Does Managerial Emotional Biases Affect Debt Maturity Preference? Bayesian Network Method: Evidence from Tunisia

Ali, Azouzi Mohamed; Jarboui, Anis

doi:10.18488/journal.89/2016.2.1/89.1.1.25

Cited by 1 publication

(1 citation statement)

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“…The Bayesian network model presents a powerful uncertainty management tool of artificial intelligence. Thereby, this network has already been applied in various fields such as risk management (Shenoy and Shenoy, 2000; Sun and Shenoy, 2007; Bola et al , 2013), financial assessments (Ali and Anis, 2016), credit scoring (Chang et al , 2000; Leong, 2016) and exchange rate forecasting (Gramacy et al , 2014).…”

Section: Gaussian Bayesian Networkmentioning

confidence: 99%

Assessing the impact of monetary fundamentals on exchange rate fluctuations a Bayesian network approach

Charfi

BenHamad

Masmoudi

2019

JM2

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Purpose The purpose of this paper is to analyze how monetary fundamentals affect exchange rate movements. Design/methodology/approach To develop this paper, a Bayesian Network modeling is applied to explore the causal interactions between monetary fundamentals and exchange rate fluctuations. Subsequently, a sensitivity analysis is performed to asses and estimate exchange rate behavior with uncertain monetary fundamentals. Furthermore, a Granger Causality test is used as suggested in the Econometric literature to determine the causality direction among factors. Findings The empirical findings show that money supply and interest rate have a significant positive effect on exchange rate, whereas inflation rate has a considerable negative effect on exchange rate. In addition, the authors deduce that real income has an indirect impact on exchange rate and a direct impact on inflation rate, interest rate and money supply. Furthermore, the sensitivity analysis shows that monetary uncertainty has a considerable effect on exchange rate fluctuations. Moreover, the Granger Causality test reveals that there is a unique unidirectional causality running from money supply to exchange rate. Practical implications The model can be considered as a vital management tool for international investors and financial analysts to explore the effect of monetary fundamentals on exchange rate behavior. It allows estimating exchange rate fluctuations with uncertain monetary factors. Originality/value This study is the first one which applied a Bayesian Network modeling to examine the exchange rate determination problem. Results of this research are presented under a clear graphical representation that can be easily useful by monetary policymakers and international traders to determine the influential monetary factors on exchange rate behavior. Also, the model will help them in estimating the effect of monetary uncertainty on exchange rate fluctuations.

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