs of exchange rates involving the previously mentioned currencies. These seven cases also correspond to a higher average index of quantile connectedness, with the effect of connectedness phasing out at higher quantiles and being more visible at lower quantiles. A portfolio investment strategy using optimal portfolio weights and hedge ratios for maintaining the accrued profit at the FOREX market is also presented.

Since the advent of floating exchange rates in Nigeria, exchange rate has been highly volatile. Excessive volatility has severe implications for international trade. This study revisits the long- standing debates on the link between exchange rate volatility and trade flow for the Nigerian economy, 1980-2020. We employ the Granger causality tests based on VECM\VAR model. The results show evidence for a bi-directional causality from trade to exchange rate volatility and vice versa. Since the Nigeria seeks export promotion, there is need to undertake measures that will check excessive fluctuations beyond fundamentals needed for the economy. Hence, we suggest that monetary authority should continue its periodic exchange rate intervention to curtail excessive swings. This should be carefully done to maintain policy rate that will not be counter-productive.

Bretton Woods sisteminin yıkılması ile esnek kur sistemine geçiş sağlanmış ve döviz kurlarındaki oynaklıkların makroekonomik faktörler üzerindeki etkisi birçok çalışmaya konu olmuştur. Bu koşullar altında oynaklığın modellenmesi, döviz kuru oynaklığı ile borsa endeks oynaklık ilişkilerinin ve oynaklık yayılmalarının belirlenmesi piyasa aktörleri için önemlidir. Bu çerçevede çalışmanın amacı, Türkiye’de 2002-2021 dönemleri arasında döviz kuru oynaklığı ile borsa endeks oynaklığı arasındaki etkileşimi incelemektir. Çalışmada döviz kuru değişkeni olarak ABD doları oynaklık verisi ve Euro oynaklık verisi, borsa değişkeni olarak BIST100, BISTHIZ, BISTSINAI endeksleri oynaklık verileri kullanılmıştır. Çalışmada kullanılan veri setinin durağanlığı ADF birim kök testi ve Lee-Strazicich birim kök testi ile ele alınmıştır. Döviz kuru oynaklığı ile borsa endeks oynaklığı arasındaki nedensellik ilişkisini belirlemek için Toda-Yamamoto Modeli kullanılmıştır. Daha sonra varyans ayrıştırma testleri ile değişkenlerdeki değişimin ne kadarı kendi ne kadarı diğer değişkenlerden kaynaklandığı belirlenmiştir. Son olarak araştırmada kullanılan değişkenlerin birim şoklara tepkisi, etki-tepki testleri ile incelenmiştir. Toda-Yamamoto nedensellik testine göre tüm endeks değişkenleri ile döviz kuru oynaklığı değişkenleri arasında çift yönlü bir nedensellik ilişkisi olduğu sonucuna ulaşılmıştır.

It is essential to predict what the exchange rate will be in the future. There are several factors affecting value of national currency of an economy. One of them is risk perception and after the end of “Quantitative Easing” program by Federal Reserve, risk perception for emerging market economies has changed. In this study, we aim to analyze interaction between credit default swap premium as a risk indicator and exchange rate in the Turkish economy after the global finance crisis. Results imply that risk perception has essential effects on the value of Turkish lira against U.S. dollar and to reduce volatility in the value of Turkish lira, risk perception has to be decreased.

This study investigates the impact of topological structure and exchange rate volatility on the collapse of industrial ecosystems. To answer this question, we developed a multidimensional nonlinear dynamic model that captures the dynamics of industrial ecosystem structures. Furthermore, the formulated complex model is reduced to a 1 D model system without lowering its ability to predict the tipping point (total collapse point). Using 1995–2015 input-output OECD data, the study was divided into three phases (before, during, and after the global crisis) for empirical testing. The results reveal that a more robust topological structure is more resilient to economic shocks. Countries with higher exchange rate volatilities are more vulnerable to global crises, even though they have a strong topological structure to resist risk. Furthermore, the upsurge in foreign direct investment (FDI) enhances the robustness of the industrial structure and reduces the exchange rate volatility risk. The results of this study will help strengthen the robustness of the industrial structure of the system to withstand both local and global perturbations better. [ABSTRACT FROM AUTHOR]

Decisions of central banks on foreign exchange rates are based on the comovement of foreign exchange (FOREX) in mature markets such as US dollar rates to the British pound, euro, Chinese yuan, Japanese yen and Australian dollar. We investigate the long-run movement and dynamic quantile connectedness of volatility among pairs of these exchange rates. The updated residual-based fractional cointegration testing framework using narrow-band frequency domain least squares estimator is used to obtain the residual series for fractional cointegration. Quantile dynamic connectedness framework for volatility spillovers at different market conditions, depicted by quantiles, are used. We find evidence of long memory cointegration in seven pairs of exchange rates involving the previously mentioned currencies. These seven cases also correspond to a higher average index of quantile connectedness, with the effect of connectedness phasing out at higher quantiles and being more visible at lower quantiles. A portfolio investment strategy using optimal portfolio weights and hedge ratios for maintaining the accrued profit at the FOREX market is also presented. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of currency substitution on exchange rate volatility using monthly data from January 1990 to May 2019. The paper applies the exponential generalized autoregressive conditional heteroscedastic in mean (EGARCH-M) model as the estimation technique. The results reveal that currency substitution has a significant positive impact on exchange rate volatility. The paper also confirms the existence of leverage effects in the exchange rate volatility. It is also revealed that negative shocks are found to have greater effect than positive shocks. Furthermore, the results indicate that inflation targeting framework has a significant positive impact on exchange rate volatility. Based on the findings and discussion, the paper concludes that currency substitution increases exchange rate volatility in Ghana. Given the findings, vital policy implications aimed at reducing or eliminating volatility in exchange rate have been provided for policy consideration.

Recent evidence suggests that stock markets experience shift in volatility which can affect development of such markets. This study re-examines exchange rate volatility and stock market development in Nigeria using annual data from 1985-2020. The study employed multivariate regression analysis as well as granger causality test to model the variables. Results show that exchange rate volatility has a significant negative impact on stock market capitalization and volume of transactions on the stock market. Essentially, exchange rate volatility has significant weak negative correlation with stock market capitalization and stock market volume of transactions. It is observed that there is no causality between exchange rate volatility and the four stock market indicators investigated. The study concludes that the effect of exchange rate volatility on stock market development in Nigeria is negative. Hence, the study recommends that dollarization of stock market transactions and operations in the Nigerian stock market should be discouraged.

With the collapse of the Bretton Woods system, the transition to the flexible exchange rate system was achieved and the effect of exchange rate volatility on macroeconomic factors has been the subject of many studies. Under these conditions, modelling volatility, determining exchange rate volatility and stock market index volatility and volatility spillovers are important for market actors. In this context, the aim of the study is to examine the interaction between exchange rate volatility and stock market index volatility between 2002-2021 in Turkey. In the study, US dollar volatility data and Euro volatility data are used as exchange rate variables, and BIST100, BISTHIZ, BISTSINAI indices volatility data are used as stock market variables. The stationarity of the data set used in the study is examined with ADF unit root test and Lee-Strazicich unit root test. TodaYamamoto Model is used to determine the causality relationship between exchange rate volatility and stock market index volatility. Then, with variance decomposition tests, it is determined how much of the change in the variables is caused by itself and how much is caused by other variables. Finally, the response of the variables used in the research to unit shocks is examined by impulse-response tests. According to the Toda-Yamamoto causality test, it is concluded that there is a two-way causality relationship in terms of all index variables and exchange rate volatility variables. [ABSTRACT FROM AUTHOR]

Purpose -- This study assesses the symmetric and asymmetric effects of exchange rate volatility on trade flows in Nigeria. Method -- The study employs quarterly data and covers the period 1995q1 to 2020q4. The data were sourced from International Financial Statistics (IFS) and Central Bank of Nigeria (CBN) websites. The paper applies both linear ARDL and non-linear ARDL (NARDL) models. These methods are employed to evaluate the symmetric and asymmetric effects of exchange rate volatility. Result -- The results from linear ARDL model show that exchange rate volatility has only significant short-run effect on export while it has both short-run and long run effects on the imports. The findings from the non-linear ARDL suggest that exchange rate volatility has neither short run nor long run asymmetric effects on exports. However, the non-linear ARDL model reveals short run and long run asymmetric effects of exchange rate volatility on imports. The findings show that increase in volatility reduces imports while decrease in volatility boosts imports. Contribution -- Previous studies have only investigated the symmetric effects of exchange rate volatility on trade balance in Nigeria. This study contributes to the literature by examining the symmetric and asymmetric effects of exchange rate volatility on trade flows, using the GARCH-based measure of exchange rate volatility. [ABSTRACT FROM AUTHOR]

Nigeria's trade volume and value with other countries have increased significantly. According to the Economic Complexity Index (ECI, 2021), Nigeria is ranked the 52nd largest economy in terms of total exports ($57.7 billion) and the 30th largest economy in terms of GDP ($440.83 billion in current US dollars). Nigeria's top five export destinations are Spain, the United States, France, and China. Using the standard demand function, this study examined the effect of exchange rate volatility on Nigeria's exports to the top five export destinations for the period 1995-2020 in an autoregressive distributed lag (ARDL) mode. The empirical results show that exchange rate volatility, gross domestic product, and population are strong determinants of real exports in Nigeria, both in the short and long run. The results further show that the depreciation of the naira tends to increase exports for France and Spain in the short run and for France, India, and Spain in the long run. While it reduces exports for China and the USA in the short run, its impact is insignificant for India in the long run. Relative prices had an adverse effect on exports in most countries, both in the short and long run. Among others, this study recommends that the standard organization of Nigeria, in conjunction with the export promotion council, should synergize and set up a standard itch-free verification system that will ensure that Nigerian goods meant for export are of international quality. More so, monetary authorities should improve the availability of hedging instruments and promote the use of hedging among exporters to support them in coping with exchange-rate uncertainty. Lastly, there is a need for an appropriate pricing template for categories of export products to avoid the deleterious effects of relative prices. This study also recommends that future studies can investigate the asymmetric effects of exchange rate volatility on exports. [ABSTRACT FROM AUTHOR]

The COVID-19 crisis has not only manifested as a tragic public health crisis but also as an unprecedented economic disruption characterized by economic deterioration, the sharp increase in market volatility and the blinding uncertainty about the impact of the pandemic, especially in the context of developing countries. It is therefore not surprising that central banks seeking to maintain macroeconomic and financial stability, which are critical for sustained economic development, have maintained the practice of central bank intervention, especially in developing countries. This paper empirically examines the effect of central bank foreign exchange interventions on the level and volatility of the Uganda shilling / US dollar exchange rate (UGX/USD). Utilizing daily data spanning the period December 30, 2016, to 1 December 2021, we estimate a foreign exchange intervention model within a GARCH theoretical framework. Empirical results indicate that foreign exchange interventions have had mixed impact on the volatility of the exchange rate. In addition, despite generating significant uncertainty, the COVID 19 pandemic adverse shock results in a 0.03 percent appreciation due to Uganda's policy response to the COVID-19 pandemic.

The paper develops a two-type behavioral heterogeneous agent model including fundamentalists and chartists. It examines whether investors’ behavioral heterogeneity is related to the excessive volatility of RMB exchange rate. We use the deviation of the real exchange rate from the fundamental exchange rate as a measure of excessive exchange rate volatility. The fundamental value is calculated by the revised RMB fundamental exchange rate model with cointegration technology. After estimating the behavioral heterogeneous agent model using the monthly RMB exchange rate data from October 2006 to November 2020, we find that the heterogeneity of traders in price and trading strategies can significantly explain excess volatility of the RMB exchange rate. Our analysis of two significant fluctuations in 2015-2016 and 2018-2019 further corroborates our key finding that investors’ behavioral heterogeneity plays an important role in explaining excess volatility of RMB exchange rate.

Purpose — This study assesses the symmetric and asymmetric effects of exchange rate volatility on trade flows in Nigeria. Method — The study employs quarterly data and covers the period 1995q1 to 2020q4. The data were sourced from International Financial Statistics (IFS) and Central Bank of Nigeria (CBN) websites. The paper applies both linear ARDL and non-linear ARDL (NARDL) models. These methods are employed to evaluate the symmetric and asymmetric effects of exchange rate volatility. Result — The results from linear ARDL model show that exchange rate volatility has only significant short-run effect on export while it has both short-run and long run effects on the imports. The findings from the non-linear ARDL suggest that exchange rate volatility has neither short run nor long run asymmetric effects on exports. However, the non-linear ARDL model reveals short run and long run asymmetric effects of exchange rate volatility on imports. The findings show that increase in volatility reduces imports while decrease in volatility boosts imports. Contribution — Previous studies have only investigated the symmetric effects of exchange rate volatility on trade balance in Nigeria. This study contributes to the literature by examining the symmetric and asymmetric effects of exchange rate volatility on trade flows, using the GARCH-based measure of exchange rate volatility.

Research background: The Brexit referendum had a profound effect on the economic relations between the United Kingdom (UK) and continental Europe. Major economic and financial determinants were affected, including the impact of the GBP/EUR exchange rate volatility on the dynamics of UK exports to the Eurozone. Purpose of the article: This paper seeks to assess the extent to which these dynamics have changed since Brexit and to estimate the magnitude of their impact. Methods: To this end, the volatility behavior of the GBP/EUR exchange rate before and after Brexit is captured using EWMA, GARCH(p,q), and EGARCH(p,q) models for the period of January 1, 2010 to August 31, 2020. The post-Brexit change in the volatility structure of GBP/EUR exchange rates is then tested by including a dummy in the optimal volatility model. Finally, the Autoregressive Distributed Lag (ARDL) Bounds Testing approach is employed to analyze the relationships between exchange rate volatility and exports. Findings & value added: GARCH(1,1) was selected as the winning model and used to examine the volatility structure of the post-Brexit exchange rate, which revealed no significant change. By incorporating a well-grounded proxy for exchange rate volatility into the demand function of exports, and controlling for the industrial production index, terms of trade, and real exchange rate, the analysis showed that exchange rate volatility had a negative impact on export volume to the Eurozone in both the long and short run. Additionally, the industrial production index had a positive effect on export volume in both the long and short run, while an appreciation in the value of the pound relative to the euro adversely affected the competitiveness of UK exports in the Eurozone market in the long run, with no impact in the short run. This paper serves as a benchmark for future studies, as it follows a three-step modeling approach and provides valuable insights into the potential economic and financial consequences a European Union (EU) member state may face should it choose to exit the EU. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of currency substitution on exchange rate volatility using monthly data from January 1990 to May 2019. The paper applies the exponential generalized autoregressive conditional heteroscedastic in mean (EGARCH-M) model as the estimation technique. The results reveal that currency substitution has a significant positive impact on exchange rate volatility. The paper also confirms the existence of leverage effects in the exchange rate volatility. It is also revealed that negative shocks are found to have greater effect than positive shocks. Furthermore, the results indicate that inflation targeting framework has a significant positive impact on exchange rate volatility. Based on the findings and discussion, the paper concludes that currency substitution increases exchange rate volatility in Ghana. Given the findings, vital policy implications aimed at reducing or eliminating volatility in exchange rate have been provided for policy consideration. [ABSTRACT FROM AUTHOR]

Exchange rate fluctuations do not affect only the companies and individuals that engage in foreign currency-based transactions. As economic exposure features, even entities with no foreign currency assets and obligations are affected from the movements in exchange rates. Exchange rates, in fact, are closely related with several macroeconomic variables including stock prices and returns. Investigations into the relationship between exchange rate fluctuations and stock returns are widely observed among financial participants and academic circles. This study aims at exploring the link between exchange rate volatility and stock returns by investigating the US Dollar/Turkish Lira (USD/TRY) exchange rate volatility and Borsa Istanbul 100 Index (BIST-100) returns. In the study, 406 days of data for the period 11.03.2020-28.10.2021 were included in the analysis. Augmented Dickey-Fuller (ADF) unit root test was used to analyze the stationarity of the variables. As a result of the test, it is seen that the series are stationary at the I(0) level. After performing the stationarity test, ARMA (2,2) from linear stationary stochastic models and EGARCH (2,2) from general autoregressive conditional variable variance models were estimated to model exchange rate volatility. Then, Granger causality test was used to see if there is a relationship between exchange rate volatility and stock returns. The findings put forward the existence of bidirectional causality relationship between the variables. As the time span of the data period overlaps with the pandemic period, it appears that causality relationship obtained by the study is like the ones that held in the studies in the pre-pandemic period. [ABSTRACT FROM AUTHOR]

The COVID-19 crisis has not only manifested as a tragic public health crisis but also as an unprecedented economic disruption characterized by economic deterioration, the sharp increase in market volatility and the blinding uncertainty about the impact of the pandemic, especially in the context of developing countries. It is therefore not surprising that central banks seeking to maintain macroeconomic and financial stability, which are critical for sustained economic development, have maintained the practice of central bank intervention, especially in developing countries. This paper empirically examines the effect of central bank foreign exchange interventions on the level and volatility of the Uganda shilling / US dollar exchange rate (UGX/USD). Utilizing daily data spanning the period December 30, 2016, to 1 December 2021, we estimate a foreign exchange intervention model within a GARCH theoretical framework. Empirical results indicate that foreign exchange interventions have had mixed impact on the volatility of the exchange rate. In addition, despite generating significant uncertainty, the COVID 19 pandemic adverse shock results in a 0.03 percent appreciation due to Uganda's policy response to the COVID-19 pandemic. [ABSTRACT FROM AUTHOR]

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The aim of this paper is to examine exchange rate volatility using GARCH models with a new innovation distribution, the Normal Tempered Stable. We estimated daily exchange rate volatility using different distributions (Normal, Student, NIG) in order to specify the performed model. In addition, a forecasting analysis is performed to check which distribution reveals the best out-of-sample results. We found that the estimated parameters of GARCH-NTS model outperform the GARCH-N and GARCH-t ones for all currencies. Besides, we asserted that GARCH-NTS and EGARCH-NTS are the preferred models in terms of out-of sample forecasting accuracy. Our results indicating the performance of GARCH models with NTS distribution contribute to increase the accuracy of risk measures which is very important for international traders and investors.