The document discusses a study that examines the effects of exchange rates and their volatility on exports, foreign direct investment (FDI), and foreign affiliate sales by the U.S. food processing industry from 1982-1995. The study uses data on these variables from 10 high-income countries and estimates equations to test whether exchange rate movements contributed to the relationship between FDI and trade. Pooled regression results found that exports, FDI, and foreign sales were negatively related to real exchange rate levels and volatility.
This document discusses whether stock markets promote economic growth. It begins by outlining the debate on whether financial development causes growth or vice versa. The authors then:
1) Describe previous empirical studies on the relationship between financial development/stock markets and economic growth that have limitations in establishing causality.
2) Explain their use of Granger causality tests on data from 64 countries over varying time periods to help determine the causal direction of the relationship.
3) Present sample statistics showing differences in growth rates and financial development across income levels and degrees of financial market freedom.
In recent years, external factors such as poor weather have contributed to poor harvests, which have in turn resulted in an understandable level of crop uncertainty. However, the forecast figures for 2016-17 that were announced at the recent International Grain Conference have only previously been bettered once.
This document discusses the susceptibility of African stock market returns to international economic policy uncertainty, specifically from the US. It uses transfer entropy methods to quantify information flow from US economic policy uncertainty to 9 African stock markets from 2010-2020. The main findings are:
1) US economic policy uncertainty transmits significant information to the stock markets of Egypt, Ghana, Morocco, Namibia, and South Africa, but insignificant information to Botswana, Kenya, Nigeria, and Zambia.
2) The asymmetry in information transfer from the US suggests African markets could provide diversification benefits when global economic policy uncertainty rises.
3) The findings have implications for adopting open innovation in African stock markets to better deal with global
Keynote Address: Navigating the Ups and Downs of the Global EconomyLora Cecere
The keynote address/presentation given by Dr. Laura D’Andrea Tyson, Professor and Director of the Institute for Business and Social Impact at the Berkeley Haas School of Business., given on day 1 at the Supply Chain Insights Global Summit in Scottsdale, AZ on September 10, 2014
Keynote Address: Navigating the Ups and Downs of the Global Economy
The global economy is turbulent. How do supply chain leaders prepare? What does growth look like? What can they expect?
Dr. Laura D’Andrea Tyson, Professor and Director of the Institute for Business and Social Impact at the Berkeley Haas School of Business.
Tyson was a member of the US Department of State Foreign Affairs Policy Board. From 2011-2013, Tyson served as a member of President Barack Obama’s Council of Jobs and Competitiveness and from 2009–2011, she was member of the President’s Economic Recovery Advisory Board. She served in the Clinton Administration and was the Chair of the Council of Economic Advisers (1993-1995) and the President’s National Economic Adviser (1995–1996).
This document provides an overview of several topics related to Anglo-American culture and history, including:
1) Demographic trends and population movements in Europe, America, and the colonization period from pre-Columbian times through the 18th century.
2) The establishment of governments and political systems in the early United States, including the Declaration of Independence, Constitution, and consolidation of federal structures.
3) Key figures and political developments in the early US, including Thomas Jefferson, Alexander Hamilton, and the Federalist vs. Democratic-Republican debate over the role of the federal government.
4) Westward expansion in the 19th century and doctrines like Manifest Destiny, as well as slavery and
1. The document examines the impact of exchange rate fluctuations on foreign trade in Nigeria from 1980-2014. It uses data from the Central Bank of Nigeria and Federal Bureau of Statistics to analyze the relationship between exchange rate, import, export, GDP, and price level.
2. Statistical analysis including OLS regression, cointegration, error correction model, and Granger causality tests were employed. The results show exchange rate fluctuations have a significant negative impact on foreign trade in Nigeria, explaining 56% of the variation in trade.
3. The error correction model also indicates about 55% of disequilibria from the previous year's foreign trade were corrected in the current year, suggesting exchange rate volatility creates instability in Nigeria
This document discusses the impacts of rising global food prices in Asia. It finds that while domestic food price inflation in Asia is not as severe as global inflation, rising prices still threaten growth and poverty reduction. Food price increases are driven by factors like increased demand from China and India, biofuel mandates, commodity speculation, and high oil prices. Countries responded with both export restrictions and increased imports, exacerbating the crisis. Higher prices negatively impact the poorest consumers, though rural agricultural producers may benefit. Overall, food inflation poses challenges but responses can help mitigate threats to the poor.
This document discusses whether stock markets promote economic growth. It begins by outlining the debate on whether financial development causes growth or vice versa. The authors then:
1) Describe previous empirical studies on the relationship between financial development/stock markets and economic growth that have limitations in establishing causality.
2) Explain their use of Granger causality tests on data from 64 countries over varying time periods to help determine the causal direction of the relationship.
3) Present sample statistics showing differences in growth rates and financial development across income levels and degrees of financial market freedom.
In recent years, external factors such as poor weather have contributed to poor harvests, which have in turn resulted in an understandable level of crop uncertainty. However, the forecast figures for 2016-17 that were announced at the recent International Grain Conference have only previously been bettered once.
This document discusses the susceptibility of African stock market returns to international economic policy uncertainty, specifically from the US. It uses transfer entropy methods to quantify information flow from US economic policy uncertainty to 9 African stock markets from 2010-2020. The main findings are:
1) US economic policy uncertainty transmits significant information to the stock markets of Egypt, Ghana, Morocco, Namibia, and South Africa, but insignificant information to Botswana, Kenya, Nigeria, and Zambia.
2) The asymmetry in information transfer from the US suggests African markets could provide diversification benefits when global economic policy uncertainty rises.
3) The findings have implications for adopting open innovation in African stock markets to better deal with global
Keynote Address: Navigating the Ups and Downs of the Global EconomyLora Cecere
The keynote address/presentation given by Dr. Laura D’Andrea Tyson, Professor and Director of the Institute for Business and Social Impact at the Berkeley Haas School of Business., given on day 1 at the Supply Chain Insights Global Summit in Scottsdale, AZ on September 10, 2014
Keynote Address: Navigating the Ups and Downs of the Global Economy
The global economy is turbulent. How do supply chain leaders prepare? What does growth look like? What can they expect?
Dr. Laura D’Andrea Tyson, Professor and Director of the Institute for Business and Social Impact at the Berkeley Haas School of Business.
Tyson was a member of the US Department of State Foreign Affairs Policy Board. From 2011-2013, Tyson served as a member of President Barack Obama’s Council of Jobs and Competitiveness and from 2009–2011, she was member of the President’s Economic Recovery Advisory Board. She served in the Clinton Administration and was the Chair of the Council of Economic Advisers (1993-1995) and the President’s National Economic Adviser (1995–1996).
This document provides an overview of several topics related to Anglo-American culture and history, including:
1) Demographic trends and population movements in Europe, America, and the colonization period from pre-Columbian times through the 18th century.
2) The establishment of governments and political systems in the early United States, including the Declaration of Independence, Constitution, and consolidation of federal structures.
3) Key figures and political developments in the early US, including Thomas Jefferson, Alexander Hamilton, and the Federalist vs. Democratic-Republican debate over the role of the federal government.
4) Westward expansion in the 19th century and doctrines like Manifest Destiny, as well as slavery and
1. The document examines the impact of exchange rate fluctuations on foreign trade in Nigeria from 1980-2014. It uses data from the Central Bank of Nigeria and Federal Bureau of Statistics to analyze the relationship between exchange rate, import, export, GDP, and price level.
2. Statistical analysis including OLS regression, cointegration, error correction model, and Granger causality tests were employed. The results show exchange rate fluctuations have a significant negative impact on foreign trade in Nigeria, explaining 56% of the variation in trade.
3. The error correction model also indicates about 55% of disequilibria from the previous year's foreign trade were corrected in the current year, suggesting exchange rate volatility creates instability in Nigeria
This document discusses the impacts of rising global food prices in Asia. It finds that while domestic food price inflation in Asia is not as severe as global inflation, rising prices still threaten growth and poverty reduction. Food price increases are driven by factors like increased demand from China and India, biofuel mandates, commodity speculation, and high oil prices. Countries responded with both export restrictions and increased imports, exacerbating the crisis. Higher prices negatively impact the poorest consumers, though rural agricultural producers may benefit. Overall, food inflation poses challenges but responses can help mitigate threats to the poor.
1. While global food supplies remain secure, price volatility and natural disasters have raised concerns of a repeat of the 2007-08 food crisis.
2. Five steps are recommended to prevent another crisis: implement social safety nets, boost smallholder productivity, establish coordinated global food monitoring, eliminate export bans, and create mechanisms to decrease price volatility such as coordinated reserves.
3. Caution is still warranted as export bans or speculation could still trigger a crisis, so targeted actions are needed to ensure global food security.
While lower oil prices today could benefit consumers, focusing only on the short term can potentially lead to issues in the future. Reducing oil production and projects now may cause supply shortages and price spikes down the road. The document discusses how past oil price volatility has been driven by various economic, political, and psychological factors. It argues that the large drop in prices seen since 2014 could reflect similar underlying demand and supply dynamics to the 2008 price crash, and recovering demand may put upward pressure on prices again over the short term. However, ongoing geopolitical factors could prolong the current period of lower prices.
The document analyzes the causes and consequences of global imbalances from the perspective of developing Asia. It finds that developing Asia's large and persistent current account surpluses since the Asian financial crisis have contributed significantly to global imbalances. While developing Asia benefited from export-led growth for decades, running sustained surpluses may not maximize long-term growth and welfare and could be a mixed blessing. The global financial crisis has added urgency for developing Asia to rebalance growth toward domestic demand but was not the sole cause, as surpluses were already exerting costs on the region.
Macroeconomic uncertainty and foreign portfolio investment volatility evidenc...Alexander Decker
This document examines the relationship between macroeconomic uncertainty and foreign portfolio investment (FPI) volatility in Nigeria from 1986-2011. It finds that macroeconomic variables like interest rates, inflation rates, market capitalization rates, exchange rates, and GDP, as well as FPI, are all highly volatile and respond asymmetrically to new information. A stable macroeconomic environment is necessary for steady FPI inflows, while steady FPI inflows also contribute to some level of macroeconomic stability. The study recommends monitoring insider activities in the capital market and balancing economic growth policies with price stability policies.
Baltic dry index paper as predictor of economic activity and stock returnsneiracar
The Baltic Dry Index as a Predictor of Global Stock Returns,
Commodity Returns, and Global Economic Activity¤
Gurdip Bakshia† George Panayotovb‡ Georgios Skoulakisc§
The document discusses how countries tend to trade most significantly with their immediate neighbors. It notes that while India and Pakistan have complementary capabilities and populations of over 1 billion people each, their bilateral trade remains low at under $3 billion annually due to political tensions. Expanding bilateral trade between India and Pakistan could boost their economies and investment levels substantially, with some estimates projecting GDP increases of 1.5% and trade growth to $40 billion within a few years.
The International Grains Council’s 24th annual conference, held in London on 9 June 2015, brought together some 300 traders, policymakers and other industry professionals. Meeting under the theme “Building on success, responding to challenges,” delegates from 48 countries gathered to assess the recent shifts in market fundamentals, which has seen global grains and oilseeds inventories build to near-record levels, with prices dropping to multi-year lows. As well as being a key forum for the exchange of views, the conference provided a valuable networking opportunity, bringing together a unique mix of participants from private and public sectors.
The FOMC minutes revealed disagreement among members about whether to raise rates in September. This uncertainty is causing volatility in markets. While some signals point to a rate hike, others suggest the Fed may pause due to concerns over a slowing Chinese economy and its potential impact on the US. Commodities have continued declining, suggesting weakness in the global economy. The Fed faces challenges in responding to economic troubles abroad while the US risks being impacted as well.
Despite natural disasters in the US, growth remains solid globally and in the US. All major economies are experiencing synchronized expansion for the first time since the financial crisis. Financial markets have responded positively but concerns remain about potential policy missteps and geopolitical tensions. Inflation is still muted but asset prices have risen sharply.
This paper examines how macroeconomic news announcements from the US and domestic economies impact exchange rates in nine emerging markets from 2000 to 2006. The authors find that major US macro news have a strong impact on the returns and volatility of emerging market exchange rates, but many domestic news do not. Emerging market currencies have become more sensitive to US news in recent years. The paper also finds that market sentiment and uncertainty can influence how emerging market currencies react to macroeconomic news.
Forecasting the Causal Relationship between Oil Prices and Exchange Rate in N...iosrjce
This study empirically forecasted the causal relationship between oil prices and exchange rate in
Nigeria using data for 45 years (1970 - 2014). The data which is purely secondary data was sourced through
the Central Bank of Nigeria Statistical Bulletin for various years. The study modified the Sibanda and Mlambo
(2014)’s model to estimate the relationship and long-run effect of oil prices and exchange rates in Nigeria. With
the Durbin-Watson statistic value that there is no autocorrelation in the model, t-test statistic was used to test
the hypothesis that “there is no significant relationship between oil prices and exchange rate in Nigeria”, using
the e-view statistical software. The empirical findings indicate that a unit increase in oil price will lead to
44.91% increases in exchange rate in Nigeria. This implies that oil prices significantly influence exchange rate
in Nigeria, with the t-statistic P-value (0.0000) and table value (1.671) at 5% level of significance. The study
then recommended that exchange rate management policy makers should ensure that the oil price changes are
included in exchange rate management in Nigeria
The document discusses the difference between recession and stagflation using global case studies. It provides definitions and examples of each. A recession is defined as two consecutive quarters of negative economic growth along with rising unemployment and falling inflation. Examples given include recessions in the US, Brazil, and Russia. Stagflation is defined as slowing economic growth combined with high unemployment and high inflation. Examples given include stagflation in OECD countries in the 1970s-1980s due to oil shocks. The document concludes that while Nigeria is experiencing negative growth and inflation, falling monthly inflation indicates the country is currently in a recession rather than stagflation.
The document discusses 7 metrics that fuel Arab youth revolt: price rise, corruption, income disparity, unemployment, repression, external (NATO) support, and internet/mobile media support. It analyzes how each of these factors contributes to social unrest in Arab countries and could potentially spread revolt to other regions. High commodity prices hit the poor hardest and fuel food riots. Corruption creates unequal opportunities and dissatisfaction. Unemployment, especially among youth and women, sparks anger at ruling governments.
World Economic and Financial Surveys - Regional Economic Outlook - Western He...FGV Brazil
World Economic and Financial Surveys - Regional Economic Outlook - Western Hemisphere
The report, prepared by the International Monetary Fund (IMF), presented at FGV’s Brazilian Institute of Economics (IBRE) in October 2015.
2007 Q3: Feature on Economic Diversificationeconsultbw
Botswana's economy has remained resilient despite global financial turbulence. Inflation has risen due to higher food and fuel prices, and is projected to increase further. Economic growth remains positive but low, with quarterly GDP data confirming recovery but at 3.3% annual growth in 2006. Government revenues met targets but spending was well below budget, resulting in a large budget surplus. Non-diamond exports grew strongly while the diamond sector saw modest growth. Monetary policy remains unchanged despite inflation concerns due to external factors beyond Botswana's control.
An Investigation of Crude Oil and its Implication for Financial Markets Priesnell Warren ✔
This research paper seeks to unearth the possible repercussions of fluctuations in Crude Oil markets and how they will affect global trade and financial markets. Crude oil or Black Gold is one of the world’s most precious commodities as its change in price affects the entire economy.
This document summarizes the debate around currency manipulation and exchange rate policies between major economies like the US, China, Europe, and Japan. It discusses claims that some countries are deliberately devaluing their currencies to gain unfair trade advantages through cheaper exports. While currency devaluations could violate WTO rules if proven to be subsidies, determining whether exchange rate policies constitute subsidies or injure trade is complex legally and economically. The document analyzes relevant WTO and IMF rules and challenges with applying them to claims of currency manipulation.
In the second quarter of 2010, global economic growth showed signs of moderating which drove investors to shift assets into safe havens like government bonds, the US dollar, and gold. Concerns over fiscal tightening in Europe, policy changes in China, and weaker US economic data contributed to the more risk-averse investor sentiment. The Canadian market declined in the quarter but outperformed other developed markets, led higher by gold stocks, while cyclical sectors tied to global growth fared worst.
Exchange Rate Volatility and Import Substitution in Nigeria: A Sectoral AnalysisAJHSSR Journal
ABSTRACT: The study attempts to estimate the impact of exchange rate volatility on import substitution in
Nigeria. The study establishes that the volatility in exchange rate has a detrimental effect in the agricultural
sector in the short run, but this normalizes in the long run, thus having a positive permanent effect. Similarly,
the empirical results depict that the demand for the consumer goods sector was negatively affected by exchange
rate shocks in the initial stage, but over the periods had a positive effect. The result of the food sector, however,
conforms with the apriori expectation that currency exchange rates have a significant impact on food prices.
Food prices are likely to respond as the Naira weakens or strengthens vis a visother currency.This study
provides empirical evidence to drive policy formulation in the management of the country’ foreign exchange
rate as it impacts on trade of goods and services, andprovides information that may guide more studies on the
subject.
Keywords: Exchange rate volatility; Import substitution; Agricultural sector; GARCH; Vector autoregression
A Dynamic Analysis of the Impact of Capital Flight on Real Exchange Rate in N...iosrjce
This study examines the dynamic effect of capital flight on the real exchange rate of the naira.
Specifically this study seeks to investigate if a long-run relationship exists between real exchange rate and
capital flight in Nigeria. This will be done using quarterly time series data covering the period 1981 to 2009. In
this process the short-run dynamics of the interactions between the two variables will be analyzed.
The study tried to examine the effect of environmental forces on foreign exchange market in Nigeria. The PEST- Political variables such as change in government (CIG) and democratic rule (DMR); Economical variables such as interest rate spread (IRS) and inflation in consumer prices (ICP); Social variable like population growth (PGR); and Technological variables such as fuel exports in merchandise (FEM) and technology export (TEX) were used to evaluate the impact these environmental factors have on foreign exchange market (official exchange rate). This study employed a time series data with the time frame 1973-2015. A multiple regression model was developed and analyzed using the ordinary least square method (OLS) with the help of E-views, a statistical package. The result showed that in isolation, IRS, FEM and DMR significantly influenced dealing rates in the Nigerian foreign exchange market while ICP, CIG, PGR, and TEX did not show any significant influence on foreign exchange market in Nigeria. However, the overall result showed a significant positive relationship between the environmental forces and the foreign exchange market in Nigeria with a p -value of 0.000000. We therefore concluded that environmental factors have significant influence on the Nigerian Foreign Exchange market. Hence, we recommended that relevant stake holders should pay proper attention to those environmental factors with significant impact on our Foreign Exchange Market in Nigeria.
1. While global food supplies remain secure, price volatility and natural disasters have raised concerns of a repeat of the 2007-08 food crisis.
2. Five steps are recommended to prevent another crisis: implement social safety nets, boost smallholder productivity, establish coordinated global food monitoring, eliminate export bans, and create mechanisms to decrease price volatility such as coordinated reserves.
3. Caution is still warranted as export bans or speculation could still trigger a crisis, so targeted actions are needed to ensure global food security.
While lower oil prices today could benefit consumers, focusing only on the short term can potentially lead to issues in the future. Reducing oil production and projects now may cause supply shortages and price spikes down the road. The document discusses how past oil price volatility has been driven by various economic, political, and psychological factors. It argues that the large drop in prices seen since 2014 could reflect similar underlying demand and supply dynamics to the 2008 price crash, and recovering demand may put upward pressure on prices again over the short term. However, ongoing geopolitical factors could prolong the current period of lower prices.
The document analyzes the causes and consequences of global imbalances from the perspective of developing Asia. It finds that developing Asia's large and persistent current account surpluses since the Asian financial crisis have contributed significantly to global imbalances. While developing Asia benefited from export-led growth for decades, running sustained surpluses may not maximize long-term growth and welfare and could be a mixed blessing. The global financial crisis has added urgency for developing Asia to rebalance growth toward domestic demand but was not the sole cause, as surpluses were already exerting costs on the region.
Macroeconomic uncertainty and foreign portfolio investment volatility evidenc...Alexander Decker
This document examines the relationship between macroeconomic uncertainty and foreign portfolio investment (FPI) volatility in Nigeria from 1986-2011. It finds that macroeconomic variables like interest rates, inflation rates, market capitalization rates, exchange rates, and GDP, as well as FPI, are all highly volatile and respond asymmetrically to new information. A stable macroeconomic environment is necessary for steady FPI inflows, while steady FPI inflows also contribute to some level of macroeconomic stability. The study recommends monitoring insider activities in the capital market and balancing economic growth policies with price stability policies.
Baltic dry index paper as predictor of economic activity and stock returnsneiracar
The Baltic Dry Index as a Predictor of Global Stock Returns,
Commodity Returns, and Global Economic Activity¤
Gurdip Bakshia† George Panayotovb‡ Georgios Skoulakisc§
The document discusses how countries tend to trade most significantly with their immediate neighbors. It notes that while India and Pakistan have complementary capabilities and populations of over 1 billion people each, their bilateral trade remains low at under $3 billion annually due to political tensions. Expanding bilateral trade between India and Pakistan could boost their economies and investment levels substantially, with some estimates projecting GDP increases of 1.5% and trade growth to $40 billion within a few years.
The International Grains Council’s 24th annual conference, held in London on 9 June 2015, brought together some 300 traders, policymakers and other industry professionals. Meeting under the theme “Building on success, responding to challenges,” delegates from 48 countries gathered to assess the recent shifts in market fundamentals, which has seen global grains and oilseeds inventories build to near-record levels, with prices dropping to multi-year lows. As well as being a key forum for the exchange of views, the conference provided a valuable networking opportunity, bringing together a unique mix of participants from private and public sectors.
The FOMC minutes revealed disagreement among members about whether to raise rates in September. This uncertainty is causing volatility in markets. While some signals point to a rate hike, others suggest the Fed may pause due to concerns over a slowing Chinese economy and its potential impact on the US. Commodities have continued declining, suggesting weakness in the global economy. The Fed faces challenges in responding to economic troubles abroad while the US risks being impacted as well.
Despite natural disasters in the US, growth remains solid globally and in the US. All major economies are experiencing synchronized expansion for the first time since the financial crisis. Financial markets have responded positively but concerns remain about potential policy missteps and geopolitical tensions. Inflation is still muted but asset prices have risen sharply.
This paper examines how macroeconomic news announcements from the US and domestic economies impact exchange rates in nine emerging markets from 2000 to 2006. The authors find that major US macro news have a strong impact on the returns and volatility of emerging market exchange rates, but many domestic news do not. Emerging market currencies have become more sensitive to US news in recent years. The paper also finds that market sentiment and uncertainty can influence how emerging market currencies react to macroeconomic news.
Forecasting the Causal Relationship between Oil Prices and Exchange Rate in N...iosrjce
This study empirically forecasted the causal relationship between oil prices and exchange rate in
Nigeria using data for 45 years (1970 - 2014). The data which is purely secondary data was sourced through
the Central Bank of Nigeria Statistical Bulletin for various years. The study modified the Sibanda and Mlambo
(2014)’s model to estimate the relationship and long-run effect of oil prices and exchange rates in Nigeria. With
the Durbin-Watson statistic value that there is no autocorrelation in the model, t-test statistic was used to test
the hypothesis that “there is no significant relationship between oil prices and exchange rate in Nigeria”, using
the e-view statistical software. The empirical findings indicate that a unit increase in oil price will lead to
44.91% increases in exchange rate in Nigeria. This implies that oil prices significantly influence exchange rate
in Nigeria, with the t-statistic P-value (0.0000) and table value (1.671) at 5% level of significance. The study
then recommended that exchange rate management policy makers should ensure that the oil price changes are
included in exchange rate management in Nigeria
The document discusses the difference between recession and stagflation using global case studies. It provides definitions and examples of each. A recession is defined as two consecutive quarters of negative economic growth along with rising unemployment and falling inflation. Examples given include recessions in the US, Brazil, and Russia. Stagflation is defined as slowing economic growth combined with high unemployment and high inflation. Examples given include stagflation in OECD countries in the 1970s-1980s due to oil shocks. The document concludes that while Nigeria is experiencing negative growth and inflation, falling monthly inflation indicates the country is currently in a recession rather than stagflation.
The document discusses 7 metrics that fuel Arab youth revolt: price rise, corruption, income disparity, unemployment, repression, external (NATO) support, and internet/mobile media support. It analyzes how each of these factors contributes to social unrest in Arab countries and could potentially spread revolt to other regions. High commodity prices hit the poor hardest and fuel food riots. Corruption creates unequal opportunities and dissatisfaction. Unemployment, especially among youth and women, sparks anger at ruling governments.
World Economic and Financial Surveys - Regional Economic Outlook - Western He...FGV Brazil
World Economic and Financial Surveys - Regional Economic Outlook - Western Hemisphere
The report, prepared by the International Monetary Fund (IMF), presented at FGV’s Brazilian Institute of Economics (IBRE) in October 2015.
2007 Q3: Feature on Economic Diversificationeconsultbw
Botswana's economy has remained resilient despite global financial turbulence. Inflation has risen due to higher food and fuel prices, and is projected to increase further. Economic growth remains positive but low, with quarterly GDP data confirming recovery but at 3.3% annual growth in 2006. Government revenues met targets but spending was well below budget, resulting in a large budget surplus. Non-diamond exports grew strongly while the diamond sector saw modest growth. Monetary policy remains unchanged despite inflation concerns due to external factors beyond Botswana's control.
An Investigation of Crude Oil and its Implication for Financial Markets Priesnell Warren ✔
This research paper seeks to unearth the possible repercussions of fluctuations in Crude Oil markets and how they will affect global trade and financial markets. Crude oil or Black Gold is one of the world’s most precious commodities as its change in price affects the entire economy.
This document summarizes the debate around currency manipulation and exchange rate policies between major economies like the US, China, Europe, and Japan. It discusses claims that some countries are deliberately devaluing their currencies to gain unfair trade advantages through cheaper exports. While currency devaluations could violate WTO rules if proven to be subsidies, determining whether exchange rate policies constitute subsidies or injure trade is complex legally and economically. The document analyzes relevant WTO and IMF rules and challenges with applying them to claims of currency manipulation.
In the second quarter of 2010, global economic growth showed signs of moderating which drove investors to shift assets into safe havens like government bonds, the US dollar, and gold. Concerns over fiscal tightening in Europe, policy changes in China, and weaker US economic data contributed to the more risk-averse investor sentiment. The Canadian market declined in the quarter but outperformed other developed markets, led higher by gold stocks, while cyclical sectors tied to global growth fared worst.
Exchange Rate Volatility and Import Substitution in Nigeria: A Sectoral AnalysisAJHSSR Journal
ABSTRACT: The study attempts to estimate the impact of exchange rate volatility on import substitution in
Nigeria. The study establishes that the volatility in exchange rate has a detrimental effect in the agricultural
sector in the short run, but this normalizes in the long run, thus having a positive permanent effect. Similarly,
the empirical results depict that the demand for the consumer goods sector was negatively affected by exchange
rate shocks in the initial stage, but over the periods had a positive effect. The result of the food sector, however,
conforms with the apriori expectation that currency exchange rates have a significant impact on food prices.
Food prices are likely to respond as the Naira weakens or strengthens vis a visother currency.This study
provides empirical evidence to drive policy formulation in the management of the country’ foreign exchange
rate as it impacts on trade of goods and services, andprovides information that may guide more studies on the
subject.
Keywords: Exchange rate volatility; Import substitution; Agricultural sector; GARCH; Vector autoregression
A Dynamic Analysis of the Impact of Capital Flight on Real Exchange Rate in N...iosrjce
This study examines the dynamic effect of capital flight on the real exchange rate of the naira.
Specifically this study seeks to investigate if a long-run relationship exists between real exchange rate and
capital flight in Nigeria. This will be done using quarterly time series data covering the period 1981 to 2009. In
this process the short-run dynamics of the interactions between the two variables will be analyzed.
The study tried to examine the effect of environmental forces on foreign exchange market in Nigeria. The PEST- Political variables such as change in government (CIG) and democratic rule (DMR); Economical variables such as interest rate spread (IRS) and inflation in consumer prices (ICP); Social variable like population growth (PGR); and Technological variables such as fuel exports in merchandise (FEM) and technology export (TEX) were used to evaluate the impact these environmental factors have on foreign exchange market (official exchange rate). This study employed a time series data with the time frame 1973-2015. A multiple regression model was developed and analyzed using the ordinary least square method (OLS) with the help of E-views, a statistical package. The result showed that in isolation, IRS, FEM and DMR significantly influenced dealing rates in the Nigerian foreign exchange market while ICP, CIG, PGR, and TEX did not show any significant influence on foreign exchange market in Nigeria. However, the overall result showed a significant positive relationship between the environmental forces and the foreign exchange market in Nigeria with a p -value of 0.000000. We therefore concluded that environmental factors have significant influence on the Nigerian Foreign Exchange market. Hence, we recommended that relevant stake holders should pay proper attention to those environmental factors with significant impact on our Foreign Exchange Market in Nigeria.
Effect of Foreign Exchange Rate Volatility on Industrial Productivity in Nige...ijtsrd
Effect of exchange rate volatility on industrial productivity has been a controversial debate among academia and experts. This study examines effect of exchange rate volatility on industrial productivity, many studies have mixed results on the direction of exchange rate volatility and the scope of the thesis covers 35years 1981 2015 , the pre and post Structural Adjustment Programme while primary and secondary data gathered from the Nigeria industrial sector by questionnaire and time series obtained from the Central Bank of Nigeria statistical bulletin, 2014 2016 were used. The data were estimated using descriptive statistical methods chi square and mean scores and Phillip Perron and Augmented Dickey Fuller used to determine the unit roots and non stationarity among the variables. ARDL and Bound test was applied to determine short and long run co integration among independent and dependent variables. Diagnostic and Normality test applied to test for stability. The F statistics is 159.3 and the R squared is 99.7 shown that variables are jointly significant and model a good fit. The Durbin Watson of 3.04 showed no serial correlation. The results shown that foreign exchange rate has a positive relationship with industrial performance, however, the exchange rate volatility crumbled industrial production as machinery and raw materials are imported for the industry productions, while bank lending rates, FDT, Inflation and PCI have negative coefficient. The ADRL and Bound test revealed a long run relationship among the variables at 5 significance level. The government should pursue currency appreciation as exporter of mono product and encourages non oil exports and discourage Nigerian cosmopolitan pattern of consumptions. Olaleye John Olatunde | Ojomolade Dele Jacob ""Effect of Foreign Exchange Rate Volatility on Industrial Productivity in Nigeria, 1981- 2015"" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-3 , April 2019, URL: https://www.ijtsrd.com/papers/ijtsrd22910.pdf
Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/22910/effect-of-foreign-exchange-rate-volatility-on-industrial-productivity-in-nigeria-1981--2015/olaleye-john-olatunde
This document summarizes a study examining the financial vulnerability of Midwest grain farms under various price, yield, cost, and asset value shocks. The study constructs illustrative farms of different sizes, land ownership percentages, and debt levels to model their financial performance. Key findings include: 1) Smaller farms and those renting a large percentage of land are very vulnerable to shocks. 2) Larger farms with modest debt that own and rent land have strong financial performance and limited vulnerability. 3) These farms can increase debt moderately with minimal financial impact. The study aims to better understand farm resilience compared to the financial crisis of the 1980s.
A causal relationship between stock indices and exchange rates empirical evid...Alexander Decker
This document summarizes a research paper that examines the causal relationship between stock prices and exchange rates in India from 2001 to 2011. The results indicate there is a bidirectional causal relationship, with negative causality from most stock indices to the exchange rate, and positive causality from technology indices to the exchange rate. The exchange rate also has negative causality to all stock market indices. In addition, the paper reviews several other studies that have examined the relationship between stock prices and exchange rates in other countries, finding mixed results.
11.a causal relationship between stock indices and exchange rates empirical e...Alexander Decker
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This document summarizes a research paper analyzing home bias in mutual fund investment strategies. It studied 30 randomly selected mutual funds across the US. It found that 73% exhibited home bias by overweighting industries prominent in their home state, and these funds achieved higher 7.45% average returns versus 4.95% for funds without home bias. Funds that invested most heavily in their home state's largest industry achieved the highest 9.04% returns. Smaller state economies showed weaker home bias and influence of local industries. The study provides evidence that home bias can be a profitable investment strategy for mutual funds.
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Bus 626 Week 6 - Discussion Forum 1Guided Response Respon.docxcurwenmichaela
Bus 626 Week 6 - Discussion Forum 1
Guided Response: Respond to at least two of your fellow students’ and to your instructor’s posts in a substantive manner and provide information or concepts that they may not have considered. Each response should have a minimum of 100 words. Support your position by using information from the week’s readings. You are encouraged to post your required replies earlier in the week to promote more meaningful and interactive discourse in this discussion forum. Continue to monitor the discussion forum until Day 7 and respond with robust dialogue to anyone who replies to your initial post.
Jocelyn Harnett
Egypt has a sizable trade deficit that has continued to grow through the 21st century. The country has imports that make up a third of GDP and exports that make up one tenth of GDP. Egypt has many critical trade partners that include China, the United States, and the Gulf Arab countries. Throughout history Egypt has had an unstable government which has led to an unstable economy. This is related to the fluctuations the country has experienced in tariffs and taxes. The country has stabilized in recent years, but the historic instability still remains a critical factor when considering the expansion of Wal-Mart into Egypt. The trade deficit would not be a concern under normal conditions due to the fact that this means money is flowing into the country and creating new opportunities, but because the government is not stable Wal-Mart would want to ascertain that money was being invested properly in the future. If money is not being utilized correctly than the trade deficit becomes a concern because future generations are inheriting a debt that had no payback associated with it. The exchange rate of the Egyptian pound has gotten stronger to the US Dollar, which is a good indicator the economy is heading in the correct direction. Wal-Mart expansion could benefit from getting into the market in Egypt at the right time to see major profits.
Egypt is a market that will continue to grow as the internal government becomes stabilized and the country continues to focus on improving the economic welfare of the people. Currently the market in Egypt is volatile and companies that select to make an investment here must be aware of the many different cultural aspects that will affect success. The government is working to “find solutions and solve difficulties for people and businesses” (Bawaba, 2019) and has seen success in the first half of 2019. “At the time of May 31, 2019, the whole country had 721,516 businesses doing business, increasing 23,921 enterprises (3.43 %) compared to the end of 2018.” (Bawaba, 2019). This sort of success validates a foreign company wanting to make an investment, but continued analysis of the country’s government stability will be needed before each new storefront is added.
References:
Bawaba, A. (2019). Egypt : "Reviewing tax policies, finding solutions to solve difficulties for people and .
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My professor’s notes:
While you have a made a sound effort at the assignment, there are significant deficiencies. You haven't compared the modeling systems methodologically, i.e., how they actually work.
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Running head: PHYSIOCRATIC AND MODERN MACROECONOMIC MODELS 1
5
PHYSIOCRATIC AND MODERN MACROECONOMIC MODELS
Name:
Institution:
Course:
Instructor:
Date:
Economic models
The Physiocrat model of economic life was developed in the eighteenth century and was highly characterized by the argument government non-interference with the operation of economic laws. The physiocrats believed that land is the main factor of production and the primary source of wealth. The main thinking was the emphasis on productive work. Their arguments largely differed with that of mercantilists who argued that the primary source of nation wealth was in Gold and silver stocks. The physiocrats believed that the real wealth of nation is from the agricultural products. The model structure consisted of three major classes namely the sterile, propriety class and the productive class. The production process starts with the propriety class who are the owners of the land as the primary means of production. The propriety class consisted of the most integral class of people since they were considered as the movers of the production activities. Agricultural production relied on the propriety class willingness to give out their land for an agricultural production... The propriety class is also consumers of agricultural products and thus their desire to consume drives them to lease additional land for production (Forstater & Gary Mongiovi, 2007).
The production class is actively engaged in an agricultural production process, and they rely on the propriety class for production purposes. The landlords desire to lease out more land for production purposes create more income for the production class and sterile class. The proprietor class was, therefore, critical in stimulating economic activities which benefited different the other two social classes. The merchants traded the surplus agricultural products in exchange for foreign products. The physiocrats, therefore, believed that agriculture was the backbone of the country’s wealth. The physiocrats envisaged a society in which the moral and economic laws will play, and that positive law will be in harmony with the natural law. The physiocrats asserted that the prices were solely determined by demand and supply plus production costs. They also asserted that there was always a fair market price which was derived from free trade. They acknowledged the contribution of the land cultivators but the profits were more assigned to the propriety class. The economic model also advocated for the government to charge fixed interests rates .
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IOSR Journal of Humanities and Social Science is an International Journal edited by International Organization of Scientific Research (IOSR).The Journal provides a common forum where all aspects of humanities and social sciences are presented. IOSR-JHSS publishes original papers, review papers, conceptual framework, analytical and simulation models, case studies, empirical research, technical notes etc.
Similar to Exchange rate effects on the relationship between fdi and trade in the u.s. food processing (20)
Exchange rate effects on the relationship between fdi and trade in the u.s. food processing
1. Agricultural & Applied Economics Association
Exchange Rate Effects on the Relationship between FDI and Trade in the U.S. Food Processing
Industry
Author(s): Munisamy Gopinath, Daniel Pick and Utpal Vasavada
Reviewed work(s):
Source: American Journal of Agricultural Economics, Vol. 80, No. 5, Proceedings Issue (Dec.,
1998), pp. 1073-1079
Published by: Oxford University Press on behalf of the Agricultural & Applied Economics Association
Stable URL: http://www.jstor.org/stable/1244207 .
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2. EXCHANGE RATE EFFECTS ON THE RELATIONSHIP
BETWEEN
FDI AND TRADE IN THE U.S. FOOD
PROCESSINGINDUSTRY
MUNISAMY GOPINATH, DANIEL PICK, AND UTPAL VASAVADA
The effect of exchange rates on international vens), a majority of studies support the neg-
trade and, more specifically, on agricultural ative relationship between the dollar value and
trade flows has been documented by several FDI inflows into the United States (Caves,
studies.' Most studies agree that an appreci- Cushman 1985).
ation (depreciation) in the value of the U.S. The juxtaposition of these two strands of
dollar hurts (helps) U.S. agricultural exports. literature suggests that as the value of the dol-
An appreciation of the U.S. dollar raises the lar declines, exports increase and FDI out-
cost of U.S. products to foreign buyers and flows decrease. Effectively, FDI and trade
reduces their purchases.2 Although neglected may be substitutes and exchange rate move-
early on, the effect of exchange rate risk as ments can cause this substitution.4 In this ar-
measured by its volatility on trade flows was ticle, the exchange-rate-induced substitution
also found to be negative (Arize, Pick). hypothesis is tested for the U.S. food pro-
Parallel to this literature were the devel- cessing industry, which presents an interest-
opment and testing of theories on the rela- ing case study. The composition of global ag-
tionship between exchange rates and foreign ricultural trade has shifted toward high-value
direct investment (FDI). Using an imperfect- processed food products, which account for
capital-market approach, Froot and Stein two-thirds of the $381 billion global trade in
demonstrated that exchange rate movements agricultural products and commodities (Hen-
affect the relative-wealth positions of coun- derson and Handy). The U.S. share in global
tries and thus have a systematic effect on agricultural trade has fallen from 22% to less
FDI.3 To the extent that foreigners own their than 15%, and processed foods account for
wealth in non-dollar-denominated forms, a less than 40% of total U.S. agricultural ex-
depreciation of the dollar increases the wealth ports for the period 1962-94 (Gehlhar and
position of foreigners relative to domestic Vollrath). However, the United States ac-
agents. This lowers foreigners' relative cost counted for six out of ten of the world's largest
of capital and allows them to bid more ag- food-processing (multinational) firms. In ad-
gressively for domestic assets (Froot and dition, sales by U.S.-owned food-processing
Stein, p. 1194). While the empirical results of foreign affiliates are estimated to have reached
Froot and Stein have been questioned (Ste- $103 billion in 1994 (Neff et al.). Declining
export shares and the increasing role of U.S.-
Munisamy Gopinath is an assistant professor in the Departmentof owned multinational corporations (MNCs)
Agricultural and Resource Economics, Oregon State University. suggest some degree of substitution in the
Daniel Pick is an economist in the Markets and Trade Economics
Division, Economic Research Service, U.S. Departmentof Agricul-
food processing industry. This has been tested
ture. Utpal Vasavada is an economist in the Resource Economics at the aggregate level and at the firm level.
Division, Economic Research Service, U.S. Departmentof Agricul- For instance, Gopinath, Pick, and Vasavada
ture.
Thanks to Andy Jerardo, Mark Gehlhar, and Alisa Livensperger
found that exports and foreign sales by U.S.-
for their help in compiling the data. The authors benefited from based multinational firms are substitutes.
helpful comments by John Beghin, Bruce Blonigen, and Tom Worth. The purpose of this study is to test for the
1'Some studies focused on nominal exchange rate effects (e.g.,
Chambersand Just), while others looked at real exchange rateeffects effects of the real exchange rate and its vol-
(e.g., Cushman 1983, Batten and Belongia). atility on exports, outward FDI, and foreign
2 As Schuh notes, a rise in the dollar value not only discourages
exports, but also exerts pressure on the domestic import-competing
industries (automobile, textile, and others).
4 Lipsey provides a useful discussion on the effects of outward
3 See Cushman (1985) and Caves for other studies on exchange
rate effects on FDI. FDI on the broader economy.
Amer. J. Agr. Econ. 80 (Number 5, 1998): 1073-1079
Copyright 1998 American Agricultural Economics Association
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3. 1074 Number 5, 1998 Amer. J. Agr. Econ.
affiliate sales by the U.S. food-processing in- FDI,
dustry. The relevant question is whether the GNP o + P3ln Ri, + 321nVi, +
GNPj - P33
appreciation (depreciation) of the U.S. dollar
and its volatility has contributed to the ob-
served relationship between FDI and trade in Foreign + ylln R, + y2ln Vi
Salesi, =
this industry. Besides underscoring the im- GNP,
portance of the level and stability of exchange + Y"3 +
Uit
rates for trade and foreign investment, this
research has implications for policy, since ex- where i denotes country of destination and t
denotes time. The value Rit, is the real ex-
panding trade and/or foreign investment can
bring about changes in the distribution of in- change rate between the ith country's curren-
come to those engaged in food processing in cy and the U.S. dollar, Vi, is the volatility of
the United States. the real exchange rate, and 7 is a time trend.
The superscripts (e, f s) on the error terms
(u) reflect the respective exports, FDI, and
foreign sales equations.6
A Test of Exchange Rate Effects
Our test of the effects of exchange rates on Data Used in Empirical Estimation
exports, outward FDI, and foreign affiliate
sales is closely related to those carried out by Since developed countries account for more
Hooper and Kohlhagen (for exports), Froot than 75% of the total of 29 billion dollars of
and Stein, and Stevens (for FDI and foreign U.S. direct investment abroad in the food-pro-
sales). By maximizing the expected utility of cessing industry, our analysis focuses pri-
profits for both the exporter and the importer, marily on high-income countries for the pe-
with the transactions denominated in the re- riod 1982-95.7
spective currencies, Hooper and Kohlhagen The ten countries included in the analysis
derived the optimal quantity exported as a are Australia, Belgium, Canada, France, Ger-
function of income levels, factor costs, and many, Japan, the Netherlands, Italy, Spain,
real exchange rates and their volatility. Froot and the United Kingdom. Data on FDI vari-
and Stein argued that informational imperfec- ables were obtained from U.S. Department of
tions cause a divergence between external and Commerce. Annual estimates of the FDI po-
internal financing, with the former being more sition abroad for the food-processing industry
expensive. Hence, by systematically lowering (SIC 20) were available for the period 1982-
the wealth of domestic agents, a depreciation 95 from the Bureau of Economic Analysis in
of the U.S. dollar can lead to foreign acqui- electronic form. Data on sales by majority-
sitions of domestic assets. They tested for this owned foreign affiliates were taken from the
effect by normalizing FDI inflows on U.S. annual U.S. Direct Investment Abroad: Op-
erations of Parent Companies and their For-
gross national product (GNP) and regressing
it on real exchange rates.5 eign Affiliates for the 1982-95 period. The
We present the following three equations to data on prices (unit values) and quantities of
test the effects of the real exchange rate and exports of processed food products were ob-
its volatility on exports, outward FDI, and for- tained from Foreign Agricultural Trade of the
U.S., published by the Economic Research
eign affiliate sales by the U.S. (home country) Service of the U.S. Department of Agriculture
food processing industry. All three dependent
variables, exports, outward FDI, and foreign (ERS/USDA). Relative consumer price indi-
affiliate sales, in a host country are normalized ces (CPIs) and nominal exchange rates (for-
eign currency per U.S. dollar) were obtained
by its GNP.
(1) = ao0+ aln R, + a21n Vi, 6
See Arize for a discussion on the pros and cons of various mea-
Exportsi, sures of exchange rate volatility. Lothian and Taylor show that the
GNP,
real exchange rates are stationary. Although Froot and Stein do not
offer an explanation for including the time trend, we assume that
+ (37 + normalized exports, FDI, and foreign sales are stationary around a
Ui,
deterministic trend.
7 Latin American countries make up most of the remaining 25%
I A normalization
by GNP discounts FDI growth for income and of the FDI in the food-processing industry. However, these countries
factor cost changes. Since GNP is the sum of the returnsto factors, have undergone substantial currency depreciation, along with large
increases in factor prices are also reflected in GNP. inflation rates, which has greatly affected the quality of data.
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4. Gopinath,Pick, and Vasavada ExchangeRate Effects 1075
Table 1. Pooled Regression Results on Exchange Rate Effects
Real
Exchange Volatility
Equation Constant Rate Measure Trend R2 d.f.
Export/GNP 0.00014a -0.000136a -0.00003a 0.000004 0.89 136
(31.1) (-15.2) (-4.11) (0.31)
Foreign Sales/GNP 0.0050a 0.00029a -0.00189a 0.00018a 0.17 136
(2.72) (4.27) (9.15) (3.40)
FDI/GNP -0.00196a 0.00116a - 0.00092a 0.00008a 0.27 136
(-3.30) (8.18) (-29.6) (2.38)
Note: Numbers in parentheses are t-values.
a
Significant at the 5% level.
Table 2. Effect of Exchange Rates on (Normalized) U.S. Exports
Real
Exchange Volatility
Countries Constant Rate Measure Trend DWa R2 d.f.
Australia 0.0008 -0.0006b 0.00003 -0.00001 1.83 0.22 9
(6.09) (-2.32) (0.83) (-1.90)
Belgium 0.0054 -0.0012b 0.00006 -0.00003 1.59 0.55 9
(2.63) (-2.16) (0.41) (-1.56)
Canada -0.0026 0.01558b -0.0003b 0.0002 1.82 0.88 9
(- 1.14) (2.30) (-1.49) (1.64)
France 0.0007 -0.0003b 0.00001 -0.00001 1.81 0.72 9
(3.57) (-1.99) (0.22) (-5.05)
Germany 0.0004 -0.00001 0.00003 -0.00001 1.78 0.35 9
(1.48) (-0.04) (0.43) (-1.44)
Italy 0.0013 -0.00014b -0.00004b 0.00006 1.37 0.18 9
(3.05) (-2.51) (-2.44) (1.82)
Japan 0.0005 0.0001 -0.00002 -0.00001 2.60 0.37 9
(1.01) (1.09) (-0.78) (-0.71)
The Netherlands 0.0017 0.0048b -0.00005 -0.00023 1.79 0.94 9
(1.16) (4.36) (-0.13) (-7.28)
Spain 0.0012 -0.0002 -0.0001 0.00001 1.18 0.67 9
(1.48) (-0.95) (-0.97) (1.00)
United Kingdom -0.0002 0.00014 -0.00015b 0.00004 2.12 0.60 9
(-0.88) (0.31) (-1.91) (1.64)
Note: Numbers in parentheses are t-values.
a Durbin-Watson statistic after
correcting for serial correlation.
"
Significant at the 5% level.
SSignificant at the 10% level.
from the International Monetary Fund to de- ported in tables 2-4. Recall that by normal-
rive the real exchange rates between the cur- izing on GNP, we account for both income
rencies of the ten countries listed above and effects and, possibly, changes in factor costs
the U.S. dollar. A moving twelve-month stan- in exports, outward FDI, and foreign affiliate
dard deviation of the relative changes in the sales.8
real exchange rate was used to represent its Both Ri, and Vi, were replaced with their
volatility. one-period lags, Ri,_1 and Vi,,_-,respectively,
Estimation and Results 8 Overall, the U.S. dollar experienced lows as well as highs during
the sample period. Beginning in the early 1980s, the value of the
Table 1 presents the results from the pooled dollar appreciated until 1985-86. The late 1980s and early 1990s
saw the dollar fall in value. This pattern changed just after 1992,
time series and cross-section models, while and since then, the value of the dollar has increased relative to most
the results for individual countries are re- other currencies.
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5. 1076 Number 5, 1998 Amer. J. Agr. Econ.
Table 3. Effect of Exchange Rates on (Normalized) Outward FDI by U.S. Multinationals
Real
Exchange Volatility
Countries Constant Rate Measure Trend DWa R2 d.f.
Australia 0.0025 0.0121b -0.0014c -0.0002 1.96 0.21 9
(0.76) (3.71) (-1.54) (-1.99)
Belgium -0.0292 0.01008b -0.0031b 0.0005 2.80 0.96 9
(-3.17) (3.89) (-4.47) (5.51)
Canada 0.0106 0.0197b -0.0007b -0.0004 3.01 0.93 9
(3.92) (3.24) (-2.12) (-3.94)
France -0.0049 0.0040c 0.0002 0.00027 2.26 0.29 9
(-0.88) (1.56) (0.25) (3.22)
Germany -0.0020 0.0034b -0.0008c 0.0003 2.40 0.77 9
(-0.88) (2.01) (-1.49) (5.40)
Italy -0.0098 0.0016c 0.00011 -0.00004 1.96 0.42 9
(-1.47) (1.62) (0.37) (-0.18)
Japan -0.0023 0.0005 -0.00004 0.00007 1.89 0.54 9
(-0.97) (1.16) (-0.41) (2.31)
The Netherlands 0.0136 0.0029 -0.0003 0.0007 1.57 0.43 9
(1.35) (0.29) (-0.18) (2.07)
Spain -0.0210 0.0044b 0.0012 0.0004 1.95 0.67 9
(-1.73) (1.93) (1.38) (2.93)
United Kingdom 0.0066 0.0062c -0.0014b -0.0001 2.66 0.75 9
(2.57) (1.63) (-2.56) (-0.14)
Note: Numbers in parentheses are t-values.
a Durbin-Watson statistic after
correcting for serial correlation.
1
Significant at the 5% level.
c
Significant at the 10% level.
Table 4. Effect of Exchange Rates on (Normalized) Foreign Affiliate Sales by U.S.
Multinationals
Real
Exchange Volatility
Countries Constant Rate Measure Trend DWa R2 d.f.
Australia 0.0017 0.0041b -0.0001 -0.00008 1.99 0.35 9
(1.08) (1.66) (-0.25) (-1.24)
Belgium 0.035 -0.0006 -0.0005c 0.00013 2.61 0.81 9
(1.07) (-0.63) (-2.82) (2.88)
Canada 0.00043 0.0126c -0.0004b 0.00002 2.59 0.73 9
(0.23) (3.04) (-1.43) (0.35)
France -0.0020 0.00114c -0.00021 0.0001 2.08 0.79 9
(-1.18) (1.83) (-1.19) (1.91)
Germany 0.0002 0.00027 -0.00004 0.00004 2.17 0.79 9
(0.59) (0.83) (-0.43) (2.97)
Italy -0.00033 0.00002 0.00008b 0.00012 1.90 0.59 8
(-0.25) (0.10) (1.78) (1.99)
Japan 0.00001 0.00003 -0.00003 0.00001 1.89 0.55 9
(0.02) (0.32) (-1.02) (2.01)
The Netherlands -0.0044 0.0092c -0.0003 0.0001 2.26 0.42 9
(-0.80) (1.89) (-0.35) (0.71)
Spain -0.0009 0.00053 -0.00022 0.00004 1.95 0.05 9
(-0.41) (1.16) (-0.79) (1.52)
United Kingdom -0.0007 0.0057c -0.0012c 0.00020 2.37 0.86 9
(-0.63) (2.93) (-4.23) (0.77)
Note: Numbers in parentheses are t-values.
a Durbin-Watson statistic after
correcting for serial correlation.
h Significant at the 10% level.
c
Significant at the 5% level.
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6. Gopinath, Pick, and Vasavada Exchange Rate Effects 1077
in order to account for the expectations as- of the real exchange rate and its stability for
sociated with exchange rates and their vola- agricultural trade flows.
tility. In the pooled model, we accounted for Real exchange rates have a positive effect
serial correlation, contemporaneous correla- on outward FDI and foreign sales by U.S.
tion between cross sections and heteroske- majority-owned multinational food compa-
dasticity by using two types of error struc- nies. That is, an appreciation of the U.S. dollar
tures. The Parks method specifies errors as: leads to an increase in outward FDI and the
resulting foreign affiliate sales. Our reasoning,
(2) Uit = piUi,t1 + Eit. which is in accord with Froot and Stein, is
that an appreciation in the U.S. dollar increas-
This model assumes a first-order autoregres- es the wealth of U.S. food processors relative
sive error structure with contemporaneous to foreigners and allows them to bid aggres-
correlation between cross sections and was sively for foreign assets through FDI. As other
used to estimate the export equations. How- studies have documented, the volatility in real
ever, we used the Da Silva method for the exchange rates has a negative effect on both
foreign affiliate sales and FDI equation, which outward FDI and foreign sales. Consistent
specifies errors as: with our hypothesis, these results suggest that
dollar appreciation has been a causal factor
+ b, + eit,
(3) uit = ai in the observed substitutability between FDI
where and trade in the U.S. food-processing industry
(Gopinath, Pick, and Vasavada).
ei = oE, + J1E,1 -. . + Et-m. The magnitudes of the above-mentioned ef-
This procedure is used to estimate a mixed- fects are also important. Note that the right-
variance-component moving average process hand side variables in the equations are in
for the errors. The moving average process of logarithms, while the left-hand side variables
order m for ei, should satisfy m - T - 1, where are shares in GNP of exports, outward FDI,
T is the total number of observations over and foreign sales for each country. By divid-
time. The order m was chosen to be three, ing the parameter estimates in table 1 by an
although the results did not vary much for m average of these shares (over all countries),
ranging from three to eight. This moving av- we obtain a measure of share elasticity. A 1%
erage process was chosen in addition to an rise in the real value of the U.S. dollar causes
error-component specification to account for a fall of 0.13% for normalized exports. In oth-
the possible lag involved in the FDI process er words, exports as a share of GNP fell by
leading to foreign affiliate sales. In the indi- 0.13% for every 1% rise in the real value of
vidual country analysis, an OLS procedure U.S. dollar. Outward FDI and foreign sales as
was used to estimate the parameters of all shares of GDP expanded by 0.54% and
three equations after accounting for serial cor- 0.04%, respectively, in response to a 1% in-
relation. crease in the real value of the U.S. dollar. The
Most of the parameter estimates of equation negative effect of the real exchange rate on
(1) reported in table 1 are significant at the U.S. processed food exports is accompanied
1% level. The R2 for the export equation was by the rise in the foreign affiliate sales of U.S.
0.89, while that for the foreign sales and FDI majority-owned MNCs.
equations were 0.17 and 0.27, respectively, Tables 2-4 report the parameter estimates
and similar in magnitude to those reported by for the normalized export, FDI, and foreign
Froot and Stein.9 The negative sign on the real sales equations for each of the ten countries.
exchange rate in the normalized export equa- This estimation, similar to that of Froot and
tion confirms the importance of real exchange Stein, was constrained by the available de-
rates in determining agricultural trade flows grees of freedom given the annual time series
(Batten and Beiongia, Pick). Moreover, the data for 1982-95. However, these results con-
negative effect of exchange rate volatility on firm earlier results from the pooled regres-
exports is consistent with previous studies as sions.
well. These results illustrate the importance The effect of the real exchange rate on ex-
ports was negative and significant for five of
the ten countries investigated (table 2). Of the
9 As FDI and foreign sales are often outcomes of intangibles rest, only one had a positive and significant
(knowledge capital, including trade secrets and brand names), it is
not surprisingthat exchange rates alone do not account for all of the coefficient (Canada). Three countries showed
variation in these variables. significant negative effects of real exchange
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7. 1078 Number 5, 1998 Amer. J. Agr. Econ.
rate volatility on exports, while this effect was focus of the current research is on the impact
insignificant for the other countries. of real exchange rates, it may be interesting
Table 3 shows that in eight out of ten coun- to incorporate these measures into future stud-
tries, the effect of the real exchange rate on ies at a more disaggregated level.
foreign affiliate sales was positive and sig- Nontraditional variables affecting FDI in-
nificant, as expected. In most countries, for- clude environmental policy variables, mea-
eign affiliate sales were negatively affected sures of degree of openness, and measures of
by the volatility of exchange rates. However, riskiness of investment. For example, factors
this effect was significant for only five coun- such as the quality of the legal system, cor-
tries. Similarly, the effect of the real exchange ruption, presence of import restrictions, and
rate and its volatility on outward FDI was currency convertibility may affect the deci-
positive and significant for about half of the sion to invest abroad and sales by foreign af-
sampled countries (table 4). The results of the filiates (Wheeler and Mody).
country-wise analysis, given the degrees of
freedom constraint, provide some support for
our pooled regression results (table 1). References
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