This paper investigates the effect of derivatives on the relationship between the foreign exchange rate and the stock market. A theoretical model is used to extend the understanding of that relationship. Also, the model is tested with an empirical analysis using the GMM strategy for the Mexican and Brazilian stock markets for the period 2007 to 2019. Findings reveal that in addition to the spot exchange rate, exchange rate futures explain the currency exposure, wherein the derivative effect is the most prominent. The result implies that both risk sources should be considered in the implementation of risk management or macroeconomic policy. The theoretical results are extended by applying them to international portfolio management, proposing a strategy to mitigate foreign exchange exposure with derivatives. This study contributes to the literature by explaining why the minimum variance hedge ratio plays an essential role in the foreign exchange rate and stock market nexus.
The contrasts of microcredit and some unresolved institutional challenges of microfinance: evidence from Mexico Los contrastes de los microcréditos y algunos retos no resueltos en microfinanzas: evidencia de México
The main objective of this study is to analyze the relationship between the financial performance and scope of MFIs with independent variables such as: country environment, MFI size, expenses, and capital structure. The Structural Equations Modeling (SEM) was used to verify direct and indirect relationships. It was found that the effect of these independent variables shows through operating expenses. Additionally, it was found that in a country with high levels of corruption, absence of rule of law, and government inefficiencies, MFIs are less likely to achieve their objectives due to the high operating costs allocated to reaching the population with low income. These factors also explain the financial performance and scope of MFIs, implying that operating expenses explain two of the most important determinants of MFI mission bias. The originality of this work resides in the methodology employed, the construction of all indicators and use of the regulatory environment, and the institutional development variables to analyze MFIs.
In this article, we analyze the way in which interest rates interact with financial performance in the MFI context. To that end, we use structural equation modeling, as it can measure both direct and indirect effects between variables. We found that interest rates are a significant mediator variable between financial performance and environment (corruption, the rule of law and government inefficiency), MFI size, and operating expense. The originality of this work lies in the methodology used. Although previous studies analyze the effect of interest rates on the financial performance of MFIs, our methodology captures the mediation effect of this variable. Finally, we state that interest rates play an essential role in the poverty-alleviating mission of MFIs, such that they are a significant indirect driver of financial performance.
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