scholarly journals Short-Term Capital Flows, Exchange Rate Expectation and Currency Internationalization: Evidence from China

2021 ◽  
Vol 14 (5) ◽  
pp. 223
Author(s):  
Mingming Li ◽  
Fengming Qin ◽  
Zhaoyong Zhang
Keyword(s):  
Exchange Rate ◽  
Capital Flows ◽  
Capital Inflow ◽  
Interactive Effects ◽  
Var Model ◽  
Short Term ◽  
Rmb Appreciation ◽  
Currency Internationalization ◽  
Rmb Internationalization ◽  
Rate Expectation

This paper intended to employ a portfolio approach to assess the effect of exchange rate expectation on Chinese RMB internationalization and empirically test the interactive effects among short-term capital flows, RMB appreciation expectation and the internationalization process using a VAR model with monthly data ranging from February 2004 to December 2020. The results suggest that RMB exchange rate appreciation could lead to an increase in the foreign demand for RMB and RMB denominated assets, while RMB internationalization would attract more short-term capital inflow due to the reduced transaction costs. The empirical evidence from the VAR model estimation confirms the finding that expected RMB appreciation induces short-term capital inflow and promotes RMB internationalization. The robustness checks confirm the evidence. The results have important policy implication for RMB internationalization and for maintaining a sound and stable financial system.

scholarly journals Analysis on the Impact of Short-Term International Capital Flows on Chinese Stock Market on the Basis of VAR Model

2018 ◽  
Vol 10 (8) ◽  
pp. 77
Author(s):  
Ning Wu
Keyword(s):  
Stock Market ◽  
Capital Flows ◽  
Composite Index ◽  
International Capital Flows ◽  
Capital Inflows ◽  
Var Model ◽  
Chinese Stock Market ◽  
International Capital ◽  
Short Term ◽  
The Impact

With the continuous development of global economic integration and financial markets, international capital flows more and more frequently, the frequent flow of international capital will inevitably affect the yield of Chinese stock market. This article uses short-term international capital inflows SS and Shanghai composite index R as research objects. Based on monthly data from January 2002 to October 2017, VAR model was constructed using Eviews8.0 to study the impact of short-term international capital flows on Chinese stock market. Empirical studies have found that short-term international capital flow is the granger cause of changes in the Shanghai composite index yield, while the yield of Chinese stock market will not affect short-term international capital flows. At the end of this paper, relevant suggestions are put forward according to the conclusions.

scholarly journals Analysis of Effect of Capital Inflow Volatility and Macroeconomic Variables on Rupiah Exchange Rate

2018 ◽  
Vol 6 (1) ◽  
pp. 1-7
Author(s):  
Adnan Muhammad Feisal ◽  
Lesta Karolina Br. Sebayang
Keyword(s):  
Exchange Rate ◽  
Time Series Data ◽  
Capital Inflow ◽  
Series Data ◽  
Short Term ◽  
Macroeconomic Variable ◽  
Macroeconomic Variables ◽  
Foreign Reserve ◽  
Negative Effect

The purpose of this research is to measure the effect of the capital inflow volatility on the rupiah exchange rate, to measure the effect of macroeconomic variables on the rupiah exchange rate, and to measure the response of capital inflow shocks and macroeconomic variables on the rupiah exchange rate. The data used is in the form of quarterly time series data from 2002:4-2014:4, which is derived from the data of Bank Indonesia. The model used in this research is the Vector Error Correction Model (VECM). The results show that: (1) In the short-term capital inflow has the positive and significant effect on the rupiah exchange rate, while in the long-term it does not have the significant effect on the rupiah exchange rate. (2) Macroeconomic variable that has the positive and significant effect on the rupiah exchange rate in the short-term is the capital inflow variable. In the long-term the macroeconomic variable that has the positive and significant effect on the rupiah exchange rate is the foreign exchange reserves variable. (3) Results of IRF, the response of the rupiah exchange rate of the capital inflow shocks indicates that an increase in capital inflow has effect on the strengthening of the rupiah exchange rate. The shocks on the foreign reserve variable have the positive effect on the rupiah exchange rate, and the shocks on the inflation variable have the negative effect on the rupiah exchange rate.

Stress test of banks in India across ownerships: a VAR approach

2017 ◽  
Vol 34 (4) ◽  
pp. 527-554 ◽  
Author(s):  
Sreejata Banerjee ◽  
Divya Murali
Keyword(s):  
Exchange Rate ◽  
Capital Flows ◽  
Banking Sector ◽  
Foreign Capital ◽  
Financial Liberalization ◽  
Stress Test ◽  
Var Model ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Foreign Capital Flows

Purpose This paper aims to examine whether the Indian banking system is robust to withstand unexpected shocks from external and domestic macroeconomic factors after financial liberalization in 1992. As proposed by Demirgüç-Kunt and Detragiache (1998) and Kaminsky and Reinhart (1999) banking crisis follows financial liberalization. India embarked financial deregulation from 1992, whereas the ongoing global financial crisis (GFC) could jeopardize bank portfolios. Design/methodology/approach Stress test is undertaken through the vector auto regressive (VAR) model to examine if decline in GDP, exchange rate volatility and foreign capital portfolio funds adversely impact bank asset quality through higher defaults. The VAR model is run for banks belonging to public, private or foreign ownership. Soundness of banks is measured by the non-performing assets (NPAs) with quarterly data from 1997 to 2014. Post-VAR estimation technique, Granger causality test (GC) and impulse response function (IRF) are used to check for robustness of the VAR model findings. Findings The authors found that there is little divergence among banks of different ownership in responding to the shocks from REER, foreign capital flows and GDP output gap. IRF shows that GDP shock to NPA of public and private banks takes more than nine and eight quarters to stabilize. Foreign banks are impacted by the same macroeconomic factors. The stress test exhibits that public banks are more vulnerable and need recapitalization. Moreover, domestic banks are not adversely affected by the GFC, and credit for this could be attributed to the Reserve Bank of India’s (RBI’s) regulatory policy. Research limitations/implications Surprisingly, capital market indices do not influence banks’ NPA, and this needs further investigation. The limitation arises from the fact that stock market index for banks was launched only in the early 2000. Missing data and limited number of banks shares traded in the market could explain the trivial results. Practical implications Findings of this study will be useful to RBI policymakers and bank managers. The exchange-rate risk faced by borrowers that lead to increased NPAs is an issue that the RBI would be interested to examine. The impact of foreign capital flows, adversely influencing the NPAs of banks, is a significant issue that the RBI is concerned with. Social implications Banking sector crisis has serious repercussions, causing loss of household savings and decline in confidence in the banking sector. Originality/value This topic was explored in India only by Bhattacharya and Roy in (2008). No other similar work has been done to the authors’ knowledge in stress test of banks in India across different ownership. The authors’ study period covers the GFC and shows that it has not caused devastation as it has in developed countries.

scholarly journals ANALISIS SIMULTAN ANTARA ALIRAN MODAL, NILAI TUKAR DAN INFLASI DI INDONESIA PERIODE 2000.01 – 2012.09

Media Ekonomi ◽  
2017 ◽  
Vol 21 (1) ◽  
pp. 42
Author(s):  
Mardiansyah . ◽  
Dian Octaviani, ME
Keyword(s):  
Foreign Direct Investment ◽  
Exchange Rate ◽  
Interest Rates ◽  
Capital Flows ◽  
Direct Investment ◽  
Simultaneous Equation ◽  
Short Term ◽  
Factors Affecting ◽  
High Inflation ◽  
The Exchange Rate

<p>Globalization and the open economic enchanced the integration of financial market and the economic condition in several countries. The effects of such integration shows in the movement of capital flows between countries. The potential risks of the capital flows, such as sudden reversal, the pressure on the exchange rate and high inflation and the susceptibility on financial sector, might be be arised. The goal of this research is to analyze the relationship between capital flows, exchange rates and inflation in Indonesia period 2000.01 – 2012.09. The method used in this research is simultaneous equations method. The model equations in this study are divided into two, which are a short-term investments are proxied from portfolio investment and long-term investments proxied from foreign direct investment. The results of the first model estimates the short-term investments shows that the exchange rate and inflation does not significant affecting short-term investments, but the ratio of domestic interest rates to foreign interest has a positive and significant impact on short-term investments. While, a short-term investments has negative and significant impact on exchange rate IDR per USD and inflation positive and significant effect on exchange rate. Factors affecting the rate of inflation is SBI interest rate and the money supply. One the other hand, the results of the second model estimation shows that the exchange rate and inflation has positive and significant impact on the flow of foreign direct investment. Inflation rate does not alter the terms of the investor’s decision in investing in Indonesia, because it was followed by the improvement in economic conditions in Indonesia.<br />Keywords: Capital Flows, Exchange Rate, Inflation, Simultaneous Equation</p>

scholarly journals Kritik Buku : MANAGING CAPITAL FLOWS AND EXCHANGE RATES PERSPECTIVE FROM THE PASIFIC BASIC Oleh Rueven Glick (Editor), Federal Reserve Bank of San Fransisco

2003 ◽  
Vol 2 (4) ◽  
pp. 230-233
Author(s):  
Syamsul Arifin
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Capital Flows ◽  
Federal Reserve ◽  
Emerging Market ◽  
Capital Inflow ◽  
Capital Flow ◽  
Cambridge University ◽  
Federal Reserve Bank ◽  
Reserve Bank

Buku terbitan Cambridge University Press tahun 1998 ini ditulis untuk mengkaji aspek teoritis dan kebijakan berkaitan dengan capital flow dan exchange rate di negara-negara emerging market di sekitar kawasan Pasifik, khususnya negaranegara Asia Timur dan Amerika latin. dari krisis nilai tukar yang ditimbulkan karena tingginga capital inflow di kawasan tersebut, penulis terdorong untuk memetik pelajaran yang sangat berharga dari krisis tersebut.

scholarly journals The Capital Flow Volatility Spillover in Some Selected African Economies

2021 ◽  
Vol 3 (1) ◽  
pp. 1-22
Author(s):  
Abdullahi Murtala Kwarah ◽  
Irrshad Kaseeram ◽  
Aliyu Sanusi Rafindadi
Keyword(s):  
Exchange Rate ◽  
Capital Flows ◽  
Exchange Rate Volatility ◽  
Capital Inflow ◽  
Considerable Effect ◽  
Capital Flow ◽  
Foreign Direct Investments ◽  
Volatility Spillover ◽  
Empirical Examination ◽  
Capital Outflow

Purpose: The study conducted an empirical examination of the link between capital flows and exchange rate by examining the relative influence of FDI and FPI on the exchange rates. Method: The study proceeded with the EGARCH model and the data sample covering the period from 1990-2016. The data were subjected to cross-country screening. The screening criteria are such that all the data that constitute capital in all sampled countries must have equal sample sizes. The measurement of capital flow in each of the sampled countries was restricted to two categories capital, namely, foreign portfolio investment (FPI) and foreign direct investment (FDI). Results: The research establishes that the behavior of capital flow volatility spillover of the sample countries' currencies exchange rate differs, with only South Africa's and Morocco's currencies revealing some slight similarity and existence of asymmetric volatility spillover from capital flows to exchange rate. Additionally, the study discloses that capital flows spillover has a considerable effect on exchange rate volatility than harmful spillover. The study also observed that positive shocks associated with capital flow volatility affect exchange rate value in Botswana more than capital outflow. Further positive capital flow spillover impending from capital inflow has a considerable effect on exchange rate volatility than the harmful spillover impending from the capital outflow. Further, the positive capital flow spill over impending from capital inflow significantly affects exchange rate volatility more than the negative spillovers that emanate from the capital outflow.  Implications:   This suggests that the monetary policy should consider options that can accelerate capital flow into the Moroccan economy. However, in South Africa for any given quantum of capital flow into the economy, the South African Reserve Bank must use instruments to affect stability; otherwise, the currency exchange rate could remain unstable. Thus, capital withdrawals out of the Egyptian economy will create domestic currency instability.       Keywords: Spill-over, Foreign Direct Investments (FDI), Portfolio Investments (PI), asymmetric, capital flow volatility, Exchange rate volatility.

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