Comparing Exchange Market Pressure across Five African Countries

Macedo, Jorge Braga de; Pereira, Luis Brites; Reis, Afonso Mendonça

doi:10.1007/s11079-008-9087-3

Cited by 9 publications

(5 citation statements)

References 26 publications

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“…This precludes any type of GARCH analysis such as that of Braga de Macedo et al . (). Our focus is different: to test for EMP spillovers among these countries and from regional and global stock markets.…”

Section: Resultsmentioning

confidence: 97%

“…Braga de Macedo et al . () focus on five African countries, but consider only a set of Portuguese‐speaking countries (Angola, Cape Verde, Guinea‐Bissau, Mozambique, and Sao Tome and Principe). Finding evidence of time‐varying volatility, they apply generalised autoregressive conditional heteroskedasticity methods (primarily exponential GARCH‐in‐Mean) to their EMP series.…”

Section: Introductionmentioning

confidence: 99%

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Measuring Exchange Market Pressure and Its Contagion in the East African Community

Hegerty

2013

South African J Economics

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As the members of the East African Community seek to further integrate their economies, issues of compatibility arise. How interlinked are these countries' exchange markets, and which currencies are most likely to influence their neighbours? This study constructs monthly indices of exchange market pressure (EMP) for Burundi, Kenya, Rwanda, Tanzania and Uganda over the past decade. Two methods of constructing these indices are shown to exhibit large differences. Vector autoregressive approaches are then applied to the main EMP series and a set of global stock price proxies. Kenya, the dominant economy, is shown to have the largest effect on the region but is not itself affected by other regional currencies. Foreign stock price declines increase EMP for all countries except Tanzania, which is also the least integrated in terms of trade. This suggests that financial integration in the region is uneven -with implications for a successful common currency. JEL Classification: F36, F41

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Section: Resultsmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

Measuring Exchange Market Pressure and Its Contagion in the East African Community

Hegerty

2013

South African J Economics

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“…However, imposing no restriction on explanatory variables, these models work adequately well with small samples. Some papers include applications of the EMP index to the currencies of African countries (de Macedo, Pereira and Reis, [29]), Australia (Jeisman, [30]), East Asian and Latin American countries (Tanner,[31]; Pontines and Siregar, [32]), East European countries (Hegerty, [33]), EU countries (Pentecost, Van Hooydonk, and Van Poeck, [34]; Klaasen and Jager, [35]), Finland (Spolander and Poso, [36]), and of Japan (Chen and Taketa, [37]). Frankel & Wei [38], Frankel & Xie, [39] developed some important discussion on this issue.…”

Section: Literature Reviewmentioning

confidence: 99%

Currency Crisis in Bangladesh Economy: Some Insights

Rahman¹,

Hasan²

2014

JFE

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Many countries around the world have faced currency crisis where they experienced substantial devaluation of local currency vis-à-vis some strong international currency within a short span of time resulting disruption in nominal as well as real activities. Although Bangladesh is not one of them yet in an integrated world possibility of experiencing such crisis is not remote. Using the concept of Exchange Market Pressure (EMP) in this paper we have tried to measure pressure on exchange rate in Bangladesh and then tried to find an early warning indicator of building EMP for Bangladesh. We found that in some occasions exchange rate situations got little erratic but never to the extent of crisis. We also found that before building up exchange rate pressure current account is most probably to show an early warning for Bangladesh. And ratio of M2 and reserve actually moves along with EMP index, so it may not be too informative for identifying currency crisis beforehand.

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“…To the researcher's knowledge, research examining EMP using EVT has never been conducted in Africa. A few studies have studied EMP in Africa but have never gone so far to model the data using EVT (De Macedo, Pereira & Reiss 2009;Fiador & Biekpe 2015). An analysis of this kind is especially important in developing countries where negative net export positions arise, with a deteriorating foreign exchange position.…”

Section: Introductionmentioning

confidence: 99%

Exchange market pressure in South Africa and Kenya: An analysis using parametric and non-parametric extreme value theory

Boer¹,

Munapo²,

Chanza³

et al. 2019

Journal of Economic and Financial Sciences

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Exchange market pressure (EMP) is the selling pressure of domestic currency or excess demand needed for foreign currency. Research purpose:The purpose of this study was to analyse EMP using extreme value theory (EVT) and to compare two commonly used EVT methods. Motivation for the study:To determine whether the EMP of two African countries can be modelled with EVT, and if so, which method would be best suited. To determine periods of extreme pressure or currency crisis by using these methods. Lastly, to study the individual components of the EMP index during these periods of stress of crises.Research design/approach and method: The monthly data of the three components of the EMP index for two African countries (Republic of South Africa [RSA] and Kenya) were studied for a period of 19 years (1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015)(2016)(2017). The data were modelled using the generalised Pareto distribution (GPD) with the peak over threshold (POT) method using maximum likelihood estimation. Moreover, the data were also modelled using the non-parametric Hill estimate. Appropriate estimated and empirical quantiles are reported in order to determine periods of extreme pressure or crises. The components of the EMP RSA data set were modelled with appropriate autoregressive moving averages and/or autoregressive conditional heteroscedasticity/generalised autoregressive conditional heteroscedasticity (ARMA/ ARCH/GARCH) processes to ensure independent and identically distributed variables. Main findings:Reliable and accurate estimates were obtained for the scale and shape parameter using the GPD POT method for both countries. Positive shape parameters confirmed generalised extreme value distributions with heavy tails of the Frechet type. Similarly, accurate and reliable shape estimates were computed using the non-parametric Hill estimator for both countries.Practical/managerial implications: The GPD POT method more closely reflected estimates to the empirical qauntiles compared to the Hill method. It is feasible to model the EMP data of two African countries with EVT using both POT estimation methods. However, the GPD method using maximum likelihood estimation was more accurate compared to the nonparametric Hill estimate. Contribution/value-add:It is feasible to model the EMP data of two African countries using EVT using both POT methods. As a consequence periods of extreme pressure could be identified. Therefore the individual components of the EMP at those periods of extreme pressure could be studied more closely.

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Comparing Exchange Market Pressure across Five African Countries

Abstract: Exchange rate regime, Exchange market pressure, EGARCH-M, C22, F31, F33,

Cited by 9 publications

References 26 publications

Measuring Exchange Market Pressure and Its Contagion in the East African Community

Measuring Exchange Market Pressure and Its Contagion in the East African Community

Currency Crisis in Bangladesh Economy: Some Insights

Exchange market pressure in South Africa and Kenya: An analysis using parametric and non-parametric extreme value theory

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