Showing papers on "Currency published in 2020"
TL;DR: Gopinath et al. as mentioned in this paper proposed a "dominant currency paradigm" with three key features: dominant currency pricing, pricing complementarities, and imported inputs in production, and test this paradigm using a new dataset of bilateral price and volume indices for more than 2,500 country pairs that covers 91 percent of world trade.
Abstract: Author(s): Gopinath, G; Boz, E; Casas, C; Diez, FJ; Gourinchas, PO; Plagborg-Moller, M | Abstract: We propose a “dominant currency paradigm” with three key features: dominant currency pricing, pricing complementarities, and imported inputs in production. We test this paradigm using a new dataset of bilateral price and volume indices for more than 2,500 country pairs that covers 91 percent of world trade, as well as detailed firm-product-country data for Colombian exports and imports. In strong support of the paradigm we find that (i) noncommodities terms-of-trade are uncorrelated with exchange rates; (ii) the dollar exchange rate quantitatively dominates the bilateral exchange rate in price pass-through and trade elasticity regressions, and this effect is increasing in the share of imports invoiced in dollars; (iii) US import volumes are significantly less sensitive to bilateral exchange rates, compared to other countries’ imports; (iv) a 1 percent US dollar appreciation against all other currencies predicts a 0.6 percent decline within a year in the volume of total trade between countries in the rest of the world, controlling for the global business cycle. We characterize the transmission of, and spillovers from, monetary policy shocks in this environment.
192 citations
TL;DR: In this article, the authors attempted to bridge this gap by revealing interactions between the food security status of people and the dynamics of COVID-19 cases, food trade, food inflation, and currency volatilities.
Abstract: The stability of food supply chains is crucial to the food security of people around the world. Since the beginning of 2020, this stability has been undergoing one of the most vigorous pressure tests ever due to the COVID-19 outbreak. From a mere health issue, the pandemic has turned into an economic threat to food security globally in the forms of lockdowns, economic decline, food trade restrictions, and rising food inflation. It is safe to assume that the novel health crisis has badly struck the least developed and developing economies, where people are particularly vulnerable to hunger and malnutrition. However, due to the recency of the COVID-19 problem, the impacts of macroeconomic fluctuations on food insecurity have remained scantily explored. In this study, the authors attempted to bridge this gap by revealing interactions between the food security status of people and the dynamics of COVID-19 cases, food trade, food inflation, and currency volatilities. The study was performed in the cases of 45 developing economies distributed to three groups by the level of income. The consecutive application of the autoregressive distributed lag method, Yamamoto's causality test, and variance decomposition analysis allowed the authors to find the food insecurity effects of COVID-19 to be more perceptible in upper-middle-income economies than in the least developed countries. In the latter, food security risks attributed to the emergence of the health crisis were mainly related to economic access to adequate food supply (food inflation), whereas in higher-income developing economies, availability-sided food security risks (food trade restrictions and currency depreciation) were more prevalent. The approach presented in this paper contributes to the establishment of a methodology framework that may equip decision-makers with up-to-date estimations of health crisis effects on economic parameters of food availability and access to staples in food-insecure communities.
169 citations
TL;DR: Wavelet analyses corroborate the thesis that the cross-currency hedge strategies, which could work under normal market conditions, are likely to fail during the periods of global crisis, e.g., such as the Covid-19 pandemic.
128 citations
TL;DR: In this article, the role of the Bitcoin currency in avoiding and surpassing the risks associated with the global geopolitical events, and circumstances was investigated, and the authors found that there are positive and negative influences that stem from GPR towards Bitcoin prices.
101 citations
TL;DR: This paper examined the response of a broad set of digital assets to US Federal Fund interest rate and quantitative easing announcements, specifically examining associated volatility spillover and feedback effects, and classified each digital asset into one of three categories: Currencies; Protocols; and Decentralized Applications (dApps).
93 citations
TL;DR: It is found that Bitcoin's behavior more closely resembles a technology-based product, an emerging asset class, or a bubble event, rather than a currency or a security; such that it is correct that existing currency and security laws should not apply to cryptocurrencies.
87 citations
TL;DR: This article established currency as an important factor shaping global portfolios and demonstrated that investor holdings are biased toward their own currencies to such an extent. But they did not consider the effect of currency exchange rates on global portfolio performance.
Abstract: We establish currency as an important factor shaping global portfolios. Using a new security-level data set, we demonstrate that investor holdings are biased toward their own currencies to such an ...
83 citations
TL;DR: The study utilized a systematic content review of the news reports, court cases, scholarly articles, online search engines, and commentaries relevant to regulations and reforms to understand the current climate of virtual currencies, their use in criminal activities, and the complexities involved in regulating cryptocurrencies.
Abstract: Cryptocurrency such as bitcoin, Ethereum, and, more recently, Monero has become the currency of choice for many drug dealers and extortionists. The criminal activities extend to tax evasion, money ...
70 citations
05 Feb 2020
TL;DR: In this paper, the authors argue that the encounter with financialization is from a subordinate position: first, in relation to global production, ECE firms occupy subordinate locations in global production networks, providing cheap labor and raw, or at best, intermediate inputs; second, E CEs are structurally subordinated to global finance, that is, both trade and the most liquid capital markets are denominated in the currency of ACEs.
Abstract: In the explosion of literature on financialization, there is a much smaller but growing interest in what the phenomenon means for emerging capitalist economies (ECEs). We hold that for agents located in ECEs, the encounter with financialization is from a subordinate position: first, in relation to global production, ECE firms occupy subordinate locations in global production networks, providing cheap labor and raw, or at best, intermediate inputs; Second, in relation to global finance, ECEs are structurally subordinated to ACEs, that is, both trade and the most liquid capital markets are denominated in the currency of ACEs. Subordination in production means firms based in ECEs are able to capture less of the value created than firms higher in the hierarchy and must pay more to hedge macroeconomic risk. In circulation, strategies may emerge in ACEs wherein increased household indebtedness and/or asset market inflation maintain aggregate demand. In finance, ECEs’ subordinate position in relation to money and capital markets means that capital inflows are predominantly short-term, seeking financial yields rather than assuming productive risk. The results are continued volatility, external vulnerability and subordination to the currencies of the ACEs, which themselves serve to further deepen domestic financialization. We conclude that, while by no means pre-destined, financialization as experienced in ECEs may serve to further cement their subordinate position in the global structure.
63 citations
TL;DR: This article proposed a theory in which liability dollarization arises from an insurance motive of domestic savers, since financial crises are associated to depreciations, savers ask for a risk premium when saving in local currency.
Abstract: Foreign currency debt is considered a source of financial instability in emerging markets. We propose a theory in which liability dollarization arises from an insurance motive of domestic savers. Since financial crises are associated to depreciations, savers ask for a risk premium when saving in local currency. This force makes domestic currency debt expensive, and incentivizes borrowers to issue foreign currency debt. Providing ex post support to borrowers can alleviate the effect of the crisis on savers' income, lowering their demand for insurance, and, surprisingly, it can reduce ex ante incentives to borrow in foreign currency.
61 citations
TL;DR: In this paper, monetary policy frameworks that are equipped to address the feedback loop between exchange rate depreciation and capital outflows stand a better chance of weathering the financial fallout from the Covid-19 pandemic.
Abstract: Borrowing through domestic currency bonds has not insulated emerging market economies (EMEs) from the financial shock unleashed by Covid-19; EME local currency bond spreads spiked amid sharp currency depreciations and capital outflows.
Portfolio investors face amplified losses as local currency spreads and exchange rates move in lockstep; their revised portfolio allocations in turn strengthen this correlation.
EMEs with monetary policy frameworks that are equipped to address the feedback loop between exchange rate depreciation and capital outflows stand a better chance of weathering the financial fallout from the Covid-19 pandemic.
To counter large stock adjustments in domestic bond markets, EME central banks may need to expand their toolkit to take on a "dealer of last resort" role; a number of them are already moving in this direction.
TL;DR: In this article, the authors investigate the influence of unscheduled currency and Bitcoin news on the returns, volume and volatility of the cryptocurrency Bitcoin and traditional currencies over the period from January 2012 to November 2018.
TL;DR: This paper found that the evidence over the subsequent three years suggests that demonetization had limited success in achieving its stated objectives, and that the output costs appeared to have been temporary in terms of lost jobs and output, while the stated objectives were to seize undeclared income, to destroy counterfeit currency, to speed up formalization of the economy, and to increase the tax base.
Abstract: On November 8, 2016, India demonetized 86 percent of its currency in circulation. The stated objectives of the move were to seize undeclared income, to destroy counterfeit currency, to speed up formalization of the economy, and to increase the tax base. I find that the evidence over the subsequent three years suggests that the move had limited success in achieving its stated objectives. Disaggregated data suggests that demonetization did have appreciable costs in terms of lost jobs and output. However, the output costs appear to have been temporary.
TL;DR: In this article, the effects of banks on the real economy were reviewed, focusing primarily on US and European policy interventions that provide quasi-natural experiments with relatively exogenous shocks to bank output.
TL;DR: This paper proposed the concept of Bitcoin as a "transfer currency" and empirically showed that herding measures centered around such a transfer currency provide a more precise representation of dispersion in investors beliefs on the crypto market.
TL;DR: In this article, the authors use the volatility spillover index and LASSO-VAR approaches in the variance decomposition framework to construct high-dimensional volatility connectedness network linking 65 major currencies.
TL;DR: In this paper, the authors argue that there is a need for international cooperation to allow emerging market economies to undertake the kind of massive fiscal response that all countries now need, and that many advanced countries have been able to carry out.
Abstract: The COVID-19 crisis has caused the greatest collapse in global economic activity since 1720 Some advanced countries have mounted a massive fiscal response, both to pay for disease-fighting action and to preserve the incomes of firms and workers until the economic recovery is under way But there are many emerging market economies which have been prevented from doing what is needed by their high existing levels of public debt and—especially—by the external financial constraints which they face We argue in the present paper that there is a need for international cooperation to allow such countries to undertake the kind of massive fiscal response that all countries now need, and that many advanced countries have been able to carry out We show what such cooperation would involve We use a global macroeconomic model to explore how extraordinarily beneficial such cooperation would be Simulations of the model suggest that GDP in the countries in which extra fiscal support takes place would be around two and a half per cent higher in the first year, and that GDP in other countries in the world be more than one per cent higher So far, such cooperation has been notably lacking, in striking contrast with what happened in the wake of the Global Financial Crisis in 2008 The necessary cooperation needs to be led by the Group of Twenty (G20), just as happened in 2008–9, since the G20 brings together the leaders of the world’s largest economies This cooperation must also necessarily involve a promise of international financial support from the International Monetary Fund, otherwise international financial markets might take fright at the large budget deficits and current account deficits which will emerge, creating fiscal crises and currency crises and so causing such expansionary policies which we advocate to be brought to an end
TL;DR: In this article, the authors highlight endogenous co-movement of bond risk premia and exchange rates through the portfolio choice of global investors who evaluate returns in dollar terms, and the relevant exchange rate involved in yield compression is the bilateral U.S. dollar exchange rate, not the trade-weighted exchange rate.
Abstract: In emerging market economies, currency appreciation goes hand in hand with compressed sovereign bond spreads, even for local currency sovereign bonds. This yield compression comes from a reduction in the credit risk premium. Crucially, the relevant exchange rate involved in yield compression is the bilateral U.S. dollar exchange rate, not the trade‐weighted exchange rate. Our findings highlight endogenous co‐movement of bond risk premia and exchange rates through the portfolio choice of global investors who evaluate returns in dollar terms.
TL;DR: In this article, the idea that monetary policy is benevolent in that it takes into account the interests of all the countries in the union is introduced, and a new criterion emerges: countries with dissimilar temptation shocks, namely those that exacerbate time inconsistency problems, should form unions.
TL;DR: The proposed platform comprehensively covers charity collection process using crypto wallets, Initial Coin Offering (ICO), economic model, and introduces CharityCoin (CC) as a digital currency and performance evaluation shows that proposed architecture scales well for large data size.
TL;DR: In this paper, the authors compared the tail behavior of daily return on Bitcoin to that of the US dollar, gold, and the stock market index with respect to contemporaneous correlation and concluded that Bitcoin is traded as an alternative for a medium of exchange and a means of investment.
TL;DR: The directional spillover effects and connectedness for both return and volatility of nine US dollar exchange rates of globally most traded currencies under the influence of trade policy uncertainty over the study period ranging from December 1993 to July 2019 are found.
TL;DR: In this paper, the authors revisited the association between fundamentals and exchange rates in emerging markets relying on the role of the Economic Policy Uncertainty (EPU) in explaining /forecasting currency movements.
TL;DR: The authors find a strong link between currency excess returns and the relative strength of the business cycle and show that a business cycle factor implied by their results is priced in a broad currency cross section.
09 Apr 2020
TL;DR: The usefulness of traditional Autoregressive Integrative Moving Average (ARIMA) model for predicting bitcoin prices is justified and the closing price of bitcoin for first seven days of January 2020 is predicted.
Abstract: Bitcoin is considered to be most valuable and expensive currency in the world. Besides being first decentralized digital currency, its value has also experienced a steep increase, from around 1 dollar in 2010 to around 18000 in 2017. In recent years, it has attracted considerable attention in a diverse set of fields, including economics, finance and computer science. In economics, the primary focus has always been on studying how it affects the market, determining reasons behinds its price fluctuations, and predicting its future prices. In computer science, the focus is on its vulnerabilities, scalability, and other techno-cryptoeconomic issues. Firstly, we are going to collect the historical data of Bitcoin prices over the years 2013 to 2019 and do prediction for the year 2020. We have aimed to justify the usefulness of traditional Autoregressive Integrative Moving Average (ARIMA) model for predicting bitcoin prices. We have predicted the closing price of bitcoin for first seven days of January 2020. Further, we have created web services using ASP.NET to make the predictions on bitcoin price online and lastly, we have plotted the results in a responsive chart using Highcharts.
TL;DR: In this paper, the authors discuss the opportunities in the cryptocurrency such as the security of its technology, low transaction cost and high investment return, and the originality of this paper is on the discussion within law and regulation, high energy consumption, possibility of crash and bubble, and attacks on network.
Abstract: Bitcoin and other prominent cryptocurrencies have gained much attention since the last several years. Globally known as digital coin and virtual currency, this cryptocurrency is gained and traded within the blockchain system. The blockchain technology adopted in using the cryptocurrency has raised the eyebrows within the banking sector, government, stakeholders and individual investors. The rise of the cryptocurrency within this decade since the inception of Bitcoin in 2009 has taken the market by storm. Cryptocurrency is anticipated as the future currency that might replace the current paper currency worldwide. Even though the interest has caught the attention of users, many are not aware of its opportunities, drawbacks and challenges for the future. Researches on cryptocurrencies are still lacking and still at its infancy stage. In providing substantial guide and view to the academic field and users, this paper will discuss the opportunities in the cryptocurrency such as the security of its technology, low transaction cost and high investment return. The originality of this paper is on the discussion within law and regulation, high energy consumption, possibility of crash and bubble, and attacks on network. The future undertakings of cryptocurrency and its application will be systematically reviewed in this paper.
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TL;DR: The authors find that portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought, while China's official net creditor position to the rest of the world is overstated by about 50 percent.
Abstract: Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their nationality in aggregate statistics. We associate the universe of traded securities with their issuer's ultimate parent and restate bilateral investment positions to better reflect the true financial linkages connecting countries around the world. We find that portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly \$600 billion, while China's official net creditor position to the rest of the world is overstated by about 50 percent. We additionally show how taking account of offshore issuance is important for our understanding of the currency composition of external portfolio liabilities, the nature of foreign direct investment, and the growth of financial globalization.
TL;DR: The authors examined the consequences of a sudden increase in household debt burdens by exploiting variation in exposure to household foreign currency debt during Hungary's late-2008 currency crisis and found that revaluation of debt burdens causes higher default rates and a collapse in spending.
Abstract: We examine the consequences of a sudden increase in household debt burdens by exploiting variation in exposure to household foreign currency debt during Hungary's late-2008 currency crisis. The revaluation of debt burdens causes higher default rates and a collapse in spending. These responses lead to a worse local recession, driven by a decline in local demand, and negative spillover effects on nearby borrowers without foreign currency debt. The estimates translate into an output multiplier on higher debt service of 1.67. The impact of debt revaluation is particularly severe when foreign currency debt is concentrated on household, rather than firm, balance sheets.
TL;DR: The authors developed a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies, and found that central banks' quantitative easing policies impact exchange rates.
Abstract: We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the supply of long-term bonds in one currency influences the foreign exchange rate between the two currencies, as well as bond term premia in both currencies. Our model matches several important empirical patterns, including the co-movement between exchange rates and term premia, as well as the finding that central banks' quantitative easing policies impact exchange rates. An extension of our model sheds light on the persistent deviations from covered interest rate parity that have emerged since 2008.
TL;DR: This article developed a model of optimal monetary policy, capital controls, foreign exchange intervention, and macro-prudential policy, which allows countries to differ across the currency of trade invoicing, degree of currency mismatches, tightness of external and domestic borrowing constraints, and depth of foreign exchange markets.
Abstract: In the Mundell-Fleming framework, standard monetary policy and exchange rate flexibility fully insulate economies from shocks. However, that framework abstracts from many real world imperfections, and countries often resort to unconventional policies to cope with shocks, such as COVID-19. This paper develops a model of optimal monetary policy, capital controls, foreign exchange intervention, and macroprudential policy. It incorporates many shocks and allows countries to differ across the currency of trade invoicing, degree of currency mismatches, tightness of external and domestic borrowing constraints, and depth of foreign exchange markets. The analysis maps these shocks and country characteristics to optimal policies, and yields several principles. If an additional instrument becomes available, it should not necessarily be deployed because it may not be the right tool to address the imperfection at hand. The use of a new instrument can lead to more or less use of others as instruments interact in non-trivial ways.