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Currencies of greater interest for central Asian economies: an analysis of exchange market pressure amid global and regional interdependence

Author

Listed:
  • Devendra Kumar Jain

    (Flame University)

  • Naqeeb Ur-Rehman

    (Westminster International University)

  • Omonjon Ganiev

    (Westminster International University in Tashkent)

  • Kapil Arora

    (Alliance University)

Abstract

Central Asian Economies (CAEs) have diverse exchange rate policies. They have recorded higher volatility in the foreign exchange market since inception. High volatility of the transition era has drifted these economies towards partial dollarization. Monetary authorities in CAEs, (already have a challenge of maintaining monetary policy autonomy) have a gigantic task of price stability and stopping the spread of dollarization. This study is directed towards assessing the drivers and the determinants of foreign exchange market pressure in CAEs. The results, based on panel data analysis and the System GMM model, have provided useful insights about the exchange market pressure determinants particularly USD, Euro, Ruble, and Renminbi. The results show that China and Russia exchange market pressure has a negative effect on the exchange market pressure of CAEs. While the dollar index shows a positive impact on the exchange market pressure of CAEs. Overall, the findings imply that China and Russia currency appreciation results in a trade deficit across CAEs. The policy implication suggests that the floating exchange rate regime (inflation targeting regime) is not in favor of CAEs, and they must use managed-float to reduce their trade deficits.

Suggested Citation

  • Devendra Kumar Jain & Naqeeb Ur-Rehman & Omonjon Ganiev & Kapil Arora, 2023. "Currencies of greater interest for central Asian economies: an analysis of exchange market pressure amid global and regional interdependence," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-18, December.
    • Handle: RePEc:spr:fininn:v:9:y:2023:i:1:d:10.1186_s40854-022-00417-7
    DOI: 10.1186/s40854-022-00417-7
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    Keywords

    Exchange market pressures; Central Asian economies; Exchange markets; Financial market Interdependence; Transition economies;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G01 - Financial Economics - - General - - - Financial Crises
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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