Abstract/Description
This study examines the relationship between central bank transparency (CBT) and foreign exchange market vulnerability, focusing on exchange market pressure (EMP) to provide a comprehensive understanding. Using panel bounds testing approach to cointegration based analysis, the study covers both developed and emerging markets, incorporating the global financial crisis (GFC) and various control variables. External policy uncertainty and FX regimes are also considered to elucidate the nuanced relationship between CBT and EMP. Findings reveal that improved CBT reduces EMP, with financial development moderating this effect, suggesting well-developed financial systems lead to more stable exchange markets. CBT consistently relieves EMP during both crisis and non-crisis periods, emphasizing the importance of information disclosure. However, CBT's impact varies with FX regimes and is conditional on financial integration, which enhances CBT's effectiveness in emerging markets but nullifies it and increases EMP in advanced markets, indicating that US investors' behavior differs between market types.
Keywords
Central Bank Transparency, Foreign Exchange Market, Exchange Market Pressure, Global Financial Crisis, Exchange Rate Regimes
Location
S1 room, Adamjee building
Session Theme
Evolving Dynamics in Inflation, Monetary and Fiscal Policy
Session Type
Parallel Technical Session
Session Chair
Kalim Hyder, State Bank of Pakistan
Session Discussant
Ilfan Oh, Institute of Business Administration ; Karim Khan, Pakistan Institute of Development Economics
Start Date
10-12-2024 3:15 PM
End Date
10-12-2024 5:15 PM
Recommended Citation
Aftab, M., & Phylaktis, K. (2024). Does Central Bank Transparency Curb Foreign Exchange Vulnerability?. CBER Conference. Retrieved from https://ir.iba.edu.pk/esdcber/2024/program/19
Does Central Bank Transparency Curb Foreign Exchange Vulnerability?
S1 room, Adamjee building
This study examines the relationship between central bank transparency (CBT) and foreign exchange market vulnerability, focusing on exchange market pressure (EMP) to provide a comprehensive understanding. Using panel bounds testing approach to cointegration based analysis, the study covers both developed and emerging markets, incorporating the global financial crisis (GFC) and various control variables. External policy uncertainty and FX regimes are also considered to elucidate the nuanced relationship between CBT and EMP. Findings reveal that improved CBT reduces EMP, with financial development moderating this effect, suggesting well-developed financial systems lead to more stable exchange markets. CBT consistently relieves EMP during both crisis and non-crisis periods, emphasizing the importance of information disclosure. However, CBT's impact varies with FX regimes and is conditional on financial integration, which enhances CBT's effectiveness in emerging markets but nullifies it and increases EMP in advanced markets, indicating that US investors' behavior differs between market types.