the frequent occurrence of currency crises in recent years brought the early warning literature back in the researchers spotlight. in recent years, concept of an early warning system (ews) developed that should be able to identify various costly events, such as currency crises, early enough for policy makers to reduce the costs. this study attempted by using iran's economy quarterly data d...

To many developing countries nowadays, Foreign direct investment (FDI) is regarded as an important factor that promotes growth. While traditional theory states that FDI helps increasing labor income by bringing capital to laborabundant countries, more recent works points to the possibility that type of capital in‡ow matters as well. Various studies of …nancial crisis highlight the stability of ...

This paper proposes a novel explanation for why foreign currency denominated loans to households have become so popular in some emerging economies. Our argument is based on what we call the debt limit channel, which arises when multi-period contracts are offered against collateral that established newly acquired assets. Whenever difference between domestic and interest rates positive, this effe...

Abstract-Foreign exchange market is the largest and the most important one in the world. Foreign exchange transaction is the simultaneous selling of one currency and buying of another currency. It is essential for currency trading in the international market. In this paper, we have investigated Artificial Neural Networks based prediction modelling of foreign exchange rates using five different ...

Countries have accumulated massive foreign reserve portfolios, but the reasons for doing so remain debated. I document a new empirical fact on the compositions of foreign reserve portfolios, and argue that the prevalence of the dollar supports an explanation in which foreign reserves hedge liquidity shocks to dollarized financial systems. First, I fit a Bayesian dynamic linear model to extract ...

This paper explores the role played by government guarantees to banks’ foreign creditors as a root cause of self-fulfilling twin banking-currency crises. We develop a general equilibrium model in which such guarantees lead to these types of crises. Absent government guarantees, such crises are not possible. The model has three key properties. First, in the presence of government guarantees bank...

In this paper, we provide a re-examination of the exchange rate exposure and foreign currency derivative use by Australian resources firms in the 2006–2009 period which is characterized by increased volatility caused by the global financial crisis. In particular, we consider the interaction of a resources firm’s exchange rate risk exposures, foreign currency derivative use and the global financ...

This paper shows that managers’ personal beliefs and individual characteristics explain a large share of the substantial time-variation of derivatives use beyond firm, industry, and market fundamentals. We construct a panel data set of foreign currency derivatives holdings and currency exposures for U.S. non-financial firms. We use a novel approach to build a firm-specific foreign exchange retu...

This paper analyzes the relationship between money and inflation in a small open economy, where domestic and foreign currencies are perfect substitutes as means of payment. It is shown that, if the path of domestic money supply is such that individuals find it optimal to change the currency in which transactions are settled, there will be an adjustment period during which domestic inflation adj...

this study investigates the effects of  macroeconomic variables and their role in development of foreign exchange market. the foreign exchange market is the mechanism by which a person of firm transfers purchasing power form one country to another, obtains or provides credit for international trade transactions, and minimizes exposure to foreign exchange risk. the foreign exchange transaction i...