Exchange Rate,Exchange Rate Volatility and Foreign Direct Investment

In the light of the importance of foreign direct investment (FDI) for the promotion of economic development, this paper examines the impact of the changes in the real exchange rate and its volatility on FDI. Examining Japan's FDI by industries, we found that the depreciation of the currency of the host country attracted FDI, while the high volatility of the exchange rate discouraged FDI. Our results suggest the need to avoid over‐valuation of the exchange rate and to maintain stable but flexible exchange rate in order to attract FDI.     

Is there a causal relationship between exchange rate volatility and unemployment?

In his article on “Germany's Stake in Exchange Rate Stability” (INTERECONOMICS, September/October 1996), Daniel Gros recently wrote that, as he sees it, the exchange rate volatility of the D-Mark against the other European currencies has a causal impact on the German unemployment rate. In the following it is examined whether Granger causality tests support this view and whether it is possible to infer from this that the establishment of a monetary union in Europe will contribute to a significant easing of unemployment problems.     

Exchange Rate Volatility and Intra‐Asia Trade: Evidence by Type of Goods

This paper examines the impact of intra‐Asia exchange rate volatility on intra‐Asia trade in primary goods, intermediate goods, equipment goods and consumption goods from 1980 to 2009. For Asia, the evidence shows that as intraregional exchange rate volatility increases, intraregional exports in these goods fall. This adverse impact is even more pronounced in the subregion of Association of Southeast Asian Nations (ASEAN)+5 comprising ASEAN member countries plus the People's Republic of China; Hong Kong, China; Japan; the Republic of Korea; and Taipei, China; and especially among intermediate and equipment exports. Again, the impact magnifies in an even smaller subgroup excluding the smaller ASEAN economies. These results underline the significant impact of exchange rate volatility on the region's production networks. For South Asia, however, exchange rate volatility appears to have a positive impact on exports. Still, caution is warranted given that South Asian economies trade relatively little with each other.     

Exchange rates and the volume of trade—The case for fixed exchange rates

Exchange rate volatility and long-term distortions of exchange rate levels have given rise to concern among participants in international trade. Do exchange rate fluctuations have an adverse impact on the volume of trade? What measures could be taken to achieve greater exchange rate stability?     

Exchange rate volatility and Turkish industry-level export: Panel cointegration analysis

The purpose of this article is to investigate the impact of the exchange rate volatility on Turkey's export. To this end, the panel cointegration analysis is applied to the data from Turkey's top 20 export industries to major 20 trading partners for the period 1980–2009. Special attention is paid to test for whether employment of country-level trade data instead of industry-level data is subject to the aggregation bias problem in the estimation of long-run cointegration parameters. The results indicate that employing country-level trade data suffers from the aggregation bias in estimating the cointegration parameters for the level of exchange rate and for the exchange rate volatility. The findings imply that (i) the impact of the exchange rate volatility on Turkish exports differs across industries, (ii) Turkey benefits from the depreciation of Turkish lira, and(iii) the foreign income plays a key role in determining the Turkish industry-level exports. The findings increase our insights to explain therecent dynamics of Turkish exports and provide some policy implications.     

A brighter future with lower transactions costs?

Recently, the OMX Nordic Exchange reduced the exchange fee for trading the OMXS 30 index futures with more than 22%. The reduction in exchange fees provides this study with a unique opportunity to investigate the effects of a change in fixed transaction costs on futures market liquidity, trading activity, volatility, futures pricing efficiency, and the futures exchange's revenues. The results show a ceteris paribus increase in futures trading volume with 19%, a 27% decrease in futures bid–ask spread, and a 27% increase in volatility, as a result of the futures exchange fee reduction, whereas the pricing efficiency of the futures contract and the exchange's revenues are unaffected by the change in transaction costs. The exchange fee reduction has improved futures market liquidity at the cost of higher volatility. Moreover, the attractiveness and competitiveness of the futures exchange has increased relative alternative trading venues, without a loss of revenues in the process. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:775–796, 2009     

The Gravity of China's African Export Promise

Africa's largest trade partner, China, criticised for exchanging resources for manufactures, has promised to increase imports and optimise the structure of trade with Africa. Using a gravity model of China's imports for the years 1995–2009, we explore potential dynamics for this promise, uniquely accounting for market economy recognition and Taiwan recognition. The former is associated with increased imports, while the latter effect is ambiguous and statistically insignificant. Comparison of projected against actual imports across three growth‐path‐aligned economic geography typologies – resource‐rich; landlocked and resource‐poor; coastal and resource‐poor – sets out China's imports trends in an abstract framework of African export potential. We find not only ‘under’ importing across a majority of resource‐poor countries. We also find that current trade policy is the least applicable to these comparatively poor exporters’ trade with China. If the latter are to serve a broader catalytic role in Africa's regional industrial transformation as compared to the role of coastal and resource‐poor countries in regional economic transformation in Asia and Latin America, China–Africa trade and investment policies may need additional thinking.     

How far have we come and where should we go after 30+ years of research on Africa's emerging financial markets? A systematic review and a bibliometric network analysis

In this study, we perform a systematic literature review and a bibliometric network analysis of studies on Africa's financial markets from 1992 to 2021. The findings are as follows. First, we observe a steady growth of financial markets research in Africa over the 30-year period under consideration, which is suggestive of increasing interest and commitment to research on financial markets in Africa. Additionally, we note a lack of collaboration between or among researchers of financial markets studies in Africa, which implies very little knowledge exchange, ideas sharing, and innovations. We identify seven major areas of research based on the thematic network and content analysis, which are as follows: (i) asset pricing, (ii) financial integration, (iii) contagion, herding and extreme global events, (iv) efficiency and predictability of stock returns, (v) market interdependencies-sources and channels, (vi) portfolio diversification and risk management strategies, and (vii) impact of economic and financial news. We offer several avenues for future research that can set the agenda for financial market research in Africa in the coming years.     

Intraday volatility in the bond,foreign exchange,and stock index futures markets

Intraday volatility for the Eurodollar, the Euro/dollar foreign exchange rate, and the E‐mini S&P 500 futures contracts traded on a continuous 23‐hour schedule on the Chicago Mercantile Exchange Globex electronic platform is studied. Volatility transmission in a single market across different regions is mainly explained by intraregion volatility (heat waves); interregion volatility (meteor showers) plays a secondary role. The joint impact of liquidity variables such as volume and open interest on volatility is also analyzed. Volume tends to increase volatility, but open interest does not affect it. The results are explained by the type of trading venue. Unlike floor‐based trading systems, in electronic markets open interest does not seem to provide additional information on market liquidity and its relation to volatility beyond any information contributed by volume. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:313– 334, 2008     

A reexamination of the demand for UK exports: Evidence from an error correction model

This article examines the demand for UK exports and is focused on five issues. It starts by examining the stochastic properties of the relevant time series. Special attention is paid to the model specification, its dynamic structure, and its temporal stability. In addition, the potential effect of exchange rate uncertainty on export demand is considered. The empirical results show that the determinants of the demand for UK exports are foreign economic activity, export price, foreign prices, and exchange rate uncertainty. The results further indicate that exchange rate uncertainty has a negative effect on exports and that the overall export demand equation requires the inclusion of such a variable in order to exhibit structural stability. Trade policy in the UK, therefore must take into account the response of export demand to changes in real exchange rate volatility.     

Exchange rate volatility and Japan–U.S. commodity trade: An asymmetry analysis

Exchange rate volatility is said to affect trade flows in either direction. When increased volatility is separated from decreased volatility, asymmetric analysis reveals even more support for the fact that both increased volatility and decreased volatility affect trade flows in either direction. We add to this new literature by considering 57 industries that trade between Japan and the US. In addition to providing evidence of asymmetric response of their trade flows to a measure of exchange rate volatility, our approach identifies industries that could benefit from increased exchange rate volatility and those that could be hurt. Similarly, we identify industries that could benefit from decreased volatility and those that could be hurt. The overall conclusion is the adverse effects of dollar–yen volatility on the trade between the two countries.     

The development of international business in Africa (1947–1997)

The genesis of international business in Africa from 1947 to 1996 is traced to colonial times. The article analyzes the dynamics and observes that international business in Africa witnessed growth but has not meaningfully influenced Africa's general economic development because of constraints: poor infrastructure, lack of maintenance culture, inadequate funding, debt burden and overemphasis on export of raw materials instead of manufactured goods. The article suggests placing a greater emphasis on the development of intermediate and capital goods industries and granting debt relief to all African countries as a means of further promoting international business entente in Africa.     

BRICS: How important is the exchange rate pass-through?

This paper analyses the exchange rate pass-through (ERPT) into domestic consumer prices in BRICS (Brazil, Russia, India, China and South Africa) countries from mid-1990s onwards by using three different econometric approaches (i.e., the single equation approach, the VAR approach and the time-varying parameter approach). It is also studied the role of macroeconomic determinants in ERPT. Our results suggest that (a) ERPT is higher for the emerging markets with mostly floating exchange rates (Brazil, Russia and South Africa) than for the other BRICS countries; (b) exchange rate explains, on average, around the 40% of the price variance for Brazil, Russia and South Africa; and (c) inflation volatility, exchange rate volatility and openness seem to be the key macroeconomic determinants in BRICS countries.     

What Drives India's Surge in Service Exports?

India's prowess in the service sector has been recognised the world over. Sustaining services exports is important not only to sustain India's high growth rate but also to compensate for a consistent deficit in merchandise trade and to maintain stability on the external sector. In this context, we analyse the factors of India's performance in services exports over the past three decades. The results reveal that endowment factors such as human capital, improvement in physical infrastructure and financial development are key drivers for India's surge in services exports along with world demand, exchange rate and manufacturing exports. While factors such as institutions, R&D expenditure, telecommunication, foreign direct investment and financial development significantly impact the export of modern services, traditional services exports are more dependent on infrastructure development, manufacturing exports, world demand and exchange rate. India's economic reforms in the financial sector, FDI, communication so far have helped the services exports, but India needs to focus on supply‐side factors to improve the competitiveness – and thereby volume – of services exports.     

World economic situation remains precarious

Global production increased at a rate of just 2% in 1998, half the previous year's growth. The USA and the EMU member countries in particular were spared a recession thanks to robust domestic demand. With continuing volatility on the financial markets, the world economic situation remains precarious.¹ How can we expect the world economy to develop in the next two years?     

The impacts of RMB internationalization on onshore and offshore RMB markets

Using the DCC-GARCH model, this study considers distinctive features of China's foreign exchange market to investigate the impacts of RMB internationalization on exchange rates in onshore and offshore markets in different stages during 2010–2017. The results show that policies concerning RMB internationalization, such as interest rate liberalization, exchange rate liberalization, and capital market internationalization, have different impacts on the central parity rate, onshore exchange rate, and offshore exchange rate. In terms of exchange rate liberalization, as the daily trading band was gradually widened in 2012–2015, the onshore exchange rate followed the offshore exchange rate more closely. The central parity rate functioned as a managed floating role. It stabilized onshore and offshore exchange rate fluctuations, while allowing partial marketization. After the exchange rate reform on August 11, 2015, the central parity rate plays a benchmark role based on a more market-oriented price formation mechanism. It makes the central parity rate regain pricing power in onshore and offshore markets. Further, it promotes exchange rate liberalization and RMB internationalization. Nevertheless, with the slowdown of China's economic growth and the narrowing of the interest rate differential between China and the US, the RMB is under pressure to depreciate, and its volatility increases significantly.     

From reform to neo-regulation: An assessment of recent political/economic developments in Nigeria

The Nigerian political economy was placed on the path of economic and political liberalization from the mid-1980s. About a decade later, both processes had experienced great reversals. This article examines the social forces that are arrayed against the reform processes. It focuses on recent political and economic developments in Nigeria with a view to understanding the nature of the emerging business environment for the purpose of potential investors, international managers, aid agencies, and donor countries in Africa's most populous country. While noting the inevitability of a modicum of regulation in the nation's economic adjustment program, this study contends that the regulatory measures contained in the 1994 budget prepared by the new military junta in Nigeria is stifling investment, and can neither lay the basis for the recovery of, nor engender sustainable development in the nation's economy. A more appropriate management of the exchange and interest rate regimes, and the democratization of the political processes as the minimum prerequisite for stability, growth, and development in the Nigerian political economy is recommended. © 1995 John Wiley & Sons, Inc.     

Should the exchange rate be a shock absorber?

This paper examines the welfare case for the exchange rate as a “shock absorber”, cushioning an economy in face of shocks to world demand for its good. We provide an example in which, although the exchange rate acts perfectly as a shock absorber, stabilizing output around the natural rate, and eliminating the impact of nominal rigidities, it may in fact be better to prevent the exchange rate from adjusting at all. The explanation for this is that, with incomplete international financial markets, the natural rate is inefficient; it does not respond enough to demand shocks. While fixing the exchange rate increases the volatility of consumption, the pro-cyclical nature of monetary policy under a fixed exchange rate allows for a more efficient composition of consumption between home and foreign goods. Furthermore, for the shocks examined, a welfare maximizing monetary rule always dampens exchange rate volatility relative to that of a free float, and in some cases may imply a fixed exchange rate.     

Market access,supplier access,and Africa's manufactured exports: A firm level analysis

Abstract

In a large cross-country sample of manufacturing establishments drawn from 188 cities, average exports per establishments are smaller for African firms than for businesses in other regions. Based on the estimation of firm level exporting equations, we show that this is mainly because, on average, African firms face more adverse economic geography and operate in poorer institutional settings. One part of the effect of geography operates through Africa's lower ‘foreign market access’: African firms are located further away from wealthier or denser potential export markets. A second occurs through the region's lower ‘supplier access’: African firms face steeper input prices, partly because of their physical distance from cheaper foreign suppliers, and partly because domestic substitutes for importable inputs are more expensive. Africa's poorer institutions reduce its manufactured exports directly, as well as indirectly, by lowering foreign market access and supplier access. Both geography and institutions influence average firm level exports significantly more through their effect on the number of exporters than through their impact on how much each exporter sells onto foreign markets.     

Microenterprise,Multinational Business Support,and Poverty Alleviation in South Africa's Informal Economy

The authors examine corporate programs that support microenterprise development in Africa. Specifically, the analysis assesses the extent to which local income and sales are affected by Coca-Cola's initiatives to assist South Africa's microenterprise in the retail trade sector. To quantify the impact, questionnaires were obtained from owners of small-scale retail establishments in the country's vast informal economy. Regression analysis is performed on key variables from the survey, testing hypotheses advanced to explain the size of an owner's income and sales. In addition to business development support, the explanatory variables include startup capital, size, and male/female ownership. It appears that business development support has a positive effect on lifting income and reducing poverty for microenterprise owners, after controlling for other influences.