Political Risk and Real Exchange Rate: What Can We Learn from Recent Developments in Panel Data Econometrics for Emerging and Developing Countries?

Bahmani‐Oskooee, Mohsen; Amor, Thouraya Hadj; Nouira, Ridha; Rault, Christophe

doi:10.2139/ssrn.3338797

Cited by 5 publications

(11 citation statements)

References 8 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…There has been a number of studies that are related to ours, of which Bouraoui and Hammami (2017), Suleman (2017), Bahmani-Oskooee et al (2019) and Abid and Rault (2020) are some recent examples. Many of these studies use political risk indicators developed by the International Country Risk Guide (ICRG) Database or develop their own customised political indicators.…”

Section: Introductionmentioning

confidence: 71%

“…Second, we provide estimates of long-run elasticities of exchange rates in regard to the said index which can be useful in gauging the long-term implications of political events. This complements similar studies that used different proxies of political risks, such as Manasse et al (2020), Bouraoui and Hammami (2017) and Bahmanee-Oskooee et al (2019). Third, we assess the exchange rates of emerging economies in the ASEAN region which have not been thoroughly covered in the past.…”

Section: Introductionmentioning

confidence: 85%

“…The empirical literature on the exchange rate and political risk linkage is more voluminous than its theoretical counterpart (see for instance, Krol, 2014, Bouraoui and Hammami, 2017; Suleman, 2017; Bahmani-Oskooee et al , 2019; Abid and Rault, 2020), The main difference between these studies is the way in which political risk and exchange rates are measured. A common thread in these studies is the inclusion of a political risk indicator as an additional regressor in some well-accepted exchange rate models, such as the monetary models (e.g.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Bahmani-Oskooee et al (2019) also use the risk indicators from the ICRG Database, but as additional regressors in a canonical Balasa-Samuelson type of framework to determine what drives real exchange rates in a panel of countries using annual data covering 1984–2016. The results indicate a negative relationship between political risk and real exchange rates.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Suleman (2017) found a similar outcome in that higher political risk reduces exchange rate returns. A comprehensive political risk index used by Bouraoui and Hammami (2017) and Bahmanee-Oskooee (2019) was also shown to undermine the value of the domestic currency.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

The long-run effects of geopolitical risk on foreign exchange markets: evidence from some ASEAN countries

Hui¹

2021

IJOEM

View full text Add to dashboard Cite

PurposeThe purpose of this paper is to analyse the long-run relationship between geopolitical risk and exchange rates in four ASEAN countries.Design/methodology/approachWe augment theoretical nominal exchange rate models available in the literature with the geopolitical risk index developed by Caldara and Iacoviello (2019), and then estimate these models using the ARDL approach to Cointegration.FindingsOur analysis uncovers evidence of Cointegration in the exchange rate models when the MYR-USD, IDR-USD, THB-USD and PHP-USD exchange rates are used as dependent variable. Next, geopolitical risk is a significant long-run driver for these exchange rates. Third, in all countries higher geopolitical risk leads to a depreciation of domestic currency.Research limitations/implicationsThere are implications for entrepreneurs, central banks, portfolio managers and arbitrageurs who actively trade in financial markets. Financial market players can benefit from a better understanding of how geopolitical events affect the portfolio of financial assets across various countries, while entrepreneurs can work out hedging strategies.Originality/valueThis is a contribution to the study of interlinkages between political risk and foreign exchange markets. It is the first study to adopt the geopolitical risk index of Caldara and Iacoviello (2019) to the study the foreign exchange markets of ASEAN countries.

show abstract

Section: Introductionmentioning

confidence: 71%

Section: Introductionmentioning

confidence: 85%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The long-run effects of geopolitical risk on foreign exchange markets: evidence from some ASEAN countries

Hui¹

2021

IJOEM

View full text Add to dashboard Cite

show abstract

Resource Curse Hypothesis in GCC Member Countries: Evidence from Seemingly Unrelated Regression

Inuwa

Adamu²,

Sani³

et al. 2022

Biophys Econ Sust

View full text Add to dashboard Cite

Oil and growth nexus: fresh evidence from top-ten oil producing countries

Inuwa,

Adamu,

Maina

et al. 2023

IJEGN

View full text Add to dashboard Cite

Oil as one of the most frequently used categories of energy resources has also been viewed as a critical factor of production coequal to labour and capital. Thus, oil consumption is linked to many economic activities and any energy policies might likely affect this relationship. This study examines the nexus between oil consumption and economic growth by controlling for labour and capital within the framework of a modified aggregate production function in the top-ten oil producing countries in the world during the period 1990-2015. The study applied a recently developed cross-sectional augmented autoregressive distributed lag (CS-ARDL) model and Dumitrescu-Hurlin Granger causality test. The empirical result revealed that oil consumption 4 N. Inuwa et al. stimulates economic growth in both short and long run. Similarly, the study shows that capital and labour significantly stimulate economic growth in not only the short but also long run. The causality results also unravelled a feedback causality relationship between oil consumption, labour, and economic growth. However, there is unidirectional causality running from economic growth to capital. Therefore, the policy implication of this study suggests that any oil conservation policies initiated by the government of the top-ten oil producing countries may be detrimental to their economic growth and development.

show abstract

Political Risk and Real Exchange Rate: What Can We Learn from Recent Developments in Panel Data Econometrics for Emerging and Developing Countries?

Cited by 5 publications

References 8 publications

The long-run effects of geopolitical risk on foreign exchange markets: evidence from some ASEAN countries

The long-run effects of geopolitical risk on foreign exchange markets: evidence from some ASEAN countries

Resource Curse Hypothesis in GCC Member Countries: Evidence from Seemingly Unrelated Regression

Oil and growth nexus: fresh evidence from top-ten oil producing countries

Contact Info

Product

Resources

About