Exchange Rate Volatility, Currency Misalignment, and Risk of Recession in the Central and Eastern European Countries

Shevchuk, Victor; Kopych, Roman

doi:10.3390/risks9050082

Cited by 6 publications

(6 citation statements)

References 72 publications

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“…If changes in exchange rates become unpredictable, this creates uncertainty about the profits to be made and, hence, reduces the benefits of international trade (Hook and Boon 2000). The empirical study result by (Shevchuk and Kopych 2021) in central and eastern European countries reveals that exchange rate volatility reduced the risk of recession in the Czech Republic, while the opposite effect was found for Hungary and Romania, with neutrality for Poland.…”

Section: Literature Surveymentioning

confidence: 92%

Does the Exchange Rate and Its Volatility Matter for International Trade in Ethiopia?

Nguse

Oshora

Fekete-Farkas

et al. 2021

JRFM

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This study was carried out to investigate the impact of the Ethiopian exchange rate and its volatility on international trade. Trade openness was used as a proxy for international trade in the study. The study’s general objective was to investigate how international trade responds to exchange rate levels and volatility. The study relied solely on secondary time-series data spanning the years 1992 to 2019. The Autoregressive Distributive Lag (ARDL) model was used in the study to investigate the long-term relationship between exchange rate level, volatility, and international trade performance. An error correction model was used to estimate the variables in the short term. To conduct the regression analysis, Foreign Direct Investment (FDI), Gross Domestic Product (GDP), and inflation were used as control variables. The finding of the study implies that: in the short term, the exchange rate level was found to negatively and significantly influence international trade. However, exchange rate volatility positively and significantly affects international trade both in the short and in the long term. In addition, gross domestic product, foreign direct investment, and inflation have a positive effect on international trade both in the short term and long term. This finding lends support to the J-curve effects, which suggest an initial loss in the short term followed by a dramatic gain in the long term. However, the findings of this study suggest that there is no significant gain from international trade to justify currency depreciation in Ethiopia.

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Section: Literature Surveymentioning

confidence: 92%

Does the Exchange Rate and Its Volatility Matter for International Trade in Ethiopia?

Nguse

Oshora

Fekete-Farkas

et al. 2021

JRFM

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“…These studies have emphasised the role of real exchange rate undervaluation and overvaluation. Methodologically, this speaks to the asymmetric characteristics of fluctuation in the real exchange rates (see Rapetti, [26]; Ribeiro et al, [32]; Shevchuk and Kopych, [33]; Iqbal et al, [19]).…”

Section: Exchange Rate Misalignmentmentioning

confidence: 99%

Exchange Rate Volatility and Productivity in Nigeria: An Empirical Analysis

Orisdare,

Olofin

2024

Asian J. Econ. Busin. Acc.

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The volatile movement in Nigeria’s exchange rate constitutes a severe headwind to the economic activity in the country and the eventual performance of productivity and economic growth. Therefore, this study sought to investigate the impact of exchange rate volatility on productivity in Nigeria. Due to the seemingly mixed order of integration in the variables, the Johansen and Bound cointegration tests were used to establish that there are long-run relationships between the variables. Following the cointegration tests, the analysis of the study was based on the Autoregressive Distributed Lag (ARDL) Model. The findings from the study revealed that exchange rate volatility negatively impacts productivity in Nigeria in the short run and in the long run. However, the financial development in Nigeria negatively impacts productivity, reflecting the underdevelopment of the financial system to transmit its function to the real sector. Other variables considered emphasise persistence in the way they impact productivity. The article also emphasised the need for the harmonisation of foreign exchange management guidelines and clarity and transparency in the management of the foreign exchange market.

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“…The high level of changes in industrial production stimulated the volatility in the exchange rate of the currencies of Malaysia, India and China. Shevchuk and Kopych [30] relied on GMM estimation to report that the volatility in exchange rate was instigated by inflation, crisis, as well as economic freedom from the Heritage Foundation, besides inflation and crisis developments. According to Mpofu (2020), volatility in the foreign exchange rate of the South African Rand was instigated significantly by the variation in commodity prices, aggregate national output, money supply, exchange rate regime, and government consumption.…”

Section: Review Of Relevant Empirical Researchmentioning

confidence: 99%

“…The former research or studies on or related to the determinants of exchange rate volatility reviewed in this study have exhibited some limitations. Most of the researchers like Bello et al [31], Shevchuk & Kopych [30], Abdul & Mohammad [29], Mpofu [23], Nawal & Adhalla [19] in their study considered inflation, interest rate and money supply as independent variables that influence the movement of exchange rate, that is, determinants of exchange rate volatility. But they failed to consider that the difference between a domestic country and a foreign country's interest rate, inflation rate, money supply, and income differential could have a significant influence on the exchange rate volatility of a country.…”

Section: Gaps In the Reviewed Researchmentioning

confidence: 99%

Causes of Exchange Rate Volatility

Umoru,

Akpoviroro,

Effiong

2023

AJEBA

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This study examined the determinants of exchange rate volatility basing evidence on 7 African countries; Niger, Sudan, Cameron, Equatorial Guinea, Tunisia, Congo, and Cote D’Ivoire from 1990-2023. The study conducted the Autoregressive Distributive Lag (ARDL) bounds testing for co-integration and also estimated the error correction model. Furthermore, ARCH and GARCH models were analyzed to measure the volatility of a time series by fitting an autoregressive model to the squared residuals of the time series. The ARCH and GARCH results suggest the volatility of the exchange rate markets in the aforementioned countries is not random. The speed of adjustment of the volatility in the exchange rate of the Sudanese economy is 39%, in Niger Republic it is 50%, in Cameroon it is 52%, in Tunisia it is 55%, in Congo the speed is 32%, in Equatorial Guinea, the speed of adjustment is 58% and in Côte D’Ivoire the speed is 45%, respectively. The study found that the determinants of exchange rate volatility among African countries vary depending on the specific country. The observed volatility in the Sudanese exchange rate was anchored by the significant positive influence of inflation and income differentials as well as the significant negative influence of interest rate differential. In Niger Republic, exchange rate volatility was driven by the significant positive influence of productivity growth and money supply as well as the significant variation in oil prices and interest rate differentials. The observed short-run volatility in Cameroon's exchange rate was significantly and positively influenced by inflation differential and money supply variation whereas it was significantly but negatively propelled by interest rate differential and oil price shock. In Tunisia, exchange rate volatility was stimulated by the significant positive influence of inflation differential, productivity growth, oil price shock, and the significant negative role played by trade balance. The observed short-run volatility in the Congolese exchange rate was induced by the significant positive impact of inflation differential, income differential, trade balance, variation in money supply, and the significant negative impact of interest rate differential. In Equatorial Guinea, the observed exchange rate volatility was determined based on the significant and positive impact of differential in the inflation rate, oil price shock, changes in the money stock, and the foreign balance of trade. The observed volatility in the Côte D’Ivoire exchange rate was significantly and positively driven by the differentials in inflation rate, interest rate, and income level, the foreign trade balance but significantly stimulated by the negative influence of oil price shock. The general policy advice is that governments of all the countries covered by the study should implement exchange rate controls to limit the volatility of their currency fluctuation by imposing a limit on the amount of foreign currency that can be traded in the country. African governments should monitor the inflation differential between their own country and their trading partners to see if it is becoming too large. If it is, the government might raise interest rates to make its currency more attractive to investors.

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Exchange Rate Volatility, Currency Misalignment, and Risk of Recession in the Central and Eastern European Countries

Cited by 6 publications

References 72 publications

Does the Exchange Rate and Its Volatility Matter for International Trade in Ethiopia?

Does the Exchange Rate and Its Volatility Matter for International Trade in Ethiopia?

Exchange Rate Volatility and Productivity in Nigeria: An Empirical Analysis

Causes of Exchange Rate Volatility

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