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:: Volume 11, Issue 42 (Quarterly Journal of Fiscal and Economics Policies 2023) ::
qjfep 2023, 11(42): 7-53 Back to browse issues page
The Effects of the volume Liquidity Shocks and Inflationary Environment on the Exchange Rate System’s Survival in countries with Exchange Rate Anchor and Inflation Targeting Monetary systems
Hossein Amini , Farzaneh Khalili , Majid Afsharirad * , Abdolrahim Hashemi Dizaj
Kharazmi University
Abstract:   (1284 Views)
The main aim of this article is to estimate the volume liquidity shocks and its impact along with other effective variables on the exchange rate system’s survival in the 9 countries with an exchange rate anchor monetary system and the 20 countries with an inflation targeting monetary system during the period of 1999-2020. In order to achieve this objective, volume liquidity shocks were first estimated using the residual method, and then low and high inflationary environments were estimated using the Markov rotation method in Ox-Metrix version 7 software. Finally, the survival of foreign exchange systems has been estimated using the quasi-parametric method with the Weibull distribution in Stata software version 17. The main results of the estimation showed that positive and negative shocks had negative, positive and significant effects on the durability or survival of exchange rate systems in both groups of countries, respectively. Moreover, the variables of gross domestic fixed capital formation, the degree of openness and marginal cost have, respectively had positive, positive and negative effects on the survival of currency systems in the group of countries under investigation. The inflationary environment had a negative and significant impact on the survival and permanence of the exchange rate systems in both groups of countries, but the effect of nominal effective exchange rate volatility on the survival of the exchange rate anchor system was not significant due to the adopted exchange rate arrangements of a stabilized currency system with a 2% and limited fluctuation range, which reduces the possibility of aggravating instability.
 
Keywords: Probability of Exchange Rate Regime Survival, volume liquidity Shocks, Inflationary Environment, Exchange Rate Anchor system, Inflation Targeting Monetary system.
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Type of Study: Applicable | Subject: Special
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Amini H, Khalili F, Afsharirad M, Hashemi Dizaj A. The Effects of the volume Liquidity Shocks and Inflationary Environment on the Exchange Rate System’s Survival in countries with Exchange Rate Anchor and Inflation Targeting Monetary systems. qjfep 2023; 11 (42) :7-53
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Volume 11, Issue 42 (Quarterly Journal of Fiscal and Economics Policies 2023) Back to browse issues page
فصلنامه سیاستهای مالی و اقتصادی Quarterly Journal of Fiscal and Economic Policies
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