Exchange rate uncertainty and economic fluctuations in typical emerging economies

Nguyen Ba Trung ()
Additional contact information
Nguyen Ba Trung: International University, Ho Chi Minh City Vietnam National University, Ho Chi Minh City, Vietnam

HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, 2024, vol. 14, issue 1, 88-103

Abstract: This paper examines the role of Exchange Rate Uncertainty (ERU) in driving economic fluctuations in emerging economies using a VAR with stochastic volatility in the mean. We use the quarterly data of three typical emerging economies from 1972Q3 to 2009Q4 within a VAR model. We show that ERU plays a vital role in driving the business cycles of emerging economies. First, an ERU can provoke risks in the financial market and the real economy. Second, ERU hurts equity prices and the output growth of emerging economies. Further investigation shows that the adverse effects of ERU on output are more severe under the fixed exchange rate regime than under the flexible exchange rate regime. This finding implies that adopting the flexible exchange rate regime can help emerging economies mitigate the adverse effects of uncertainty shocks.

Keywords: Bayesian VAR model; exchange rate uncertainty; emerging economies; stochastic volatility; uncertainty (search for similar items in EconPapers)
JEL-codes: F21 F32 G15 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journalofscience.ou.edu.vn/index.php/econ-en/article/view/2729/2011 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bjw:econen:v:14:y:2024:i:1:p:88-103

DOI: 10.46223/HCMCOUJS.econ.en.14.1.2729.2024

Access Statistics for this article

HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION is currently edited by Nguyen Thuan

More articles in HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION from HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY
Bibliographic data for series maintained by Vu Tuan Truong ().