Do Exchange Rate Shocks Have Asymmetric Effects on Reserve Accumulation? Evidence from Emerging Markets*

Chen, Shiu‐Sheng; Lin, Tzu-Yu

doi:10.1111/sjoe.12348

Cited by 3 publications

(3 citation statements)

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“…This price gap does not only occur in spatially separated markets but also the domestic market. Two, the intervention of monetary authority in exchange rate management and determination often leads to switching of the exchange rate from one regime to another one, usually an unstable regime (Arize, Malindretos, & Igwe, 2017;Chen & Lin, 2019;Dada, 2021). For instance, the desire of the apex bank to protect the export competitiveness of a country could force them to limit currency appreciations rather than depreciations, which has been termed the "fear of appreciation" hypothesis in literature.…”

Section: Introductionmentioning

confidence: 99%

“…Recent studies that have incorporated asymmetry into exchange rate have focused mainly on export (Adaramola, 2016;Oyovwi, 2012;Rahman & Serletis, 2009;Verheyen, 2013), pass through (Bussiere, 2013), trade balance (Arize et al, 2017;Mohsen Bahmani-Oskooee et al, 2018;Buba, Garba, & Guza, 2018;Jibrilla Aliyu & Mohammed Tijjani, 2015;Kyophilavong, Shahbaz, Rehman, Souksavath, & Chanthasene, 2018;Nathaniel, 2020), reserve (Adler & Mora, 2011;Chen & Lin, 2019;Pontines & Rajan, 2011), inflation (Wimanda, 2014), etc. with little or no known study on the asymmetric effect of exchange rate on output especially in Africa which is one of the developing region and worst hit by factors that could make exchange rate respond asymmetrically.…”

Section: Introductionmentioning

confidence: 99%

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On the asymmetric effect of real exchange rate on growth: Evidence from Africa

Dada

2022

Econ. J. Emerg. Mark.

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Purpose ― This study investigates the asymmetric effect of real exchange rates on the economic growth of twenty African countries for the period 2005 to 2019. Design/Method/Approach ― A refined method of Granger and Yoon (2002) was used to decompose real exchange into appreciation and depreciation. To address the problem of endogeneity and cross-sectional dependence, a two-steps system generalized method of moments, Driscoll-Kraay estimator, and Augmented Mean group were used. Findings ― This study established the presence of asymmetries in the real exchange rate in the region. Further, the study found that real exchange rate appreciation inhibits economic growth while real exchange rate depreciation is beneficial to growth in the region. The results are robust to different estimation techniques. Practical Implications ― The outcome of this study supports the traditional view of exchange rates on macroeconomic variables. Hence, findings from this study can help investors and policymakers in the region to better understand the dynamics of the exchange rate and its effect on economic growth. Originality/Value ― This study enriches the literature on the relationship between exchange rate and growth, especially in Africa using a refined approach to decompose exchange rate into appreciation and depreciation.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

On the asymmetric effect of real exchange rate on growth: Evidence from Africa

Dada

2022

Econ. J. Emerg. Mark.

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“…According to Chang (2008), Latin America economies are active in accumulating the official reserves because of their concern about the speculative attack on the domestic currency. Chen and Lin (2019) suggest that emerging economies care about depreciation pressures and favour the accumulation of reserves. Mundaca (2018) has a similar argument for Peru.…”

Section: The Relevance Of Forex Interventions In Emerging Economiesmentioning

confidence: 99%

Monetary policy

Bui

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Monetary policy is a crucial tool used by most, not to say all, central banks to finetune macroeconomic conditions. However, empirical evidence regarding its effectiveness is mixed and based on the premise that monetary policy is appropriately measured and identified. Compared with the vast literature for advanced economies, studies investigating the problem of the indicator and identification of monetary policy are limited in emerging economies. ACKNOWLEDGEMENTI would like to thank my wife and family for their support and continuous care throughout my study in Hungary. Also, I would like to express my gratitude and appreciation to the supervisor -Dr Habil. Kiss Gabor David -and other colleagues for their guidance, comments, and corrections. Their contributions are of importance to complete the thesis.Moreover, I would like to show my appreciation to the Doctoral School of Economics of the University of Szeged, the Stipendium Hungaricum for their support during my study.Finally, I am grateful for precious comments of reviewers.

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Foreign exchange interventions and monetary policy: evidence from emerging economies

Bui

2024

Review of Economic Perspectives

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The role of foreign exchange interventions in monetary policy conduct is an ongoing debatable issue, especially in inflation-targeting emerging economies, where monetary authority can follow other targets rather than price stability. This paper examines whether interventions in foreign exchange markets affect the setting of interest rates in countries where price stability is the main target of monetary policy. We used the ARDL model to investigate the matter of the intervention policy as well as its asymmetric impacts on monetary policy. The results provide evidence of the significant effect of foreign exchange interventions on monetary policy in inflation-targeting emerging economies, implying the existence of fear of floating. Particularly, interest rate changes can mitigate or accommodate the intervention policy, depending on countries. Furthermore, the interventions have asymmetric effects on monetary policy, showing the bias toward sales interventions. While sales interventions play a more pronounced effect in most emerging economies, excepting for Mexico where purchase intervention effect is of more importance.

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Do Exchange Rate Shocks Have Asymmetric Effects on Reserve Accumulation? Evidence from Emerging Markets*

Cited by 3 publications

References 46 publications

On the asymmetric effect of real exchange rate on growth: Evidence from Africa

On the asymmetric effect of real exchange rate on growth: Evidence from Africa

Monetary policy

Foreign exchange interventions and monetary policy: evidence from emerging economies

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