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Islam, Tamanna, Ashfaque A. Mohib, and Shahnaz Zarin Haque. "Econometric Models for Forecasting Remittances of Bangladesh." Business and Management Studies 4, no. 1 (December 13, 2017): 1. http://dx.doi.org/10.11114/bms.v4i1.2860.
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At present, the remittance of Bangladesh (RB) is the largest source of foreign exchange earning of the country. The RB plays a critical role in alleviating the foreign-exchange constraint and supporting the balance of payments, enabling imports of capital goods and raw materials for industrial development. Remittance from overseas migrant workers certainly increases the income disparity between classes of the rural society. Therefore forecasting plays an important role to know the future situation of economic condition. This paper employed the prospective data on RB to derive a unique and suitable forecasting model. The data were collected from Bangladesh Bank (BB) during January, 1998 to December, 2003. The Autoregressive Integrated Moving Average (ARIMA) and the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models were used to find out the best one. The findings indicated that the ARIMA (0,1,1) (0,2,1)12 and the GARCH (2,1) models were appropriate for our data and the GARCH (2,1) model appeared to be the best one between these.
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Chen, An-Sing, and Mark T. Leung. "Dynamic Foreign Currency Trading Guided by Adaptive Forecasting." Review of Pacific Basin Financial Markets and Policies 01, no. 03 (September 1998): 383–418. http://dx.doi.org/10.1142/s0219091598000247.
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The difficulty in predicting exchange rates has been a long-standing problem in international finance as most standard econometric methods are unable to produce significantly better forecasts than the random walk model. Recent studies provide some evidence for the ability of multivariate time-series models to generate better forecasts. At the same time, artificial neural network models have been emerging as alternatives to predict exchange rates. In this paper we propose a nonlinear forecast model combining the neural network with the multivariate econometric framework. This hybrid model contains two forecasting stages. A time series approach based on Bayesian Vector Autoregression (BVAR) models is applied to the first stage of forecasting. The estimates from BVAR are then used by the nonparametric General Regression Neural Network (GRNN) to generate enhanced forecasts. To evaluate the economic impact of forecasts, we develop a set of currency trading rules guided by these models. The optimal conditions implied by the investment rules maximize the expected profits given the expected changes in exchange rates and the interest rate differentials between domestic and foreign countries. Both empirical and simulation experiments suggest that the proposed nonlinear adaptive forecasting model not only produces better forecasts but also results in higher investment returns than other types of models. The effect of risk aversion is also considered in the investment simulation.
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GNOATTO, ALESSANDRO. "COHERENT FOREIGN EXCHANGE MARKET MODELS." International Journal of Theoretical and Applied Finance 20, no. 01 (February 2017): 1750007. http://dx.doi.org/10.1142/s0219024917500078.
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A model describing the dynamics of a foreign exchange (FX) rate should preserve the same level of analytical tractability when the inverted FX process is considered. We show that affine stochastic volatility models satisfy such a requirement. Such a finding allows us to use affine stochastic volatility models as a building block for FX dynamics that are functionally-invariant with respect to the construction of suitable products/ratios of rates, thus generalizing the model of [A. De Col, A. Gnoatto & M. Grasselli (2013) Smiles all around: FX joint calibration in a multi-Heston model, Journal of Banking and Finance 37 (10), 3799–3818.].
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ZIMMERMANN, GEORG, RALPH NEUNEIER, and RALPH GROTHMANN. "MULTI-AGENT MARKET MODELING OF FOREIGN EXCHANGE RATES." Advances in Complex Systems 04, no. 01 (March 2001): 29–43. http://dx.doi.org/10.1142/s021952590100005x.
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A market mechanism is basically driven by a superposition of decisions of many agents optimizing their profit. The macroeconomic price dynamic is a consequence of the cumulated excess demand/supply created on this micro level. The behavior analysis of a small number of agents is well understood through the game theory. In case of a large number of agents one may use the limiting case that an individual agent does not have an influence on the market, which allows the aggregation of agents by statistic methods. In contrast to this restriction, we can omit the assumption of an atomic market structure, if we model the market through a multi-agent approach. The contribution of the mathematical theory of neural networks to the market price formation is mostly seen on the econometric side: neural networks allow the fitting of high dimensional nonlinear dynamic models. Furthermore, in our opinion, there is a close relationship between economics and the modeling ability of neural networks because a neuron can be interpreted as a simple model of decision making. With this in mind, a neural network models the interaction of many decisions and, hence, can be interpreted as the price formation mechanism of a market.
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Sun, Wenxiang, Jisheng Peng, Juelin Ma, and Weiguo Zhong. "Evolution and performance of Chinese technology policy." Journal of Technology Management in China 4, no. 3 (September 25, 2009): 195–216. http://dx.doi.org/10.1108/17468770911013528.
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PurposeThe purpose of this paper is to analyze the evolution of Chinese technology policy, assess its technological and economic performance from the visual angle of “market in exchange for technology” strategy.Design/methodology/approachA quantified method based on policy contents from policy power, policy goals and policy means was developed to build a policy database, and analyze the evolutionary tendency of Chinese technology policy. In addition, econometric models were built to assess the performance of technology policy.FindingsThe critical goals of Chinese technology policy are introducing technology directly or indirectly by introducing foreign investment and innovation, but the critical linkage between introduction and innovation‐technology absorption was absent – almost all policy means aim at the introduction of foreign investment and innovation but not technology absorption. More unfortunately, the econometric results show that introduction of foreign investment contributes little, while technology absorption contributes much more. Institutional path‐dependence and the competition for benefits among different departments have aggravated an already unbalanced emphasis on technology policies during the reform.Research limitations/implicationsDuring the quantification of technology policy, one perhaps loses some information about policy, and it can only be used to analyze the technology policy system, not special technology policy.Practical implicationsAnalyses of the evolution of Chinese technology policy and econometric results show the blunder of “market in exchange for technology” strategy from policy formulation and execution. Also, it leads to the optimization of technology policy from policy targets, implements based on national technology and innovation strategy.Originality/valueThe paper develops the method of technology policy quantification and builds econometric models to assess the contribution of technology policy to technology progress and economy development.
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Peel, D. A., P. DeGrauwe, H. Dewachter, and M. Embrecht. "Exchange Rate Theory: Chaotic Models of Foreign Exchange Markets." Economica 61, no. 243 (August 1994): 402. http://dx.doi.org/10.2307/2554626.
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Ahmed, KHATTAB, and SALMI Yahya. "Modeling Sources of Asymmetry in the Volatility of the Moroccan Dirham Exchange Rate." Applied Economics and Finance 8, no. 4 (July 26, 2021): 31. http://dx.doi.org/10.11114/aef.v8i4.5232.
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The main objective of this paper is to study the sources of asymmetry in the volatility of the bilateral exchange rates of the Moroccan dirham (MAD), against the EUR and the USD using the asymmetric econometric models of the ARCH-GARCH family. An empirical analysis was conducted on daily central bank data from March 2003 to March 2021, with a sample size of 4575 observations. Central bank intervention in the foreign exchange (interbank) market was found to affect the asymmetry in the volatility of the bilateral EUR/MAD and USD/MAD exchange rates. Specifically, sales of foreign exchange reserves by the monetary authority cause a fall in the exchange rate, which means that the market response to shocks is asymmetric. Finally, the selection criterion (AIC) allowed us to conclude that the asymmetric model AR(1)-TGARCH(1,1) is adequate for modeling the volatility of the exchange rate of the Moroccan dirham.
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LeBaron, Blake. "Exchange rate theory: Chaotic models of foreign exchange markets." Journal of International Economics 39, no. 1-2 (August 1995): 185–87. http://dx.doi.org/10.1016/0022-1996(95)90028-4.
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Thujiyanthan, Priyatharsiny. "The Impact of Exchange Rate and Exchange Rate Volatility on Foreign Direct Investment: An Econometric Investigation in Sri Lanka." Asian Journal of Managerial Science 10, no. 2 (November 5, 2021): 41–51. http://dx.doi.org/10.51983/ajms-2021.10.2.2928.
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This paper aims to explore the impact of exchange rate volatility on the ability to attract foreign direct investment (FDI) in the emerging economy of Sri Lanka. This investigation covers the period between 1978 and 2018. Exchange rate volatility is captured from the variance of the residuals by employing the testing procedure of ARCH (Engle, 1982) and GARCH (Bollerslev, 1986) models and its impact upon FDI is estimated by an Autoregressive Distributed Lag (ARDL) approach which is developed by Pesaren et al. (2001). The estimated results indicated that exchange rate volatility exerted significant positive impact on FDI during the period between 1978 and 2018 and the results show that exchange rate, exchange rate volatility, inflation, infrastructure, local and foreign interest rate, real GDP, political stability, and trade openness are the crucial determinants of FDI inflow in Sri Lanka. These findings are supported with Goldberg and Kolstad (1994) and it helps to the policy makers to concentrate exchange rate volatility, other macro-economic stability and political stability are key to boom FDI inflow in Sri Lanka.
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Gençay, Ramazan, Michel Dacorogna, Richard Olsen, and Olivier Pictet. "Foreign exchange trading models and market behavior." Journal of Economic Dynamics and Control 27, no. 6 (April 2003): 909–35. http://dx.doi.org/10.1016/s0165-1889(02)00049-0.
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Panda, Ajaya Kumar, Swagatika Nanda, Vipul Kumar Singh, and Satish Kumar. "Evidence of leverage effects and volatility spillover among exchange rates of selected emerging and growth leading economies." Journal of Financial Economic Policy 11, no. 2 (May 7, 2019): 174–92. http://dx.doi.org/10.1108/jfep-03-2018-0042.
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Purpose The purpose of this study is to examine the evidences of leverage effects on the conditional volatility of exchange rates because of asymmetric innovations and its spillover effects among the exchange rates of selected emerging and growth-leading economies. Design/methodology/approach The empirical analysis uses the sign bias test and asymmetric generalized autoregressive conditional heteroskedasticity (GARCH) models to capture the leverage effects on conditional volatility of exchange rates and also uses multivariate GARCH (MGARCH) model to address volatility spillovers among the studied exchange rates. Findings The study finds substantial impact of asymmetric innovations (news) on the conditional volatility of exchange rates, where Russian Ruble is showing significant leverage effect followed by Indian Rupee. The exchange rates depict significant mean spillover effects, where Rupee, Peso and Ruble are strongly connected; Real, Rupiah and Lira are moderately connected; and Yuan is the least connected exchange rate within the sample. The study also finds the assimilation of information in foreign exchanges and increased spillover effects in the post 2008 periods. Practical implications The results probably have the implications for international investment and asset management. Portfolio managers could use this research to optimize their international portfolio. Policymakers such as central banks may find the study useful to monitor and design interventions strategies in foreign exchange markets keeping an eye on the nature of movements among these exchange rates. Originality/value This is one of the few empirical research studies that aim to explore the leverage effects on exchange rates and their volatility spillovers among seven emerging and growth-leading economies using advanced econometric methodologies.
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Bozhechkova, A. V., S. G. Sinelnikov-Murylev, and P. V. Trunin. "Factors of the Russian ruble exchange rate dynamics in the 2000s and 2010s." Voprosy Ekonomiki, no. 8 (August 3, 2020): 5–22. http://dx.doi.org/10.32609/0042-8736-2020-8-5-22.
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The article discusses the key factors of the ruble exchange rate dynamics, analyzes the features of Russian currency market in the context of inflation targeting and the application of the budget rule. The basic theoretical approaches to modeling the dynamics of real and nominal exchange rates are presented, including behavioral models of the exchange rate, the monetary model of the exchange rate, and the hypothesis of uncovered interest parity. The most important factors of long-term and short-term dynamics of the exchange rate are revealed. The results of an econometric evaluation of the models of the real and nominal ruble exchange rates using dynamic least squares method (DOLS) are presented. It is shown that the key factors shaping the dynamics of the nominal ruble exchange rate are the terms of trade, the interest rate spread, the VIX volatility index, and the operations of the Russian Ministry of Finance under the budget rule. The long-term trajectory of the real exchange rate is formed by the terms of trade conditions, the Balassa—Samuelson effect, the dynamics of net foreign assets of the private sector.
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SALİHOĞLU, Esengül. "The Effects Of The Exchange Rate On Foreign Trade Performance In Countries With Foreign Trade Deficit." İnsan ve Toplum Bilimleri Araştırmaları Dergisi 11, no. 3 (September 30, 2022): 1712–30. http://dx.doi.org/10.15869/itobiad.1143215.
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Exchange rates have become increasingly important as the rise of free trade has been supported by globalization and technological developments. In flexible exchange rate systems, the exchange rate is expected to affect the volume of foreign trade and thus aggregate output. In this context, it is important to understand the relationship between the exchange rate and foreign trade in economic policy implementation. The aim of this study is to contribute to the literature by comparatively analyzing the relationship between exchange rates and foreign trade volumes in selected countries. Accordingly, the relationship between the real effective exchange rate (REER) and import and export volumes of the eight countries with the largest foreign trade deficits in 2020 (USA, UK, India, France, Turkiye, Egypt, Philippines, and Pakistan) is estimated using monthly data for the period January 2003–January 2022. By including the REER as a proxy for the exchange rate in the analysis, domestic prices and prices in the trading countries, which are important determinants of foreign trade, are also considered. The heterogeneous structure of the countries and the horizontal cross-sectional dependence between the series are taken into account in the choice of the analysis method. In the analysis using new generation econometric methods compatible with the characteristics of the series, CADF and CIPS unit root tests are followed by Westerlund's (2008) Durbin-Hausman Cointegration Test, then Pesaran's (2006) Common Correlated Effects (CCE) Estimator and Emirmahmutoglu and Kose's (2011) Panel Causality Test are applied.The findings of the analysis are listed as follows. According to the results of the cointegration test, a cointegration relationship was found between the REER and import and export volume in all countries included in the analysis. Then, the long-run coefficients of the models were estimated. According to the CCE estimation results, export volume is negatively affected by the REER in the long run, while import and export volumes are positively affected by each other. According to the Panel Fisher test statistics of the Panel Causality Test, there is a bidirectional causality relationship between export volume and the REER. The bidirectional relationship between the REER and foreign trade volumes in the short run indicates that the interaction between the variables is cyclical.
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Van der Geest, Willem. "Peter J. Montiel, Pierre-Richer Agenor, and Nadeem ul Haque. Informal Financial Markets in Developing Countries: A Macroeconomic Analysis. Published in the "Advances in Theoretical and Applied Economics" series edited by Homa Motamen-Scobie. Oxford: Blackwell. 1992. i-xi + 212 pp., including appendices. Hardbound. £40.00." Pakistan Development Review 32, no. 3 (September 1, 1993): 332–35. http://dx.doi.org/10.30541/v32i3pp.332-335.
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This volume reviews the nature and scope of informal financial markets in developing countries and elaborates on the theoretical and conceptual models which analyse 'financial repression' and other aspects of government intervention in financial markets. It also focuses on the consequences which the prevalence of informal financial markets in developing countries may have for monetary and exchange rate policy. In particular, it attempts to capture the functioning of informal, unregulated markets into macroeconomic models, working towards a general eqUilibrium model with informal financial markets. Two types of informal markets are analysed. The first are for informal lending at terms and conditions which differ greatly from those prevailing in the official banking system. The second are the 'parallel' markets for foreign exchange which tend to emerge in response to quantity restrictions on trade and administered allocation of foreign exchange to certain users at official rates, which are well below those on the parellel markets. The key question is whether these informal markets change the efficacy of monetary and credit policy-and, if they do, to what extent and in what direction? Two supporting appendices present econometric analyses of the efficiency of parallel currency markets and the degree of capital mobility in developing countries.
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Zhou, Shuna, and Chengwen Kang. "Research on the Influencing Factors of Russian Foreign Trade Based on R Language Regression Analysis." Mathematical Problems in Engineering 2021 (December 27, 2021): 1–11. http://dx.doi.org/10.1155/2021/5638831.
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Based on the systematic analysis of the development of Russian foreign trade and the characteristics of the regional distribution structure of trade, this work further studies the influencing factors of Russia’s foreign trade by using the R language regression analysis method and constructs three econometric models from import, export, and total import and export. The real effective exchange rate and various instruments and equipment and accessories are the main factors affecting Russia’s import trade, energy, minerals, timber, and related products are the main factors affecting its export trade, and Russia’s GDP and international oil prices are the major factors affecting the total import and export volume. A correct understanding of the factors affecting Russia’s foreign trade will help to understand Russia’s economic and trade development and its changing trend and provide a reliable reference value for the further expansion and optimization of economic and trade cooperation between other economies and Russia.
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Dueker, Michael, and Christopher J. Neely. "Can Markov switching models predict excess foreign exchange returns?" Journal of Banking & Finance 31, no. 2 (February 2007): 279–96. http://dx.doi.org/10.1016/j.jbankfin.2006.03.002.
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KIRMAN, ALAN, ROMAIN FABIO RICCIOTTI, and RICHARD LÉON TOPOL. "BUBBLES IN FOREIGN EXCHANGE MARKETS." Macroeconomic Dynamics 11, S1 (November 2007): 102–23. http://dx.doi.org/10.1017/s1365100507060257.
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We consider a model in which foreign and domestic traders buy the assets of both of two countries. Speculators in both countries use chartist or fundamentalist rules for forecasting the exchange rate. Demand for the assets of each country is determined by these forecasts. Perceptions of the fundamentals in each country are not necessarily the same. Rules are used with a certain probability depending on an agent's previous experience with them. The demands of the fundamentalist and chartist agents in the two countries determine the temporary equilibrium exchange rate at each point in time. This is unique under certain assumptions. With traders of both nationalities there is no need, as in other models, for an exogenous supply of foreign exchange. The model produces realistic features of the equilibrium exchange rate series. Periods in which the exchange rate tracks the fundamentals of one of the countries alternate with others in which bubbles appear.
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Tufail, Saira, and Sadia Batool. "An Analysis of the Relationship between Inflation and Gold Prices: Evidence from Pakistan." LAHORE JOURNAL OF ECONOMICS 18, no. 2 (July 1, 2013): 1–35. http://dx.doi.org/10.35536/lje.2013.v18.i2.a1.
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In this study, we formulate a new inflation equation to capture the potential effects of gold and stock prices on inflation in Pakistan. We aim to assess the inflation-hedging properties of gold compared to other assets such as real estate, stock exchange securities, and foreign currency holdings. Applying time-series econometric techniques (cointegration and vector error correction models) to data for 1960–2010, we find that gold is a potential determinant of inflation in Pakistan. On the other hand, it also provides a complete hedge against unexpected inflation. Real estate assets are more than a complete hedge against expected inflation, although stock exchange securities outperform gold and real estate as a hedge against unexpected inflation. Foreign currency proves to be an insignificant hedge against inflation. Given the dual nature of the relationship between gold and inflation, it is increasingly important for the government to monitor and regulate the gold market in Pakistan. Moreover, stock market investment should be encouraged by the government given that asset price inflation does not pose a critical problem for Pakistan as yet.
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Pluskota, Anna. "Makroekonomiczne determinanty ryzyka kredytowego w Polsce ze szczególnym uwzględnieniem kursów walut obcych." Finanse i Prawo Finansowe 3, no. 31 (September 30, 2021): 107–18. http://dx.doi.org/10.18778/2391-6478.3.31.07.
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The purpose of the article. The aim of the study is to show the impact of the key macroeconomic determinants of the credit risk of the banking sector in Poland in 2011–2020. This aim was achieved by analysis of the Pearson correlation coefficient and econometric models allowing to determine the impact of individual variables on the NPL index.
Methodology: The empirical part includes the presentation and description of basic descriptive statistics, as well as the calculation of the Pearson correlation coefficient with the interpretation of the obtained results. The dynamic econometric model describing the variability of the NPL ratio was built using mainly macroeconomic variables.
Results of the research: Research has shown the impact of changes in the unemployment rate and the inflation rate on credit risk. On the other hand, the impact of economic growth on the NPL ratio in the analyzed period was not statistically significant. The relationship between credit risk and changes in foreign exchange rates (CHF, USD, EUR) turned out to be negative in the analyzed period, which means that the increases in exchange rates of these currencies did not result in a significant burden of credit risk in the banking sector in Poland.
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Chi-Chi Ebiringa, Onuorah Anastasia, Oforegbunam Thaddeus, and Okoli Margaret Nnenna. "Causality effect of capital market indicators on foreign investment model in Nigeria and South Africa (1980-2013)." International Journal Of Innovation And Economic Development 1, no. 2 (2015): 7–12. http://dx.doi.org/10.18775/ijied.1849-7551-7020.2015.12.2001.
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This study examined causal effects of economic indicators attracting foreign investment inflows in Nigeria and South Africa. The purpose of the study is to investigate the behavioural pattern of economic indicators and determinants of economic indicators of capital market model influencing foreign investment inflows these two countries. The data were sourced from various economic and statistical bulletins of each country. Diagnostic test and Granger causality tests were the main econometric techniques for the analysis. The findings confirmed that for both countries; total value of transaction (TVT) and market capitalisation (MCAP) are the main economic indicators of capital market model (CMD) attracting foreign investment (FI). The study concluded that the identified economic indicators of CMD influenced FI in a short-run equilibrium relationship except interest rate having long-run equilibrium with foreign investment in South Africa. It is recommended that substantial approach and workable policy formulation and implementation in the stock exchange market to improve quality portfolio is highly needed to attract foreign investors in the global financial market.
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Hacioglu, Umit, Hasan Dincer, and Ismail Erkan Celik. "Conflict Risk and Its Implication on Economy and Financial System." International Journal of Finance & Banking Studies (2147-4486) 2, no. 2 (November 16, 2016): 109. http://dx.doi.org/10.20525/ijfbs.v2i2.638.
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<p>Considering the impacts of the conflict on the economic parameters in terms of macroeconomics, the following factors might affect the profitability of the company: foreign capital outflows, decrease in exports, increase in the interest rates, disruption of the investment climate, increase in the exchange rates, increase in the costs of import entry etc. Due to the expectable decrease in profit shares as to the investors, the contraction in the risk appetite will cause volatility in the prices of equity securities markets based on the impacts of the conflict, and the equity securities will depreciate. In this study, the main contributions on conflict risk and related econometric models have been discussed.</p>
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Muñoz Mendoza, Jorge A., Carmen L. Veloso Ramos, Sandra M. Sepúlveda Yelpo, Carlos L. Delgado Fuentealba, and Edinson E. Cornejo Saavedra. "Exchange Markets and Stock Markets Integration in Latin-America." Revista Mexicana de Economía y Finanzas 17, no. 3 (June 13, 2022): 1–24. http://dx.doi.org/10.21919/remef.v17i3.719.
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We analyze the relationship between the exchange markets and the integration process of the Latin American stock markets (MILA), focusing the analysis on two points. First, we evaluate the existence and nature of exchange risk premium and its relationship with the uncovered interest parity (UIP) bias. Second, we analyze the effect of MILA on Latin American foreign exchange markets. We use monthly time series between January 1997 and December 2021 for the exchange markets of Brazil, Chile, Colombia, Mexico and Peru. The econometric analysis was based on OLS, GARCH-in-Mean and DCC-MGARCH regressions. Our results indicate that UIP is does not meet. Even the GARCH-in-Mean models results indicates that there is no individual risk premium that corrects UIP bias. However, the results of the DCC-MGARCH model show that there is a risk premium generated simultaneously by the correlation between markets. Finally, MILA increased the dynamic correlations of exchange returns and risk premiums, mainly among the MILA markets. These results have relevant implications for policymakers and investors due to the impacts on exchange markets dependence and international investment decision-making.
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Mowlaei, Mohammad. "The impact of foreign capital inflows on economic growth on selected African countries." African Journal of Economic and Management Studies 9, no. 4 (December 3, 2018): 523–36. http://dx.doi.org/10.1108/ajems-01-2018-0021.
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Purpose Nowadays, foreign capital inflow (FCI) is considered as a catalyst for economic development and an important source of transferring technology and foreign exchange earnings from developed to developing countries. The purpose of this paper is to study, first, the impact of different forms of FCIs, namely, foreign direct investment (FDI), personal remittances (PR) and official development assistant (ODA) on economic growth on 26 top African countries; and, second, which of them is more effective on economic growth of the studied countries. The results of this paper are very important for host governments’ policy and help them to design their economic plans to absorb the suitable foreign inflow. Design/methodology/approach The paper uses Pooled Mean Group (PMG) econometric technique to estimate the heterogeneous panels over the period 1992–2016. Findings The results of the study show that all three forms of FCIs have positive and significant effects on economic growth in the long and short run. However, the PR had the most effect on economic growth in the long and short run. The study suggests that the governments should design and implement appropriate fiscal, monetary and trade policies in order to create and improve an enabling environment to attract FCIs as a supplementary source of domestic investment. Research limitations/implications The research limitations of this paper are as follows: data sets of FDI, PR and ODA were available not for all African countries; and, data sets that were available were of before the year 1992. Thus, the research is done for the African countries which had the data sets after the year 1992. Practical implications The result of this paper indicates the impact of each FDI, PR and ODA in economic growth. So, countries can take more attentions to each of them on economic planning. Social implications FCIs are one of the important external source of exchange for each country. So, the study of importance of each of them is necessary for economic planning. Originality/value Most of the previous studies have examined the impact of three different forms of FCIs on economic growth separately, on different countries and regions and using various models and econometric techniques. One of the contributions of this paper is focused on the impacts of FDI, PR and ODA on economic growth separately and simultaneously in 26 top recipient African countries and using the PMG technique which is an advanced econometrical estimation and studied less about it. The other contribution of this research is the comparison of the impact of different FCIs on economic growth, and it is very important for governments’ economic policy.
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KIANI, KHURSHID M. "FORECASTING FORWARD EXCHANGE RATE RISK PREMIUM IN SINGAPORE DOLLAR/US DOLLAR EXCHANGE RATE MARKET." Singapore Economic Review 54, no. 02 (June 2009): 283–98. http://dx.doi.org/10.1142/s0217590809003288.
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In this research, monthly forward exchange rates are evaluated for possible existence of time varying risk premia in Singapore forward foreign exchange rates against US dollar. The time varying risk premia in Singapore dollar is modeled using non-Gaussian signal plus noise models that encompass non-normality and time varying volatility. The results from signal plus noise models show statistically significant evidence of time varying risk premium in Singapore forward exchange rates although we failed to reject the hypotheses of no risk premium in the series. The results from Gaussian versions of these models are not much different and are in line with Wolff (1987) who also used the same methodology in Gaussian settings. Our results show statistically significant evidence of volatility clustering in Singapore forward exchange rates. The results from Gaussian signal plus noise models also show statistically significant evidence of volatility clustering and non-normality in Singapore forward foreign exchange rates. Additional tests on the series show that exclusion of conditional heteroskedasticity from the signal plus noise models leads to false statistical inferences.
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Li, Jinliang, Chihwa Kao, and Wei David Zhang. "Bounded influence estimator for GARCH models: evidence from foreign exchange rates." Applied Economics 42, no. 11 (April 2010): 1437–45. http://dx.doi.org/10.1080/00036840701721422.
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Phillips, Shauna, and Fredoun Z. Ahmadi-Esfahani. "Exchange rates and foreign direct investment: theoretical models and empirical evidence*." Australian Journal of Agricultural and Resource Economics 52, no. 4 (December 2008): 505–25. http://dx.doi.org/10.1111/j.1467-8489.2008.00431.x.
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Mansur, Iqbal, Steven J. Cochran, and David Shaffer. "Foreign Exchange Volatility Shifts and Futures Hedging: An ICSS-GARCH Approach." Review of Pacific Basin Financial Markets and Policies 10, no. 03 (September 2007): 349–88. http://dx.doi.org/10.1142/s0219091507001112.
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In this study, the impact of volatility regime shifts on volatility persistence and hedge ratio estimation is determined for four major currencies using an iterated cumulative sums of squares (ICSS)-GARCH model. Employing a standard GARCH (1,1) model as the benchmark, within-sample results demonstrate that the inclusion of volatility shifts substantially reduces volatility persistence and the significance of the ARCH and GARCH coefficients. In terms of hedging effectiveness, the ICSS-GARCH model outperforms the standard GARCH model for all four currencies. In comparison to two constant volatility models, the standard GARCH model yields the lowest performance, whereas the ICSS-GARCH model performs at least as well as these models. In out-of-sample analysis, the GARCH model provides substantial variance reductions relative to the constant volatility models. Moreover, the ICSS-GARCH model yields positive variance reductions relative to all competing models, including the standard GARCH model. The results suggest that in cases where dynamic hedging is important, sudden shifts in volatility should not be ignored.
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Hammer, Jerry A. "Ex-ante hedging strategy selection using foreign-exchange-rate forecasting models." Journal of Futures Markets 12, no. 2 (April 1992): 219–36. http://dx.doi.org/10.1002/fut.3990120209.
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PELLEGRINO, TOMMASO. "SECOND-ORDER STOCHASTIC VOLATILITY ASYMPTOTICS AND THE PRICING OF FOREIGN EXCHANGE DERIVATIVES." International Journal of Theoretical and Applied Finance 23, no. 03 (May 2020): 2050021. http://dx.doi.org/10.1142/s0219024920500211.
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We consider models for the pricing of foreign exchange derivatives, where the underlying asset volatility as well as the one for the foreign exchange rate are stochastic. Under this framework, singular perturbation methods have been used to derive first-order approximations for European option prices. In this paper, based on a previous result for the calibration and pricing of single underlying options, we derive the second-order approximation pricing formula in the two-dimensional case and we apply it to the pricing of foreign exchange options.
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Supriyatna, Rio Kartika, Dedi Junaedi, and Evi Novita. "PENGARUH STABILITAS MONETER TERHADAP PEREKONOMIAN NASIONAL." Al-Kharaj : Jurnal Ekonomi, Keuangan & Bisnis Syariah 1, no. 2 (September 30, 2019): 119–38. http://dx.doi.org/10.47467/alkharaj.v1i2.57.
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ABSTRACTObjectives of this research is to analyze: Does monetary stability affect Indonesia's GDP?; Does the difference ingovernance regimes affect the governance of monetary stability in supporting the achievement of Indonesia's GDP?; Doesmonetary stability affect Indonesia's per capita income (PCI)?; Does the difference in government regimes affect themanagement of monetary stability in supporting the achievement of Indonesia's per capita income (PCI)?.The research method uses descriptive-quantitative analysis with saturated sampling techniques and secondary datafrom Bank Indonesia, the National Development Planning Agency (Bappenas), the Central Statistics Agency (BPS), the WorldBank, and other reference sources. The data is in the form of time series data from the period 1990-2019. The dependentvariable is the value of GDP and GDP per capita (ICP). While the independent variable: the exchange rate, the money supply,the inflation rate, direct investment, financing, the state budget, the amount of debt (US $), the number of exports, the numberof imports, and the dummy variable period of the reform era government with the era of the New Order Government(Soeharto) as comparison or reference. The processed data were analyzed in quantitative descriptive with multipleregression models with dummy variables.The result is that some indicators of monetary stability (money supply, exchange rate, BI rate, investment, imports, andthe state budget) have a significant effect on the economy (GDP). While inflation, financing and foreign debt did notsignificantly affect GDP achievement. The Reformation government regimes (BJ Habibie, Abdurrahman Wahid, MegawatiSukarnoputeri, Soesilo Bambang Yudhoyono, and Joko Widodo) are different and better than the New Order (Soeharto)government in managing stability towards achieving GDP. The econometrics model is GDP$ = 178,542 + 0.0999 * M1M2 -0.0186 * EXCHANGE $ + 9.5872 * BI_RATE + 1.1935 * INVEST $ - 0.000225 * IMPORT + 0.181 * APBN + 182.488 * REZIM1 +171.038 * REZIM2 + 199.86 * REZIM3 + REVIMIM3 + 214.599 * REZIM5. Some indicators of monetary stability (money supply,exchange rate, BI rate, investment, import and APBN) also have a significant effect on GDP per capita. While inflation,financing and foreign debt did not significantly affect the achievement of GDP per capita. The Reform era government regime(BJ Habibie, Abdurrahman Wahid, Megawati Sukarnoputeri, Soesilo Bambang Yudhoyono, and Joko Widodo) differed andmore better than the New Order era administration (Soeharto) in governance stability. to the achievement of GDP per capita.The econometric model: PCIUS$ = 5.7594 + 0.0032 * M1M2 - 0.0006 * EXCHANGE$ + 0.3092 * BI_RATE + 0.0385 * INVEST$ -0.0000072 * IMPORT + 0.0058 * APBN + 5.8867 * REZIM1 + 5.5173 * REZIM2 + 6.4471 * REZIM3 + 6.ZZ * REZIM5.JEL CLASSIFICATION: E52, E58, E63Keywords: economy, financial, GDP, monetary, PCI, stability
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Rana Shahid Imdad Akash, Muhammad Mudasar Ghafoor, and Navid Ahmed. "Testing the Validity of Purchasing Power Parity Theory and Dynamics of Exchange Rate Behavior (Pakistan, China, Iran and Turkey)." Journal of Accounting and Finance in Emerging Economies 6, no. 1 (March 31, 2020): 127–44. http://dx.doi.org/10.26710/jafee.v6i1.1059.
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Purpose: This study is aimed at to observe the purchasing power parity (PPP) Theory. The purchasing power parity (PPP) is the most enduring debate of literature in international macroeconomics. It is most controversial due to various puzzles and tested with different econometric models for certain group of countries. Therefore, the PPP is valid assumption while international comparison due to use of common exchange rate and the prevalence of Law of One price.
Design/Methodology/Approach: The validity of PPP for relative countries (Pakistan, China, Iran and Turkey) was tested and analyzed for the sample period 2001 to 2018.
Findings: It is observed that exchange rates of Pakistan, China, Iran and Turkey are not consistent and constant. The deviations of PPP through structural changes identified and are not persistence over long period. Overall results reflected that there is an existence of long run equilibrium relation in between Pakistan and China as well as in between Iran and Turkey. The error correction model has confirmed the adjustment speed of short run disequilibrium to long term disequilibrium level. Implications/Originality/Value: The expected differential level of inflation has significant positive impact to exchange rate shift to Pakistan and trading activity patterns. The changes in foreign exchange market and commodity market due to economic integration are important implications for economic globalization.
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CUTHBERTSON, CHARLES, GRIGORIOS PAVLIOTIS, AVRAAM RAFAILIDIS, and PETTER WIBERG. "ASYMPTOTIC ANALYSIS FOR FOREIGN EXCHANGE DERIVATIVES WITH STOCHASTIC VOLATILITY." International Journal of Theoretical and Applied Finance 13, no. 07 (November 2010): 1131–47. http://dx.doi.org/10.1142/s0219024910006145.
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We consider models for the valuation of derivative securities that depend on foreign exchange rates. We derive partial differential equations for option prices in an arbitrage-free market with stochastic volatility. By use of standard techniques, and under the assumption of fast mean reversion for the volatility, these equations can be solved asymptotically. The analysis goes further to consider specific examples for a number of options, and to a considerable degree of complexity.
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Li, He, Zhixiang Yu, Chuanjie Zhang, and Zhuang Zhang. "Determination of China’s foreign exchange intervention: evidence from the Yuan/Dollar market." Studies in Economics and Finance 34, no. 1 (March 6, 2017): 62–81. http://dx.doi.org/10.1108/sef-10-2015-0249.
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Purpose The paper aims to investigate the determinants of China’s daily intervention in the foreign exchange market since the 2005 reform aimed at moving the Renminbi (RMB) exchange rate regime towards greater flexibility. Design/methodology/approach The paper uses bivariate probit models to test whether China’s intervention decision is driven by three sets of factors, comprising Model I (basic model), Model II and Model III. Findings Evidence from the models suggests that medium-term Chinese interventions tend to be leaning-against-the-wind, whereas long-term interventions are leaning-with-the-wind. Furthermore, by analyzing exchange rate volatility, this paper finds that intervention is used by the Chinese central bank to ensure that there are no big swings in the RMB exchange rate. Originality/value The paper will be of value to other researchers attempting to understand the policy of the central bank and, in particular, the factors that can lead to interventions during periods of financial crisis.
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PANDA, CHAKRADHARA, and V. NARASIMHAN. "FORECASTING DAILY FOREIGN EXCHANGE RATE IN INDIA WITH ARTIFICIAL NEURAL NETWORK." Singapore Economic Review 48, no. 02 (October 2003): 181–99. http://dx.doi.org/10.1142/s0217590803000712.
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This study compares the efficiency of a non-linear model called artificial neural network with linear autoregressive and random walk models in the one-step-ahead prediction of daily Indian rupee/US dollar exchange rate. We find that neural network and linear autoregressive models outperform random walk model in in-sample and out-of-sample forecasts. The in-sample forecasting of neural network is found to be better than that of linear autoregressive model. As far as out-of-sample forecasting is concerned, the results are mixed and we do not find a "winner" model between neural network and linear autoregressive model. However, neural network is able to improve upon the linear autoregressive model in terms of sign predictions. In addition to this, we also find that the number of input nodes has greater impact on neural network's performance than the number of hidden nodes.
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Mele, Marco. "A Logical Process about the Chaos in FOREX Financial Market." Asian Journal of Finance & Accounting 9, no. 1 (February 25, 2017): 105. http://dx.doi.org/10.5296/ajfa.v9i1.10343.
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Foreign exchange market has been subject of studies and discussions for many years. They were created modern theories and models to understand and predict the evolution of the price of money, and embarked on new discussions and new frontiers of study.In this paper we test the hypothesis of non-linearity and behavior chaotic the latest developments of the markets, to arrive at a solid and unambiguous conclusion on this type of dynamic systems analyzed. In particular, we introduce mathematical concepts and to study the properties of chaotic dynamics and non-linear in nature. It will delve into topics not therefore always present in economics courses in order to base the tests carried out on solid considerations from the point of view of formal mathematical. It will be followed, finally, a scientific rigor during the course of the analysis in order to give an interpretation of the results of logistic type can lead to scientific considerations different from econometric modeling.
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Nag, Tirthankar, and Chanchal Chatterjee. "Exploring Linkages Between Corporate Governance and Business Performance: Does Good Corporate Governance Lead to Enhanced Business Value?" South Asian Survey 27, no. 1 (March 2020): 37–61. http://dx.doi.org/10.1177/0971523120907189.
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This study explores the influence of corporate governance practices in corporate boards on firm performance and draws insights on the relative importance for companies for fostering the development of governance mechanisms in business. The study examines 50 firms belonging to the benchmark index of the National Stock Exchange of India (NIFTY 50) and tracks them for over a five-year period. The study uses fixed and random effect econometric models to explore the relationship between corporate governance variables, and firm performance using both accounting returns (EVA, ROA and ROE) and market returns (MVA). The study finds that corporate governance variables significantly improve firm performance or value creation. Especially, multiple directorships, involvement of foreign institutional investors and increase in promoter holdings may significantly affect returns of the firm. The study suggests that it may be useful to foster better corporate governance practices and monitor linkages with firm performance as the effect is influenced by other control variables also.
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Supriyanto, Wiwiek Rabiatul Adawiyah, Arintoko, Dijan Rahajuni, and Nunik Kadarwati. "Economic growth and environmental degradation paradox in ASEAN: A simultaneous equation model with dynamic panel data approach." Environmental Economics 13, no. 1 (December 5, 2022): 171–84. http://dx.doi.org/10.21511/ee.13(1).2022.14.
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Economic variables are dynamic in nature. This paper uses a simultaneous equation model to assess the complexity of the link between economic expansion and environmental deterioration in ASEAN. The study examines how CO2 emissions, economic growth, public health initiatives, and control factors interact using dynamic panel data from 2011 to 2020. The population, the amount of forested land, the use of renewable energy, foreign investment, the inflation rate, the total amount of foreign exchange reserves, and government health policies are just a few examples. In order to provide a reliable and accurate assessment of the long-term relationship, this study employs the generalized approach of the Arellano-Bond moment method. The econometric technique deals with the issues of nonstationary, endogeneity, cross-error correlation, and heteroscedasticity.Additionally, the two stage least square (2SLS) method was used to assess the results’ robustness. According to the statistical results, there is a causal link between CO2 emissions and economic growth, and between CO2 emissions and energy consumption. Furthermore, according to the data, ASEAN CO2 emissions showed a monotonically growing relationship during the sample period. Policymakers may use these findings since they can aid in implementing economic measures to promote sustainable and ecologically friendly development.
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Petrushenko, Yuriy, Maxim Korneyev, Natalia Nebaba, Olena Banchuk-Petrosova, and Anna Bohorodytska. "Assessment of the external debt impact on a country’s economic development indicators: Evidence from Ukraine." Investment Management and Financial Innovations 19, no. 1 (April 4, 2022): 360–69. http://dx.doi.org/10.21511/imfi.19(1).2022.28.
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External public debt is not only a means of raising funds to finance public needs, but also an effective tool for stabilizing a country`s economic development, the assessment and analysis of which allows making effective management decisions at the state level and developing effective measures to improve the economic and debt situation. The paper aims to assess the impact of external public debt on Ukraine’s economic development indicators (GDP, foreign direct investment, foreign exchange reserves). In order to achieve the stated goal distributed lag models are used, which allow modeling a country’s economic development (according to key indicators) within certain forecast scenarios. The study covers the period from 2009 to 2021. An analysis of the dynamics of external public debt in Ukraine led to the conclusion about the unstable debt situation in Ukraine and a significant increase in external debt in recent years. Econometric models with a distributed lag of three years are built and the results of the influence of external public debt in different time periods are analyzed. The average lag in the built models is about one and a half years (for GDP) and two and a half years (for foreign direct investment). This value indicates that the average change (increase/decrease) in external public debt will change economic development over time. A positive conclusion is made on the possibility of not only assessing the time lag between the indicators, but also on the prospects for forecasting both the public debt and key indicators of Ukraine`s economic development. AcknowledgmentThe article was published as part of research projects “Convergence of economic and educational transformations in the digital society: modeling the impact on regional and national security” (No. 0121U109553) and “Reforming the lifelong learning system in Ukraine for the prevention of the labor emigration: a coopetition model of institutional partnership” (No. 0120U102001).
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Menshikh, D. A. "Estimation of fiscal rule impact on Russian ruble equilibrium exchange rate." Voprosy Ekonomiki, no. 2 (February 7, 2021): 70–84. http://dx.doi.org/10.32609/0042-8736-2021-2-70-84.
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This paper describes a new approach that makes it possible to assess the impact of foreign exchange interventions implemented under the fiscal rule on the Russian ruble equilibrium exchange rate. The essence of the approach is to quantify the impact of foreign exchange interventions carried out within the framework of the fiscal rule on the balance of supply and demand of foreign exchange, and to reflect this influence in macroeconomic models using the “effective” oil price indicator. The article describes in detail the calculation of this indicator. The advantage of using the “effective” oil price indicator compared to alternative methods lies in the efficiency (the ability to apply for monthly data), simplicity (the possibility of using for scenario forecasting of the exchange rate), as well as the flexibility of the method (the possibility of taking into account periods of suspension of the fiscal rule and deferred purchases). The current gap in the real effective exchange rate of Russian ruble was calculated based on the data for February 2008 — October 2019. The assessment of the contribution of the fiscal rule to the equilibrium value of the real exchange rate was about 2 pp., at the end of 2019 Russian ruble was overvalued.
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HAN, CHUAN-HSIANG, WEI-HAN LIU, and TZU-YING CHEN. "VaR/CVaR ESTIMATION UNDER STOCHASTIC VOLATILITY MODELS." International Journal of Theoretical and Applied Finance 17, no. 02 (March 2014): 1450009. http://dx.doi.org/10.1142/s0219024914500095.
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This paper proposes an improved procedure for stochastic volatility model estimation with an application to Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR) estimation. This improved procedure is composed of the following instrumental components: Fourier transform method for volatility estimation, and importance sampling for extreme event probability estimation. The empirical analysis is based on several foreign exchange series and the S&P 500 index data. In comparison with empirical results by RiskMetrics, historical simulation, and the GARCH(1,1) model, our improved procedure outperforms on average.
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Gevorkyan, Aleksandr V. "The foreign exchange regime in a small open economy: Armenia and beyond." Journal of Economic Studies 44, no. 5 (October 9, 2017): 781–800. http://dx.doi.org/10.1108/jes-08-2016-0155.
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Purpose Offering an example of a small open developing economy, the purpose of this paper is to explore the reasons for relative stability in Armenia’s foreign exchange market. Relying on a single currency and derived cross-currency exchange rates, the paper models short-term effects between exchange market pressure and financial and macroeconomic factors. Design/methodology/approach Following a literature review, the paper sets the macroeconomic context with an initial variance comparison of standard currency pairs and derived cross-currency exchange rates. Then, the core analysis is carried out with a vector error correction model, focusing on short-term cross-dynamics in monthly data. The orthogonal impulse response function analyses help solidify and further inform relevant conclusions. Findings Three broad factors influence Armenia’s foreign exchange market: external push factors; domestic banking sector competition, and foreign currency risk perceptions; and domestic macroeconomic and dual, cross-pair, exchange rate target priorities. The central bank’s implicit management of the foreign exchange market’s expectations, pull factor, is consistent with trader market power’s contribution to lower volatility. Yet, the risk of financial and real-sector decoupling remains. Originality/value The results are relevant for emerging markets attempting to leverage the global liquidity and low interest rates, while being exposed to external pressures in the post-crisis environment, in which international reserves may be scarce while currency stability is an implied priority. This study can be further adapted to a more comprehensive structural short-term analysis of currency determination or similar dynamics in other small open economies.
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Ilyas, Muhammad, Rehman Uddin Mian, and Nabeel Safdar. "Institutional investors and the value of excess cash holdings: empirical evidence from Pakistan." Managerial Finance 48, no. 1 (October 13, 2021): 158–79. http://dx.doi.org/10.1108/mf-05-2021-0201.
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PurposeThis study examines the effects of foreign and domestic institutional investors on the value of excess cash holdings in the context of Pakistan where the institutional setting is broadly considered as non-friendly to outside shareholders due to family control.Design/methodology/approachA panel sample of 220 listed firms on the Pakistan Stock Exchange (PSX) was employed over the period 2007–2018. Data on institutional ownership are collected from the Standard & Poor’s (S&P) Capital IQ Public Ownership database, while the financial data are collected from Compustat Global. The study uses ordinary least squares (OLS) regression with year and firm fixed effects as the main econometric specification. Moreover, the application of models with alternative measures, high-dimensional fixed effects and two-stage least squares (2SLS) regression are also conducted for robustness.FindingsRobust evidence was found that unlike domestic institutional investors, which do not influence the value of excess cash holdings, foreign institutional investors positively affect the contribution of excess cash holdings to firm value. The positive effect on excess cash holdings' value is mainly driven by foreign institutions domiciled in countries with strong governance and high investor protection. Moreover, this effect is stronger in firms that are less likely to have financial constraints.Originality/valueThis study provides novel evidence on the effect of institutional investors on the value of excess cash holdings in an emerging market like Pakistan. It also adds to the literature by revealing that the effect of different groups of institutional investors on the value of excess cash holdings is not homogenous.
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Rossi, Barbara. "Exchange Rate Predictability." Journal of Economic Literature 51, no. 4 (December 1, 2013): 1063–119. http://dx.doi.org/10.1257/jel.51.4.1063.
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The main goal of this article is to provide an answer to the question: does anything forecast exchange rates, and if so, which variables? It is well known that exchange rate fluctuations are very difficult to predict using economic models, and that a random walk forecasts exchange rates better than any economic model (the Meese and Rogoff puzzle). However, the recent literature has identified a series of fundamentals/methodologies that claim to have resolved the puzzle. This article provides a critical review of the recent literature on exchange rate forecasting and illustrates the new methodologies and fundamentals that have been recently proposed in an up-to-date, thorough empirical analysis. Overall, our analysis of the literature and the data suggests that the answer to the question: “Are exchange rates predictable?” is, “It depends”—on the choice of predictor, forecast horizon, sample period, model, and forecast evaluation method. Predictability is most apparent when one or more of the following hold: the predictors are Taylor rule or net foreign assets, the model is linear, and a small number of parameters are estimated. The toughest benchmark is the random walk without drift. (JEL C53, F31, F37, E43, E52)
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Karemera, David, and John Cole. "ARFIMA Tests for Random Walks in Exchange Rates in Asian, Latin American and African-Middle Eastern Markets." Review of Pacific Basin Financial Markets and Policies 13, no. 01 (March 2010): 1–18. http://dx.doi.org/10.1142/s0219091510001846.
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This article examines fractional processes as alternatives to random walks in emerging foreign exchange rate markets. Sowell's (1992) joint maximum likelihood is used to estimate the ARFIMA parameters and test for random walks. The results show that, in most cases, the emerging market exchange rates follow fractionally integrated processes. Forecasts of exchange rates based on the fractionally integrated autoregressive moving average models are compared to those from the benchmark random walk models. A Harvey, Leybourne and Newbold (1997) test of equality of forecast performance indicates that the ARFIMA forecasts are more efficient in the multi-step-ahead forecasts than the random walk model forecasts. The presence of fractional integration is seen to be associated with market inefficiency in the exchange markets examined. The evidence suggests that fractional integrated processes are viable alternatives to random walks for describing and forecasting exchange rates in the emerging markets.
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Ali, Farman, Pradeep Suri, Tarunpreet Kaur, and Deepa Bisht. "Cointegration and causality relationship of Indian stock market with selected world markets." F1000Research 11 (November 1, 2022): 1241. http://dx.doi.org/10.12688/f1000research.123849.1.
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Background: The purpose of this study is to explore the trends and causes of established and emerging nations' stock market integration with India. The National Stock Exchange (NSE) indices act as a counterweight to international market indices. This study investigates the sustained interest of foreign investors in the Indian stock market in the wake of capital market reforms, as well as whether it moves in tandem with other markets in Asia and the United States. Methods: Our study examined the possibility of cross-country cointegration between the largest economies and indices around the world using multiple financial econometric models, such as Augmented Dickey-Fuller, Unit Root, Correlation, and Johansen Cointegration. Results: The findings of this study significantly support the notion that Indian and international financial markets are highly integrated. Vector error correction model indicates that the Indian market (NSE) is highly cointegrated with the US market (National Association of Securities Dealers Automated Quotations) and increased volatility signifies global contagion. Conclusion: A cursory examination of the data reveals distinct investment and portfolio diversification options for global investors. This could assist regulators in formulating more effective rules regarding price discovery processes.
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Hong, Yongmiao, and Tae-Hwy Lee. "Inference on Predictability of Foreign Exchange Rates via Generalized Spectrum and Nonlinear Time Series Models." Review of Economics and Statistics 85, no. 4 (November 2003): 1048–62. http://dx.doi.org/10.1162/003465303772815925.
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Hong, Yongmiao, and Tae-Hwy Lee. "Inference on Predictability of Foreign Exchange Rates via Generalized Spectrum and Nonlinear Time Series Models." Review of Economics and Statistics 86, no. 3 (August 2004): 840. http://dx.doi.org/10.1162/0034653041811716.
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Jaiblai, Prince, and Vijay Shenai. "The Determinants of FDI in Sub-Saharan Economies: A Study of Data from 1990–2017." International Journal of Financial Studies 7, no. 3 (August 12, 2019): 43. http://dx.doi.org/10.3390/ijfs7030043.
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Foreign Direct Investment (FDI) can bring in much needed capital, particularly to developing countries, help improve manufacturing and trade sectors, bring in more efficient technologies, increase local production and exports, create jobs and develop local skills, and bring about improvements in infrastructure and overall be a contributor to sustainable economic growth. With all these desirable features, it becomes relevant to ascertain the factors which attract FDI to an economy or a group of adjacent economies. This paper explores the determinants of FDI in ten sub-Saharan economies: Liberia, Sierra Leone, Ivory Coast, Ghana, Nigeria, Mali, Mauritania, Niger, Cameroun, and Senegal. After an extensive literature review of theories and empirical research, using a set of cross-sectional data over the period 1990–2017, two econometric models are estimated with FDI/GDP (the ratio of Foreign Direct Investment to Gross Domestic Product) as the dependent variable, and with inflation, exchange rate changes, openness, economy size (GDP), income levels (GNI/capita (Gross National Income) per capita), and infrastructure as the independent variables. Over the period, higher inflows of FDI in relation to GDP appear to be have been attracted to the markets with better infrastructure, smaller markets, and lower income levels, with higher openness and depreciation in the exchange rate, though the coefficients of the last two variables are not significant. These results show the type of FDI attracted to investments in this region and are evaluated from theoretical and practical viewpoints. FDI is an important source of finance for developing economies. On average, between 2013 and 2017, FDI accounted for 39 percent of external finance for developing economies. Policy guidelines are formulated for the enhancement of FDI inflows and further economic development in this region. Such a study of this region has not been made in the recent past.
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Engel, Charles. "Exchange Rates, Interest Rates, and the Risk Premium." American Economic Review 106, no. 2 (February 1, 2016): 436–74. http://dx.doi.org/10.1257/aer.20121365.
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The uncovered interest parity puzzle concerns the empirical regularity that high interest rate countries tend to have high expected returns on short term deposits. A separate puzzle is that high real interest rate countries tend to have currencies that are stronger than can be accounted for by the path of expected real interest differentials under uncovered interest parity. These two findings have apparently contradictory implications for the relationship of the foreign-exchange risk premium and interest-rate differentials. We document these puzzles, and show that existing models appear unable to account for both. A model that might reconcile the findings is discussed. (JEL E43, F31, G15)
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Chen, Mei-Ling, Kai-Li Wang, Ya-Ching Sung, Fu-Lai Lin, and Wei-Chuan Yang. "The Dynamic Relationship between the Investment Behavior and the Morgan Stanley Taiwan Index: Foreign Institutional Investors' Decision Process." Review of Pacific Basin Financial Markets and Policies 10, no. 03 (September 2007): 389–413. http://dx.doi.org/10.1142/s0219091507001124.
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This research employs VAR models, impulse response function, forecast error variance decomposition and bivariate GJR GARCH models, to explore the dynamic relationship between foreign investment and the MSCI Taiwan Index (MSCI–TWI). The estimations of the VAR, impulse-response functions and predicted error variance decomposition tests show that stronger feedback effects exist between net foreign investment and MSCI–TWI. In particular, our results demonstrate that the MSCI–TWI has the greatest influence over the decision-making processes of foreign investors. Also, we see that exchange rates exert a negative influence on both net foreign investment dollars and the MSCI–TWI. In addition, US–Taiwan interest rate difference has a positive influence on net foreign investment dollars and a negative influence on the MSCI–TWI. As for asymmetric own-volatility transmission, negative shocks in the MSCI–TWI tend to create greater volatility for itself in the following period than positive shocks. Our research indicates an asymmetric information transmission mechanism from net foreign investment to MSCI–TWI markets. Moreover, the estimated correlation coefficient shows that MSCI–TWI and net foreign investment dollar have a positive contemporaneous correlation.