Testing the Effects of Real Exchange Rate Pass-Through to Unemployment in Brazil

Ojonugwa Usman; Osama Elsalih

doi:10.3390/economies6030049

Testing the Effects of Real Exchange Rate Pass-Through to Unemployment in Brazil

Economies ◽

10.3390/economies6030049 ◽

2018 ◽

Vol 6 (3) ◽

pp. 49 ◽

Cited By ~ 7

Author(s):

Ojonugwa Usman ◽

Osama Elsalih

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Unemployment Rate ◽

Policy Implications ◽

The Real ◽

Distributed Lag ◽

Long Run ◽

Short Run ◽

Pass Through ◽

Linearity Test

This paper attempts to test the pass-through of the real exchange rate (RERT) to unemployment in Brazil over the period 1981M1–2015M11 using linear and nonlinear Autoregressive Distributed Lag (ARDL) models. The result of the linearity test suggests that the relationship between RERT and unemployment is linear in the short-run and nonlinear in the long-run. Therefore, using the symmetric ARDL model for the short-run analysis, we find that an increase in the RERT decreases the unemployment rate. The result of the nonlinear ARDL for the long-run analysis shows that the unemployment rate reacts to the RERT appreciations and depreciations differently with depreciations having a strong effect. However, the pass-through of the RERT to unemployment is incomplete both in the short- and long-run. These findings have important policy implications for the designing of appropriate monetary policy in response to a rise in unemployment resulting from a change in the real exchange rate.

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DETERMINANTS OF REAL EXCHANGE RATE IN ETHIOPIA

International Journal of Research -GRANTHAALAYAH ◽

10.29121/granthaalayah.v4.i6.2016.2652 ◽

2016 ◽

Vol 4 (6) ◽

pp. 183-210

Author(s):

Nandeeswara Rao ◽

TassewDufera Tolcha

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Impulse Response ◽

Variance Decomposition ◽

Capital Inflow ◽

Terms Of Trade ◽

Nominal Exchange Rate ◽

The Real ◽

Long Run ◽

Short Run

Real exchange rate has direct effects on trade particularly on international trade and has indirect effects on productions and employments, so it is crucial to understand the factors which determine its variations. This study analyses the main determinants of the real exchange rate and the dynamic adjustment of the real exchange rate following shocks to those determinants using yearly Ethiopian time series data covering the period 1971 to 2010. It begins with a review of literatures on Exchange rate, real exchange rate, determinants of the real exchange rate and provides an updated background on the exchange rate system in Ethiopia. An empirical model linking the real exchange rate to its theoretical determinants is then specified. This study had employed the cointegration and vector autoregression (VAR) analysis with impulse response and variance decomposition analyses to provide robust long run effects and short run dynamic effects on the real exchange rate. Share of investment, foreign exchange reserve, capital inflow and government consumption of non-tradable goods were the variable that have been found to have a long run relationship with the real exchange rate. The estimate of the speed of adjustment coefficient found in this study indicates that about a third of the variation in the real exchange rate from its equilibrium level is corrected within a year. The regression result of VECM reveals that terms of trade, nominal exchange rate, and one period lag of capital flow were the variables significantly affects the real exchange rate in the short run. However, the impulse response and variance decomposition analysis shows a better picture of the short run dynamics. The their analysis provided evidence that the Shocks to terms of trade, nominal exchange rate, capital inflow and share of investment have persistent effects on the real exchange rate in the short run. In general the regression results of both long run and short run models mostly suggest that the fluctuations of real exchange rates are predominantly responses to monetary policies shocks rather than fiscal policy shocks.

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Dynamic Effects of Exchange Rate Movements on Productivity Levels: New Evidence From Nigeria Based on NARDL

Journal of Development Policy and Practice ◽

10.1177/24551333211050704 ◽

2021 ◽

pp. 245513332110507

Author(s):

Emmanuel Uche ◽

Sunday Ikedinobi Nwamiri

Keyword(s):

Exchange Rate ◽

Output Growth ◽

Distributed Lag ◽

Dynamic Relationship ◽

Autoregressive Distributed Lag ◽

Long Run ◽

Exchange Rate Movements ◽

Short Run ◽

Pass Through ◽

Exchange Rate Depreciation

The dynamic relationship between exchange rate movements (appreciation and depreciation) and macroeconomic fundamentals had preoccupied the minds of researchers across the globe. Consequently, extensive research works have been conducted to unravel the puzzle; however, the findings remain inconclusive. The inconclusiveness of these researches may not be unconnected with the choice of model, the omission of key variables and erroneous assumption of symmetric interrelationships of the variables. To mitigate such error and fill the observed research gaps, this study leveraged on the non-linear autoregressive distributed lag to trace the possible asymmetric pass-through of the exchange rate to output growth in Nigeria. The study made use of monthly time series for the period 2000M1–2018M12 for empirical estimations. The empirical findings reveal an asymmetric pass-through from exchange rate to productivity. Exchange rate depreciation led to output retardation in the short run, but neither appreciation nor depreciation of the exchange affected output in the long run. The findings highlight that exchange rate depreciation of the local currency does not improve the country’s productivity. This reveals a disconnection and misalignment between exchange and productivity in Nigeria. The findings call for proper alignment of the Naira exchange rate with the U.S. dollar for improved productivity in the economy.

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The dynamics of inflation, exchange rates and the trade balance in a small economy

International Journal of Development Issues ◽

10.1108/ijdi-12-2017-0209 ◽

2018 ◽

Vol 17 (2) ◽

pp. 246-264 ◽

Cited By ~ 2

Author(s):

Zelealem Yiheyis ◽

Jacob Musila

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Exchange Rate Policy ◽

Content Type ◽

The Real ◽

Weak Support ◽

Long Run ◽

Curve Effect ◽

Short Run

Purpose The purpose of this study is to examine the temporal relationships between inflation and exchange rate changes and their implications for the trade balance in Uganda, which saw persistent trade deficits, rising inflation and disinflation episodes, as well as significant exchange-rate realignments and other liberalization measures over the sample period considered. Design/methodology/approach The short-run dynamics of the variables in question and the pattern of their long-run relationships are examined applying the bounds testing approach to cointegration on quarterly data. Findings The estimates suggest that, in the long run, a real depreciation leads to an increase in inflation; and that both real depreciation and inflation exert no significant effect on the trade balance. The estimated short-run dynamics suggest a causal relationship between the trade balance and the real exchange rate and between the real exchange rate and inflation, which is also found responsive to developments in the foreign sector. Taken together, the short-run and long-run multipliers seem to provide a weak support for the J-curve effect, while no evidence is found for the presence of the S-curve effect. Originality/value The study sheds light on the relationship among real exchange rate, inflation and the trade balance in the context of a small developing economy; it highlights that an improvement in the trade balance requires more than an appropriate exchange rate policy and underscores the importance of other policies in strengthening the external sector of the economy.

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Real Exchange Rate, Exports, and Imports Movements: A Trivariate Analysis

The Pakistan Development Review ◽

10.30541/v44i2pp.177-195 ◽

2005 ◽

Vol 44 (2) ◽

pp. 177-195 ◽

Cited By ~ 8

Author(s):

M. Ali Kemal ◽

Usman Qadir

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Deficit ◽

Raw Material ◽

The Real ◽

Long Run ◽

Short Run ◽

The Exchange Rate ◽

Exchange Rate Shocks ◽

Trivariate Analysis

The exchange rate exerts a strong influence on a country’s trade. It is depicted from the high correlation between the real exchange rate and exports (0.90) and that between the real exchange rate and imports (0.88). In the present-day scenario of falling levels of tariff and a reduced number of non-tariff barriers, the exchange rate has assumed a crucial role in influencing the trade deficit. Imports have a very significant association with exports as shown by the correlation between exports and imports (0.97). The increase in exports in the absence of surplus stocks requires an increase in production, which in turn requires capital and raw material. We analysed the long-run relationship and the short-run dynamics among the three variables. It is concluded that there exists a long-run relationship between real exchange rate, exports, and imports; and real exchange rate is negatively associated with the exports and positively associated with the imports. In the short-run, imports and exports adjust towards their equilibrium when there is disequilibrium. But the adjustment in the imports is greater than the adjustment in the exports. Moreover, exports do not respond to the shock caused by the real exchange rate, but imports respond to the sudden shock in the real exchange rate. The study ends up with the note that the sudden movements in the real exchange rate do not affect exports. Therefore, Pakistan should not worry about exchange rate shocks.

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SHORT-RUN AND LONG-RUN DETERMINANTS OF THE REAL EXCHANGE RATE IN MEXICO

The Developing Economies ◽

10.1111/j.1746-1049.2007.00055.x ◽

2008 ◽

Vol 46 (1) ◽

pp. 52-74 ◽

Cited By ~ 9

Author(s):

Antonia LÓPEZ VILLAVICENCIO ◽

Josep Lluís RAYMOND BARA

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

The Real ◽

Long Run ◽

Short Run

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Mobile Money Use: The Impact of Macroeconomic Policy and Regulation

Economies ◽

10.3390/economies9020051 ◽

2021 ◽

Vol 9 (2) ◽

pp. 51

Author(s):

Lorna Katusiime

Keyword(s):

Exchange Rate ◽

Interest Rates ◽

Financial Innovation ◽

Macroeconomic Policy ◽

Mobile Money ◽

Distributed Lag ◽

Distributed Lag Model ◽

Long Run ◽

Short Run ◽

The Impact

This paper examines the effects of macroeconomic policy and regulatory environment on mobile money usage. Specifically, we develop an autoregressive distributed lag model to investigate the effect of key macroeconomic variables and mobile money tax on mobile money usage in Uganda. Using monthly data spanning the period March 2009 to September 2020, we find that in the short run, mobile money usage is positively affected by inflation while financial innovation, exchange rate, interest rates and mobile money tax negatively affect mobile money usage in Uganda. In the long run, mobile money usage is positively affected by economic activity, inflation and the COVID-19 pandemic crisis while mobile money customer balances, interest rate, exchange rate, financial innovation and mobile money tax negatively affect mobile money usage.

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Fish Exports and Economic Growth: The Pakistan’s Experience

Global Business Review ◽

10.1177/0972150918825422 ◽

2019 ◽

Vol 20 (2) ◽

pp. 279-296 ◽

Cited By ~ 1

Author(s):

Syed Tehseen Jawaid ◽

Mohammad Haris Siddiqui ◽

Zeeshan Atiq ◽

Usman Azhar

Keyword(s):

Economic Growth ◽

Time Series Data ◽

Positive Impact ◽

Impulse Response Function ◽

Policy Implications ◽

Sensitivity Analyses ◽

Series Data ◽

Distributed Lag ◽

Long Run ◽

Short Run

This study attempts to explore first time ever the relationship between fish exports and economic growth of Pakistan by employing annual time series data for the period 1974–2013. Autoregressive distributed lag and Johansen and Juselius cointegration results confirm the existence of a positive long-run relationship among the variables. Further, the error correction model reveals that no immediate or short-run relationship exists between fish exports and economic growth. Different sensitivity analyses indicate that initial results are robust. Rolling window analysis has been applied to identify the yearly behaviour of fish exports, and it remains negative from 1979 to 1982, 1984 to 1988, 1993 to 1999, 2004 and from 2010 to 2013, and it shows positive impact from 1989 to 1992, 2000 to 2003 and from 2005 to 2009. Furthermore, the variance decomposition method and impulse response function suggest the bidirectional causal relationship between fish exports and economic growth. The findings are beneficial for policymakers in the area of export planning. This study also provides some policy implications in the final section.

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The Effect of Real Exchange Rate on Trade Balance in a Resource-Rich Economy: The Case of Mongolia

Foreign Trade Review ◽

10.1177/0015732518797184 ◽

2018 ◽

Vol 53 (4) ◽

pp. 211-224 ◽

Cited By ~ 2

Author(s):

Gan-Ochir Doojav

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Developing Economies ◽

Jel Classification ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run ◽

Exchange Rate Depreciation

For resource-rich developing economies, the effect of real exchange rate depreciation on trade balance may differ from the standard findings depending on country specific characteristics. This article employs vector error correction model to examine the effect of real exchange rate on trade balance in Mongolia, a resource-rich developing country. Empirical results show that exchange rate depreciation improves trade balance in both short and long run. In particular, the well-known Marshall–Lerner condition holds in the long run; however, there is no evidence of the classic J-curve effects in the short run. The results suggest that the exchange rate flexibility may help to deal effectively with current account deficits and exchange rate risk. JEL Classification: C32, C51, F14, F32

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Research On Monetary Neutrality: Evidence From Exchange Rate And Trade Balance Of G-7 Countries

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v24i2.1351 ◽

2011 ◽

Vol 24 (2) ◽

Cited By ~ 1

Author(s):

Doh-Khul Kim

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Monetary Shocks ◽

Font Size ◽

Long Run ◽

Short Period ◽

Short Run ◽

Monetary Neutrality ◽

Nominal Shocks

According to a recent paper by Fisher and Huh (2002), in contrast to a long-run neutrality hypothesis, nominal shocks have long-run effects on a country’s real exchange rate and trade balance. However employing a similar method (VAR) with identical restrictions (long-run neutrality and short-run recursive hypotheses), this paper shows that the effects on the real exchange rate are much shorter in this G-7 country study than what Fisher and Huh (2002) contend. Further, the trade balance improves for a short period of time, from which it can conclude there is a shorter existence of the depreciation effect in response to expansionary monetary shocks, which supports the long-run neutrality hypothesis in an open macroeconomic framework.

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Effects of Exchange Rate and Inflation Rate on Stock Market Returns Volatility in India.

10.21203/rs.3.rs-55417/v1 ◽

2020 ◽

Author(s):

Nenavath Sre ◽

Suresh Naik

Keyword(s):

Exchange Rate ◽

Stock Market ◽

Error Correction ◽

Inflation Rate ◽

Market Returns ◽

Stock Market Returns ◽

Positive Effects ◽

Distributed Lag ◽

Long Run ◽

Short Run

Abstract The paper investigates the effect of exchange and inflation rate on stock market returns in India. The study uses monthly, quarterly and annual inflation and exchange rate data obtained from the RBI and market returns computed from the Indian share market index from January, 2000 to June, 2020.The paper uses the autoregressive distributed lag (ARDL) co-integration technique and the error correction parametization of the ARDL model for investigating the effect on Indian Stock markets. The GARCH and its corresponding Error Correction Model (ECM) were used to explore the long- and short-run relationship between the India Stock market returns, inflation, and exchange rate. The paper shows that there exists a long term relationship but there is no short-run relationship between Indian market returns and inflation. But, there is periodicity of inflation monthly considerable long run and short-run relationship between them existed. The outcome also illustrates a significant short-run relationship between NSE market returns and exchange rate. The variables were tested for short run and it was significantly shown the positive effects on the stock market returns and making it a desirable attribute of which investors can take advantage of. This is due to the establishment of long-run effect of inflation and exchange rate on stock market returns.

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