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A simulation of the dinar exchange rate linked to the basket of currencies

rocky
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A simulation of the dinar exchange rate linked to the basket of currencies Empty A simulation of the dinar exchange rate linked to the basket of currencies

Post by rocky on Fri 05 Jan 2018, 3:30 am

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Introduction:
The stabilization of the national currency by a basket of currencies, which is among the world's exchange-rate regimes, as well as strict or flexible bilateral linkage. Therefore It is proposed that the dinar be pegged to a basket of major currencies, international reserve currencies, dominant in foreign trade and capital markets, United States Dollars. But Iraq has been used to favoring bilateral ties in its monetary history and to this day. It is no secret to the followers of the argument of bilateral linkage and dollars in particular That the source of foreign currency to Iraq is the dollar first, and secondly the dollar is often in official international reserves and about 65 percent in Third, Iraq's foreign trade depends on the dollar's currency, even with neighboring and Asian countries, and the fourth most countries depend on the dollar to intervene in the market Exchange is called the intervention currency, and in Iraq also operates the window of the central bank in dollars and so we call the currency of the window.

 
However, it is necessary to interact with the currency basket proposal and to discover patterns of exchange rate movement under this system. For those interested and decision-makers to consider the performance of this system and how it differs from the bilateral link.
 
The exchange rate of the dinar linked to a basket of currencies of varying weights:
In this note, a review of the exchange rate of the Euro, Pound Sterling, Yen and Swiss currency against the Dollar since the beginning of 1999. Then we assumed The Iraqi dinar was pegged to a basket of currencies according to three alternatives to weights between the first of January 1999, the beginning of the euro, and the beginning of the 10th of 2017.
 
The weights are:
First: 65% of the dollar; 20% of the euro; and the rest of the currencies 5% each.
Second: 60% for the dollar; 20% for the euro; 10% for the sterling; and 5% for the Swiss and Japanese.
Third: 50% to the dollar; 25% to the euro; 10% to the pound; 5.7% to the Swiss and Japanese.

The exchange rate of the dinar was then calculated according to the linkage of these currencies. For simulations we assumed starting from the beginning of 2012, and points could be selected Start again and recalculate but this does not affect the pattern of movement up and down. It is important to state the results of the currency basket commitment and its weights in the exchange rate calculation, And within a period of time sufficient for the occurrence of cyclical changes and fluctuations in the relationship between the major currencies in the world. At the starting point on the first day of the first month For the year the dollar was 1200 dinars, ie at the moment of transition from the binary system to the basket. The exchange rates of other currencies change in dinars according to their exchange rates In dollars. The result is shown in the table at the end of this note, which shows how much the exchange rate will be in accordance with the currency basket and its stated weights. Below is pure experience with the assumption that the exchange rate of another primary is 1700 dinars per dollar
 
The proposal to adopt a currency basket instead of a bilateral link means that the exchange rate of the dollar will change in dinars according to the exchange rate of the basket currencies against the dollar. How many will be Change ranges, this is what you find in the table. When pricing the euro or the pound in dinars it depends on the exchange rates between those currencies and dollars, for example:
Dollars per euro are multiplied by dinars per dollar and so on. So that the dealer who turned the dinar into euros and then to the dollar recovers the amount of the dinar He used it to buy the euro when converting dollars into dinars at the same market moment. Note that the euro exchange rate with the dollar is cyclical, and generally the trend of the exchange rate of all currencies for reasons related to Productivity and therefore export prices and balance of payments accordingly. Therefore, adoption of the basket does not guarantee a specific direction for the exchange rate of the dollar, or any Other currency, in dinars. And when the basket is adopted, it does not require changing the exchange rate daily, but enough per week or monthly.  These accounts and data presentations for clarification, and knowledge of the quantitative scope of the issue under discussion. When you switch to a basket, you need to agree on currencies Weights and why. The weights assumed in this note are close to the first alternative to the components of Iraq's international reserves. Relative components can be considered For foreign trade or others to propose weights.

Table (1)
Summary of exchange rate simulation results (JDs) when linked to a currency basket
From the assumed time horizon until October 2017

 
Table (1) Summary of exchange rate simulation results (JDs) when linking a basket of currencies from the assumed start date until October 2017
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Figure 1: Exchange rate movement between January 2005 and October 2017: Simulating the peg to the basket of currencies
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PDF [You must be registered and logged in to see this link.]
Note: this research id posted on the CBI website, [You must be registered and logged in to see this link.] , by  Dr.. Ahmed Ibrahimi Ali
 








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sassy
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Post by sassy on Fri 05 Jan 2018, 5:56 am

hum
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azareus
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Post by azareus on Fri 05 Jan 2018, 6:01 am

Pegged to a basket 
Hmm
weslin3
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Post by weslin3 on Fri 05 Jan 2018, 7:57 am

But if IMF is in control, as it has been said, they always speak of pegging IQD with USD... scratch Or is this something that this Dr.. Ahmed Ibrahimi Ali is purposing????
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Post by tt10 on Fri 05 Jan 2018, 9:19 am

The iqd has been pegged to the dollar alone since 2004 if memory serves. Something must be in the works for them to stray from that IMO.
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Post by Zuzu on Fri 05 Jan 2018, 9:30 am

From 2016, maybe this will explain why: 

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The renminbi's inclusion in the SDR basket is an important milestone in the integration of the Chinese economy into the global financial system, the IMF says (photo: TPG/Newscom).

IMF Adds Chinese Renminbi to Special Drawing Rights Basket

IMF News
September 30, 2016

  • Renminbi joins U.S. dollar, euro, yen, and British pound in SDR basket
  • Change represents important milestone for IMF, SDR, and China
  • Move recognizes and reinforces China’s continuing reform progress

Effective October 1, the IMF is adding the Chinese renminbi (RMB) to the basket of currencies that make up the Special Drawing Right, or SDR. 

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The [You must be registered and logged in to see this link.]  is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. The IMF’s Executive Board [You must be registered and logged in to see this link.]  in November 2015, and the decision now [You must be registered and logged in to see this link.] after a period of transition. The RMB joins the SDR basket in addition to the previously included four currencies—the U.S. dollar, the euro, the Japanese yen, and the British pound (see chart).
In an interview, Siddharth Tiwari (Director of the IMF’s Strategy, Policy, and Review Department) and Andrew Tweedie (Director of the IMF’s Finance Department) explain why this change took place and its significance for the IMF, the SDR, China, and the international monetary system as a whole.
IMF News: What does the renminbi’s inclusion in the SDR basket mean for China?
Tiwari : The RMB’s inclusion is an important milestone in the integration of the Chinese economy into the global financial system. The IMF’s determination that the RMB is freely usable reflects China’s expanding role in global trade and the substantial increase in the international use and trading of the renminbi. It also recognizes the progress made in reforms to China’s monetary, foreign exchange, and financial systems and acknowledges the advances made in liberalizing, integrating, and improving the infrastructure of its financial markets. We expect that the inclusion of the RMB in the SDR basket will further support the already increasing use and trading of the RMB internationally.
In addition, while data disclosure is not a formal criterion for a currency’s inclusion in the SDR basket, issuers of reserve currencies generally meet high transparency standards. The Chinese authorities have recently taken welcome steps to increase data disclosure and enhance their commitment to multilateral data initiatives; for instance, reporting the currency composition of reserves to the IMF. Also, the Chinese authorities continue to work with the Bank for International Settlements on their reporting of the Chinese banking sector statistics. These developments will lead to increased acceptance of the RMB among official holders of foreign exchange reserves.
IMF News: Stepping back a bit, what are the criteria for inclusion in the SDR?
Tweedie : There are two main criteria for a currency to be included in the SDR basket.
The first is the export criterion, which requires that the currencies in the basket be issued by the top exporters of the world. It has been part of the SDR methodology since the 1970s and it aims to ensure that the currencies that qualify for the basket are those issued by members or currency unions that play a central role in the global economy.
The second is the requirement for currencies in the SDR basket to be determined by the Fund to be “freely usable”—that is, widely used to make payments for international transactions and widely traded in the principal exchange markets. This criterion became part of the SDR methodology in 2000 to capture the importance of financial transactions in the global economy.
IMF News: How is the renminbi’s inclusion expected to impact the international monetary system?
Tiwari : There are several benefits to the international monetary system.
First, the inclusion of the RMB in the SDR basket consolidates the RMB’s internationalization process. The internationalization of a currency imposes strong requirements on its markets and institutions. Experience shows that some of these elements include developing deep and liquid financial markets, achieving a certain degree of openness of the capital account, delivering predictable macroeconomic outcomes, strong and credible institutions, and securing the integrity of the markets—for example, by putting in place a reliable rule of law. Thus, consolidating and further strengthening the RMB internationalization process will help strengthen the Chinese economy, and therefore the global economy.
Second, the inclusion of the RMB in the SDR basket enhances the attractiveness of the RMB as an international reserve asset. This will help with the diversification of global reserve assets.


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mochasmom
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Post by mochasmom on Fri 05 Jan 2018, 10:24 am

Pink green and gold remember..old days
noced71
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Post by noced71 on Fri 05 Jan 2018, 11:16 am

[You must be registered and logged in to see this link.] wrote:Pink green and gold remember..old days
???   ummmm... can you elaborate... my memory is failing me.
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azareus
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Post by azareus on Fri 05 Jan 2018, 11:45 am

Lol Mocha. What an idiot he was Larry
Pegged to the dollar for 18 months Duck told us . Will he be right or wrong ?
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Post by Lobo on Fri 05 Jan 2018, 11:51 am

WOW, thanks Rocky and everyone for your thoughts - the fact that this is posted on the CBI web site says something - it wouldn't be there if it was unimportant.

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