Exchange Rate Pass-Through to Brazilian E-Commerce Prices

In this paper evidence on whether Malaysia’s, Bank Negara policy of allowing flexible exchange rate along with financial development has affected the volatility of real macroeconomic variables like trade, foreign investment and economic growth is presented. An econometric framework is also utilized to examine the linkages between the exchange rate and the real economy. Different indicators of financial development and exchange rate variability are used. Results are found to vary with the indicators used. Correlation matrix shows that Variability in real effective exchange rate has an adverse effect on the inflow of FDI and economic growth. While the development of Capital market has a positive correlation with FDI, trade and economic growth. Credit to the private sector by the financial institutions has a positive impact on the international trade intensity. Regression results show that variability in exchange rate has a significant negative impact on economic growth. While its effect on trade intensity is not conclusive.

Dynamic connectedness of oil price shocks and exchange rates

Recent episodes of excessive volatility in the foreign exchange market have brought to the fore the interest in studying the transmission mechanism of global uncertainty on the domestic economy. At the core is the degree of adjustment in the exchange rate as a shock absorber and the impacts of domestic policies in mitigating the spillover effects of global volatility. Using data for a sample of advanced and developing countries, the paper studies the responses of the nominal effective exchange rate, the real effective exchange rate, and price inflation to domestic and external sources of economic shifts. Subsequently, the analysis evaluates the degree of correlations between the responses of these variables to each economic shift. The objective is to study sources of movements in the real effective exchange rate and bilateral nominal exchange rates versus price inflation. The analysis then turns to evaluation of the determinants across countries of the time-series correlations between the change in the real effective exchange rate and its underlying components—nominal change and inflation—within countries over time. Cross-country regressions establish the relevance of the trend and variability of each of price inflation, the change in the nominal exchange rate, and the change in the real exchange rate on the degree of association between each pair. The evidence attests to a high pass-through from fluctuations in the nominal exchange rate to price inflation, which is more pronounced in developing countries, attesting to the need to target the real effective exchange rate as a framework for monetary policy.

PurposeThis paper first examines how changes in the real effective exchange rate and its volatility affect the exporting activities of firms. Next, it investigates whether exchange rate volatility (EXRV) affects the export behavior of financially constrained and unconstrained firms differently. Finally, it examines the role of financial development in mitigating the effects of EXRV and financial constraints on firms' exports.Design/methodology/approachThe empirical analysis of the paper is based on a wide panel of Pakistani nonfinancial firms listed at the Pakistan Stock Exchange during the period 2001–2016. To mitigate the problem of endogeneity and to take into account the dynamic nature of the empirical model, the authors apply the robust two-step system-GMM estimator developed by Blundell and Bond (1998). To examine the role of credit constraints, firm-year observations are sorted as financially constrained and unconstrained based on the median value of three alternative measures: the liquidity ratio, the dividend payout ratio and the Whited and Wu (WW) index.FindingsThe results reveal that an increase in the real effective exchange rate has a positive and significant impact on firms' exports. However, the results show that the EXRV is significantly and negatively related to exporting decisions, suggesting firms considerably decrease their exports during periods of increased unpredictable variations in exchange rates. The findings also suggest that compared to financially constrained firms, the adverse effect of EXRV on exports is weaker for financially unconstrained firms. This finding implies that firm-level financial constraints unfavorably impact exports by making exporting more sensitive to the EXRV. Finally, the findings indicate that financial development not only positively affects firms' exports but also plays a vital role in declining the adverse effects of EXRV on firm-level exports. Specifically, the results show that financial development decreases the negative impact of EXRV on exports for both financially constrained and unconstrained firms. However, the moderating role of financial sector development is higher for financially unconstrained firms.Research limitations/implicationsNotwithstanding that the authors present robust and strong empirical evidence of the effects of EXRV on exporting and on the role of both firm-level financial constraints and financial sector development in formulating these effects, there are some limitations of the study. The authors use a single proxy for measuring financial sector development. However, one may construct an index for the financial sector developed using principal component analysis (PCA) by considering different measures of financial development. The authors use three different measures of financial constraints. Nonetheless, more sophisticated techniques such as switching regression can be used to endogenously determine whether firms are financially constrained. Moreover, an examination of the asymmetric effects of EXRV on exporting across different industries would also be worthwhile.Practical implicationsFrom a policy point of view, the results suggest that the development of the financial sector and the strategies to lessen credit constraints faced by firms will help in mitigating the adverse effects of the EXRV on the exporting behavior of firms in Pakistan. The findings also suggest that managers in financially constrained firms should apply appropriate hedging strategies to hedge exchange rate risks. Finally, the findings suggest that investors should take into consideration exchange rate dynamics and firms' financial constraints while investing in exporting firms' stocks.Social implicationsSince the findings suggest that financially constrained firms' exports are more exposed to EXRV, managers of such exporting firms are suggested to apply effective and suitable currency risk-minimizing hedging instruments for enhancing their exports. The government should also implement economic and financial policies in such a way that they should help in reducing volatilities of exchange rates and in turn, encouraging firms to export more. Definitely, any policy, at both government and firm level, favoring exporting and export-oriented growth will not only help in overcoming the problem of a persistent and wide trade deficit but also help society by providing more employment and investment opportunities.Originality/valueRecently, Pakistan has experienced significant declines in foreign reserves, persistent political unrest and enlarged trade deficits. All these have increased the uncertainty about the exchange rate. Therefore, it is valuable to know the EXRV effects on firms' exporting activities. Second, Pakistani firms face more financial constraints, and thus, the influence of financial constraints in formulating the volatility effects on exporting would be worth exploring. Finally, no research has yet taken place to scrutinize the role of financial development in mitigating the adverse effects of EXRV and financial constraints on exporting activities. This paper provides firsthand empirical evidence on the role of financial constraints and financial sector development in formulating the EXRV impacts on firm-level exports in Pakistan.

This study aims to analyze the relationship between Exports, Inflation, Money Supply, GDP, Imports, and Per capita Income to exchange rates. Where variable monetary policy (Exchange Rate, GDP, Money Supply, Inflation, Per capita Income) and macro policy (Export and Import). Using time-series data from 2010 to 2019. The data analysis model is a Vector Autoregression method viewed and sharpened by Impulse Response Function analysis and Forecast Error Variance Decomposition. The results of the IRF analysis know that the response stability of all variables is formed in the five or medium or medium-term and long-term periods, where the response of other variables to changes in one variable shows different variations from positive to negative responses or vice versa. Some variables show a positive reaction or remain negative in short to long term. The results of the FEVD analysis show that variable exchange rates in the short and medium term are recommended by the Variable Exchange Rate itself and the Money Supply Amount. At the same time, the long term is affected by Imports. Export variables in the short term are recommended by the Exchange Rate, while the medium and long term is affected by Per capita Income. Then, import variables in the medium and long short term Imports are affected by Exports. Variable GDP in the short and medium-term is influenced by GDP itself and the exchange rate, while in the long run, it is influenced by Per capita income. Inflation in the medium and long short term is affected by imports. The money supply in the medium and long short term is affected by inflation and imports, while exports influence per capita income in the short, medium, and long time. So that can be recommended in this study is as input for the government, namely through Bank Indonesia, the Ministry of Finance, the Central Banks of the State, which is the object of research in controlling exchange rates as an effort to maintain currency market stability in emerging markets of Muslim Countries through inflation control to increase price stability that can boost economic growth.

This study aims to analyze the effect of Exchange Rates and Inflation on the Value of Non-Oil and Gas Exports. The independent variables used in this research are the Exchange and Inflation rates. The dependent variable used is the value of Indonesia's Non-Oil and Gas Exports. Data collection uses secondary data obtained from Badan Pusat Statistik and Bank Indonesia period 2015-2021, the data is analyzed using multiple linear regression analysis which is processed using the Eviews program version 12. The results of this study indicate that the variables Exchange Rate and Inflation affect Export Value Non-Oil and Gas. The Exchange Rate does not affect the Non-Oil and Gas Exports Value. The Inflation Rate affects the Value of Non-Oil and Gas Exports.

Changes in exchange rates are well-known to possess non-Gaussian distributions, yet in testing for differences in exchange rate volatility few researches have examined measures that do not assume Gaussian data. This paper develops a robust, non-parametric measure for comparing exchange rate variability across time. The measures are applied to monthly exchange rate data to test for differences in exchange rate variability across different monetary policy regimes. The comparison show inconsistencies between conclusions based on the classical F -test and the robust, non-parametric equivalent. Using the robust test for changes in exchange rate variability, we do not conclude that variability has increased over time. Increases in variability do occur, but usually only in specific percentiles of the data.

Sharia shares are securities proof of equity participation in a company. On the base of this proof of participation shareholders are entitled to a share of income arisen from the company's business. This concept of equity participation with share rights of operating income does not conflict with Sharia principles. This study aimed to analyze the effect of exchange rate, foreign exchange reserves and consumer price index on the Sharia stock index of Asian countries, where the research object was the Islamic stock index of Indonesia, Malaysia, Japan and India. It is known that many factors influence on the stock index movements in a country, including domestic interest rates, foreign exchange rates, international economic conditions, a country's economic cycle, inflation rates, tax regulations, and the money supply. In this study, the authors examine the influence of only three factors – the exchange rate, foreign exchange reserves and consumer price index. The panel data regression method was used for the period of January to December 2019. The results of the regression analysis shown that the variables of exchange rates, foreign exchange reserves and the consumer price index together had a significant effect on the Islamic stock index of Asian countries. The R-squared value was 0.997762, meaning that 99% of the variation in the Islamic stock index of Asian countries could be explained by variations in the variable exchange rates, foreign exchange reserves and the consumer price index. The individual test results show that the exchange rate had a significant negative effect on the Islamic stock index of Asian countries. Meanwhile, foreign exchange reserves and the consumer price index had a significant positive effect on the Islamic stock index of Asian countries.

PurposeThis study aims to investigate the impact of the rise in coronavirus disease 2019 (COVID-19) cases on stock prices, exchange rates and sovereign bond yields in both Brazil and India.Design/methodology/approachThe authors employ the wavelet transform coherence (WTC) and continuous wavelet transform (CWT) techniques on daily data from March 17, 2020 to May 8, 2021.FindingsThe findings show that COVID-19 has no impact on exchange rates but slightly increases sovereign bond yields from 2021 onwards. In contrast, the effect of COVID-19 on stock prices is quite high in both countries. There is a considerable consistency between COVID-19 cases and stock prices across different time–frequency dimensions. The rise in COVID-19 cases has an increasing effect on stock prices in Brazil and India, especially in the high-frequency ranges.Originality/valueAs far as the authors know, no prior study has simultaneously analyzed the effects of the COVID-19 pandemic on exchange rates, stock prices and sovereign bonds in Brazil and India.

This paper analyses the asymmetric responses of manufacturing output to changes in exchange rates and bank credit in Nigeria. The results reveal significant countercyclical effects of exchange rate changes on manufacturing output. Bank credit to the private sector was the only predictor with procyclical effects on Nigeria’s manufacturing output. As these responses are often impacted by behavioural patterns, shifts in policy and economic fluctuations, the study employed the non-linear ARDL method alongside the Wald test, Quandt-Andrews and Zivot-Andrews tests. The results of the phase shift analysis show that in Nigeria, only private sector credit leads the manufacturing output cycle, while changes in the exchange rate, inflation and lending rates lag behind. Regardless of the timeframe, manufacturing output was adversely affected by positive and negative changes or variations in the exchange rate. Shifts in bank credit, whether positive or negative, had a positive and considerable effect on manufacturing production. The Wald test confirms the presence of asymmetry in the effects of the exchange rate and private credit on output. The Quandt-Andrews F-statistics for both the maximum likelihood ratio (LR) and Wald statistics, as well as the Zivot-Andrews intercept and trend test results, show that there were breakpoints in bank credit and exchange rate variations in different years, particularly in 2016 and 2020, which marked periods of economic recession, health pandemics, policy shifts, external shocks and macroeconomic instability, as measured by rising petrol pump prices. Neither model, with or without structural breaks, supports the conventional economic theory that devaluation leads to an expansion in output. This is attributed to the contractionary effect of naira depreciation in the context of significant foreign currency-denominated external debt. The negative output effect of naira devaluation in Nigeria was also explained by the low level of competition among domestic firms. In the short term, the results further account for the inflation-output trade-off in Nigeria’s manufacturing industry, while in the long term, the neutrality principle does not fully apply to Nigeria, whose financial market is still emerging, hampered by structural imbalances in the economy. To minimize arbitrage, the Nigerian government should implement financial policies capable of closing the gap between devaluation and appreciation of the naira exchange rates. Specifically, the monetary authorities should set credible inflation targets, and the rate of interest adjustment should align with these targets. This can be achieved by creating an autonomous central bank responsible for maintaining price stability. The research findings will be valuable to manufacturers, the financial sector and small and medium-sized enterprise (SME) owners, both in and outside Nigeria. SMEs and manufacturing industries can benefit from government funding, aid, or investment tax breaks. Such initiatives may take the form of reinvestment allowances, amortization allowances or cash-based grants.

The Indonesian Capital Market has an important role in the mobilization of funds for national development. The capability of the Indonesian Capital Market in mobilizing funds has become an important container besides banking to provide funds through the sale of shares and bonds. The counting of return and risk are two important things in any capital or fund to be invested. Investment risk generally is affected by micro and macro factors. The purpose of this research is to analyze how the effect of financial leverage, operating leverage and company liquidity simultaneously and partially to share investment risk on the food and beverage industry in Indonesia stock exchange period 2013-2017. The result of this research were the variable of economic conditions, interest rate, inflation, exchange rate, financial leverage, operating leverage and company liquidity simultaneously have a significant effect to share investment risk on the food and beverage industry in Indonesia stock exchange period 2013-2017 and the variable of exchange rate with financial leverage variable has a negative and significant effect to share investment risk on the food and beverage industry in Indonesia stock exchange period 2013-2017.

Agribusinesses are focusing increased attention on linkages between the US agricultural sector and international economic variables. Increased dependency by the agribusiness sector on exports, greater variability in interest rates, and greater variability in exchange rates are illustrative of recent changes. Lead-lag relationships between interest rates, exchange rates, and agricultural exports suggest strong relationships in the US and several industrialized nations. US interest rates often lead foreign exchange rates, while relationships between interest rate differentials and exchange rates are generally instantaneous.

The role of exchange rates is very important in the international market and the variability of exchange rates both in the case of appreciation or depreciation is directly connected with the economic performance of a country. Exchange rate variations in oil-producing countries in Africa have been too high resulting in volatilities due to domestic and foreign shocks. High volatility of exchange rate may translate into reduction of trade flows, foreign direct investment, and instability in both interest rates and inflation rates. Several studies on the relationship between economic fundamentals and exchange rates focused more on Africa or country-specific with limited focus on African oil-producing countries using asymmetric cointegration. Therefore, this study examines the relationship between some economic fundamentals and real exchange rates in oil-producing countries in Africa. The dynamics panel non-linear autoregressive distributed lag and linear autoregressive distributed lag were used to investigate the relationship between economic fundamentals and real exchange rate (RER). The NARDL result shows evidence that there exists both short and long-run asymmetric relationship between economic fundamentals and RER. The study recommended that policymakers in these countries pay more attention to their macroeconomic policies to reduce the production and transaction costs of foreign direct investment (FDI).

(ProQuest: ... denotes formulae omitted.)1. IntroductionExchange rates, which is simply the price of one currency in terms of another currency, are one of the key component of the macroeconomics discussions in the literature. If one want to understand why some currencies depreciate and others appreciate, the factors that cause the change in supply and demand of currencies must be investigated. These factors include various fundamentals such as real income, inflation rates, real interest rates, consumer preferences, and government trade policy. For example, Purchasing Power Parity (PPP) states that a country's currency will depreciate by an amount equal to the excess of domestic inflation over foreign inflation while Uncovered Interest Parity (UIP) suggests that the interest rate differentials change the exchange rates. Traditional Flow Approach, which is also called the balance-ofpayments view, states that exchange rate moves to keep the balance of payments in equilibrium under the assumption of no government interventions. On the other hand, nominal exchange rate fluctuations should reflect movements in a country's monetary fundamentals such as relative money, output, interest rates and prices, according to the Monetary Model of Exchange Rate Determination.One of the important debates centers on the international economics is the difficulty of predicting exchange rates by using monetary fundamentals such as money supplies, outputs, and interest rates. As stated above, some theories in the economic literature claim that the exchange rates might be determined by such fundamental variables. However, since Meese and Rogoff (1983), it has been considered that exchange rates are very difficult to predict using monetary fundamentals; in particular, a simple random walk without drift (RW), is found to produce better exchange rate forecasts than fundamental-based exchange rate models. In other words, fundamental variables do not help predict future changes in exchange ratesMeese and Rogoff's (1983) finding was a shock for economists since monetary fundamentals have long been considered key determinants of exchange rates. If their finding is true, then all exchange rate models based on the fundamentals are misleading. Therefore, large numbers of studies have attempted to refute Meese and Rogoff's findings and find positive results in favor of fundamentals-based models. One of the most well-known rebuttals to Meese and Rogoff's work is Mark's (1995) study. Mark concludes in his study that monetary fundamentals contain predictive power for exchange rate. He used the long horizon regression (or Error Correction Model (ECM)) derived from the VECM (Vector Error Correction Model). However, these two studies are not the only ones testing the predictive ability of exchange rate models. Several models such as the single equation linear models, single-equation ECM, multi-equation VECM models, time-varying parameter models, and panel models have been used in the literature in the attempt to predict exchange rates. Even though most of the authors are unable to document short-run exchange rate predictability, some of them find evidence of long horizon predictability. Nevertheless, the literature has remained pessimistic about the link between exchange rates and fundamentals.The main purpose of the study is to investigate the exchange rate predictability in Turkey by using the monetary fundamentals in the ECM. This study first examines the in-sample fit of the ECM model, and then evaluates the out-of sample forecast performance of the ECM against benchmark RW model. The fundamental value of exchange rate used in this study is obtained from Frankel-Bilson Monetary Model. The error correction term is constructed under the assumptions of zero/nonzero interest rate differentials and country specific money demand elasticities to satisfy the cointegration assumption between fundamentals and exchange rates. The in-sample analysis results present evidence that monetary fundamentals are useful to explain the long horizon changes in the logarithm of the exchange rates while the out-of sample analysis results suggest that whether the ECM or the RW explains the nature of exchange rate changes might be considered that time varying. …

Background/Objectives: Export competitiveness of an economy is determined by exchange rate and price level movements. This paper endeavors to analyze relative price and exchange rate movements in selected Asian countries visà-vis India and theirimplications for trade policy. Methods/Statistical analysis: The trends in changes in relative prices, exchange rates and trade are analyzed for years 1993, 2003 and 2013. Unit value index for exports is used to calculate relative price ratios. The relative prices and exchange rates are calculated using simple mathematical equations. Then, the price ratios and exchange rates are compared with export and imports movements of each country vis-à-vis another to assess effects of these movements on trade competitiveness. Findings: The study elucidates thatthe greater the increase in the exchange rate than the increase in the relative price level, the beneficial it is for a country to trade with another country. India’s exports to selected five countries reflected an upward trend whenever the depreciation of currency was greater that the upward movements in the price levels. An analysis of percentage changes in price and exchange rates and growth rates of exports and imports also reflects that India experienced a slow growth in exports in all those years when price rise was not compensated equally by exchange rate depreciations.It also indicates that whenever the price rise was compensated by the equivalent or greater depreciation of currency, there was surplus in trade with the competing country. These findings are in tune with fundamental macroeconomic theory of exchange rates and price movements. This analysis clearly indicates that unlike other competing economies India lacks active policy interventions that will help in enhancing export competitiveness through precise exchange rate movements. Applications/Improvements: The study puts forward a strong case in favor of an exchange rate policy that brings about the movements in exchange rate in such a manner as to compensate for the changing price level in India. Keywords: Exchange Rate Movements, Export Competitiveness, Price Level, Trade Policy