The Saga of Venezuelan Bolivar Fuerte Essay Example | Topics and Well Written Essays - 2000 words

The Saga of Venezuelan Bolivar Fuerte - Essay Example Bolivar fixed exchange rate to the dollar has been increasing meaning it has been losing value to the dollar. This leads the government of Hugo Chavez to establish strict currency controls in efforts to counter budget deficits. The currency controls however have caused currency devaluation that has disrupted the economy. From 8th January 2010, the fixed exchange rate was Bs.F. 2.15= 1 dollar but by 13th February 2013, the fixed exchange rate was Bs.F. 6.3= 1 dollar (Trinkunas, 2014, p. 1). Between 2003 and 2013, there were a total of four devaluations of the Venezuela currency. Every devaluation generated more Boliver per dollar hence increasing more money to be spent by the Venezuela government. A country will devalue its currency any time it cannot maintain the fixed market exchange rate (Boyes & Melvin, 2012, p. 408). To be able to maintain the market foreign exchange rate, a country utilizes its reserved foreign currency to acquire back home currency. Venezuela government was not able to buy back home currency since its value had dropped against the dollar. Devaluation enabled the government to buy back home country at an affordable rate while at the same time promoting exports. By increasing exports, Venezuela was guaranteed of increased revenue since local monetary resources from oil exports increased significantly. This extended essay aims at explaining the timeline under which Venezuela currency has undergone devaluation. The essay will address issues on restri ction, black market, increased prices, and devaluation effect on inflation. Hugo Chavez is the mastermind behind currency exchange controls. Hugo Chavez took office as the president of Venezuela in February 1999. While in office, crude oil prices plunged and four years later he was overthrown for at least 47 hours before fighting back for power through flaunting the constitution.

Impact of foreign exchange rate on stock returns Dissertation

Impact of foreign exchange rate on stock returns - Dissertation Example Table 1 reports the results of Augmented Dickey Fuller test of unit root for the stock indices and exchange rates of both the UK and Pakistan. The test has further been applied at different levels as well as in the first difference form. The findings will be reported in terms of each country starting with the UK first then Pakistan. Both the ADF and regression results will be presented for the country indices and then for each of the companies. This chapter is divided into several parts with the main parts comprising study findings for the UK (both ADF test and regression), study findings from Pakistan (ADF and regression), and finally the analysis section where these findings are discussed and analyzed. 5.2 Findings (UK) Augmented Dickey Fuller (ADF) Test Table 1 below presents ADF results for UK companies and GBP/USD rate. As is evident in the table, the results include the FTSE 100 index and ten major companies operating in the UK. Table 2 provides the findings of the ADF test for the national exchange rate (EX) of the GBP against the GBP. Table 1: Augmented Dickey Fuller test (UK companies and FTSE 100 Index) Augmented Dickey fuller (ADF) test (UK companies and FTSE 100 Index) Index + companies S= Index value/ stock price Critical values of 1%, 5%, 10% at Level ?S= 1st difference Critical values at 1%, 5%, 10% for ?S FTSE 100 -2.250374 -3.486064 -2.885863 -2.579818 -10.25769 -2.584707 -1.943563 -1.614927 Antofagasta -3.066955 -4.036983 -3.448021 -3.149135 -12.97182 -2.584707 -1.943563 -1.614927 Babdock -1.747700 -4.036983 -3.448021 -3.149135 -10.71888 -3.486551 -2.886074 -2.579931 HSBC Holdings -2.867695 -3.486064 -2.885863 -2.579818 -10.42942 -2.584707 -1.943563 -1.614927 Imperial tobacco -2.160689 -4.036983 -3.448021 -3.149135 -11.17921 -2.584707 -1.943563 -1.614927 Johnson matthey -2.543982 -4.036983 -3.448021 -3.149135 -10.41562 -2.584707 -1.943563 -1.614927 Meggit 0.828451 -2.584539 -1.943540 -1.614941 -11.56089 -2.584707 -1.943563 -1.614927 Morrison - 2.901854 -4.036983 -3.448021 -3.149135 -11.50647 -2.584707 -1.943563 -1.614927 Pearson plc -1.841245 -4.036983 -3.448021 -3.149135 -12.55195 -3.486551 -2.886074 -2.579931 Standard chartered bank -1.868623 -3.486064 -2.885863 -2.579818 -10.62130 -2.584707 -1.943563 -1.614927 Weir group -1.782673 -4.036983 -3.448021 -3.149135 -9.851895 -2.584707 -1.943563 -1.614927 Table 2: Augmented Dickey fuller (ADF) test (GBP/USD) Augmented Dickey fuller (ADF) test (GBP/USD) Currency X= Exchange rate Critical values of 1%, 5%, 10% at Level ?X= 1st difference Critical values at 1%, 5%, 10% for ?X GBP/USD -2.046301 -4.036983 -3.448021 -3.149135 -9.755815 -2.584707 -1.943563 -1.614927 According to the findings of the study, the ADF test results for the FTSE 100 index show that FTSE statistic value does not exceed the critical values at the 1%, 5%, and 10% critical levels. Therefore, the null hypothesis of the unit root for the index