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We study the transmission of exchange rate shocks in the Turkish interbank loan market using high-frequency bank-level data. Our results suggest that interbank market plays a stabilizing role: following large domestic currency depreciations, banks with a higher share of foreign currency liabilities borrow more in the interbank market, with a higher but insignificant effect on borrowing costs. The results are stronger the larger the exchange rate shock is and the lower the capital adequacy or liquidity ratios of borrower banks. Interbank markets play a weaker stabilizing role for banks with higher short-term rollover risks. [ABSTRACT FROM AUTHOR]

In this paper, we investigated how policy rate modifications – the main instrument used by central banks to provide liquidity during the current health crisis – influenced the evolution of the exchange rate, which is a key element within macro-stabilization policies. We documented that foreign exchange markets in European countries responded asymmetrically to monetary policy interventions devoted to the encouragement of spending and the stimulation of the economy. However, this only occurred during extreme events, which is a side-effect of the monetary policy on the foreign exchange market. These results contribute to the assessment of the space for manoeuvres by monetary policymakers regarding key policy rate modifications as a response to pandemic shocks. [ABSTRACT FROM AUTHOR]

This study investigates how equity portfolio flows affect the transition processes of exchange rate returns in Australia by employing a Markov-switching AR-GARCH-Jump model with time-varying transition probabilities. Three interesting findings are observed. Firstly, both GARCH and jump effects are totally different in the high-volatility and low-volatility states. Secondly, the net equity portfolio inflows increase exchange rate market fluctuations. Thirdly, the marginal effect of net equity flows is stronger in low-volatility state than in high-volatile state. [ABSTRACT FROM AUTHOR]

This study analyses the relationship between sovereign yield factors and exchange rate changes. A new method is proposed to extract proxy relative yield factors from the yield curves of two countries. As previous studies showed (e.g. Chen and Tsang 2013; Wellmann and Trück 2018), the relative yield curve factors play an important role in explaining the variation in the foreign exchange rates. Especially, the proxy relative level and slope factors have explanatory power for exchange rate changes, especially for the JPY/USD pair. [ABSTRACT FROM AUTHOR]

The aim of this paper is to test the purchasing power parity theory for the exchange rates between the peseta and both the French franc and the pound sterling for the period 1868–1914. The stationarity of the real exchange rate is tested using linear and non-linear unit root tests and wholesale and consumer price series. The results show that possible short-term deviations in the real exchange rate series are corrected in the long term, so the purchasing power parity theory holds. [ABSTRACT FROM AUTHOR]

In this paper, we focus on the stochastic (chaotic) attributes of the US dollar-based exchange rates for Brazil, Russia, India, China and South Africa (BRICS) using a long-run monthly dataset covering 1812M01-2017M12, 1814M01-2017M12, 1822M07-2017M12, 1948M08-2017M12, and 1844M01-2017M12, respectively. For our purpose, we consider the Lyapunov exponents, robust to nonlinear and stochastic systems, in both full – samples and in rolling windows. For comparative purposes, we also evaluate a long-run dataset of a developed currency market, namely British pound over the period of 1791M01-2017M12. Our empirical findings detect chaotic behavior only episodically for all countries before the dissolution of the Bretton Woods system, with the exception of the Russian ruble. Overall, our findings suggest that the establishment of the free floating exchange rate system have altered the path of exchange rates removing chaotic dynamics from the phenomenon, and hence, the need for policymakers to intervene in the currency markets for the most important emerging market bloc, should be carefully examined. [ABSTRACT FROM AUTHOR]

We try to assess the impact of exchange rate changes on the demand for money in eight Asian countries. When we followed the previous literature and the standard linear Autoregressive Distributed Lag (ARDL) approach, we found exchange rate changes had no long-run significant effects in five out of the eight countries in our sample. However, when we applied the nonlinear ARDL approach and separated appreciations from depreciations, at least one of them or both had significant effects on the demand for money in India, Indonesia, Korea, the Philippines, and Singapore, supporting asymmetric effects of exchange rate changes. There was also evidence of short-run asymmetric effects. [ABSTRACT FROM AUTHOR]

This article examines the validity of the capital-enhanced equilibrium exchange rate (CHEER) approach using quarterly data ranging from 1993Q1 to 2016Q2. Using unit root break test and structural break cointegration technique, our overall results indicated that the CHEER is invalidated once a structural break is accounted for in the cointegration relationship. The rejection of the validity could be attributed to the asymmetry in the capital flows and exchange rates being not fully flexible. [ABSTRACT FROM AUTHOR]

Singapore's monetary policy is centred on the management of the exchange rate. We examine how macroeconomic forecasters perceive the effectiveness of this unconventional policy. We provide empirical evidence that forecasters' expectations are consistent with a forward-looking exchange-rate-based Taylor-type policy rule. They expect monetary authorities to actively manage the currency against expected future changes in inflation and output. [ABSTRACT FROM AUTHOR]

In order to account for currency substitution, the majority of recent studies relating to the specification of the demand for money include the exchange rate as another determinant of the demand for money. However, those who have estimated the demand for money in China have been unable to find any significant effects of exchange rate changes on the demand for money by the Chinese. We show that this is due to the assumption that exchange rate changes have symmetric effects. Once depreciations are separated from appreciations of the yuan, those exchange rate changes are shown to have significant effects on the demand for money in China, but in an asymmetric manner. [ABSTRACT FROM AUTHOR]

Using as an example data on official Japanese interventions in the yen/dollar market, I show that techniques developed to analyse relative operating characteristic (ROC) curves can be useful to study the forecasting value and effectiveness of interventions. [ABSTRACT FROM PUBLISHER]

In this article, we investigate Granger’s causality among the exchange rate, Tobin’s marginal q and investment-capital ratio with quarterly data on firms categorized as small and medium-sized enterprises (SMEs) in Japan. We utilize the data of the following industries: chemical, iron and steel, production machinery, electric machinery and equipment, automobile and accessories and all manufacturing. The empirical results we obtain show that the null hypotheses of no Granger’s causality from the exchange rate to other variables, investment and marginal q, are accepted in all industries. The reason is the lower percentage of export by SMEs. Thus, it is considered that the effects of Abenomics on SMEs are limited, and that other kinds of reflation measures for SMEs are needed. [ABSTRACT FROM AUTHOR]

It is shown that a cutback in external funding would reduce the incidence of foreign sponsored terrorism in the home country, but the magnitude of the reduction will be somewhat smaller than normally expected because of the precipitous fall in the price of terror caused by home currency depreciation. [ABSTRACT FROM AUTHOR]

We study optimized Taylor rules with the appropriate lag structure, which has been little done for emerging market economies. Setting the policy interest rate in response to movements in domestic long-term bond yields, in addition to the output gap, the inflation gap and the exchange rate, can make monetary policy more effective. But a more complex rule can reduce monetary policy effectiveness, notably in the presence of uncertainty about the effects of capital flows on domestic monetary conditions. [ABSTRACT FROM AUTHOR]

This article investigates the random walk behaviour of CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) foreign exchange rates against the US dollar using weekly data from February 2007 to April 2012. Using variance ratio tests, the results suggest that the nominal exchange rates of Vietnamese dong and Egyptian pounds violate the random walk hypothesis and do not follow a martingale process. However, the Colombian peso, Indonesian rupiah, Turkish lira and South African rand exchange rate markets are considered weak-form efficient. [ABSTRACT FROM AUTHOR]

We examine asymmetry in the loss function of corporate executives in their exchange rate forecasts and test for rationality of the forecast under the assumption of a possibly asymmetric loss function. We find evidence that the loss function of the forecast with a 1-year horizon is symmetric and support for rationality. These findings hold for manufacturing and nonmanufacturing sectors. [ABSTRACT FROM AUTHOR]

This article aims to investigate whether the interaction between exchange rate and oil price exhibits asymmetric adjustment in Philippines using quarterly data over the period 1970Q1 to 2011Q4. The Threshold Autoregressive (TAR) model reveals that exchange rate and oil price are not cointegrated. However, these two variables are asymmetrically adjusted in Momentum Threshold Autoregressive (MTAR) model. Thus, it suggests that adjustment mechanism towards equilibrium may not be necessarily constant. [ABSTRACT FROM AUTHOR]

This article examines the influence of exchange rate volatility on exports for three South American countries (Bolivia, Colombia and Guyana) in the period January 1973 to February 2010. Using a new measure of volatility, a significant negative relationship is found between aggregate exports and volatility. [ABSTRACT FROM PUBLISHER]

This article investigates how the jump in the exchange rate and risky asset can affect the central bank's foreign management. We find that the jump in the exchange rate has a positive impact on the need for the risky asset, whereas the jump in the risky asset has a negative impact. However, the overall impact relies on how effective the central bank can intervene in the exchange market. Specifically, if the central bank can intervene in the market effectively, the safety of foreign reserves becomes a more important issue, which will decrease the need for risky asset. [ABSTRACT FROM PUBLISHER]

This article shows what the yen/dollar rate would be without foreign exchange interventions by the Japanese government for 61 086 billion yen. If there had been no interventions, then the yen/dollar rate in June 2011 may have been 54.30 instead of the actual rate of 80.52. [ABSTRACT FROM PUBLISHER]

We used the yen/dollar exchange-rate forecasts of the Wall Street Journal (WSJ) poll to analyse whether exchange-rate forecasters have an asymmetric loss function. To this end, we applied an approach recently developed by Elliott et al. (2005). We found that only few forecasters seem to form forecasts under an asymmetric loss function. For some forecasters, accounting for the asymmetry of their loss function makes their forecasts look rational. [ABSTRACT FROM PUBLISHER]

The aim of this study is to determine whether the domestic economy as represented by the interest rate, the international economic status as represented by the exchange rate or both determine sovereign Credit Default Swap (CDS) spreads. Using a Vector Autoregressive (VAR) and Granger noncausality tests, the results suggest that it is the exchange rate that has the most important effect on sovereign CDS spreads, with domestic interest rates having only a limited effect. There is also some evidence of causality running from the CDS spread to the exchange rate. [ABSTRACT FROM AUTHOR]

This study analyses the impacts of economic activity and exchange-rate movement and its volatility on exports and imports between Korea and China. Using monthly data from April 1994 to December 2007, Error-Correction Models (ECMs) are specified to estimate the cumulative effects of determinants for export and import demand. According to the empirical results, the depreciation of exchange rate would stimulate the export growth. In addition, it would be desirable to stabilize exchange rate in order to boost trade flows. [ABSTRACT FROM AUTHOR]