Special Issue "Currency Crisis"

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Banking and Finance".

Deadline for manuscript submissions: closed (28 February 2019)

Special Issue Editor

Guest Editor
Dr. Faridul Islam

Professor of Economics Morgan State University, Baltimore, MD, USA
Website | E-Mail
Interests: currency crisis; international trade; development economics; applied time series econometrics; economics of labor, immigration, and education; environmental & energy economics; corporate finance; monetary and macroeconomics

Special Issue Information

Dear Colleagues,

The recent experience with bouts of financial crisis and the ever-rising possibility of another (perhaps more severe) one demands that academics across the globe—importantly those working in the area of economics and finance—take a serious look at the trends in the financial market, both at the national and global levels. It is our role and responsibility to present emerging facts that might point to the turn of event in the market which may produce another crisis in the not-too-distant future! The toll it takes on individuals and the nation is enormous and so painful that we need to come forward and act from a professional standpoint sooner rather than later.

In light of this concern, we are publishing a Special Issue focusing primarily on a potential financial/economic crisis. Several economists have been raising the red flag for some time. Our aim is to identify early signs of some economic booby-trap—if any—that lie ahead with a deep desire to ambush us. We believe that a set of serious academic papers by scholars of your demeanour would be valuable, with the ability to offer valuable insight, and perhaps guidance to the policy-makers to stay prepared early on, prompting them to be ready with the necessary tools to respond to the eventuality, should such a possibility even arise. Such preparedness will enable us to avoid one, or keep the adverse effect at minimal, before we have to confront the reality of being struck by the crisis. Both theoretical and empirical papers are welcome.

Please consider submitting an article for publication in this journal, which strictly follows a double-blind review process to ensure quality. Please note that we are offering a very broad latitude for authors to accommodate papers from a wide array in the discipline. Should you have questions, please feel free to address them to me.

Thank you!

Sincerely,

Dr. Faridul Islam
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All papers will be peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 350 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • E3 Prices, Business Fluctuations, and Cycles 
  • E32 Business Fluctuations 
  • Cycles 
  • E44 Financial Markets and the Macroeconomy 
  • E5 Monetary Policy, Central Banking, and the Supply of Money and Credit 
  • E52 Monetary Policy 
  • E58 Central Banks and Their Policies 
  • E6 Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook 
  • E63 Comparative or Joint Analysis of Fiscal and Monetary Policy 
  • Stabilization 
  • Treasury Policy 
  • E65 Studies of Particular Policy Episodes 
  • F. International Economics 
  • F00 General 
  • F01 Global Outlook 
  • F02 International Economic Order and Integration 
  • F13 Trade Policy 
  • International Trade Organizations 
  • F14 Empirical Studies of Trade 
  • F15 Economic Integration 
  • F2 International Factor Movements and International Business 
  • F20 General 
  • F21 International Investment 
  • Long-Term Capital Movements 
  • F3 International Finance 
  • F31 Foreign Exchange 
  • F32 Current Account Adjustment
  • Short-Term Capital Movements 
  • F33 International Monetary Arrangements and Institutions 
  • F34 International Lending and Debt Problems 
  • F36 Financial Aspects of Economic Integration 
  • F37 International Finance Forecasting and Simulation: Models and Applications 
  • F38 International Financial Policy: Financial Transactions Tax
  • Capital Controls 
  • F4 Macroeconomic Aspects of International Trade and Finance 
  • F41 Open Economy Macroeconomics 
  • F42 International Policy Coordination and Transmission 
  • F44 International Business Cycles
  • F45 Macroeconomic Issues of Monetary Unions
  • F53 International Agreements and Observance 
  • International Organizations 
  • F55 International Institutional Arrangements 
  • F6 Economic Impacts of Globalization 
  • F60 General 
  • F61 Microeconomic Impacts
  • F62 Macroeconomic Impacts 
  • F63 Economic Development 
  • G. Financial Economics 
  • G00 General
  • G01 Financial Crises 
  • G1 General Financial Markets 
  • G11 Portfolio Choice 
  • Investment Decisions 
  • G15 International Financial Markets 
  • G2 Financial Institutions and Services 
  • G23 Non-Bank Financial Institutions 
  • Financial Instruments 
  • Institutional Investors 
  • G28 Government Policy and Regulation 
  • G29 Other

Published Papers (7 papers)

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Open AccessArticle
Investigating the Economic and Financial Damage around Currency Peg Failures
J. Risk Financial Manag. 2019, 12(2), 92; https://doi.org/10.3390/jrfm12020092
Received: 1 May 2019 / Revised: 20 May 2019 / Accepted: 22 May 2019 / Published: 30 May 2019
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Abstract
The choice and structure of a country’s exchange rate regime has wide implications for the effectiveness and flexibility of monetary policy tools, as well as for economic and financial stability. We examine 21 instances where exchange rate pegs have been abandoned in the [...] Read more.
The choice and structure of a country’s exchange rate regime has wide implications for the effectiveness and flexibility of monetary policy tools, as well as for economic and financial stability. We examine 21 instances where exchange rate pegs have been abandoned in the past, to gauge the potential economic damage associated with pegs failing. The sample includes major exchange rate shifts over the past thirty years, spanning from the Latin America currency crises of the 1990s to the peg abandonment in Egypt in 2016. Given the close interconnection of banks to the sovereign and the real economy, risks often flow through to, and can also be magnified by, the banking system. We therefore examine the interaction of currency peg abandonment with the occurrence of a banking crisis to investigate the different circumstances and impacts of exchange rate pegs failing. We have found that countries that simultaneously suffered a systemic banking crisis during the period of exchange rate regime shift also experienced significantly greater economic and financial damage following the adoption of a freely floating exchange rate. Nevertheless, regardless of whether there was a banking crisis, countries start showing signs of recovery after the same amount of time once the currency floated. Full article
(This article belongs to the Special Issue Currency Crisis)
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Open AccessArticle
A Cointegration of the Exchange Rate and Macroeconomic Fundamentals: The Case of the Indonesian Rupiah vis-á-vis Currencies of Primary Trade Partners
J. Risk Financial Manag. 2019, 12(2), 87; https://doi.org/10.3390/jrfm12020087
Received: 28 February 2019 / Revised: 21 April 2019 / Accepted: 25 April 2019 / Published: 13 May 2019
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Abstract
Since the appearance of persistent research finding a disconnection between the exchange rate and its macroeconomic fundamentals, the empirical debate has not stopped. Studies employ various methods to explain the presence of the exchange rate disconnect puzzle, including applying models to the case [...] Read more.
Since the appearance of persistent research finding a disconnection between the exchange rate and its macroeconomic fundamentals, the empirical debate has not stopped. Studies employ various methods to explain the presence of the exchange rate disconnect puzzle, including applying models to the case of emerging market economies. However, the exchange rate has different determinants in some countries. To revisit this puzzle in an emerging market currency, we analyzed the cointegration of the exchange rate of the Indonesian Rupiah vis-á-vis currencies of primary trade partners and its macroeconomic fundamentals. The empirical results based on Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) models show that the fundamental variables consistently drive the exchange rate. The trade surplus as an extended nonlinear variable revealed high feedback to the exchange rate volatility in the long-run. Full article
(This article belongs to the Special Issue Currency Crisis)
Open AccessArticle
Money as an Institution: Rule versus Evolved Practice? Analysis of Multiple Currencies in Argentina
J. Risk Financial Manag. 2019, 12(2), 80; https://doi.org/10.3390/jrfm12020080
Received: 6 March 2019 / Revised: 24 April 2019 / Accepted: 28 April 2019 / Published: 8 May 2019
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Abstract
Monetary policies and adjustments during a financial crisis depend on policy-makers’ conceptions on what money is and how it works. There is sufficient consensus among scholars that money is an institution created within the economic system and is in line with other institutions [...] Read more.
Monetary policies and adjustments during a financial crisis depend on policy-makers’ conceptions on what money is and how it works. There is sufficient consensus among scholars that money is an institution created within the economic system and is in line with other institutions that regulate economic action. However, there are different understandings of what institutions are and how they operate, and these understandings imply differences in terms of monetary enforcement, resilience, responsiveness and stability. This paper discusses the two main approaches that conceptualise institutions as rules and as practices presenting an empirically informed discussion of money as an institution drawing on these insights. It grounds the analysis on the empirical case of Argentina as a monetary laboratory and the plurality of currencies that circulate in its economy. The study argues that while the official currency of Argentina corresponds to the institutions as rules approach, the adoption of the U.S. dollar into a bimonetary economy evolved as equilibrium. In between, the massive community currency systems that rose and declined during the economic meltdown between 1998 and 2002 were a hybrid institution that combined rules and practice. All three of them show various degrees of resilience and stability. Full article
(This article belongs to the Special Issue Currency Crisis)
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Open AccessArticle
Simulation of the Grondona System of Conditional Currency Convertibility Based on Primary Commodities, Considered as a Means to Resist Currency Crises
J. Risk Financial Manag. 2019, 12(2), 75; https://doi.org/10.3390/jrfm12020075
Received: 28 February 2019 / Revised: 13 April 2019 / Accepted: 22 April 2019 / Published: 29 April 2019
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Abstract
Currency crises are a significant feature of the present-day world economy, in which financial transactions are many times larger than monetary flows in the “real economy”, so that defending a currency’s exchange-rate is a major challenge for the governments of countries which may [...] Read more.
Currency crises are a significant feature of the present-day world economy, in which financial transactions are many times larger than monetary flows in the “real economy”, so that defending a currency’s exchange-rate is a major challenge for the governments of countries which may be smaller than a single large corporation. It is made even more difficult due to the United States government and its agents openly using economic pressures to try to force other countries to obey its orders, even including regime change. Guaranteed convertibility of a currency, such as maintaining a gold standard, can in principle help to stabilise its value, but this has been absent since the end of US dollar convertibility in 1971. The Grondona system of conditional currency convertibility was not planned as a counter-measure for currency crises. However the simulation of its operation demonstrated in this paper shows clearly how its automatic counter-cyclical stock-holding in response to movements in commodity prices—and so to exchange-rate movements that alter domestic commodity prices—causes monetary flows that would resist large exchange-rate movements (among other effects), and thereby tend to ameliorate a currency crisis. Moreover, it would achieve this without the need for international negotiations, agreements or other geopolitical trade-offs. Full article
(This article belongs to the Special Issue Currency Crisis)
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Open AccessArticle
Monetary Policy, Cash Flow and Corporate Investment: Empirical Evidence from Vietnam
J. Risk Financial Manag. 2019, 12(1), 46; https://doi.org/10.3390/jrfm12010046
Received: 7 February 2019 / Revised: 1 March 2019 / Accepted: 13 March 2019 / Published: 19 March 2019
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Abstract
This paper examines the relationships between macroscopic determinants (typically, monetary policies) and microscopic factors (mainly, cash flows and other controlling variables) on corporate investment. By employing system-GMM estimation for the 250 Vietnamese non-financial firms, the authors find that the expansionary monetary policy not [...] Read more.
This paper examines the relationships between macroscopic determinants (typically, monetary policies) and microscopic factors (mainly, cash flows and other controlling variables) on corporate investment. By employing system-GMM estimation for the 250 Vietnamese non-financial firms, the authors find that the expansionary monetary policy not only encourages the borrowing activities but also results in more corporate investment activities over the period from 2006 to 2016. Noticeably, the internal cash flow is also significant factor, which enhances the activities of corporate investment. Finally, there are differences between internal cash flow effects on corporate investments between two groups, divided by three theoretical criteria. To recapitulate, our implications highlight the importance of monetary policy stability for sustainable growth in corporate investment in Vietnam. Full article
(This article belongs to the Special Issue Currency Crisis)
Open AccessArticle
Asymmetric Effects of Policy Uncertainty on the Demand for Money in the United States
J. Risk Financial Manag. 2019, 12(1), 1; https://doi.org/10.3390/jrfm12010001
Received: 12 October 2018 / Revised: 12 November 2018 / Accepted: 19 November 2018 / Published: 20 December 2018
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Abstract
A comprehensive measure of economic uncertainty, known as “Policy Uncertainty”, which was constructed by the Economic Policy Uncertainty Group by searching popular newspapers for uncertain terms associated with economic factors and its impact on macro variables, is gaining momentum. Although some researchers have [...] Read more.
A comprehensive measure of economic uncertainty, known as “Policy Uncertainty”, which was constructed by the Economic Policy Uncertainty Group by searching popular newspapers for uncertain terms associated with economic factors and its impact on macro variables, is gaining momentum. Although some researchers have assessed its impact on the demand for money in a few countries, we considered the U.S.A. demand for money one more time and showed that when a linear money demand was estimated, policy uncertainty had no long-run effects. However, when a nonlinear model was estimated, the results showed that while increased policy uncertainty induces the public to hold less money in the long run, decreased uncertainty has no long-run effects, a clear sign of asymmetric response. Full article
(This article belongs to the Special Issue Currency Crisis)
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Open AccessCommentary
China and Special Drawing Rights—Towards a Better International Monetary System
J. Risk Financial Manag. 2019, 12(2), 60; https://doi.org/10.3390/jrfm12020060
Received: 28 February 2019 / Revised: 28 March 2019 / Accepted: 3 April 2019 / Published: 9 April 2019
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Abstract
China and the international monetary system need each other. The international monetary system is strained, with crisis just around the corner, yet reform is not on anyone’s agenda. Meanwhile China, deeply invested in the current system, faces narrowing options as trading partners question [...] Read more.
China and the international monetary system need each other. The international monetary system is strained, with crisis just around the corner, yet reform is not on anyone’s agenda. Meanwhile China, deeply invested in the current system, faces narrowing options as trading partners question its moves abroad, debt levels rise at home, and its current account moves from surplus to deficit. RMB internationalization might appear to provide a way out, but the policy has its limits and tends to exacerbate rather than relieve tensions. We argue that a tension-reducing solution is at hand to the problems of both the international monetary system and China—IMF-style Special Drawing Rights (SDRs). If in a unilateral initiative China were to make the SDR central to its next phase of capital account opening, China’s institutions, corporates and individuals—presently restricted in their access to international currency—would likely embrace it. Begun by China, with support from the international community and Hong Kong, promulgation of the SDR would usher in an era of lower tensions, providing space for development and avoidance of conflict within a reordered monetary system in which China would have a more prominent role. Full article
(This article belongs to the Special Issue Currency Crisis)
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