The Choice and Design of Exchange Rate Regimes Már Gudmundsson
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Foreign Exchange
Comptroller of the Currency Administrator of National Banks Foreign Exchange Comptroller’s Handbook (Section 813) Narrative and Procedures - March 1990 I Other Income Producing Activities Foreign Exchange (Section 813) Table of Contents Introduction 1 Risks 1 Policy 6 The Market 12 Examination Procedures 17 Internal Control Questionnaire 25 Verification Procedures 32 Comptroller’s Handbook i Foreign Exchange (Section 813) Foreign Exchange (Section 813) Introduction This section is intended to provide minimum background and procedural guidelines to examiners responsible for evaluating a bank’s foreign currency activities. Within individual banks, foreign currency money market and exchange trading operations may be combined or completely separate with regard to policies, procedures, reporting, and even dealing. However, they ultimately must be viewed together to evaluate liquidity and to insure compliance with overall bank objectives and risk management strategy. For the sake of brevity, this section discusses both functions as if they were performed by the same traders, processed by the same bookkeepers and managed by the same officers. Close coordination is required among examiners performing the foreign exchange, due from banks—time, nostro account, and funds management functions. Most importers, exporters, manufacturers, and retailers tend to let banks handle their foreign exchange needs. They rely on banks to make and receive their foreign currency payments, to provide them with foreign currency loans, to fund their foreign currency bank accounts, and to purchase their excess foreign currency balances. They may ask banks to provide such services for immediate delivery, i.e., at spot (short-term contracts, perhaps up to 10 days), or they might contract to buy or sell a specified amount of foreign currency for delivery at a future date. -
A Survey of the Institutional and Operational Aspects of Modern-Day Currency Boards by Corrinne Ho
BIS Working Papers No 110 A survey of the institutional and operational aspects of modern-day currency boards by Corrinne Ho Monetary and Economic Department March 2002 Abstract This paper surveys the institutional and operational features of the six modern currency boards. The survey is developed around three key aspects: organisation, operations and legal foundation. By laying out the facts, this survey seeks to shed light on how and why modern currency boards in practice are different from the classic definition, and to distil from their features an updated definition and the revised “rules of the game”. JEL Classification Numbers: E42, E52, E58 Keywords: currency boards, convertibility, rules, discretion, liquidity management BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. Copies of publications are available from: Bank for International Settlements Information, Press & Library Services CH-4002 Basel, Switzerland E-mail: [email protected] Fax: +41 61 280 9100 and +41 61 280 8100 This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2002. All rights reserved. Brief excerpts may be reproduced or translated provided the source is cited. ISSN 1020-0959 Table of contents -
Revaluation of Financial Statement Due To
Academy of Accounting and Financial Studies Journal Volume 25, Special Issue 2, 2021 REVALUATION OF FINANCIAL STATEMENT DUE TO DEVALUATION OF CURRENCY– DOES FINANCIAL STATEMENT SHOW ACCURATE VALUE OF YOUR ORGANIZATION? Muhammad Nabeel Mustafa*, SZABIST University Haroon ur Rashid Khan, SZABIST University Salman Ahmed Shaikh, SZABIST University ABSTRACT Purpose: Debtors are current asset has a time of 120 days at max. During this time, the value of debtors gets changed. This study explores the effect of this time value of money. The objective of this research is to sight see the effect of the time value of money, normal inflation, and purchasing power on the comprehensive debtors/receivable side of the balance sheet, which can be devalued if key macroeconomic factors determine the devaluation percentage of a single currency. Methodology: Concerning these significant questions of the research, we grasped a pragmatic philosophy with an inductive approach. A mono-method of qualitative based on grounded theory was endorsed, which helped to unfold a new model through qualitative data analysis. Results: A new strategy is developed, which utters three components; normal inflation, time value of money, and purchasing power revealing significant contribution in literature. The effect of these constructs was not incorporated in the financial statement, showing vague financial valuation. These constructs have a significant impact on the financial statement of any organization especially with items having time components in the balance sheet, such as receivables and payables. Research Limitations: This research is limited to only one currency i.e., Pakistani Rupee but can be implemented on any currency. Practical Implication: The strategy will help auditors to pass the adjustment entry in the balance sheet to adjust the value of the currency at the year-end. -
Redenomination of Naira: a Strategy for Inflationary Reduction
International Journal of Academic Research in Business and Social Sciences Vol. 1 1 , No. 2, 2021, E-ISSN: 2222-6990 © 2021 HRMARS Redenomination of Naira: A Strategy for Inflationary Reduction Osakwe Charity Ifunanya, Nduka, Afamefuna Joseph, Obi-nwosu Victoria Ogochukwu To Link this Article: http://dx.doi.org/10.6007/IJARBSS/v11-i2/8860 DOI:10.6007/IJARBSS/v11-i2/8860 Received: 02 January 2021, Revised: 29 January 2021, Accepted: 15 February 2021 Published Online: 25 February 2021 In-Text Citation: (Ifunanya et al., 2021) To Cite this Article: Ifunanya, O. C., Nduka, A. J., & Ogochukwu, O. V. (2021). Redenomination of Naira: A Strategy for Inflationary Reduction. International Journal of Academic Research in Business and Social Sciences, 11(2), 472–481. Copyright: © 2021 The Author(s) Published by Human Resource Management Academic Research Society (www.hrmars.com) This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode Vol. 11, No. 2, 2021, Pg. 472 - 481 http://hrmars.com/index.php/pages/detail/IJARBSS JOURNAL HOMEPAGE Full Terms & Conditions of access and use can be found at http://hrmars.com/index.php/pages/detail/publication-ethics 472 International Journal of Academic Research in Business and Social Sciences Vol. 1 1 , No. 2, 2021, E-ISSN: 2222-6990 © 2021 HRMARS Redenomination of Naira: A Strategy for Inflationary Reduction Osakwe Charity Ifunanya (PhD) Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria. -
Chapter 1717
ChapterChapter 1717 FixedFixed ExchangeExchange RatesRates andand ForeignForeign ExchangeExchange InterventionIntervention Copyright © 2003 Pearson Education, Inc. Slide 17-1 Chapter 17 Learning Goals • How a central bank must manage monetary policy so as to fix its currency's value in the foreign exchange market. • The relationship between the central bank's foreign exchange reserves, its purchases and sales in the foreign exchange market, and the money supply. • How monetary, fiscal, and sterilized intervention policies affect the economy under a fixed exchange rate. • Some causes and effects of balance of payments crises. • How alternative multilateral systems for pegging exchange rates work. Copyright © 2003 Pearson Education, Inc. Slide 17-2 Chapter Organization ! Why Study Fixed Exchange Rates? ! Central Bank Intervention and the Money Supply ! How the Central Bank Fixes the Exchange Rates ! Stabilization Policies with a Fixed Exchange Rate ! Balance of Payments Crises and Capital Flight ! Managed Floating and Sterilized Intervention ! Reserve Currencies in the World Monetary System ! The Gold Standard ! Liquidity Traps Copyright © 2003 Pearson Education, Inc. Slide 17-3 Chapter Organization ! Summary ! Appendix I: Equilibrium in the Foreign Exchange Market with Imperfect Asset Substitutability ! Appendix III: The Timing of Balance of Payments Crises Copyright © 2003 Pearson Education, Inc. Slide 17-4 Introduction ! In reality, the assumption of complete exchange rate flexibility is rarely accurate. • Industrialized countries operate under a hybrid system of managed floating exchange rates. – A system in which governments attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. • A number of developing countries have retained some form of government exchange rate fixing. ! How do central banks intervene in the foreign exchange market? Copyright © 2003 Pearson Education, Inc. -
Redenomination of Naira: a Critical Analysis of Its Problems and Prospects
EUROPEAN ACADEMIC RESEARCH Vol. VII, Issue 12/ March 2020 Impact Factor: 3.4546 (UIF) ISSN 2286-4822 DRJI Value: 5.9 (B+) www.euacademic.org Redenomination of Naira: A Critical Analysis of Its Problems and Prospects OSAKWE CHARITY IFUNANYA (Ph.D)1 Department of Banking and Finance Faculty of Management Sciences Nnamdi Azikiwe University, Awka, Nigeria Abstract The study examines the problems and prospects of redenominating the naira currency. The economic consequences of the devaluation of Naira currency in the eighties are still being felt in the low value of naira. To ascertain Nigerians view on redenominating the naira, a total number of 153 respondents were studied and the data extracted from them was analyzed with simple percentage method. The study found that redenomination of naira will lead to the economic recovery of Nigeria and that redenomination can increase the prices of Nigeria export. The study recommends that for the redenomination exercise to be successful, it should be complemented with strict and disciplined fiscal policy so as to strengthen the economy and sustain the value of the redenominated currency and that the redenomination exercise should be timed in such a way that it will not create uncertainty and instability that will make investors to be risk averse. Key words: Redenomination, Prospects, Currency, Decimalization, and evaluation. 1 The author Osakwe Charity Ifunanya is a Financial Management Lecturer in Banking and Finance Department of Nnamdi Azikiwe University, Awka, Nigeria. Her research interests cover diverse areas of Investment Banking and finance. Her recent publications include: stock market capitalization and economic growth of Nigeria and South Africa (2000-2018), Credit Risk Management and Efficiency in the Banking Industry of an Emerging Economy in Africa: Evidence from Nigeria and stock market development and economic growth in Nigeria: A camaraderie Reconnaissance amongst others. -
Argentina's Monetary and Exchange Rate Policies After the Convertibility
CENTER FOR ECONOMIC AND POLICY RESEARCH April Argentina’s Monetary and Exchange Rate Policies after the Convertibility Regime Collapse • ii Contents Introduction 1 1. The Convertibility Regime 2 2. The Post-Convertibility Macroeconomic Regime and Performance 9 2.1 The Main Characteristics of the Economic Recovery 10 2.2 The Evolution of Monetary and Exchange Rate Policies 16 3. A Macroeconomic Policy Regime with a SCRER as an Intermediate Target 25 3.1 The Orthodox Arguments Against RER Targeting 26 3.2 The Exchange Rate Policy 29 3.3 The Exchange Market and Capital Flows 30 3.4 Monetary Policy 31 Conclusion 35 References 36 Chronological Appendix 39 About the Authors Roberto Frenkel is a senior research associate at the Center for Economic and Policy Research in Washington, D.C. and Principal Research Associate at the Centro de Estudios de Estado y Sociedad (CEDES) in Buenos Aires, Argentina. Martín Rapetti is a research assistant at CEDES and a Ph.D. candidate at the University of Massachusetts, Amherst. Acknowledgements This paper was written as part of an international research project on Alternatives to Inflation Targeting for Stable and Equitable Growth co-directed by Gerald Epstein, PERI and Erinc Yeldan, Bilkent University. The authors thank the Rockefeller Brothers Fund, Ford Foundation and UN-DESA for financial support. Additionally, Nelson Barbosa-Filho, Erinc Yeldan and the participants in the workshop on “Alternatives to Inflation Targeting Monetary Policy for Stable and Egalitarian Growth in Developing Countries” held at CEDES in May 13-14, 2005 contributed comments to a previous version of this paper. Finally, the authors thank Julia Frenkel for her collaboration and Erinc Yeldan and an anonymous referee from World Development for their comments and suggestions. -
The History of the Bank of Russia's Exchange Rate Policy
The history of the Bank of Russia’s exchange rate policy Central Bank of the Russian Federation Abstract During the post-Soviet period of 1992–98, the monetary policy of the Bank of Russia was essentially exchange rate-oriented due to overall economic and financial instability combined with hyperinflation (1992–94) and high inflation (1995–98). An exchange rate corridor system was introduced in 1995. The government debt crisis of 1998 triggered a shift to a managed floating exchange rate. After that crisis, exchange rate dynamics were largely market-driven. The exchange rate continued to be tightly managed through 2002–05. In 2004, less restrictive capital control regulations were adopted, marking a move from an authorization-based system to flow controls. The rouble experienced steady upward pressure and the Bank of Russia intervened repeatedly in the foreign exchange market to contain the rouble’s appreciation. In 2005, the Bank of Russia introduced a dual-currency basket as the operational indicator for it exchange rate policy, again to smooth the volatility of the rouble’s exchange rate vis-à-vis other major currencies. Following the global financial crisis, the Bank of Russia changed its policy focus towards moderating the rouble’s depreciation. Interest rates were steadily raised, and a range of control measures was implemented. During 2009–12, the Bank of Russia further increased the flexibility of its exchange rate policy. Intervention volumes have steadily decreased. The overall scale of the exchange rate pass-through in the Russian economy has diminished in recent years. Greater flexibility on exchange rates has also let the Bank of Russia put increased emphasis on its interest rate policy. -
Central Banks and the Challenge of Development Bank for International Settlements Basel Switzerland May 2006 Contents
Central banks and the challenge of development Bank for International Settlements Basel Switzerland May 2006 Contents The original papers in this volume were prepared for a meeting of 4 Acknowledgments senior officials from central banks held at the Bank for International Settlements in March 2006. The views expressed are those of the 5 Foreword authors and do not necessarily reflect the views of the BIS or the Malcolm D Knight institutions represented at the meeting. Individual papers may be reproduced or translated with the authorisation of the authors 7 About the Bank for International Settlements concerned. 11 Central banks and the challenge of development: Requests for copies of publications, or for additions/ an overview of a roundtable debate changes to the mailing list, should be sent to: Malcolm D Knight Bank for International Settlements Press & Communications 19 The challenges of development CH-4002 Basel, Switzerland Amartya Sen E-mail: [email protected] 27 The global economy and Africa: Fax: +41 61 280 9100 and +41 61 280 8100 the challenges of increased financial inflows © Bank for International Settlements 2006. All rights reserved. M S Mohanty and Philip Turner Limited extracts may be reproduced or translated provided the source is stated. 45 The relationship between the central bank and the government ISBN 92-9131-713-6 (print) ISBN 92-9197-713-6 (online) Paul Moser-Boehm 65 Financial access and financial stability Penelope Hawkins 81 The implementation of Basel II Jaime Caruana 89 Anchors for monetary policy Paul Masson 105 The choice and design of exchange rate regimes Már Gudmundsson 123 Central banks and the challenge of development List of participants 127 The BIS and central banks in the developing world Acknowledgments Foreword Clare Batts, who was responsible for the logistics and organisation of The Bank for International Settlements has been a centre for this meeting, did a first rate job in coordinating the preparation of these discussion and debate among governors and other senior central papers for publication. -
Exchange Rate Regime and Economic Growth in Asia: Convergence Or Divergence
Journal of Risk and Financial Management Article Exchange Rate Regime and Economic Growth in Asia: Convergence or Divergence Dao Thi-Thieu Ha 1,* and Nga Thi Hoang 2 1 International Economics Faculty, Banking University Ho Chi Minh City, Ho Chi Minh City 70000, Vietnam 2 Office of Finance & Accounting, Ho Chi Minh City Open University, Ho Chi Minh City 70000, Vietnam; [email protected] * Correspondence: [email protected] Received: 29 June 2019; Accepted: 30 December 2019; Published: 3 January 2020 Abstract: Exchange rates and exchange rate regimes in a constantly changing economy have always attracted much attention from scholars. However, there has not been a consensus on the effect of exchange rate on economic growth. To determine the direction and magnitude of the impact of an exchange rate regime on economic growth, this study uses the exchange rate database constructed by Reinhart and Rogoff. This study also employs the GMM (Generalized Method of Moments) technique on unbalanced panel data to analyze the effect of the exchange rate regime on economic growth in Asian countries from 1994 to 2016. Empirical results suggest that a fixed exchange rate regime (weak flexibility) will affect economic growth in the same direction. As such, results from the study will serve as quantitative evidence for countries in the Asian region to consider when selecting a suitable policy and an exchange rate regime to attain high economic growth. Keywords: exchange rate regime; economic growth; Asia; Reinhart and Rogoff 1. Introduction In a market economy with a flexible exchange rate, the exchange rate changes daily, or in fact, by the minute. -
Is the Euro's Fixed Exchange Rate Regime Undermining Cohesion Policy?
European Review, page 1 of 25 © 2020 Academia Europaea. This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited. doi:10.1017/S1062798720001192 Continental Drift: Is the Euro’s Fixed Exchange Rate Regime Undermining Cohesion Policy? CHRISTOPHER JAMES DAY University of Cambridge, Department of Land Economy, 16–21 Silver Street, Cambridge CB3 9EP, UK. Email: [email protected] The ravages of two world wars and a desire to develop a politically and economically united Europe led to the establishment of the Eurozone in January 1999. The European Monetary Union was a grand experiment that brought 11 European nations under a single currency, the euro. Complexities associated with the imple- mentation of effective fiscal, budgetary and banking coordination left the bloc vul- nerable to asymmetries in the productivity and factor markets of its members. This article analyses how adoption of the euro, which prevented nominal exchange rate adjustments, impacted on the competitiveness and real economies of member states, thereby undermining the European Union’s key priority of creating balanced eco- nomic growth and productivity. 1. Introduction The establishment of the Eurozone in January 1999 marked a significant step towards the European Union’s (EU’s) goal of ‘ever closer union’. Notwithstanding, the absence of sufficient fiscal and budgetary coordination has created tensions between the diverse economies of the European Monetary Union (EMU) (Baldwin and Wyplosz 2012; De Grawe 2012; Stiglitz 2016). -
The Scope for Foreign Exchange Market Interventions
THE SCOPE FOR FOREIGN EXCHANGE MARKET INTERVENTIONS No. 204 October 2011 THE SCOPE FOR FOREIGN EXCHANGE MARKET INTERVENTIONS Peter Bofinger No. 204 October 2011 Acknowledgement: This paper was prepared as a background note for a seminar of the UNCTAD Division on Globalization and Development Strategies. The author is grateful to seminar participants for valuable comments during the discussion. UNCTAD/OSG/DP/2011/4 ii The opinions expressed in this paper are those of the author and are not to be taken as the official views of the UNCTAD Secretariat or its Member States. The designations and terminology employed are also those of the author. UNCTAD Discussion Papers are read anonymously by at least one referee, whose comments are taken into account before publication. Comments on this paper are invited and may be addressed to the author, c/o the Publications Assistant, Macroeconomic and Development Policies Branch (MDPB), Division on Globalization and Development Strategies (DGDS), United Nations Conference on Trade and Development (UNCTAD), Palais des Nations, CH-1211 Geneva 10, Switzerland (Telefax no: +41 (0)22 917 0274/Telephone no: +41 (0)22 917 5896). Copies of Discussion Papers may also be obtained from this address. New Discussion Papers are available on the UNCTAD website at http://www.unctad.org. JEL classification: F31, F32, F33 iii Contents Page Abstract ....................................................................................................................................................... 1 I. THE CURRENT DEBATE ON THE REFORM OF THE INTERNATIONAL MONETARY SYSTEM (IMS) ......................................................................................................... 1 II. THE SYSTEM OF FLEXIBLE EXCHANGE RATES: MYTHS AND REALITY ................... 2 A. Myths of flexible exchange rates .................................................................................................. 2 B. The puzzling and dangerous reality of flexible exchange rates ...................................................