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Economies
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Exchange Rates: Drivers, Dynamics, Impacts, and Policies
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Exchange Rates: Drivers, Dynamics, Impacts, and Policies

A special issue of Economies (ISSN 2227-7099). This special issue belongs to the section "International, Regional, and Transportation Economics".

Deadline for manuscript submissions: 28 February 2025 | Viewed by 7769

Special Issue Editor

Dr. Balázs Égert

E-Mail Website
Guest Editor
Economics Department, Organisation for Economic Co-operation and Development (OECD), Paris, France
Interests: macroeconomics; international economics; structural policies
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

This Special Issue aims to gather empirical and theoretical papers that investigate exchange-rate-related issues in developing, emerging markets and advanced economies covering real exchange rate modelling (including the purchasing power parity, the Balassa–Samuelson effect, and the Dutch Disease), nominal exchange rate forecasting and modelling (e.g., monetary model to the exchange rate, target zones), central bank actual and verbal foreign exchange interventions, the connection between the exchange rate, trade, and current account, and the exchange rate–inflation nexus (e.g., exchange rate pass-through, inflation targeting in open economies).

Dr. Balázs Égert
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Economies is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • exchange rate drivers
  • dynamics
  • impacts
  • policies

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Published Papers (5 papers)

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Research

16 pages, 618 KiB  
Article
Analysis of Exchange Rate Stability on the Economic Growth Process of a Developing Country: The Case of South Africa from 2000 to 2023
by Collin Chikwira and Mohammed Iqbal Jahed
Economies 2024, 12(11), 296; https://doi.org/10.3390/economies12110296 - 29 Oct 2024
Viewed by 1122
Abstract
This study examines the impact of exchange rate stability on the economic growth of South Africa from 2000 to 2023, a period characterised by significant political and economic changes. Exchange rate stability is critical for developing countries, affecting key macroeconomic variables such as [...] Read more.
This study examines the impact of exchange rate stability on the economic growth of South Africa from 2000 to 2023, a period characterised by significant political and economic changes. Exchange rate stability is critical for developing countries, affecting key macroeconomic variables such as trade balances, foreign direct investment (FDI), and inflation. For emerging economies like South Africa, maintaining a stable exchange rate can reduce uncertainty in international transactions, foster investor confidence, and support sustainable economic development. This research explores whether consistent exchange rate management has positively influenced South Africa’s economic trajectory, particularly by mitigating the adverse effects of global shocks and domestic volatility. Using the EasyData online database, which contains yearly time series data, the method of analysis adopted by the research is the ordinary least squares (OLS) regression method. The findings show that while exchange rate stability positively impacts GDP, the influence of FDI and political risk is more substantial. These results underscore the importance of fostering a stable economic environment through sound exchange rate policies, political stability, and efforts to attract foreign investments to ensure long-term economic growth. Full article
(This article belongs to the Special Issue Exchange Rates: Drivers, Dynamics, Impacts, and Policies)
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10 pages, 488 KiB  
Article
US Dollar Exchange Rate Elasticity of Gold Returns at Different Federal Fund Rate Zones
by Michael D. Herley, Lucjan T. Orlowski and Mark A. Ritter
Economies 2024, 12(9), 229; https://doi.org/10.3390/economies12090229 - 28 Aug 2024
Viewed by 975
Abstract
We examine the relationship between gold prices and the U.S. dollar exchange rate, arguing that their interactions are state-dependent and asymmetric under different market conditions. State dependency hinges on different short-term interest rate zones. To prove this point, we determine three distinct levels [...] Read more.
We examine the relationship between gold prices and the U.S. dollar exchange rate, arguing that their interactions are state-dependent and asymmetric under different market conditions. State dependency hinges on different short-term interest rate zones. To prove this point, we determine three distinct levels or zones of the effective federal funds rate using SETAR(2,p) tests. Subsequently, we perform conditional least square estimations of log changes in gold prices as a function of log changes in the nominal broad U.S. dollar exchange rate index for each of the obtained zones. Their relationship is consistently inverse, suggesting that gold and the U.S. dollar are risk-hedging substitutes for normal market periods. This also implies that gold is a safe-haven asset against the U.S. dollar exchange rate risk against a broad range of currencies. The substitution is weaker in the low-interest rate zone, more robust in the intermediate zone, and very pronounced in the high zone. We also perform a Markov switching test on the double-log function of gold prices and the exchange rate. The tests show a pronounced inverse relationship, i.e., substitution between assets, at normal market conditions. The relationship becomes significantly positive during episodes of financial distress, indicating complementarity between gold and U.S. dollar assets. Full article
(This article belongs to the Special Issue Exchange Rates: Drivers, Dynamics, Impacts, and Policies)
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19 pages, 1229 KiB  
Article
Assessing the Effects of Exchange Rate Volatility on Zambia’s Economic Growth: Evidence from ARDL and NARDL Models
by Tabo Mwiya, Briven Muchanga Simaundu, Maria Nyau and Joseph Phiri
Economies 2024, 12(9), 224; https://doi.org/10.3390/economies12090224 - 23 Aug 2024
Viewed by 1746
Abstract
This study investigated the interplay between exchange rate volatility, inflation rates, and real interest rates on Zambia’s economic growth from 1992 to 2022, utilizing annualized time series data. The study was necessitated by the limited published literature and relatively varying findings on the [...] Read more.
This study investigated the interplay between exchange rate volatility, inflation rates, and real interest rates on Zambia’s economic growth from 1992 to 2022, utilizing annualized time series data. The study was necessitated by the limited published literature and relatively varying findings on the variables’ relationships in resource-dependent countries, such as Zambia. Diagnostic tests, including stationarity and co-integration analyses, were employed to determine integration orders and potential long-run relationships. The linear and nonlinear autoregressive distributed lag models were employed to assess short- and long-run dynamics of the variables on economic growth. The results established a positive short-run relationship between inflation rates and Gross Domestic Product (GDP) growth in the linear autoregressive distributive lag model, while an inverse relationship was observed in the nonlinear autoregressive distributive lag model, suggesting that negative shocks in inflation rates had a highly significant positive impact on economic growth. Furthermore, interest rates exhibited a positive relationship with economic growth, further suggesting that positive shocks had a greater significant direct effect on economic growth in comparison to negative shocks in the short and long run, respectively. Finally, exchange rates in both models exhibited an inverse relationship with economic growth irrespective of positive or negative shocks in the long run, highlighting the adverse effect of exchange rate volatility on economic growth prospects in developing countries, such as Zambia. The speed of adjustment to convergence following any disruptions was determined to be 75.18% (ARDL) and 89.19% (NARDL), highlighting relatively fast speeds of adjustments from any short-run disruptions. Notably, some of the policy recommendations included regular assessments of exchange rate volatility influences on import prices, domestic inflation, and production costs in key sectors. Additionally, the implementation of currency hedging options and forwards as well as bulking of foreign exchange reserves will ensure the stability of exchange rates against other major currencies in various economic conditions. Full article
(This article belongs to the Special Issue Exchange Rates: Drivers, Dynamics, Impacts, and Policies)
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12 pages, 232 KiB  
Article
Investigating How Exchange Rates Impact Japan’s Machinery Exports since 1990
by Willem Thorbecke
Economies 2024, 12(6), 133; https://doi.org/10.3390/economies12060133 - 28 May 2024
Viewed by 1126
Abstract
Japan exports sophisticated capital goods. Since the Global Financial Crisis (GFC), Japanese companies have offshored the production of lower-end goods and parts and components to Asian countries. Because of this, several researchers argued that a weaker yen no longer stimulates machinery exports much [...] Read more.
Japan exports sophisticated capital goods. Since the Global Financial Crisis (GFC), Japanese companies have offshored the production of lower-end goods and parts and components to Asian countries. Because of this, several researchers argued that a weaker yen no longer stimulates machinery exports much because an increase in Japanese exports increases parts and components imports from overseas Asian subsidiaries. This paper finds that, after the GFC, a weaker yen no longer increases Japanese machinery exports to Asia but continues to stimulate exports outside of Asia. Thus, the weaker yen since 2020 does not help Asian firms to import vital Japanese capital goods but does increase the profitability of Japanese manufacturers and their exports to non-Asian countries. Full article
(This article belongs to the Special Issue Exchange Rates: Drivers, Dynamics, Impacts, and Policies)
13 pages, 1204 KiB  
Article
Asymmetric Exchange Rate Effects on Trade Flows in India
by Niloufer Sohrabji
Economies 2024, 12(5), 114; https://doi.org/10.3390/economies12050114 - 9 May 2024
Cited by 1 | Viewed by 2248
Abstract
This paper examines the role of exchange rate changes on India’s trade. The drivers of exports and imports (income, exchange rate including sectoral differences, and exchange rate variability) are estimated for the short and long run including a structural break. Using annual data [...] Read more.
This paper examines the role of exchange rate changes on India’s trade. The drivers of exports and imports (income, exchange rate including sectoral differences, and exchange rate variability) are estimated for the short and long run including a structural break. Using annual data from 1994 to 2022, the results of dynamic fixed effects estimation show that both exports and imports are income-elastic in the short and long run, but income elasticity is far stronger for exports. Moreover, exports are responsive to the real effective exchange rate in the short run but not in the long run, and the reverse is true for imports. Furthermore, exchange rates have asymmetric effects for high-volume and primary sectors for exports and imports. The combined impacts show the ineffectiveness of using currency depreciation to address trade imbalances. Full article
(This article belongs to the Special Issue Exchange Rates: Drivers, Dynamics, Impacts, and Policies)
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