This paper examines the differential responses of various emerging market export sectors to exchange rate risk. This paper finds origin in initial theoretical posits of Ethier (1973) and Clark (1973) which both contend that exchange rate risk has a negative impact on the export flows of international trade participants who are assumed to be inherently risk averse.
At what level does a currencys volatility become excessive, in a concrete sense? Any claim that an exchange rate is excessively volatile needs a benchmark for normalvariability. We compute variance bounds implied by exchange rate models as the norm, for a set of particularly volatile emerging market currencies; and a nd that long-run exchange rate volatility does not breach the upper bound implied by the present value of underlying fundamentals for each currency in our sample, except the Brazilian real. However, nominal exchange
This paper presents a overview and discussion of facts and research findings on South African equity, currency, bond and derivatives markets. It is not a comprehensive literature review, but rather an assessment of where we stand - how the markets have developed, how
the main markets compare internationally, what do we have a firm understanding of, and what are (some of) the areas in most evident need for further research.
Emerging market economies (EMEs) have persistently experienced different waves of commodity terms of trade disturbances, generating macroeconomic instabilities. The adoption of inflation targeting (IT) by many emerging market economies has raised the questions about its relative suitability in dealing with these shocks compared with other regimes. This paper tests the robustness of inflation targeting compared to monetary targeting and exchange rate targeting regimes in coping with commodity terms of trade shocks.