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Article
Publication date: 11 February 2014

Peijie Wang and Bing Zhang

The authors make assessment on RMB valuation and to contribute to the fierce debate on this important issue, which is perceived to have a great effect on the improvement…

Abstract

Purpose

The authors make assessment on RMB valuation and to contribute to the fierce debate on this important issue, which is perceived to have a great effect on the improvement or deterioration in trade balance. A triangular analysis approach is put forward and empirical assessment is made. The paper aims to discuss these issues.

Design/methodology/approach

A triangular analysis approach based on no arbitrage conditions for three currencies, and causality and influence analysis.

Findings

First, it has been found that the movements in the RMB dollar exchange rate do influence the dollar euro exchange rate and the former do have a causality effect on the latter, in both the long run and the short term. Second, it is implied that the RMB is overvalued vis-à-vis the US dollar, as the analysis suggests that an overvalued euro vis-à-vis the US dollar would imply a kind of overvaluation of the RMB vis-à-vis the US dollar, and by any conventional measures the euro has appeared to be overvalued vis-à-vis the US dollar, especially in the months before the last financial crisis.

Practical implications

First, the peg of the RMB to the US dollar that undervalues the RMB vis-à-vis the US dollar will not help promote China's overall trade balance or export even if undervaluation of currencies can ever help improve nations' terms of trade. Second, no stability in RMB exchange rates can be claimed by pegging the RMB to the US dollar, as the exchange rate of the RMB vis-à-vis currencies other than the US dollar would be as volatile as that between the US dollar and the euro and other convertible currencies.

Originality/value

A new triangular analysis approach in international finance research. First, there is an advantage to adopt this seemingly simple analytical framework: it is highly reliable; no triangular arbitrage conditions have to be met even under exchange controls, whilst PPP may not hold even with flexible exchange rate regimes. Second, it does away with the thinking confined to small open economies that has dominated academic research for so long and is totally inapplicable to the RMB case.

Details

China Finance Review International, vol. 4 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

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Book part
Publication date: 17 December 2003

Edward J.Y. Lin, J.H.W. Penm, R.D. Terrell and Soushan Wu

In this paper the techniques of zero-non-zero (ZNZ) patterned vector autoregressive modelling are utilized to examine two issues associated with the European single…

Abstract

In this paper the techniques of zero-non-zero (ZNZ) patterned vector autoregressive modelling are utilized to examine two issues associated with the European single currency – the euro. First, “Granger causality” is employed to examine the causal linkages between the euro exchange rate, the euro area money supply and the gross domestic product (GDP) growth in the euro area. Second, we examine the hypothesis that the euro has become a major influence on international stock markets by testing for the causal relationships between movements in the euro exchange rate, the U.K. pound exchange rate and the London stock market index.

Details

Research in Finance
Type: Book
ISBN: 978-1-84950-251-1

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Article
Publication date: 9 March 2010

Athanasios Koulakiotis, Katerina Lyroudi, Nikos Thomaidis and Nicholas Papasyriopoulos

The purpose of this paper is to examine volatility transmissions between portfolios of cross‐listed equities and exchange rate differences and also the volatility…

Abstract

Purpose

The purpose of this paper is to examine volatility transmissions between portfolios of cross‐listed equities and exchange rate differences and also the volatility persistence for home, foreign equities, and exchange rate differences in the UK and German markets.

Design/methodology/approach

A primary focus of this paper is to see if there is an impact first on the volatility persistence for foreign equities that are listed in the UK and German markets, second on the respective home portfolios of cross‐listed equities, and third on the exchange rate differences. In addition, whether there are any bilateral spillovers between the following equity portfolios: foreign cross‐listed equities, home cross‐listed equities, and also local or global exchange rate differences are investigated.

Findings

The paper finds that the volatility persistence is more prominent than error persistence from cross‐listed equities, foreign or home, and the exchange rate differences. Furthermore, the transmission mechanism indicates a bilateral integration process in some of the cases that were examined. Based on these results, it is concluded that in the UK market the foreign cross‐listings affect less the domestic equities compared to the German market.

Originality/value

This paper examines the interdependence of portfolios of home and foreign equities for cross‐listings that belong to the same stock exchange with two exchange rates, a local and a global one in order to provide more evidence in this area of literature.

Details

Studies in Economics and Finance, vol. 27 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

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Book part
Publication date: 1 April 2007

Manoranjan Dutta

Abstract

Details

European Union and the Euro Revolution
Type: Book
ISBN: 978-1-84950-827-8

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Article
Publication date: 1 February 1999

Karl Socher

Most studies about the influence of the euro for tourism calculate the savings of transaction costs of ½‐3% and assume that these amount will increase tourism demand. This…

Abstract

Most studies about the influence of the euro for tourism calculate the savings of transaction costs of ½‐3% and assume that these amount will increase tourism demand. This paper argues, that the influence of the euro on tourism is much smaller. The transaction costs would have been falling even without the euro due to technological developments (cash‐cards etc) and a part of the costs (of credit cards) will not be diminished. Also, the costs for the tourism industry of fluctuations of the exchange rates would become smaller in the future even without the euro. In addition, the costs of the introduction of the euro will have to be born lastly by the households and therefore by tourists.

Details

The Tourist Review, vol. 54 no. 2
Type: Research Article
ISSN: 0251-3102

Keywords

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Book part
Publication date: 7 December 2011

Manoranjan Dutta

On January 1, 1999, the euro became the common currency of the 11 Member States of the European Union (EU) – Austria, Belgium, Finland, France, Germany, Ireland, Italy…

Abstract

On January 1, 1999, the euro became the common currency of the 11 Member States of the European Union (EU) – Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxemburg, The Netherlands, Portugal, and Spain, to be joined by Greece in 2000. The 12 were joined by Slovenia on January 1, 2007, Malta and Cyprus on January 1, 2008, and Slovakia on January 1, 2009. Estonia was scheduled to be the 17th member of the Eurozone on January 1, 2011, and was admitted to the Eurozone membership in September 2010. Following Slovenia and Slovakia, Estonia is the third former Communist state to join the Euro regime. It is, however, the first former Soviet republic to earn this honor. The remaining East European countries, who were admitted to EU membership by the Treaty of Rome in 2004, will become members of the Eurozone after a process of scrutiny. Each must satisfy the terms of the Maastricht Treaty of 1992. Denmark, Sweden, and the United Kingdom, three of the original EU-15 countries, continue to be outside the Eurozone. However, Sweden and Denmark have limited exchange rate fluctuations with the euro. The United Kingdom has a different story. Its economic structure and its relatively small share of world GDP have become an issue. The declining share of the United Kingdom's pound sterling as an international reserve currency warrants much critical evaluation.

Details

The United States of Europe: European Union and the Euro Revolution, Revised Edition
Type: Book
ISBN: 978-1-78052-314-9

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Article
Publication date: 27 July 2012

Yutaka Kurihara

The purpose of this article is to analyse methods for determination of exchange rates in response to fundamental economic variables and changes in monetary policies.

Abstract

Purpose

The purpose of this article is to analyse methods for determination of exchange rates in response to fundamental economic variables and changes in monetary policies.

Design/methodology/approach

The paper undertakes empirical examination of exchange rate movements and their structural changes in response to changes in macroeconomic variables and monetary policies in the USA, the Euro area, and Japan.

Findings

Exchange rates have been influenced by macroeconomic fundamentals and have been impacted by the conduct of monetary policies in some cases. Some structural changes in exchange rates have coincided with implementation of drastic monetary policies but not in others. The Japanese quantitative easing policy has had an effect on exchange rates.

Originality/value

Monetary policy has been often examined; however, few studies have examined the response of exchange rate movements to monetary policies. Moreover, structural changes in exchange rates are examined in comparison with domestic monetary policies in the USA, the Euro Area, and Japan.

Details

Studies in Economics and Finance, vol. 29 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

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Article
Publication date: 4 July 2019

Cynthia Miglietti, Zdenka Kubosova and Nicole Skulanova

This paper aims to empirically investigate the volatility of Bitcoin, Litecoin and the Euro.

Abstract

Purpose

This paper aims to empirically investigate the volatility of Bitcoin, Litecoin and the Euro.

Design/methodology/approach

The authors use quantitative methodologies to assess the annualized volatility of two cryptocurrencies and one international fiat currency. The exchange rate of the currencies is monitored on a daily basis using 1,460 observations from January 1, 2014 to December 31, 2017. The models used include the augmented Dickey–Fuller test, Akaike Information Criteria, autocorrelation function and exchange rate changes determining which currency is the most volatile.

Findings

The findings indicate, based on the statistical measures used, including the standard deviation of selected currencies and annualized volatility, that Litecoin is more volatile than Bitcoin and the Euro and that Bitcoin is more volatile than the Euro. This furthers previous research on cryptocurrency volatility.

Originality/value

The paper provides compelling evidence about the volatility of Litecoin and Bitcoin. The volatility of cryptocurrencies is furthered with data that are more current. The findings are important for investors, financial markets and central banks.

Details

Studies in Economics and Finance, vol. 37 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

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Article
Publication date: 1 January 2006

Mazin A.M. Al Janabi

This paper seeks to provide foreign exchange risk measurement/management techniques and strategies that can be applied to investment and trading portfolios in emerging…

Abstract

Purpose

This paper seeks to provide foreign exchange risk measurement/management techniques and strategies that can be applied to investment and trading portfolios in emerging financial markets, such as the Moroccan foreign exchange market, with the objective of setting up the basis of a methodology/procedure for the measurement, management and control of foreign exchange exposures in the day‐to‐day trading operations.

Design/methodology/approach

Demonstrates a proactive approach for the measurements, management and control of market risk exposure for financial trading portfolios that contain foreign exchange securities. This approach is based on the renowned concept of value‐at‐risk (VAR) along with the creation of a software tool utilizing matrix‐algebra technique. In order to illustrate the proper use of VAR and stress‐testing methods, real‐world examples and practical reports of foreign exchange trading risk management are presented for the Moroccan Dirham.

Findings

To this end, several case studies were achieved with the objective of setting up a practical framework of trading risk measurement and control reports in addition to the inception of procedures for the calculation of VAR's limits. Moreover, the effects of hedging of foreign exchange trading exposures with reciprocal equity trading positions were explored and quantified. Finally, initial empirical tests of the long‐term behavior of the Moroccan foreign exchange and debt markets were quantified and analyzed.

Practical implications

In this work, key foreign exchange trading risk management methods, rules and procedures that financial entities, regulators and policymakers should consider in setting up their daily foreign exchange trading risk management objectives are examined and adapted to the specific needs of emerging markets, such as in the context of the Moroccan foreign exchange market.

Originality/value

This paper fills a gap in the foreign exchange risk management literature especially in the emerging markets perspective. The risk management procedures that are discussed in this work will aid financial markets' participants, regulators and policymakers in founding sound and up‐to‐date policies to handle foreign exchange risk exposures.

Details

Journal of Financial Regulation and Compliance, vol. 14 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

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Abstract

Details

Designing the New European Union
Type: Book
ISBN: 978-1-84950-863-6

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