Fixing the Central Parity and the Evolution of the Currency within the Exchange Rate Mechanism II in the Countries that Joined the Euro Zone

The present paper presents the models used by the countries that joined the Euro zone after 2000, in fixing the central parity and the evolution of the local currency towards Euro, when participating in Exchange Rate Mechanism II (ERM II). It synthesizes the main theories for determining the equilibrium exchange rate. It also presents the modality of putting them into practice in the countries that had already become members of the Euro zone. The better we know the other countries’ experience in the respect of the joining process to the Euro zone, the better will Romania be able to prepare itself for adopting the unique European currency. Thus, we will be synthesize the main approaches within literature and also in the economic policy deciders’ practice concerning the estimation of the equilibrium exchange rate and implicitly, of the central parity. The paper presents the modality of fixing the central parity and the experience of participating in ERM II for a number of member states that joined the Euro zone after 2000: Greece, Slovakia, Slovenia, Malta, Cyprus and Estonia. For these states we also analyze the evolution of the currency towards Euro while participating in ERM II. Starting from these examples, we explain the advantages and the disadvantages in fixing the central parity over/at/under the value of the exchange rate on the market at the moment of joining ERM II and we underline the problems that might occur in the case of choosing a central parity that is not compatible with the equilibrium value of the exchange rate

BRAIN Journal - Artificial Systems and Models for Risk Covering Operations

<div><i>Abstract </i></div><div><br></div>Mainly, this paper focuses on the roles of artificial intelligence based systems and especially on risk-covering operations. In this context, the paper comes with theoretical explanations on real-life based examples and applications. From a general perspective, the paper enriches its value with a wide discussion on the related subject. The paper aims to revise the volatilities’ estimation models and the correlations between the various time series and also by presenting the Risk Metrics methodology, as explained is a case study. The advantages that the VaR estimation offers, consist of its ability to quantitatively and numerically express the risk level of a portfolio, at a certain moment in time and also the risk of on open position (in titles, in FX, commodities or granted loans), belonging to an economic agent or even individual; hence, its role in a more efficient capital allocation, in the assumed risk delimitation, and also as a performance measurement instrument. In this paper and the study case that completes our work, we aim to prove how we can prevent considerable losses and even bankruptcies if VaR is known and applied accordingly. For this reason, the universities inRomaniashould include or increase their curricula with the study of the VaR model as an artificial intelligence tool. The simplicity of the presented case study, most probably, is the strongest argument of the current work because it can be understood also by the readers that are not necessarily very experienced in the risk management field.<div><br></div><div><b>Find more at:</b></div><div><b>https://www.edusoft.ro/brain/index.php/brain/article/view/679</b><br></div

The Evaluation of the Equilibrum Exchange Rate based on the Purchase Power, for Romania’s Case

The current paper aims to analyse one of the many models of evaluation for the equilibrum rate in an economy. It also briefly presents the main models and methods used in the specialized literature for the evaluation of the equilibrum exchange rate. The utilization of as many methods allows the deciders of monetary and economic policy to accurately ground the moment of one country adhesion to the euro zone. Also, an analysis can be made, whether the respective countru is ready and how fast the process of convergence to the Euro zone can evolve. In general, it is recommendable a country not to force de adhesion to the euro zone because the negative effects may occur for a long period of time, leading to a development for the respective economy under its potential. The estimated model in Romania based on data will be afterwards used for estimating the equilibrum rate and for issuing scenarios concerning its future evolution. Usually, the parity at which the national currency should be converted for an unlimited period of time, will also be around the level of the equilibrum rate. From that moment on, after attending the Exchange Rate Mechanism II (ERM II), the respective country’s economy loses an equilibrum buffer – the exchange rate. Starting from that moment, the country’s economy is supposed to be so performant that it absorbs the internal and external negative shocks, only relaying on the fiscal and budget policies. Hence, the particular importance of a correct evaluation for the equilibrum rate by using several models and methods, so that to be as close as possible to the equilibrum level on mid term