Currency regimes and external competitiveness: the role of institutions, trade agreements and monetary frameworks

Aman, Zunaira; Mallick, Sushanta; Nemlioglu, Ilayda

doi:10.1017/s1744137421000503

Cited by 9 publications

(10 citation statements)

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“…The choice of currency regime has been shown to be a major factor in predicting the probability of a currency crisis (Holtemöller & Mallick, 2013), with managed floats being significantly less prone to crises (Ghosh et al, 2014). Aman et al (2022) find that currency misalignment in fixed regimes declines in the presence of stronger institutions or in countries with inflation-targeting type monetary policy frameworks. An important aspect of exchange rate management for the purpose of the analysis in this paper is that an 'undervalued' real effective exchange rate (REER) means more competitive relative prices for boosting trade.…”

Section: Introductionmentioning

confidence: 88%

“…REER differences may result in countries having different levels of external competitiveness despite a similar level of development. However, trade openness alone is not enough to promote external competitiveness (Aman et al, 2022), as real depreciation may not always give economic competitiveness (see Nasir & Jackson, 2019), since the equilibrium exchange rate may shift with the changes in the structure of the economy. An alternative would be to consider using terms of trade to reveal comparative advantage which would require using disaggregated data at product level.…”

Section: Introductionmentioning

confidence: 99%

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Does greater financial openness promote external competitiveness in emerging markets? The role of institutional quality

et al. 2022

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Studies have shown that external capital account liberalisation can boost capital inflows and augment economic development. Nevertheless, in the case of developing and emerging economies (DEE), adverse currency fluctuations could hamper external competitiveness due to relative price differences creating currency overvaluation, which might not be mitigated via financial openness alone. Therefore, this paper uses annual panel data for 35 DEEs over 40 years to explore whether financial openness of countries can help preserve their external price competitiveness, in the presence of greater trade openness and better institutional quality. Our findings suggest that financial openness alone does not aid export competitiveness, unless it is supported by greater trade openness. In addition, both cross country and regional analyses show that financial openness can benefit economies in maintaining their export competitiveness if they have stronger quality of institutions. Our results remain robust when we estimate the role of financial openness and institutional quality jointly on external competitiveness across regions, and during the pre-and post-crisis periods. We conclude that financial openness alone is not sufficient to improve external competitiveness of an emerging economy, but it does help in the presence of greater trade openness or better institutions, enabling reduction in trade costs and thereby making these countries more price-competitive. K E Y W O R D Scapital inflows, financial openness, quality of institutions, real effective exchange rates

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Section: Introductionmentioning

confidence: 88%

Section: Introductionmentioning

confidence: 99%

Does greater financial openness promote external competitiveness in emerging markets? The role of institutional quality

et al. 2022

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“…Given that policymakers handle the issue of REER misalignment in different ways, this paper focuses on ERR choices and ascertains whether the choice of the ERR affects the magnitude and the persistence of the REER misalignment. For this purpose, this paper mimics Carrera et al (2021) and Aman et al (2022) empirical modeling approaches. However, this paper considers an additive heterogeneous panel data setting instead.…”

Section: Exchange Rate Regimes Choice and Misalignment Equationmentioning

confidence: 99%

“…The second is the Chinn-Ito financial openness index from Chinn andIto (2006, 2008). This indicator takes into account various forms of capital controls and currency convertibility restrictions (Aman et al, 2022). However, to emphasize the qualities of each proxy, Cubeddu et al (2019) take a complementary scientific approach and use both indicators in the same model.…”

Section: Data and Variable Descriptionsmentioning

confidence: 99%

Exchange Rate Regime Choices and Real Effective Exchange Rate Misalignments: Degree and Persistence

Byusa,

Byusa

2024

Preprint

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This paper assesses the impact of de facto exchange rate regime (ERR) choices on the magnitude and the persistence of multilateral price levels-based (also known as real effective exchange rate, REER) misalignments in a large sample of countries (126) over the period 1990–2019. This paper considers the random effects within-between (REWB) framework to evaluate the degree of REER misalignments and the novel mean-group instrumental variables (MGIV) to estimate the persistence of the REER misalignments. This paper finds that both fixed and intermediate ERRs perform better in limiting the degree of REER misalignment than the floating ERRs Furthermore, this paper finds evidence of the strongest persistence of REER misalignment in the fixed and intermediate ERRs. These results indicate that the choice of ERR is relevant to REER misalignment. JEL codes: C33, F32, F31, F33, F41

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“…For instance, preferential trade agreements, average weighted tariff, common border, and language. Examining how these institutional and cultural factors affect textile trade is of great importance because it enlightens policymakers to make full use of institutions and cultural integration to improve textile trade and eventually drive economic development (Aman et al, 2022; Coulibaly, 2021; Richter et al, 2021). Thus, this study is designed to check the roles of the ER, GDP, distance, common border, language, and average weighted tariff in textile product exports of the top 10 major textile producers in a gravity model.…”

Section: Introductionmentioning

confidence: 99%

Factors Affecting Textiles Products Exports of Major Producers: A Gravity Model Approach

Chen,

Ahmad,

Jiang

et al. 2023

Sage Open

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This study employed the gravity model approach to explore the predictors of textile product exports of the top 10 major textile producers. A specific dataset was generated and used to estimate the effects of 14 textile commodities selected in specific countries using Poisson regression and panel data from 1990 to 2021. The 10 major textile export countries hold significance in the global industry, providing comprehensive insights into export factors. Their diverse representation aids in understanding the challenges faced by exporters across continents. These countries possess substantial export markets and showcase various strategies and trade policies. Reliable data availability enables accurate analysis of factors affecting textile exports. Studying these countries enhances export performance and informs global industry strategies. Estimated results indicate that the real exchange rate, real GDP of the reporting country, preferential trade agreements, and the common border are significant positive predictors for textile exports of all commodities. The results further show that distance, average weighted tariff, and language have negative effects on the textile exports of all selected commodities. The transportation cost, measured by distance, is a barrier to textile commodity exports. The findings highlight the significant factors influencing textile exports and provide insights for exporters, policymakers, and researchers in the industry. Notably, this study addresses the challenges encountered by textile product export companies. These challenges include trade barriers, regulatory compliance, fluctuating exchange rates, intense competition, rising production costs, and market access barriers. By analyzing these challenges within the gravity model framework, the study aims to offer comprehensive insights into the complexities faced by textile exporters and their impact on the industry. The outcome of this study will be beneficial for the world’s major textile producers in setting their export targets and strategies to promote textile and cotton exports. The study suggests that the major exporters should benefit from moving exports to rich markets, which are situated at a nearby distance. The results of this study can be valuable for exporters in setting export targets, devising strategies, and formulating trade policies to overcome these challenges and enhance the competitiveness of the textile industry. The corresponding practical implications include the need to strategically manage exchange rates, focus on promoting exports to rich economies, reduce transportation costs, leverage preferential trade agreements, manage average weighted tariffs, address language barriers, and develop strategic export objectives and strategies. This research offers valuable insights for policymakers and society regarding factors influencing textile exports by major producers. Policymakers can utilize this information to inform trade regulations, exchange rate management, and the promotion of preferential trade agreements, enhancing export competitiveness and fostering sustainable practices. The research promotes international cooperation by encouraging collaboration and the sharing of best practices among reporting and partner countries. The findings contribute to economic growth, job creation, and improved standards of living, benefiting society as a whole.

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Currency regimes and external competitiveness: the role of institutions, trade agreements and monetary frameworks

Cited by 9 publications

References 65 publications

Does greater financial openness promote external competitiveness in emerging markets? The role of institutional quality

Does greater financial openness promote external competitiveness in emerging markets? The role of institutional quality

Exchange Rate Regime Choices and Real Effective Exchange Rate Misalignments: Degree and Persistence

Factors Affecting Textiles Products Exports of Major Producers: A Gravity Model Approach

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