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Mohsen Bahmani-oskooee - One of the best experts on this subject based on the ideXlab platform.

  • The Black-Market Exchange Rate Versus the Official Rate: Which Rate Fosters the Adjustment Speed in the Monetarist Model?
    The Manchester School, 2010
    Co-Authors: Mohsen Bahmani-oskooee, Scott W. Hegerty, Altin Tanku
    Abstract:

    Many less developed countries have currency controls, which can lead to black-Market trade and cause distortions in the Exchange Market. We test the flexible-price monetary model for 25 less developed countries, using both official and black-Market Exchange rates. We find that the model is supported in the long run, particularly when black-Market rates are used. Measuring the speed of convergence to equilibrium, we find that it is often higher in the black-Market specification, implying greater efficiency. This could offer justification for Exchange-rate unification, particularly in Latin America.

  • Black and official Market Exchange rates and purchasing power parity: Evidence from Latin America
    Applied Economics Letters, 2010
    Co-Authors: Mohsen Bahmani-oskooee, Ali M. Kutan, Su Zhou
    Abstract:

    A group of studies have shown that in less developed countries, Purchasing Power Parity (PPP) theory is supported more often when black Market Exchange rates rather than official rates are used in the testing procedure. They have all relied upon linear Augmented Dickey-Fuller (ADF) test applied either to the residuals of a cointegrating vector or to real Exchange rates. In this article, we use a nonlinear ADF test and show that when nonlinearity is incorporated in the testing procedure, the nonlinear tests support PPP more often than the linear test regardless of whether we use official or black Market Exchange rate. Besides, for the post-Bretton Woods period, PPP is almost equally supported using either the black Market Exchange rates or the official rates.

  • Could Changes in Black Market Exchange Rates be Expansionary in LDCs
    Economics Bulletin, 2008
    Co-Authors: Mohsen Bahmani-oskooee, Ilir Miteza, Gour Gobinda Goswami
    Abstract:

    Many of the previous studies that tried to assess the contractionay or expansionary effects of depreciations or devaluations in less developed countries (LDCs) used official Exchange rate data and concluded that devaluations are contractionary in LDCs. However, due to capital controls, there is a black Market for foreign Exchange in many of the LDCs. In this paper when we use black Market rates over the period 1975-1998 from 29 LDCs in a panel model, we find that devaluations are expansionary. Thus, for an effective Exchange rate policy the official and black Market Exchange rates should be unified.

  • The black Market Exchange rate vs. the official rate in testing PPP: Which rate fosters the adjustment process?
    Economics Letters, 2008
    Co-Authors: Mohsen Bahmani-oskooee, Altin Tankui
    Abstract:

    In testing the purchasing power parity theory (PPP) researchers hardly pay attention to the speed with which the Exchange rate adjusts to a change in relative prices. In this paper we show that the speed of adjustment is faster when the black Market Exchange rate is used in testing the PPP as compared to the official Exchange rate. This could be another reason as to why central banks should unify the two rates.

  • Black Market Exchange Rate versus the Official Rate in Testing the PPP: An Application of a Non-Linear Test
    Comparative Economic Studies, 2007
    Co-Authors: Mohsen Bahmani-oskooee, Altin Tanku
    Abstract:

    Due to foreign Exchange controls in many developing countries, there is a black Market for foreign Exchange. Since the black Market Exchange rates are good proxies for the floating Exchange rates, they provide relatively more support for the purchasing power parity theory (PPP). In this paper, we show that in a majority of the developing countries the adjustment of relative prices and the nominal black Market Exchange rate is on a non-linear stationary process, implying that the PPP holds even more when a non-linear test versus a linear test is employed in the analysis.

James A. Edmonds - One of the best experts on this subject based on the ideXlab platform.

  • Market Exchange Rates Or Purchasing Power Parity: Does The Choice Make A Difference To The Climate Debate?
    Climatic Change, 2005
    Co-Authors: Alan S. Manne, Richard G. Richels, James A. Edmonds
    Abstract:

    Critics of the Intergovernmental Panel on Climate Change’s Special Report on Emission Scenarios claim that the use of Market Exchange rates (MER) rather than purchasing power parity (PPP) to measure gross domestic product (GDP) has led to a significant upward bias in projections of greenhouse gas emissions, and hence unrealistically high future temperature. Rather than revisit the debate on the choice of Exchange rates, we address a much simpler question: when it comes to temperature change, how much does it matter if potential GDP is expressed in MER rather than PPP? Employing a computable general equilibrium model designed to examine a variety of issues in the climate debate, we find that there is a difference, but that it is only minor.

Valentyna Ozimkovska - One of the best experts on this subject based on the ideXlab platform.

  • Real financial Market Exchange rate volatility and portfolio flows
    International Economics and Economic Policy, 2017
    Co-Authors: Valentyna Ozimkovska
    Abstract:

    This paper studies the relationship between real financial Market Exchange rate volatility and US cross-border equity flows. We found strong evidence that causality goes from real financial Market Exchange rate volatility to equity flows. According to our results, real financial Market Exchange rate volatility negatively influences purchases of foreign equity. This finding is in line with the portfolio optimization theory. The impact of real financial Market Exchange rate volatility on sales of foreign equity is also negative. This result can be explained by the theory of behavioral finance which states that investors are reluctant to realize losses of their portfolios. This is why investors decrease sales of assets when riskiness of the assets increases. The impact of real financial Market Exchange rate on net purchases of foreign equity is positive. It follows from these results that sales of foreign equity decrease more strongly than purchases of foreign equity when riskiness of foreign assets increases.

  • Essays on the common currency, real financial Market Exchange rates and capital flows
    2016
    Co-Authors: Valentyna Ozimkovska
    Abstract:

    Chapter 1 of this thesis studies the impact of the introduction of the euro on the volatility of industrial production growth and the characteristics of the optimal currency in the EU-12 countries (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain).Chapter 2 investigates the relationship between cross-border equity flows and relative international asset prices expressed in the same currency which can be considered as the Real Financial Market Exchange Rate (RFER). This chapter investigates cross-border equity flows between the US and a number of industrialized countries as well as a number of emerging Markets. Chapter 3 is dedicated to the relationship between equity flows and the RFER between Canada and the US.

Adam M. Akyoo - One of the best experts on this subject based on the ideXlab platform.

  • Implication of quality uncertainty on Market Exchange: The case of seed industry in Kilolo district, Tanzania.
    Emerald Open Research, 2020
    Co-Authors: Saadan A. Edson, Adam M. Akyoo
    Abstract:

    An increasing demand of agricultural intensification and value addition necessitates the use of improved inputs such as improved seed. Smallholder farmers contribute about 70 % of agricultural production in Tanzania. Agriculture sector in Tanzania contributes about 24.1 % of the GDP, 30 % of exports and 65% of industrial raw materials. Thus, agriculture development, economic growth and industrialization are inseparable. Due to the nature of the product, smallholder farmers cannot judge the overall excellence of seed at the time of buying.  This paper assessed quality uncertainty in maize and vegetable seed and its implication for Market Exchange between farmers and seed sellers in Kilolo district, Iringa Tanzania. The study used a random sample of 130 smallholder farmers and representatives from ten seed companies. Asymmetric information prevails between the two trading sides i.e. sellers and buyers leading into quality uncertainty. Moreover, product augmentation is profoundly overlooked whereby most of seed companies have not augmented their products. Because an improved seed is a quintessential example of an experience good, quality uncertainty of some crop varieties under field conditions favored some seed brands to be used more by farmers compared to others. This paper offers a thorough deduction on quality uncertainty under farmers’ field condition and its implication on Market Exchange. It adds information in the body of knowledge on how an improved seed can contribute to sustainable production of food and industrial raw materials, which is a step towards desired industrialization agenda in Tanzania.

  • Implication of quality uncertainty on Market Exchange: The case of seed industry in Kilolo district, Tanzania.
    Emerald Open Research, 2020
    Co-Authors: Saadan A. Edson, Adam M. Akyoo
    Abstract:

    An increasing demand of agricultural intensification and value addition necessitates the use of improved inputs such as improved seed. Smallholder farmers contribute about 70 % of agricultural production in Tanzania. Agriculture sector in Tanzania contributes about 24.1 % of the GDP, 30 % of exports and 65% of industrial raw materials. Thus, agriculture development, economic growth and industrialization are inseparable. Due to the nature of the product, smallholder farmers cannot judge the overall excellence of seed at the time of buying.  This paper assessed quality uncertainty in maize and vegetable seed and its implication for Market Exchange between farmers and seed sellers in Kilolo district, Iringa Tanzania. The study used a random sample of 130 smallholder farmers and representatives from ten seed companies. Asymmetric information prevails between the two trading sides i.e. sellers and buyers. Moreover, product augmentation is profoundly overlooked whereby most of seed companies have not augmented their products. Despite that genetic and environmental interaction sways crop performance, the paper offers a thorough deduction of the results and its implication on Market Exchange. This paper adds information in the body of knowledge on how an improved seed can intensify upsurge production of food and industrial raw materials, which is a step towards desired industrialization agenda in Tanzania.

Nicholas Sarantis - One of the best experts on this subject based on the ideXlab platform.

  • Does purchasing power parity hold in emerging Markets? Evidence from a panel of black Market Exchange rates
    International Journal of Finance & Economics, 2007
    Co-Authors: Mario Cerrato, Nicholas Sarantis
    Abstract:

    We examine the purchasing power parity (PPP) hypothesis using a unique panel of monthly data on black Market Exchange rates for 34 emerging Market economies. We apply a large number of recent heterogeneous panel unit root and cointegration tests. Panel unit root tests reject mean reversion in black Market real Exchange rates for most (but not all) emerging Market economies. On the other hand, all panel cointegration tests provide strong evidence of cointegration between the nominal black Market Exchange rate and domestic and foreign prices for both individual countries and the full panel. Since we believe that the findings from unit root tests may be affected by the imposition of the joint symmetry and proportionality restriction due to trade restrictions and measurement errors, we test for such a restriction using likelihood ratio tests and find that it is strongly rejected. Copyright © 2007 John Wiley & Sons, Ltd.

  • Does the Purchasing Power Parity Hold in Emerging Markets? Evidence from Black Market Exchange Rates
    2003
    Co-Authors: Mario Cerrato, Nicholas Sarantis
    Abstract:

    We examine the Purchasing Power Parity (PPP) hypothesis using a unique panel of monthly data on black Market Exchange rates for twenty emerging Market economies over the period 19973M1-1993M12. We apply a large number of recent heterogeneous panel unit root and cointegration tests. Panel unit root tests do not favour mean reversion in the real black Market Exchange rate. The evidence for non-rejection of the unit root hypothesis remains robust even after allowing for structural breaks. Panel cointegration tests support evidence of cointegration between the nominal Exchange rate and relative prices. These results contrast with those obtained from unit root tests. Since we believe that the former may be biased by the imposition of the joint symmetry and proportionality restriction, we test for such a restriction using likelihood ratio tests and find that it is strongly rejected.