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Recommendation 12

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IEA (2021), Recommendations of the Global Commission on People-Centred Clean Energy Transitions , IEA, Paris https://www.iea.org/reports/recommendations-of-the-global-commission-on-people-centred-clean-energy-transitions, Licence: CC BY 4.0

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12. enhance impact through international collaboration and exchange of best practice.

Many innovative approaches to people-centred energy transitions policies offer valuable insights to others. Some countries will face greater challenges pursuing clean energy transitions, pointing to the value of best practice exchange, collaboration and co-operation. The IEA is supporting the aims of the Global Commission in developing a data bank of global best practices in the design and implementation of people-centred clean energy policies.

• A new initiative of the CEM, “ Empowering People: Advancing Skills and Inclusivity for Clean Energy Transitions ”, seeks to highlight critical socio-economic elements of the energy transition, in particular as it relates to empowering people and promoting just and equitable transitions, by advancing skills, inclusivity and workforce development.  
• A number of IEA Technology Collaboration Programme s foster cooperation on social dimensions of clean energy, including the Users TCP , which insights on the design, social acceptance and usability of clean energy technologies, and the Wind TCP , which examines social acceptance of renewables infrastructure.
• The UK COP26 Energy Transition Council aims to support people and communities around the world heavily reliant on the coal economy to make a secure and just transition, including building engagement through a new Just Transition Declaration.
• The EU has set up an initiative for coal regions in transition in the Western Balkans and Ukraine as well as an exchange programme with EU coal regions to ensure that lessons learned from the EU experience are shared across Europe.

As governments around the world enact policies to support energy transitions, they should ensure even distribution of benefits to countries and people around the world. The concentration of clean technology innovation, production and supply chains in a few regions will exacerbate income inequality and divide economic opportunities and job creation, eroding support for the energy transition. A collaborative approach among countries can help mitigate these impacts.

Increased and new types of co-operation between international organisations with traditional competencies in energy data analysis, such as the IEA, and organisations that focus on social and economic development issues, such as the ILO, will also help disseminate better outcomes and greater transparency on people-centred clean energy transitions globally. It is also crucial to measure progress of the transition using standard indicators that capture social, environmental and economic dimensions.

The sharing of experiences and best practices extends beyond international organisations and national governments to sub-national governments, businesses, communities and individuals. For example, several international city networks bring together urban practitioners to share their experiences and lessons learned in combining clean energy transition and social goals, such as the Global Covenant for Mayors on Climate and Energy , the C40 Cities Climate Leadership Group and the Carbon Neutral Cities Alliance .

The question of financing people-centred clean energy transitions requires particular consideration. Not all countries will have the same financial means and technical capacity to deliver people-centred energy system transformations at the same scales and timeframes. As such, there will be an important role for international financing mechanisms, including through international development banks, to help developing countries carry out their transitions. For example, the EBRD launched a just transition initiative to ensure widespread benefits from the clean energy transition are shared by vulnerable countries and regions.

The Global Commission urges the IEA to expand its work on the people-centred issues of clean energy transitions, including close collaboration with other key bodies such as the ILO, and through the development of new ways to facilitate collaboration and analysis to support governments as they undertake transitions tailored to their own circumstances. 

Countries can learn from each other, collaborate and support implementation of people-centred transitions

Clean Energy Ministerial Empowering People initiative

A new initiative of the Clean Energy Ministerial (CEM), “Empowering People: Advancing Skills and Inclusivity for Clean Energy Transitions”, seeks to highlight critical socio-economic elements of the energy transition that relate to empowering people and promoting just and equitable transitions: skills, inclusivity and workforce development. This initiative aims to convene a dialogue that expands the conversation taking place within existing technology-oriented CEM initiatives, and to develop solutions relevant to those initiatives’ goals. It will bring together relevant people and partners to share best practices between CEM members, companies and partner organisations. This includes providing a platform for underrepresented and marginalised voices – to bring forward novel approaches and diverse perspectives needed to move the needle on achieving a just and equitable transition for a clean energy future. Among its goal, the initiative will highlight different policy mixes to support workers and communities and advocate for inclusiveness and diversity in HR policies.

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IEA Technology Collaboration Programmes (TCPs)

The IEA TCPs support the work of independent, international groups of experts and industries to lead programmes and projects on a variety of energy technologies and related issues. A number of IEA TCPs foster cooperation on social dimensions of clean energy, including the Users TCP, providing insights on the design, social acceptance and usability of clean energy technologies, and the Wind TCP, examining social acceptance of renewables infrastructure. The Users TCP focusses on the vital role of people in energy technology systems and sees user-centred energy systems as critical for delivering socially and politically acceptable energy transitions. For example, the Users TCP has launched a Behavioural Insights Platform, which brings together government policy makers and other experts to share knowledge and experiences applying behavioural insights to energy policy.

UK COP26 Energy Transition Council

In the lead-up to COP26 in Glasgow in November 2021, the UK government, in its role as COP26 Presidency, announced that it would launch the COP26 Energy Transition Council, which will support developing countries as they transition away from coal to cleaner sources of electricity. The Council will use its platform to increase co-operation among governments and institutions to find solutions to address the technical, economic and social dimensions of clean energy transitions. Priority areas identified by the Council include: promoting clean power as the preferred choice for new generation capacity, developing policy frameworks to attract private investment into clean energy, supporting coal-dependent communities secure a just transition, and ensuring universal access to sustainable, affordable energy. The Council is chaired by COP26 President, Alok Sharma, and the UN Secretary General’s Special Representative for Sustainable Energy, Damilola Ogunbiyi. The first meeting of the Council took place in December 2020, attended by ministers and senior officials from 21 countries and international organisations. 

G20 complementary concept of energy security and cooperation in clean energy transitions under Italian presidency

The Italian G20 presidency of 2021 placed a complementary concept of energy security and cooperation at the core of clean energy transitions, which included a people-centred dimension for the first time. This initiative resulted in a G20 joint communiqué, which expanded the definition of energy security in the context of clean energy transitions, to consider “the needs for just and inclusive transitions that put individuals and society at the center.”  

EU initiative for coal regions in transition in the Western Balkans and Ukraine

The EU in December 2020 launched an initiative to help coal regions in six neighbouring EU countries undertake a just transition from coal towards a carbon-neutral economy. At least 17 regions in Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia and Ukraine with significant coal mining activities and coal-based energy production are eligible to participate on a voluntary basis. The initiative offers an open platform for region-wide multi-stakeholder dialogue to share experiences, knowledge and best practices on the transition, and region-to-region exchanges with EU counterparts. The selected pilot regions will be able to access dedicated trainings through a Coal Academy, technical assistance in the development of transition roadmaps, and receive support to access financing opportunities. Since 2021, the initiative’s secretariat in Brussels has facilitated its implementation and ensures stakeholder collaboration. It is managed by the European Commission and six collaborating international partners, building on the existing EU initiative for coal regions in transition, to reinforce and complement implementation of the European Green Deal and the achievement of a just transition out of coal in Europe. 

EBRD just transition initiative

The EBRD’s just transition initiative will help its countries of operation achieve clean and inclusive transitions. Since 2006, the EBRD has undertaken EUR 34 billion in green financing for more than 1 900 projects as well as EUR 7 billion for inclusion projects. The just transition initiative will focus on three priority areas: 1) a green economy transition; 2) supporting workers; and 3) regional economic development. The work will build off the bank’s expertise in promoting economic inclusion by harnessing private sector investments and undertaking policy engagement to promote structural changes. Moreover, the EBRD is also piloting targeted strategic support initiatives for select national and regional authorities based on transition challenges and opportunities. Such efforts will greatly support countries that require additional economic assistance to undertaken inclusive transitions. For example, the EBRD invested PLN 240 million (EUR 55 million) in a bond issued by one of Poland’s largest energy companies to pursue a decarbonisation strategy that must include a programme to address the regional social impacts of coal plant closures. 

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Health Information Exchange: Understanding the Policy Landscape and Future of Data Interoperability

A jay holmgren.

1 University of California, San Francisco, USA

Moritz Esdar

2 University of Applied Sciences Osnabrueck, Germany

Jens Hüsers

João coutinho-almeida.

3 Porto University, Portugal

Objectives : To review recent literature on health information exchange (HIE), focusing on the policy approach of five case study nations: the United States of America, the United Kingdom, Germany, Israel, and Portugal, as well as synthesize lessons learned across countries and provide recommendations for future research.

Methods : A narrative review of each nation’s HIE policy frameworks, current state, and future HIE strategy.

Results : Key themes that emerged include the importance of both central decision-making as well as local innovation, the multiple and complex challenges of broad HIE adoption, and the varying role of HIE across different national health system structures.

Conclusion : HIE is an increasingly important capability and policy priority as electronic health record (EHR) adoption becomes more common and care delivery is increasingly digitized. While all five case study nations have adopted some level of HIE, there are significant differences across their level of data sharing infrastructure and maturity, and each nation took a different policy approach. While identifying generalizable strategies across disparate international systems is challenging, there are several common themes across successful HIE policy frameworks, such as the importance of central government prioritization of data sharing. Finally, we make several recommendations for future research to expand the breadth and depth of the literature on HIE and guide future decision-making by policymakers and practitioners.

1 Introduction

As health care has modernized in the 21 st century, moving away from paper-based record keeping to digital workflows following the broad adoption of electronic health records (EHRs), health information exchange (HIE) and data interoperability – the process of electronically sharing data across unaffiliated organizations including care delivery providers, payers, public health agencies, and more - have become increasingly crucial components of a modern health system [ 1 , 2 ]. Not only is widespread HIE critical to providing clinicians with a full picture of patient health status at the point of care to ensure quality and safety, robust interoperability could also slow medical cost growth through a reduction in duplicative utilization [ 3 ], and may reduce administrative burden on patients by letting their data follow them seamlessly across the continuum of care [ 4 ]. Further, the COVID-19 pandemic has illustrated the importance of readily-available patient and population-level health data aggregated across care delivery organizations – one of several critical HIE use cases [ 5 ]. Building a robust interoperable health system is therefore an important policy goal, and is essential to realizing the value of the significant investment made in digitizing health care delivery over the past several decades.

HIE appears simple in concept – the idea that all health data should be readily available to the patient and clinicians at the point of care, regardless of where that data was generated. However, the implementation of large-scale, robust HIE infrastructure and capabilities has proven difficult in health systems across the world [ 6 , 7 ]. Building connectivity between unaffiliated health care organizations presents a wide array of challenges, ranging from technical issues around data standards, governance problems with what data is shared and who owns it, privacy and security concerns for both patients and organizations, costs of technology and implementation, competitive disincentives to allow data to flow easily to other organizations, and workflow questions on how to best present busy clinicians with actionable knowledge without burdening them with irrelevant information. These challenges are situated within the broader policy framework of each nation, both their specific approach to HIE as well as how they organize care delivery in general. For example, in some nations HIE faces financial disincentives as health care organizations are reluctant to share patient data that they see as a key strategic asset in a competitive market [ 8 , 9 ]. Additionally, while the theoretical benefits of HIE are obvious, demonstrating value to patients, clinicians, and health systems at scale has been more difficult. There remain critical unanswered questions around HIE and interoperable data exchange, including how different public policy approaches have resulted in varying levels of HIE adoption and use, best practices for integrating HIE into clinical, reporting and administrative workflows, and identifying where HIE can generate the most value across a range of clinical, financial, and administrative scenarios.

In this survey paper, we discuss the concept and types of HIE, the benefits and challenges of implementing HIE systems, and use national case studies to highlight the diverse set of approaches to HIE from five different countries. We focus our review specifically on examining the policy frameworks employed by our case study nations around data sharing between acute care delivery organizations, and how they have influenced the development of HIE in each country. We then synthesize the current literature on HIE and provide recommendations for future work. Focusing on recent literature, we provide readers with a look at the current state of global research relating to HIE and identify opportunities for the informatics community to advance our knowledge and understanding of HIE across a range of domains.

We conducted a narrative review of the HIE and interoperability literature in both the peer reviewed and grey literature, focusing on highlighting the history, current state, and future strategy of five case study nations: the United States of America, the United Kingdom, Germany, Israel, and Portugal. We specifically focused on identifying literature from the last three years but did not exclude older or non-peer reviewed articles which provided important context or the most up-to-date information. The search strategy was broken down into three steps. First, we combined relevant search terms for identifying current research articles in the respective countries in MEDLINE via PubMed and Google Scholar:

(health OR healthcare OR clinical OR medical) AND (information exchange OR data sharing OR data exchange OR information sharing OR interoperability) AND (United States OR Germany OR United Kingdom OR England OR NHS OR Israel OR Portugal)

Second, we researched the official websites of the respective health authorities for additional resources (e.g., strategy papers, government reports, policy documents or other information on current legislation). Third, we complemented the search with additional grey literature based on leads from the sources found in the first two steps. Furthermore, to contrast the state of HIE between the selected countries along comparable dimensions, we used the identified literature alongside complementary sources to classify: 1) the level of EHR adoption in acute care organizations (as an essential prerequisite for HIE); 2) the overall HIE maturity; 3) the level of HIE centralization; and 4) level of incentivization for HIE as either “low”, “moderate”, or “high” for each country ( Table 1 ). We then summarized our findings across these international contexts to create a synthesized set of lessons learned, as well as areas for future study and research.

Dimensions of Health Information Exchange Across Five Nations.

3.1 Health Information Exchange – The Concept, The Verb, the Noun

As discussed in the introduction, the goal of HIE sounds simple – all health information should be available to the appropriate users (patients, clinicians, public health agencies, etc.) whenever necessary, regardless of where that data was generated. However, operationalizing this idea requires consideration of many socio-technical issues, e.g., What data should be shared with whom? What specific data elements? Who should access the data? How should data be accessed? Should the patients opt-in to data sharing, or should they be enrolled by default with the ability to opt-out? What standards and processes should be used to capture and transfer data and to ensure data privacy and security? These difficult questions, and many more, illustrate the complexity in turning HIE from an idea into a reality. HIE can therefore represent a wide array of electronic data sharing – ranging from sending flat PDF files via secure email to semantic interoperability, where standardized, structured, machine-readable data elements are transferred and integrated directly into the receiving organization’s EHR without manual intervention [ 10 , 11 ]. HIE can be a “push”, where a health system or provider sends patient data to another provider during a transition of care, or a “pull”, where the receiving system queries for any patient data available from other providers.

The term “HIE” is frequently used as both a verb and a noun [ 12 , 13 ]. HIE the verb refers to the act of data transfer, sharing data between two health care organizations, of which there are many possible technical approaches and mechanisms of data exchange. HIE the noun , however, most frequently refers to an organization that is facilitating the data transfer, sometimes known as health information exchange organizations (HIOs). They are most often vendor-neutral, compared to the vendor-mediated tools that connect organizations using the same EHR vendor [ 14 ], and HIOs provide technical capability and governance frameworks for data exchange [ 15 , 16 ]. In the United States (US), for example, these organizations can be non-profit or for-profit, based in a specific geography (e.g., state or local) or national, and may be based on a specific framework designed to streamline data exchange across different platforms and technology vendors such as Carequality, and some HIEs are a “network-of-networks” that link several other HIEs together, while in Germany the gematik, a national eHealth organization, provides similar services but with a much broader mandate to set policy, standards, and governance relative to regional US HIOs [ 17 , 18 ].

Finally, the terms HIE and interoperability are often used interchangeably. However, they are distinct concepts – HIE involves any health data transfer, in any format, whereas interoperability refers specifically to the exchange of structured data elements. In this way, sending scanned paper files in PDF form electronically would represent HIE, but not interoperability, whereas data that was sent in a machine readable format and integrated into the receiving provider’s EHR would be described as interoperability [ 19 ].

3.2 The State of International Health Information Exchange: a study of five case nations

3.2.1 the united states of america.

Following the passage of the Health Information Technology for Economic and Clinical Health (HITECH) Act in 2009, acute care hospitals and primary care physician offices in the U.S. rapidly adopted EHRs in response to federal incentives included in the Meaningful Use (MU) program [ 1 , 20 , 21 ]. While not as directly incentivized with payments to the same level as EHR adoption, a variety of public policies have focused on encouraging interoperability and HIE within US health care delivery organizations. Most directly, HITECH included several subsidies and grant programs to fund the creation, expansion, and operation of HIOs, often operating at the state or local level, to build HIE infrastructure. Several MU requirements in the later stages of the program directly incentivized at least some level of data sharing, such as requiring a certain proportion of patient care transitions to outside organizations have summary of care records sent electronically, and the EHR certification program to attest to MU ensured that EHR products were able to send and receive data electronically. These requirements have been expanded by the Centers for Medicare and Medicaid Services (CMS) Promoting Interoperability program [ 22 ]. Several policy initiatives have attempted to promote HIE adoption and use through aligning the financial incentives of care delivery organizations with data sharing, such as the proliferation of value-based payment models including bundled payments or Accountable Care Organizations (ACOs) that reward providers for reducing population-level utilization and spending [ 23 ]. These types of value-based payment reforms were intended to overcome the misaligned financial incentives in the fee-for-service payment model for care delivery in the US, and which provides no financial incentive to use HIE to avoid redundant or unnecessary services [ 19 , 24 ].

Despite the wide range of policy incentives targeted at encouraging HIE, the state of interoperability (within and across the health care delivery eco-system) in the US varies. The US Office of the National Coordinator for Health Information Technology (ONC) tracks hospital interoperability using four domains of: 1) finding/querying for data; 2) sending data electronically; 3) receiving data electronically; and 4) integrating outside data into the EHR without manual intervention [ 25 , 26 ]. Reflecting the structure of the MU certification requirements, as of 2018, the ability to send data electronically is nearly ubiquitous, with nearly 90% of hospitals reporting they often or routinely send patient summary of care records electronically. In contrast, fewer than two-thirds of US hospitals report being able to integrate outside data into their EHR, and less than half (45.4%) reported engaging in all four ONC’s interoperability domains [ 27 ]. Research has also found that hospitals and public health agencies lack bi-directional interoperability, which caused significant issues aggregating population-level data in the early days of the COVID-19 pandemic [ 5 , 28 , 29 ]. While interoperability has made progress over the past several years [ 30 , 31 ], it has been significantly slower than EHR adoption [ 1 , 21 ]. Ambulatory physician offices report even lower levels of interoperability or HIE engagement, as they often lack the organizational resources such as a full-time information technology staff to build and maintain HIE connections [ 32 ], though national-level data for these organizations is less detailed [ 33 ].

The current state of HIE and interoperability in the US is a patchwork of connectivity without a centralized national HIE approach, and whether a patient’s data follows them as they transition across care providers is determined more by whether their organizations are on the same EHR vendor or participate in the same method of HIE. Significant heterogeneity in state policy for HIE, including different approaches to governance, financial support, data privacy and patient consent laws (opt-in vs opt-out), also contributes to variation in interoperable data exchange in the US [ 34 , 35 ]. Many organizations report participating in multiple different modalities of sharing patient data, such as vendor (EHR)-based systems [ 36 ] as well as regional HIEs and national HIE networks [ 37 ]. Interoperability between acute care providers and other health care organizations, including long-term care facilities or public health agencies, is also limited and uneven across the country [ 5 , 38 ]. These results are the reflection of the somewhat scattered policy environment, with few prescriptive requirements and many diffuse and weak incentives to share data without a comprehensive path towards national-level interoperability. The value-based payment models to align financial incentives for data sharing were only modestly successful, with ACO hospitals sharing data with more types of partners, but with a lower overall volume of records exchanged relative to non-ACO participants [ 39 , 40 ], and the lack of HIE infrastructure has presented a significant barrier for ambulatory practices participating in population health management programs [ 41 ].

Future Considerations & Strategy: In 2016, Congress passed the 21 st Century Cures Act (Cures), which included several provisions to improve patient access to data as well as interoperability between provider organizations. Cures provides a framework for HIE in the US, including provisions such as outlawing “information blocking”, the practice of intentionally and knowingly blocking patient data access by health information technology developers or health care provider organizations [ 8 ], as well as updates to the ONC EHR certification criteria to mandate the use of standardized application programming interfaces (APIs) that facilitate patient access to their own health data and HIE using a common set of standards known as Fast Healthcare Interoperability Resources (FHIR) [ 42 ]. Further, the act outlined the Trusted Exchange Framework and Common Agreement (TEFCA), a voluntary technology and governance model that seeks to streamline the exchange of patient data across the multiple fragmented HIO networks that exist in the US, reducing the need for provider organizations to participate in multiple HIE networks [ 43 ]. Rulemaking for the Cures Act was finalized in 2021, with information blocking and FHIR API requirements now in place, and the first several organizations designated as Qualified Health Information Networks (QHINs) in the TEFCA framework were named in early 2023 with plans to go live within the next year [ 44 , 45 ]. This more prescriptive framework represents a departure from previous efforts focused on aligning financial incentives, and will hopefully deliver significant improvements to interoperability in the US.

3.2.2 Germany

Germany initiated the development of a dedicated infrastructure for HIE, called the telematics infrastructure (TI), for the statutory health insurance (SHI) system in 2004. The TI uses an opt-in patient consent model that also requires the patients provide their clinician with a physical card that authorizes access and changes to the data stored in the TI. This was followed, however, by a prolonged timeframe of disagreements and mutual obstruction among the main shareholders of the national organization that was made responsible for the development of the TI (the so-called gematik) [ 46 ]. The ensuing stalemate was said to be driven by a mix of poor federal governance, lack of a strategy, lack of consensus-building, excessive data protection concerns on the part of the physician associations, and miss-aligned financial incentives which severely hampered progress towards widespread HIE practices [ 46 47 48 49 50 ]. From 2016 on, renewed legislative efforts were made to implement the TI and to subsequently specify how data ought to be exchanged through a central EHR system that utilizes the TI. Also, the federal ministry of health intervened in 2019 and took over the majority shares of the gematik to be able to undercut further deadlocks between the main parties (particularly the National Association of SHI Funds, the National Association of SHI Physicians, and the German Hospital Federation).

As part of the latest legislative initiatives, the National Association of SHI Physicians was made exclusively responsible for specifying syntactic and semantic standards for exchanging health information via the central EHR system. Although this recently resulted in an increased focus on international standards (e.g., FHIR, SNOMED CT, and LOINC), Germany’s HIE capabilities remain at a low level. While all German EHRs are now required to be interoperable with the TI infrastructure [ 51 ], a survey from 2017 showed that only a fraction of German hospitals are able to regularly exchange data with other providers or the patients electronically [ 49 ]. More recent data corroborate these findings [ 52 ] – and note poor HIE between physicians in ambulatory care settings and low adoption rates of the central EHR by patients [ 17 , 53 ]. However, the central EHR system and related components are still being developed and the current government has committed to switching from an opt-in to an opt-out principle for all members of the SHI, thus hoping to significantly increase HIE engagement. Still, Germany is generally considered to perform worse in HIE as compared to the US, England, Portugal and Israel [ 6 , 54 ].

Future Considerations & Strategy: Germany’s previous “hands-off” approach to facilitating HIE can hardly be classified as strategic. And with few exceptions, neither the health insurance companies nor the various providers or the state governments developed HIE systems themselves from the ‘bottom-up’. To cope with the resulting inadequacies, the federal ministry of health started intervening through numerous legislative initiatives, especially after a change in leadership in 2018. These were primarily concerned with further developing the TI as a single, centralized HIE system and the central EHR system as well as a comprehensive financial incentive program for hospitals that, among others, aims at the widespread adoption of patient portals to exchange data with the patients and other providers. From an organizational viewpoint, clearer lines of responsibilities were instituted within the self-governing bodies (e.g., the physician’s association was made solely responsible for defining standards to be used in the central EHR and the health insurance companies for providing the EHR to their beneficiaries). Additionally, a decree was issued in 2021 to create a governance structure for ensuring universal interoperability with the so-called Interop Council at the center and binding directives for providers and vendors to adhere to certain standards. However, some of these initiatives were criticized as being reactive rather than proactive, partly disconnected from one another and at risk of creating parallel HIE structures. Hence, calls for a coherent strategy followed, which the current federal ministry has taken up and is expected to announce in 2023.

3.2.3 The United Kingdom

The English National Health Service (NHS) has had a long and checkered history of building its HIE capabilities [ 55 ]. Capitalizing on its centralized make-up and control, the NHS has focused on defining and propagating technical and data standards as early as 1992. Significant investments were made early on which led to the incremental establishment of a connectivity framework, comprising the Health and Social Care Network, the “NHS Spine”, as well as various other central and local services for enabling HIE [ 7 , 55 ]. Current rules for data sharing in the United Kingdom (UK) use an implied consent (or explicit ‘opt-out’) model for direct patient care purposes [ 56 ].The NHS’s strategic approach has often been characterized as largely coming from the ‘top-down’ [ 55 , 57 ]. Particularly the much-discussed National Programme for Information Technology (NPfIT) from 2003 exhibited high degrees of central control. It attracted a lot of criticism and is said to have failed partly because of this high degree of centrality [ 57 ]. Still, the NPfIT contributed fundamentally to the connectivity framework in its current form. The NHS subsequently moved on to allow for more local variation in their following strategies, thus shifting towards what has been characterized as a ‘middle-out’ approach [ 55 ].

The NHS’s early commitment to HIE, together with a convoluted interplay of policy and technology changes over time has resulted in a rather complex ecosystem of patient health records [ 58 ]. Perhaps most importantly, Summary Care Records (SCRs) containing basic patient information such as medications and allergies are available and used by almost all general practitioners via the NHS Spine digitally and this functionality is required for EHRs [ 59 ], and more comprehensive shared records are increasingly being adopted by local NHS organizations and systems. The increase in shared records partly results from more recent initiatives – particularly the Information Governance Framework for Integrated Health [ 60 ]. However, despite the NHS’s relatively advanced stage of HIE adoption [ 7 ], data sharing and interoperability challenges remain – particularly with regard to the EHR vendor specificity of HIE systems in place as well as information exchange with and between hospitals [ 58 , 61 ]. While a recent study by Watkins et al. shows that the use and user satisfaction with an EHR vendor-specific solution is quite high, another study by Warren et al. points to substantial misalignments and information exchange barriers that remain between hospital trusts that use different HIE solutions [ 58 , 62 ].

Future Considerations & Strategy: The NHS continues to actively adjust and adapt its HIE strategy from a rather central angle while explicitly leaving room for variations by local NHS authorities and systems. Most recently, this finds expression in its 2022 “data saves lives” strategy and in the substantial reforms of its governance structure [ 63 ]. These activities might best be summarized as the ambition to consolidate, advance, and capitalize on its HIE capabilities. As a principal challenge in delivering universal interoperability still lies in the fragmentation of responsibilities for the HIE infrastructure [ 61 ], the NHS plans to consolidate the previously separated public bodies NHS Digital, NHSX and NHS Improvement under one roof in 2023 - that of NHS England to form a centralized, single HIE system. This consolidation is also reflected in the data strategy’s premise itself, which views HIE not as an isolated matter, but rather as an integral part of a wider and more far-reaching data strategy. It thereby, among other things, aims at giving patients greater control over their data and creating secure data environments for research. From a technical viewpoint, the strategy commits to enhancing the usage of international standards (particularly in the form of UK-wide HL7 FHIR Profiles), the usage of cloud services, and services to centrally find and retrieve records from the various systems. In terms of advancements, it aims to extend the types of data exchanged such as health information from wearables and, crucially, social care data. Lastly, the strategy also sketches out further steps to better harness health data for research, promote the application of AI technologies in reference to the Topol review [ 64 ], and steps to continue to work towards establishing a learning health system – thus capitalizing on its current and anticipated HIE capabilities [ 65 ], These activities reflect an integrated, holistic policy approach and a structured governance framework to integrate care pathways across siloed responsibilities to encourage health information technology-based innovation [ 66 ].

3.2.4 Israel

HIE structures and practices in Israel have been closely tied to the structure of the country’s healthcare system [ 67 ]. Within their universal national health insurance system, each Israeli citizen is a member of one of the four not-for-profit Health Maintenance Organizations through which they receive both insurance and care. While the Ministry of Health (MoH) is responsible for overarching policy, regulation, planning, budgeting, etc., the HMOs have been relatively independent in the way they design their healthcare services. The competition among them as well as their integrated accountability for the patients across various care settings is said to have facilitated innovation-seeking strategies from the bottom-up, including the adoption of HIE solutions within the HMOs [ 54 , 67 ]. The largest of the four HMOs, ‘Clalit’ (which covers roughly 52% of the population and exhibits the highest degree of vertical integration from primary to tertiary care services), was an early adopter of an HIE system called OFEK – a distributed system that enabled the retrieval of basic patient information from any kind of local EHR system through a specific interface, with patients automatically enrolled with an opt-out option [ 68 , 69 ]. Although the system was found to create local benefits in terms of reduced test ordering and nearly all Israeli EHRs were interoperable within HMOs [ 70 ], information exchange outside the HMOs remained insufficient and patient access to their medical data is still rather limited for many citizens [ 6 ]. In light of these limitations, the MoH started taking on a more active role to promote widespread HIE. This was first expressed by adopting OFEK as a single centralized HIE system to be used on a national level across all service providers by 2014 [ 70 , 71 ]. Subsequently, the MoH also published a digital health strategy in 2018 in which HIE was recognized as a foundational strategic element [ 71 , 72 ]. Correspondingly, OFEK was further developed and eventually upgraded to a new version with more comprehensive and advanced functionalities, called EITAN. The implementation of EITAN was supported by a financial incentive program for the adopting organizations and designed as an opt-out system to ensure widespread use [ 71 , 73 ].

Most Israeli healthcare organizations have now adopted EITAN. Similar to its predecessor OFEK, EITAN uses a decentralized architecture: clinical data are stored in local databases within the provider organizations based on a nationally consented clinical dataset. These databases operate using a proprietary and detailed mapping of clinical data elements into a semantic interoperability standard, and receive their data from the organization’s EHR and are connected through a national HIE network which has its hub at the MoH [ 74 ]. Thus, patient data can be shared and accessed by authorized personnel in all provider organizations. However, due to the usage of varying HIE solutions in conjunction with different local EHR systems over time, challenges remain concerning the consistent use of standards and terminologies [ 71 , 75 ]. Furthermore, Itzhaki et al. recently found that many ward nurses, contact nurses (who are responsible for care coordination across providers), and patients are still unaware of EITAN which impedes its effective use [ 76 ]. Additionally, there is a nascent but growing community emphasizing the use of HL7 FHIR standards in Israel, including the MoH, which launched the first FHIR-based projects in 2021 [ 75 ]. But despite these drawbacks, Israel’s HIE capabilities are viewed as rather advanced as compared to many other developed countries [ 54 , 72 ].

Future Considerations & Strategy: The MoH continues to actively support the adoption and further development of its nationwide HIE solution EITAN based on a public-private partnership [ 72 , 77 ]. Thus, local-level HIE innovations within the HMOs have largely given way to more centralized strategic planning and execution by the MoH to promote coherence across health system silos. For example, this is currently reflected in efforts to improve the interoperability and accessibility of clinical information for advanced data analytic services by pursuing the widespread implementation of HL7 FHIR [ 75 ]. Despite this tendency for more centralized planning in many regards, the MoH still aims to facilitate bottom-up innovation based on their past successes by, for example, providing funding for digital health services such as third-party clinical decision support tools that utilize data from the HIE network [ 72 , 78 ]. Going forward, it is also expected to aim for enhanced patient access to their medical data through mobile, personal health record solutions [ 71 ] – thereby making further progress in realizing the paradigm shift towards more personalized medicine.

3.2.5 Portugal

Portugal’s national HIE strategy has gone through several transitions since its foundation in the 1990s. If in the late 90s and early 2000s, the Portugal eHealth ecosystem was recognized as being the most advanced for its time, i.e. being one of the first countries to implement nationwide unique health identification, it has been lacking the same propelling drive since the early 2000s. The prevalent idea until the early 2000s was monolithic solutions that, in theory, would cover most of the institutions’ Health Informatics necessities. However, the 2010s brought a different perspective to the Portuguese landscape.

This happened for mainly two reasons, SONHO as a mandatory software and LIGHt (Local Interoperability Gateway for Healthcare). SONHO is a public admission-discharge-transfer (ADT) health information system (HIS) and in 2013 all public hospitals were forced by law to migrate their current solutions to it [ 79 ]. This software is the base for registering administrative and demographic data and was first built in the early 90s. Even though it has passed through several iterations and improvements, the core is still very similar to its original one (based on Oracle 8).The second reason is an infrastructure called LIGHt which functions like a broker that is used to communicate health information from the state-provided software (i.e., SONHO) to third parties and is highly based on the HL7 version 2 standard [ 80 ]. This was a significant paradigm shift as this gateway provided the state-owned HIS the ability to connect with third parties. All this software and infrastructure is provided by SPMS, a state-owned enterprise, which is the governmental branch and the center of public eHealth policies, infrastructure, acting as regulator and HIS developer. This centralized top-down initiative was meant to enable better, faster interoperability progress, though it may come at the cost of innovation as private technology developers are unable to find a market in Portugal [ 81 ], and may explain why many large information technology companies do not have a significant presence in the country as Portugal’s health information software systems are based on public, state-owned systems.

Due to the mandatory migration, virtually all public hospitals have the same basis for administrative data input and different health information systems for the clinical data (some public and some private). Private care delivery organizations are free to choose which health information software to use and now are not part of the HIE structure [ 82 ]. The data stored in public software is exchanged through the RSE (“Registo Saúde Eletrónico” – Portuguese for Electronic Health Record) [ 83 ]. From its inception, the RSE was designed to act as an aggregator of health data, with a similar structure to a hybrid federated approach having three different layers of information, ranging from local to shared/centralized data. In the middle layer, rests interoperability with existing systems. The catalog of data available at the moment in the RSE is difficult to collect and aggregate, but the high-level national goal is to provide access to general information about medication, diagnosis, demographic data, procedures, vaccination, and laboratory exams in the shared layer [ 84 ]. While the definition of full interoperability is constantly being updated, a major barrier to completion is physical hardware, where it is estimated that the public sector has between 25% and 50% of the necessary computer equipment across care delivery and public health agencies [ 85 ].

Future Considerations & Strategy: The current focus of the MoH is applying eHealth efforts supporting the patients, namely telemedicine and personal smartphone applications. Key points from Portugal’s scene from 2021-2022 were the telemedicine support for its HIS. In 2019, the Portuguese MoH introduced PENTS (National Strategic Telehealth Plan), with an aim to provide access to telehealth across the country [ 86 ], with a focus on chronic illnesses [ 87 ]. Further, SNS24 – the personal app provided by SPMS has received several updates over the last two years, and can now be used by patients to access key health information due to connection with RSE. Vaccines, prescriptions, referrals, teleconsultations, allergies, and sick leaves are some of the possible information to view in the app [ 88 ]. These two points are defined by the national strategy for the Health Information Ecosystem 2020 which is focused on three aspects: governance and strategy alignment; improvement of human resources’ competencies and technological upgrades [ 89 , 90 ]. Finally, Portugal faces several future challenges which have yet to be addressed in a formal way. Data security is a growing issue, with several hospitals having been attacked by ransomware hackers over the last few years and the strategy to respond to this matter is still being formalized [ 91 ]. Several workgroups were created, but a clear guideline or approach is yet to be determined. Further, patient consent processes remain an ongoing area of development in Portugal – currently, many patients engage in a two-step consent process where they consent for their inclusion and for each use of medical services for some features (such as e-prescribing), but for other features such as the use of HIE for clinical care by providers, implied consent (or an opt-out consent model) is the norm, while the patient-facing portals have stricter consent requirements [ 92 ]. Experts rated “Inadequate or inconsistent approaches to patient consent” as a major barrier to interoperability in Portugal in 2020 [ 93 ]. Additionally, data quality issues remain problematic – researchers have found large discrepancies in reconciling different electronic referral records in Portuguese hospitals [ 94 ]. Keeping in mind that evidence generated from data is the basis of clinical practice, ensuring quality and accuracy standards is key to going further into digital adoption and fulfillment of national strategies around the world.

4 Discussion

While deriving generalizable insights from the case studies of the health systems presented here is difficult, given the unique legislative and regulatory, policy, and health care delivery environments in each, our study contributes to our understanding of how policy shapes HIE adoption and use by identifying several commonalities across our five focal nations. First, successful national HIE requires some level of central strategic planning and involvement, irrespective of health system type. As Payne et al. noted in their paper comparing HIE internationally, “ in countries that have successfully achieved HIE, or are on course to do so, the impetus came from government and the change was galvanized with economic incentives to health care providers ”[ 7 ]. Despite operating within different payment and care delivery environments, both Israel and Portugal have more advanced HIE capabilities than the US, in part due to the emphasis placed on data exchange by a national-level policy. However, centralization is not a guarantee of complete success without adversity – the UK NHS has, and continues to, experienced challenges in their HIE strategy despite the extremely high level of organizational centralization in the UK. However, “bottom-up” innovation and early adoption can spur important progress, such as the adoption of early HIE systems by Israel’s largest HMO, Clalit, which provided a blueprint for national adoption. The US may soon experience a similar process – despite the relatively “hands-off” nature of their early HIE strategy, several pockets of successful HIE did develop, which serve as a model for a new strategy following the 21 st Century Cures Act focusing on APIs, FHIR standards, and penalties for information blocking.

The variation in HIE policy and success across varying nations reflects the multiple challenges of HIE, including aligning financial incentives for adoption and use, technical challenges, governance choices, and integration of outside data into clinical workflows. If the only serious impediment to broad interoperability were financial incentives, the UK NHS would have had a simple time achieving robust HIE. Similarly, while HIE is far from robust in the US, it is likely more advanced than the German system despite featuring an even more decentralized, competitive, and market-oriented care delivery system. Socio-technical challenges around setting standards, generating awareness of the HIE and encouraging adoption without burdening clinician and patient users, and building governance models with broad acceptance that are flexible enough to adapt to changing technological and social needs are common across our case study nations.

While there is no clear “best” overarching HIE strategy, multiple approaches may be effective in facilitating robust interoperable data exchange. For example, it may be that a “middle-out” system, defined by Price et al. as centralized leadership with strong public-private collaboration and more local control by individual care delivery organizations similar to the current strategy in the UK, may provide a balanced approach to these challenges, preserving local innovation around issues like workflow integration by private vendors and health care organizations while setting national-level interoperability incentives, standards, and governance frameworks [ 55 ]. Similarly, heavily centralized approaches may be successful, as Israel’s increasing centralization has shown. However, the early experience of the US during the HITECH era illustrates the difficulty of achieving broad, robust interoperability with a heavily decentralized policy framework – even with significant effort to build EHR infrastructure and align financial incentives. Each system must recognize the importance and centrality of the patients – from giving them the final say in the ability to opt-out of data sharing such as in Israel to enabling them to access all their clinical data in the US, any national HIE strategy must work to ensure patients’ changing needs are being met. Policymakers may wish to focus on creating integrated care structures that maximize incentives to share data while simultaneously ensuring there is a national-level interoperability strategy that makes data exchange a priority, with prescriptive guidance around standards and governance. At the same time, these strategies need to be adaptable to an ever-changing world, and researchers should carefully monitor and evaluate HIE progress to inform policymakers and allow them to be flexible in their approach. Finally, ensuring awareness among users (e.g. clinicians, patients, payers, public health agencies, etc.) and supporting actual use of HIE is critical to move from encouraging building interoperable data exchange to maximizing the potential of HIE to improve health and care delivery.

Directions for Future Study, Research and Policy Implications: While there is a significant and growing literature, there are still many unknowns with respect to HIE. While we provide speculation above regarding how different policy frameworks have influenced the development of HIE in five nations, in many dimensions of HIE we are unable to make direct cross-country comparisons due to a lack of data or published research. Standardized measures of HIE in terms of data exchanged, semantic interoperability, use by frontline clinicians are often not available at the national-level, or only available in aggregate form or with organization-level survey measures that do not provide granular details of use. Our analysis was limited to holistic, qualitative evaluations of HIE maturity, centralization, and incentives due to this lack of broad, comparable empirical measures, and we supplemented what literature exists with small and single-site studies, policy briefs, and grey literature. To remedy this, we provide a non-exhaustive list of areas for additional future research:

• Measurement : Many measures of HIE focus on organization-level adoption, rather than evaluating actual real-world use (e.g., how often data from HIE is used in care delivery, or aggregated into population-level data by public health agencies), especially in studies measuring at a national-level [ 33 , 95 ]. More granular measurement, including measuring volume of outside records exchanged, viewed, and their influence on the patient and clinician, is the next frontier of HIE measurement. Finally, measuring whether and how clinicians actually use that data when delivering care is critical to improving HIE policy at a national level and implementation at a local level.
• Impact : While early modeling studies have predicted significant cost reductions from HIE [ 3 ], many empirical studies have found it difficult to identify broad gains in either quality or cost [ 96 ]. Additional research, especially studies with robust designs for causal inference, is important to identify the impact of HIE on quality, costs, and the patient experience [ 97 ].
• Workflow : Given growing concerns over clinician EHR work [ 98 , 99 ], especially in the US [ 100 ], it is critical for HIE to present outside records within existing workflows without exacerbating burden. Early studies show integrating HIE into the standard patient history screen greatly increased clinician views of outside records [ 101 ], future research should evaluate how and when to present information from various sources (e.g., other providers; patient reported data; remote monitoring devices) to clinicians across various clinical scenarios and settings (e.g., inpatient, outpatient, emergency; post-acute care; community health providers).
• Population Health and HIE as “Data Utility” : While HIE has always held great potential as a data aggregation source to fuel population-level analytics, the COVID-19 pandemic demonstrated the importance of this information. Several efforts are underway to conceptualize HIEs more broadly as a “data utility”, including using HIE data for more accurate clinical quality measurement, data aggregation for research, and public health analytics [ 102 , 103 ]. While still a nascent field, following the development of these next-generation efforts and evaluating their effectiveness is critical to guide the next phase of HIE.

HIE research is at an important inflection point – moving past structural measures of adoption to evaluating volume and impact at scale, best practices for integration of data into clinical workflows across a range of scenarios and broadening the spectrum of HIE use cases. Scientific research plays a critical role in the continuous evaluation of HIE to inform the healthcare eco-system (including patients, policymakers and practitioners) of the value of data sharing and avoid potential pitfalls and unintended consequences.

5 Conclusion

Following the digitization of health care delivery, HIE and data interoperability has become increasingly important for delivering high quality care. HIE can reduce costs and duplicative utilization, improve the patient experience, and empower patients with access to their data, and ensure clinicians have access to all relevant information for their patients at the point of care, no matter where that data was generated. While implementing robust national HIE has been a challenge, our case studies highlighting different approaches from five nations suggest some generalizable policy frameworks that balance centralized decision-making around standards and governance but allow for local innovation in technical capability and workflow integration. Future research on HIE should include more detailed measurement of data exchange and use, the impact of interoperability on patients and care delivery organizations and assessing new frontiers of using HIE for public and population health.

• Corpus ID: 167134121

Foreign Exchange Exposure and Management : Case study of two large Multinationals

• Coline Sume Emadione
• Published 2009
• Economics, Business

2 Citations

An investigation of foreign exchange risk management in chinese multinational companies compared with us and uk mnes, an assessment of foreign exchange risk management process: the case of davis and shirtliff company limited of arusha tanzania, 21 references, the management of foreign exchange risk in us multinational enterprises: an empirical investigation, the management of foreign exchange risk in uk multinationals: an empirical investigation, managing foreign exchange risk with derivatives, foreign exchange risk management in uk, usa and asia pacific multinational companies, financial innovations: some empirical evidence from the united kingdom, corporate use of innovative foreign exchange risk management products, the management of strategic exchange risk: evidence from corporate practices, risk management: coordinating corporate investment and financing policies, the practice of financial risk management: an international comparison, the use of foreign currency derivatives and firm market value, related papers.

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International Exchanges Beyond COVID-19

​International exchanges are an essential part of campus internationalization and global engagement.  More broadly, they strengthen our democracy by developing stronger institutions and better citizens. 

The pandemic has prompted some vital questions about the future of exchanges: 

• What will the world of exchanges look like after the pandemic has subsided? 
• Should campus leaders take a fresh look at exchanges and how they contribute to their international goals?
• Should we move more decisively toward [online collaboration] versus physical mobility? 

With support from the Konrad Adenauer Foundation , ACE will explore these questions in a series of webinars and case studies that will focus on faculty, student, and professional exchanges. 

Focusing on the relationship between the United States and the European Union, ACE Engage convened a series of discussions among academic experts, former participants, and campus executives.  The webinars built on an ebook on the same topic, which was released in late March.

These webinars took place on April 1, 15, and 22, and focused on faculty exchanges, student exchanges, and professional exchanges.

An ebook with six chapters takes a close look at the current state of international exchanges and make some predictions about their future after the pandemic.  The geographic focus is on the European Union, including the impact of recent political developments on the bilateral US-EU relationship.  The eight authors are a unique combination of academic experts and seasoned practitioners.

Explore Individual Chapters

Introduction.

​The first section introduces the volume.  Brad Farnsworth, lead author for the series, lays out the themes that are explored throughout the remaining chapters, including the impact of technology, the need for more rigorous evaluation, and the need to align the goals of exchange programs with the broader institutional mission of ACE institutions.

​The first chapter focuses on scholarly exchanges, with a focus on the Fulbright Program, the government-funded exchange program with the strongest name recognition and public support in the United States.  Ray Mitic notes that the program is at a critical inflection point after a successful 75-year history.  He proposes a number of changes in order to strengthen the program and specifically discusses the contribution of exchanges to the overall US-EU relationship.

​Chapter 2 moves to the area of professional exchanges, taking a close look at exchanges in the field of journalism.  Birgit Rieck describes the key elements of successful programs for mid-career professionals while raising some important questions about the benefits to sending and hosting organizations.  She concludes with case studies of how exchanges have led to ongoing collaboration among journalists worldwide.

Chapter 3 focuses on the world of international research collaboration, a complex eco-system with formal funding structures augmented by informal, “bottom up” networks.  Recent advances have greatly enhanced our ability to measure the impact of research collaboration across borders.  Co-authors Laure Haak and Caroline Wagner make some critically important points about investing in infrastructure—including norms and standards—that would expand research collaboration beyond elite institutions.

​Chapter 4 begins the discussion of student exchanges.  Co-authors Amelia Dietrich and Melissa Torres cover a broad range of issues while focusing on technology as a means to improve the exchange experience--including interventions before, during, and after the travel stage.  They discuss evaluation and impact in detail, making some important recommendations for improving measurement and accountability.

​The final chapter continues the discussion on student exchanges, focusing on the exchanges at the graduate level and MBA programs specifically.  Lisa Miller describes the challenges of designing travel programs for students in professional schools, and especially the challenge of increasing interest in the European Union as a destination.  She concludes with several recommendations for designing programs that would increase student interest.

This project is generously supported by the Konrad Adenauer Foundation .

Read the Ebook

An ebook with six chapters takes a close look at the current state of international exchanges and make some predictions about their future after the pandemic.

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Top 10 International Business Negotiation Case Studies

International business negotiation case studies offer insights to business negotiators who face challenges in the realm of cross-cultural business negotiation..

By PON Staff — on March 26th, 2024 / International Negotiation

If you engage in international negotiation , you can improve your odds of success by learning from these 10 well-known international business negotiation case studies:

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• Apple’s Apology in China

When Apple CEO Timothy D. Cook apologized to Apple customers in China for problems arising from Apple’s warranty policy, he promised to rectify the issue. In a negotiation research study, Professor William W. Maddux of INSEAD and his colleagues compared reactions to apologies in the United States and in Japan. They discovered that in “collectivist cultures” such as China and Japan, apologies can be particularly effective in repairing broken trust, regardless of whether the person apologizing is to blame. This may be especially true in a cross-cultural business negotiation such as this one.

• Bangladesh Factory-Safety Agreements

In this negotiation case study, an eight-story factory collapsed in Bangladesh, killing an estimated 1,129 people, most of whom were low-wage garment workers manufacturing goods for foreign retailers. Following the tragedy, companies that outsourced their garment production faced public pressure to improve conditions for foreign workers. Labor unions focused their efforts on persuading Swedish “cheap chic” giant H&M to take the lead on safety improvements. This negotiation case study highlights the pros and cons of all-inclusive, diffuse agreements versus targeted, specific agreements.

• The Microsoft-Nokia Deal

Microsoft made the surprising announcement that it was purchasing Finnish mobile handset maker Nokia for $7.2 billion, a merger aimed at building Microsoft’s mobile and smartphone offerings. The merger faced even more complexity after the ink dried on the contract—namely, the challenges of integrating employees from different cultures. International business negotiation case studies such as this one underscore the difficulties that companies face when attempting to negotiate two different identities.

• The Cyprus Crisis

With the economy of the tiny Mediterranean island nation Cyprus near collapse, the International Monetary Fund (IMF), European Central Bank (ECB), and the European Commission teamed up to offer a 10-billion-euro bailout package contingent on Cyprus provisioning a substantial amount of the money through a one-time tax on ordinary Cypriot bank depositors. The move proved extremely unpopular in Cyprus and protests resulted. The nation’s president was left scrambling for a backup plan. The lesson from international business negotiation case studies such as this? Sometimes the best deal you can get may be better than no deal at all.

• Dissent in the European Union

The European Union (EU) held a summit to address the coordination of economic activities and policies among EU member states. German resistance to such a global deal was strong, and pessimism about a unified EU banking system ran high as a result of the EU financial crisis. The conflict reflects the difficulty of forging  multiparty agreements  during times of stress and crisis.

• North and South Korea Talks Collapse

Negotiations between North Korea and South Korea were supposed to begin in Seoul aimed at lessening tensions between the divided nations. It would have been the highest government dialogue between the two nations in years. Just before negotiations were due to start, however, North Korea complained that it was insulted that the lead negotiator from the South wasn’t higher in status. The conflict escalated, and North Korea ultimately withdrew from the talks. The case highlights the importance of pride and power perceptions in international negotiations.

• Canceled Talks for the U.S. and Russia

Then-U.S. president Barack Obama canceled a scheduled summit with Russian President Vladimir Putin, citing a lack of progress on a variety of negotiations. The announcement came on the heels of Russia’s decision to grant temporary asylum to former National Security Agency contractor Edward Snowden, who made confidential data on American surveillance programs public. From international business negotiation case studies such as this, we can learn strategic reasons for  breaking off ties , if only temporarily, with a counterpart.

• The East China Sea Dispute

In recent years, several nations, including China and Japan, have laid claim to a chain of islands in the East China Sea. China’s creation of an “air defense” zone over the islands led to an international dispute with Japan. International negotiators seeking to resolve complex disputes may gain valuable advice from this negotiation case study, which involves issues of international law as well as perceptions of relative strength or weakness in negotiations.

• An International Deal with Syria

When then-U.S. Secretary of State John Kerry and his Russian counterpart, Sergey Lavrov, announced a deal to prevent the United States from entering the Syrian War, it was contingent on Syrian President Bashar al-Assad’s promise to dismantle his nation’s chemical weapons. Like other real-life negotiation case studies, this one highlights the value of expanding our focus in negotiation.

• A Nuclear Deal with Iran

When the United States and five other world powers announced an interim agreement to temporarily freeze Iran’s nuclear program, the six-month accord, which eventually led to a full-scale agreement in 2015, was designed to give international negotiators time to negotiate a more comprehensive pact that would remove the threat of Iran producing nuclear weapons. As Iranian President Hassan Rouhani insisted that Iran had a sovereign right to enrich uranium, the United States rejected Iran’s claim to having a “right to enrich” but agreed to allow Iran to continue to enrich at a low level, a concession that allowed a deal to emerge.

What international business negotiation case studies in the news have you learned from in recent years?

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It would be interesting to see a 2017 update on each of these negotiations.

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Volume 11 Supplement 2

Global health research case studies: lessons from partnerships addressing health inequities

• Introduction
• Open access
• Published: 08 November 2011
• Zoë Boutilier 1 ,
• Ibrahim Daibes 1 &
• Erica Di Ruggiero 2  

BMC International Health and Human Rights volume  11 , Article number:  S2 ( 2011 ) Cite this article

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Inspiration for compiling this collection of case studies comes from the Global Health Research Initiative’s (GHRI) commitment to conceptualizing and supporting global health research as a practice with increasingly discernable core characteristics. Through an exploration of these characteristics, the collection highlights practical, relevant and transferable lessons for consideration by researchers, their research-user partners, and donors working to address health inequities through global health research partnerships. The value of global health research partnerships is illustrated through the achievements of the collaborations featured in this collection.

The ten case studies included in this collection do not describe individual research projects. Instead, they each provide an in-depth account of a defined program of research that acts as a platform for theoretically linked research projects. The programs are an integrated blend of knowledge generation, capacity building, and knowledge translation activities that have evolved towards increasing complexity and sophistication. In particular, attention to capacity building and knowledge translation increases as the programs mature over time. The programs of research are animated by a core alliance of individuals whose international partnerships are rooted in mutual trust and the articulation of a common goal: health equity.

The cases presented in this collection are concerned with health inequities experienced by certain population groups. For example, the two cases set in South Asia (Haddad et al., Mumtaz et al.) are both concerned with the persistent health inequities that are experienced by lower-caste women belonging to marginalized indigenous groups. Another disadvantaged population group highlighted twice in this collection is people living with HIV/AIDS in rural Sub-Saharan Africa (Kipp et al., Sodhi et al.). A third group, Ecuadorians with limited resources who are vulnerable to environmental degradation and to acute pesticide poisoning, is also highlighted twice in this collection (Spiegel et al., Cole et al.). All of these groups face persistent social and health inequities that have “both historical roots and present day causes” (Cole et al.).

This collection features partnerships that include Canadian researchers. This is in part not accidental given that these cases were compiled by Canada’s Global Health Research Initiative (GHRI), a partnership between five Canadian government agencies that are responsible for health, health research and international development (the International Development Research Centre, the Canadian Institutes of Health Research, Health Canada, the Canadian International Development Agency, and the Public Health Agency of Canada). Over the past ten years, GHRI has sought to understand the characteristics of effective global health research and to create an environment that is conducive to its successful conduct. While the programs described in this collection are not all directly supported by GHRI, they share characteristics that are common to the programs of research supported by GHRI. We emphasize these characteristics here because we believe that they are core to the practice of global health research. The practice of global health research as described in these case studies and as supported by GHRI is characterized by:

1) long-term and sustainable North-South partnerships;

2) interdisciplinary responses to complex issues;

3) participatory action research that grounds the research in its context; and

4) research with a policy or practice impact orientation.

In this introductory essay we elaborate on each of these characteristics. We also take this opportunity to highlight some of the commendable achievements of the partnerships. At the same time, we do not neglect to expand on the challenges that face global health research partnerships, nor fail to recognize the systemic barriers that too often confine researchers, research-users, and donors.

Long-term, sustainable North-South partnerships

The complexity of health issues addressed by global health research programs necessitates long-term visions and timelines. On average, the partnerships described herein have been in existence for just short of a decade; in two cases the partnership has been in existence for almost a decade and a half (Haddad et al., Kipp et al.). This commitment to long-term, North-South partnerships is significant given that political, institutional, and professional priorities tend to change with time. Literature on North-South partnerships is often pessimistic about the prospects for partnership sustainability, with repeated references to pervasive power imbalances in agenda-setting, in funding sources, and in allegiance to methodologies and scientific traditions [ 1 – 3 ]. These and other issues present an ongoing challenge to attempts to establish and maintain long-term North-South research partnerships. Despite these challenges, the case studies in this collection demonstrate that partnerships of this kind can not only be sustained, but can thrive.

The sustainability of these partnerships might be a product – or a cause – of a continued evolution in sophistication and approach. In the case of Delisle et al., the process of exploring the initial research questions and assumptions led to new ones that needed to be tested. The generation of scientific knowledge, often the initial impetus for the partnership, was enhanced over time by an increasing investment in capacity building and knowledge translation activities. In the words of Haddad et al., “The initial focus on survey-based research and data analysis gradually transformed in the direction of understanding local governance, political analysis, marginalization, gender and empowerment” [ 4 ]. In most of the cases, the overall program of research systematically emerged from its component parts. For example, Cole et al. describe their progression through three distinctly-funded projects (‘EcoHealth II’ funded from 2005 to 2008, ‘Healthy Horticulture’ funded from 2007 to 2010, and ‘Social Capital and Accountability’ funded from 2008 to 2011). Each project was designed to build on the last; not just in terms of the scientific knowledge generated, but also in terms of the human capacity developed and the impact on policy and practice. Similarly, Spiegel et al. describe the phases that made up their Ecuador EcoHealth program: a nationally-accredited ‘train-the-trainers’ Master’s program led to the establishment of other Masters programs and eventually to the launch of an innovative doctoral program. The evolution of the research program seems to reflect an evolving understanding of the problem, a greater appreciation for nuances and context, and the consolidation of the numerous relationships that must be in place for the purposes of credibility.

Another key similarity that links these longstanding, multi-stage, and evolving programs of research is their success in attracting funds from different sources over time. This may seem obvious, given that many of these partnerships have been in existence for almost a decade and given that donors generally do not commit to ten year timelines. It is instructive nonetheless to observe that these programs of research were sufficiently multi-faceted and compelling to be supported by a series of different donors, each with unique (albeit sometimes overlapping) mandates. The research program of Yassi et al. is one good example, having received at various times support from sources including (but not limited to) the Canadian Institutes of Health Research (CIHR), the Canada Research Chairs program, the Canada Foundation for Innovation (CFI), the International Development Research Centre (IDRC), the Canadian International Development Agency (CIDA) and Health Canada (HC). Likewise, the program of Ridde et al. received funding from IDRC (through its Research for Health Equity program), from GHRI (through its Africa Health Systems Initiative program), and from CIHR (through its New Investigators program). It is apparent, therefore, that long-term partnerships have the ability to supersede and outlast their current funding arrangements when they have a coherent and compelling motivation that both keeps them together during periods of financial uncertainty, and renders them fundable across a spectrum of donors.

Interdisciplinary responses to complex issues

The majority of the research partnerships featured in this supplement are, or strive to be, interdisciplinary both in their composition and in their approach to problem solving. We see, for example, partnerships that join development economists with physicians (Haddad et al.), biostatisticians with nurses (Kipp et al.), and infectious disease biologists with occupational health professionals (Yassi et al.). We also see partnerships that embrace qualitative and quantitative researchers, researchers and decision-makers, established and junior researchers, and academics and activists. Adding yet another layer of complexity, most of the partnerships featured here involve members from far-flung geographic regions and different cultural backgrounds. Spiegel et al. sum up all of these dimensions, when they explain that “knowledge sharing has fundamentally taken place within the dynamic of difference…three or more cultures, half a dozen disciplines, distinct paradigms, (and) three languages…” [ 5 ]. If the partnerships described in this supplement are representative of the wider field of global health research, it is clear that an interdisciplinary perspective is indeed a core characteristic of global health research.

Interdisciplinary approaches are characterized by the engagement of researchers from different disciplines in understanding and engaging in all components of a study and in sharing their different viewpoints regarding results and interpretations [ 6 ]. Interdisciplinary approaches are therefore considered more likely to lead to learning that goes beyond “additive” learning [ 7 ] and more likely to produce solutions that will have traction in the messiness of the real world. This view is reflected in some of the cases of this collection. Haddad et al. explain a process whereby the strengths of the two team leaders became mutually complementary, and then were further enhanced by the addition of different disciplines to the team, such that “the project became a crucible of intense learning, sending a strong message to the Canadian team that the narrow boundaries of economics had to be transcended to understand social systems with diverse caste and religious identities” [ 4 ].

Why is global health research a practice that causes its participants to strive to break down silos on so many fronts? Upon close reading, these articles suggest that at least part of the motivation lies in matching the means to the problem and to the end. In other words, research teams must be interdisciplinary in order to process and tackle the complex nature of global health issues, and their necessarily multi-faceted solutions. This is an era in which the inter-related socio-economic determinants of health are recognized but imperfectly understood [ 8 , 9 ]. Indeed, global health has been described as a ‘composite’ field; one that comprises biological, clinical and social health and is complemented by other disciplines such as engineering and political science [ 10 ]. Per force, the problems faced by global health partnerships are profoundly complex. Now more than ever, global health research requires the bridging of traditional divisions between disciplines in order to innovatively protect and promote health for all people [ 10 , 11 ].

While the bridging of disciplines is a fine theoretical ideal, how possible is this in the everyday reality of global health research programs? Both the literature and the experiences of these teams suggest that there are common impediments as well as key facilitating factors. At least one impediment stems from the possibly incompatible core values of different epistemological traditions. The depth of difference between traditions can often be appreciated in the downstream difficulty of reconciling different research methodologies. Beliefs and values about what constitutes sound research are often grounded in epistemologies and expressed in methodological approaches [ 12 , 13 ]. As explained by Ridde et al.:

“The challenges involved in the partnership …were more of an interdisciplinary nature than about North-South differences…the focus was on complementarity of theoretical and methodological approaches. For example, anthropologists most often use a very inductive process in conducting their research, whereas researchers in evaluation and public health generally organize their data using an analytical framework.” [ 14 ]

It follows then that in addition to linguistic bilingualism, global health research partnerships often strive for “methodological bilingualism”; a bilingualism that requires a minimum competency from all team members in each of the research methods [ 15 ]. Otherwise, researchers from various traditions find themselves at worse talking mutually incomprehensible methodological languages; and at best, producing ‘parallel’ results that fail to be integrated.

Participatory action research

The case studies in this collection present a variety of experiences with participatory action research. Participatory action research involves a commitment to both study a system and to collaborate with members of that system to bring about desired change [ 16 ]. It demands the active collaboration of all stakeholders, leading ideally to a blurring of traditional roles defining “researcher” and “researched” and to an equal partnership between researchers and community stakeholders [ 17 ]. Theoretically, participatory action research involves all potential users of the research in the formulation, conduct, and application of the research and the research occurs in phased cycles (problem diagnosis, action planning, taking action, evaluating the actions, incorporating lessons, repeat) [ 18 , 19 ].

The phased-cycle nature of participatory action research is demonstrated in a number of the case studies. Cole et al. describe their decade-long program of research as a series of “iterative cycles of mixed methods research around particular questions, actions relevant to stakeholders, new proposal formulation and implementation followed by evaluation of impacts” [ 20 ]. A number of the partnerships initially worked together on fairly straightforward epidemiological surveys; and gradually moved towards a participatory action research orientation. This is exemplified by Spiegel et al., who describe moving from research for inquiry’s sake to impact-oriented investigation while maintaining rigor in methods. Similarly, Deslisle et al. reflect on the evolution of their program of research, in which “progress is being made in the type of research, impacts and partnership” [ 21 ]. All of this suggests that an enhanced degree of maturity is important for successful participatory action research. Maturity (in terms of the relationship between the primary research collaborators, the relationship between the researchers and the community stakeholders, and a nuanced understanding of the setting) and a willingness to invest in a phased-cycle of action and reflection are factors that privilege the uptake and the likely success of participatory action research.

It can be inferred from the case studies of this collection that a commitment to the ideals of participatory action research is often difficult to apply. The very complex confluence of sociocultural factors that contributed to the existing health inequities will not instantly dissipate in the face of even the best-designed action research intervention. As Cole et al. explain,

“Our research-action process sought to address (the underlying causes of health inequities)… but was constrained by them. During EcoSalud II interventions, vertical approaches to community leadership excluded broader social participation and limited some community members’ access…” [ 20 ].

A look at the relevant literature reveals some healthy skepticism about another fundamental tenet of participatory action research: the requirement of equal partnerships between researchers and community stakeholders. It has been pointed out that many action research projects, described as participatory, actually use differing levels of collaboration at distinct stages of the research. For example, community stakeholders may be more involved in diagnosing the problem and in taking action, but less involved in the analysis and writing of the findings [ 22 ]. Some argue that “dragging” participants through all of the research process is unjustified, as long as said participants help define the research questions and then eventually help to interpret the findings [ 18 ]. When the concept of community stakeholders is widened to include not just a single geographically defined human settlement, but also other groups of people such as health practitioners and policy makers, the challenges to full and equal stakeholder participation become ever greater.

Research with a policy or practice impact orientation

Scholarly publishing is recognized as a measure of excellence in research. Global health research is certainly no exception. However, our experience in global health research reinforced by the case studies presented herein indicates that publishing alone is not sufficient. Taking action on modifiable determinants that affect health and health equity, and converting new knowledge into improved policies and programs are fundamental components of global health research. That is why, throughout this collection, the reader will notice the authors continually referring to the impact orientation of their work. As expressed by Delisle et al.; “The global health field owes it to itself to not only generate new knowledge and information but also to contribute to a population’s well-being” [ 21 ].

Through their storytelling the authors demonstrate the difficult and often capricious nature of knowledge translation. As such, the authors confirm known wisdom about the non-formulaic nature of policymaking and the sheer volume of factors that can influence the uptake of knowledge gleaned from research [ 23 – 26 ]. While each case study offers program-specific introspection about the factors governing policy and practice influence, overall the collection illuminates no pattern or best practice. In the world of policy and practice change, “outright success in terms of achieving specific, hoped-for change is rare, and the work that does influence policy is often unique and rarely repeated…” [ 27 ].

In this collection, only a few of the case studies describe situations in which the research provoked a traceable influence on policy at the national level. In their case study, Delisle et al. point to the influence of their research on policy and on practice at a national level in two countries.

“We believe that, because of our work, at least partly, nutrition related chronic diseases (NRCD) are being taken into account in Benin’s 2007 – 2016 National Health Development Plan…(and)…the primary education department in Burkina Faso is now considering introducing school lunch and nutrition programs not only in rural schools but also in urban schools…” [ 21 ]

The authors’ reluctance to claim direct sole responsibility for these changes points to a reality which complicates the lives of global health researchers and their donors—the “attribution problem” [ 27 , 28 ]. The causes of change (or stasis) in policy and practice are difficult to predict ahead of time and are often just as challenging to isolate and identify after the fact. This seems particularly true of the highest levels of government, as suggested by Cole et al., who describe the effort that was required from multiple civil society actors in order to restrict the use of hazardous pesticides in Ecuador. Thus the majority of the case studies in this supplement concentrate on describing changes that occurred in practice, and often at a very local level. These local changes in practice are often more tangible and a causal link can be more accurately attributed to the given research program.

Some of the case studies in this collection describe research that resulted in little or no discernable change to date. The case study of Mumtaz et al., for example, underlines the limitations of research when it confronts the more intractable and intransigent aspects of human society. In this case, relevant - and emotionally powerful -knowledge about gender inequities was generated. However, policymakers were not ready to address the deep-rooted ramifications of this knowledge. Because knowledge translation was a stated key objective of the research, the researchers had developed direct and ongoing engagement with government policymakers, who in turn expressed appreciation of the research results and saw them as important contributions to knowledge gaps. Despite these promising acknowledgements, however, policymakers have been unable to use the research results because “it is difficult for them to address the deep-seated … inequalities” [ 29 ].

Concluding comments

It is in keeping with the nature of modern times that the practice of global health research defies tidy definition, as it grows and morphs and adapts on a continuous basis. For this reason, rather than exploring competing definitions we have preferred in this essay to deepen our understanding of global health research by examining some of the core characteristics that link ten exemplary global health partnerships. The core characteristics that we have chosen to explore (long-term partnerships, interdisciplinary approaches, participatory action research, and impact orientation) are simply those that are illustrated most vividly across the ten case studies. This is not intended to provide an exhaustive list nor a conclusive characterization of the practice of global health research. Furthermore, a listing of these four as separate characteristics risks over-simplification, since each is interwoven with the others. For example, the phased-cycle nature of participatory action research often demands long timeframes and thus long-term partnerships. Likewise, a desire to influence policy and practice requires that health researchers also understand socio-political contexts, and thus adopt interdisciplinary approaches.

In this essay we have not elaborated on the commendable achievements of this collection of partnerships. On this point, the case studies speak most eloquently for themselves. In describing long-term research programs as opposed to short-term discrete research projects, each set of authors has showcased the value and the potential of global health research partnerships.

We remain curious as to the applicability of our conceptualization of global health and global health research’s core characteristics. Does this collection of case studies represent a uniquely Canadian ‘take’ on global health research? Given that each partnership featured here is a mix of Canadian and international colleagues, and given that the partnerships have been described as egalitarian and mutually respectful, it follows that these case studies can be said to represent a ‘global’ approach to global health research. That said, it is also true that the research featured here is funded at least partially from Canadian sources, and thus might reflect the programming principles, priorities and concerns of these donors. We remain open to the idea that other collections of global health case studies, compiled using different criteria, might yield different visions about what characterises the practice of global health research.

Semantics, definitions, and core characteristics aside: at essence, this collection is a spirit-lifting demonstration that many people are incapable of living ‘life as usual’ when this requires ignoring the social injustices suffered by others. Furthermore, this collection is a demonstration that people are capable of joining forces across cultures, disciplines and sectors to forge long-term commitments to programs of research and real-world impact.

Abbreviations

Global Health Research Initiative

Human Immunodeficiency Virus / Acquired Immune Deficiency Syndrome

Canadian Institutes of Health Research

Canada Foundation for Innovation

International Development Research Centre

Canadian International Development Agency

Health Canada

nutrition related chronic disease

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Acknowledgement

The authors would like to acknowledge the contribution of the GHRI Casebook Advisory Committee, who provided valuable advice and support to this process (Susan Godt, Nadia Hamel, Thomas Kibua, and Stephen Trott). We are particularly grateful to the external reviewers who contributed their time to undertake extensive peer review of these articles. Thanks to Anna Dion and Marc Cohen, who coordinated the earliest stages of collecting the case studies and coordinating the peer review. Thanks also to Ashley Page and Manon Therien, who provided the indispensible administrative coordination that allowed this project to move forward.

This article has been published as part of BMC International Health & Human Rights Volume 11 Supplement 2, 2011: Global health research case studies: lessons from partnerships addressing health inequities. The full contents of the supplement are available online at http://www.biomedcentral.com/1472-698X/11?issue=S2 .

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Zoë Boutilier and Ibrahim Daibes serve as Program Officer and Senior Program Specialist, respectively, for the Global Health Research Initiative. Erica Di Ruggiero serves on the steering committee of the Global Health Research Initiative. The Global Health Research Initiative supported the assembly and publication of this supplement. The views expressed in this introductory article are those of the authors alone and do not represent the views of the Global Health Research Initiative (GHRI), the International Development Centre (IDRC), nor the Canadian Institutes of Health Research (CIHR).

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Boutilier, Z., Daibes, I. & Di Ruggiero, E. Global health research case studies: lessons from partnerships addressing health inequities. BMC Int Health Hum Rights 11 (Suppl 2), S2 (2011). https://doi.org/10.1186/1472-698X-11-S2-S2

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The new central bank law strengthened Guatemala’s monetary policy framework by clarifying that price stability is a primary objective, and the Bank of Guatemala (BoG) has tried to incorporate consideration of the exchange rate into its policy analysis. At the same time, in January 2005, the BoG adopted a rule-based mechanism for intervention in the foreign exchange market, which effectively establishes the exchange rate objective. Episodes during 2005–06 with high inflation and appreciation pressures reveal potential tension between the two objectives.

• Monetary and Exchange Rate Policy Framework

The BoG has established an explicit inflation goal under the framework of its monetary policy. Since 1991, the BoG’s monetary board announced an inflation goal in terms of annual consumer price index (CPI) growth for the coming year. Monetary policy is formulated to achieve this goal. The current framework is outlined below.

At the end of each year, the monetary board determines the monetary, exchange rate, and credit policy for the subsequent year, and presents the basic strategy in terms of both a policy goal as well as various indicative variables. The policy goal is described in the form of a CPI target for the next two years; for example, 5.5 percent ±1.5 percent was set for December 2008, and 5.5 percent ±1 percent for December 2009.

The monetary board decides on a policy rate, namely the seven-day certified term deposit rate of the central bank, at a previously specified monthly meeting. The decisions are based on analyses of various economic indicators as well as a comparison of the inflation forecast with the CPI target.

The BoG conducts monetary operations to manage systemic liquidity to ensure that money market conditions are consistent with the policy rate, thereby helping to achieve the inflation goal. Currently, weekly withdrawal operations (monetary stabilization operations) are the primary tool, given the systemic excess liquidity.

A new central bank law, enacted in 2002, strengthened Guatemala’s monetary framework. The new law clearly establishes the maintenance of price stability as a primary objective of the central bank. 54 Other responsibilities and functions of the BoG are subject to the price stability objective. The law also enhances operational autonomy by introducing an executive committee that is responsible for monetary policy implementation, and transparency is improved through various measures such as a governors’ biannual report to Congress on monetary policy.

The BoG has identified the exchange rate as one of the transmission channels for monetary policy. In its assessment of monetary policy, the BoG uses a Taylor-rule-type reaction function, which incorporates an adjustment of the nominal exchange rate in addition to inflation differentials and an output gap. 55 A monetary condition index—a composite index that combines an interest rate and a foreign exchange rate—is also cited in the analysis of monetary easiness or tightness. These analytical frameworks are based on the assumption that the exchange rate has an important influence on economic activity and inflation developments.

The BoG adopted a rule-based mechanism for intervention in the foreign exchange market in January 2005. The rule, integrated into the annual monetary, exchange rate, and credit policy, clarifies that the purpose of intervention is to moderate the volatility of the nominal exchange rate without affecting its tendency, while assuming that the exchange rate is determined by supply and demand conditions in the market. Initially, the rule was established only for the purchase of foreign currency, in light of upward pressure on the currency (quetzal) at that time, but it was followed by the introduction of a similar rule for intervention to address depreciation pressures. The rule provides some conditions that trigger intervention, but these are asymmetrical between cases of appreciation and depreciation; the purchase of U.S. dollars is always available as long as the quetzal has appreciated 0.5 percent more than the five-day moving average. On the other hand, sale of U.S. dollars can be undertaken only when the quetzal has depreciated below a certain level. 56 Depending on the resistance threshold against depreciation, this indicates the BoG’s stronger stance of leaning against the appreciation trend.

• Policy and Exchange Rate Developments in 2005–06

Experiences in 2005–06 illustrate the BoG’s attempt to deal simultaneously with high inflation and appreciation pressures. The BoG chose a policy mix of moderate monetary tightening and intervention in the foreign exchange market, which might create tension between the inflation and exchange rate objectives.

High inflation and appreciation pressures

Guatemala’s inflation rate moved well above the central bank’s target range. Higher oil prices and relatively easy monetary conditions caused high inflation, which registered over 8 percent in 2005 despite the inflation goal of 4–6 percent. In 2006, inflation declined significantly to the lower part of the range because of weak oil prices and the lagged effect of monetary tightening. 57

A sharp rise in worker remittances, together with capital inflows, put upward pressure on the quetzal. The quetzal was on an appreciation trend during 2005–06. This, along with other supply-side and external demand factors, contributed in part to the trade deficit and slow export growth, leading to the authorities’ concerns about competitiveness.

The BoG’s policy responses

To contain inflation pressures, the BoG continually raised its benchmark interest rate. The leading interest rate of monetary policy was increased by a total of 170 basis points (bps), to 4.25 percent, on seven occasions in 2005, and further raised by 75 bps, to 5 percent, in 2006. These actions were based on an expected overshooting of the inflation target and aimed at moderating inflation expectations and limiting the second-round effect of the imported inflation. 58 As a result, inflation decreased into the central bank’s target range toward end-2006, but short-term interest rates remained negative in real terms.

Meanwhile, the BoG intervened in the exchange market to stem the appreciation pressures according to the established rule. In 2005, when the new intervention rule was introduced, the BoG bought US$466.6 million, and in 2006 it purchased US$130.5 million. It should be noted that interventions were conducted only against abrupt appreciation, as specified in the rule stated above. 59 These operations helped lead to the accumulation of foreign reserves, but at the same time appear to have been conducive to rapid money and credit expansion.

• Implications

The BoG recognizes that the exchange rate is an important channel in the pursuit of the explicit inflation goals, but it faces conflicts. The new central bank law strengthened Guatemala’s monetary policy framework, clarifying price stability as a primary objective, under which the BoG tried to incorporate exchange rate considerations into its policy analysis. But, in the face of high inflation and appreciation pressures, the BoG was forced to conduct a conflicting policy combination of monetary tightening and U.S. dollar purchase interventions, resulting in still relatively easy monetary conditions.

A clear rule for foreign exchange intervention, despite increasing transparency, has complicated policy implementation. According to the current rule, interventions can be triggered automatically, based on exchange rate developments, which effectively establishes a kind of exchange rate objective. This arrangement makes unclear the role of the exchange rate in pursuit of the inflation objective, causing potential tension between the two.

Hungary, an open transition economy, adopted an inflation target with a ±15 percent exchange rate band in 2001. This reflects the importance of the exchange rate channel in a transmission mechanism and also the authorities’ planned entry into the European Economic and Monetary Union (EMU). Under the framework, the Magyar Nemzeti Bank (MNB) guides the exchange rate in line with the inflation objective by maneuvering the policy interest rate. The MNB was explicit about its preferred exchange rate target in the initial stage of the regime. However, speculative attacks and deterioration of market confidence in 2003 caused conflicts between the inflation target and exchange rate management. A preferred exchange rate was no longer announced after 2004. Furthermore, to make clear the MNB’s primary objective of price stability, the exchange rate band was abandoned in February 2008.

To achieve and maintain its price stability objective, Hungary adopted: (1) an inflation target in 2001, and (2) a ±15 percent intervention band for the exchange rate. In the process of economic transition in the 1990s, the (crawling) peg arrangement succeeded in bringing down the inflation rate from 30 percent to 10 percent. However, disinflation came to a halt as a result of higher prices for imports during 1999–2000, boosting inflation expectations, which required a new monetary policy regime. The key elements adopted in 2001 were the following:

In agreement with the government, the MNB widened the fluctuation band of the exchange rate from ±2.25 percent to ±15 percent (May 2001), which is compatible with the European exchange rate mechanism II (ERM II). 60, 61 The central parity, pegged to the euro, was Ft 276.1 per €1.62 Subsequently, the crawling peg was abandoned (October 2001). Under this exchange rate regime, the MNB was occasionally explicit about its preferred exchange rate (narrower band), but this practice was abandoned around the beginning of 2004, as discussed below.

The forint was declared fully convertible, and the existing restrictions on foreign exchange transactions were lifted (June 2001).

The MNB introduced inflation targeting (June 2001). The consumer price index targets were set jointly with the government at 7 percent ±1 percent for December 2001 and 4.5 percent ±1 percent for December 2002. Afterward, the targets were determined on a yearly basis until the end of 2006, followed by the introduction of the medium-term target at 3 percent for the period starting in 2007. 63

The new Central Bank Act defined that the primary objective is to achieve and maintain price stability, and reinforced the central bank’s operational independence, which is consistent with European Union requirements (effective July 2001).

The MNB’s monetary council is responsible for setting the key policy rate to guide the exchange rate in line with the inflation target. The council convenes at least twice a month according to an announced schedule, and the two-week policy rate is set by a simple majority vote. 64 A change in the MNB’s policy rate is aimed primarily at affecting the foreign exchange rate, which has a considerable impact on aggregate demand and inflation in Hungary. 65 For example, when the council judges that developments in the exchange rate jeopardize meeting the inflation target, it raises (or cuts) the policy rate to expand (or reduce) the forint-euro interest rate differential, which in turn is supposed to stimulate an appreciation (or depreciation). At the same time, the MNB makes clear that it does not focus exclusively on changes in the exchange rate but on all factors that affect inflation.

The MNB, in principle, refrains from intervening in the foreign exchange market, although it is entitled to conduct interventions within the exchange rate band. Indeed, in the initial period of widening the band in 2001, the MNB allowed the exchange rate to appreciate strongly to find a new equilibrium. In the face of speculative attacks in early 2003, the MNB intervened in the exchange market to counteract them, but announced in May 2003 that it had ended such operations and would conduct interventions only in cases of market disturbances in the future. This effectively clarified the MNB’s intention to influence exchange rate movements mainly through changes in the policy interest rate.

The MNB provides the general public with various kinds of information about monetary policy. The monetary council announces its decision and the underlying reasons in the form of a policy statement or press release on the day of the previously announced meeting. Abridged minutes of the rate-setting meetings (that is, the second meeting of each month) are released regularly, before the next rate-setting meeting takes place. In addition, the Quarterly Report on Inflation 66 presents the MNB’s inflation forecasts, which play the role of an intermediate target for the monetary framework.

• Policy and Exchange Rate Developments in 2003

After a successful two-year implementation of the inflation target, speculative attacks and a deterioration in market confidence in 2003 posed challenges to the conduct of monetary policy. The MNB missed the target for the first time in 2003; year-end inflation stood at 5.7 percent, whereas the target was 3.5 percent ±1 percent.

Speculative currency attacks in early 2003

In January 2003, there was a massive inflow of speculative capital aimed at forcing a revaluation of the exchange rate band. To defend the band, the MNB lowered its key interest rate from 8.5 percent to 6.5 percent in two phases. Changes were also made to monetary policy instruments by widening the overnight interest rate corridor and putting a temporary limit on the availability of the deposit facility at the MNB. Further, the MNB intervened actively in the exchange market. As a result of these measures, the MNB succeeded in defending the currency band and fending off the speculative capital by May 2003, when the end of the currency attack was announced explicitly by the monetary council. However, the consequences were lower interest rates and a weaker exchange rate, which boosted inflation pressure during the latter part of the year.

Depreciation pressures after devaluation of the parity in June 2003

The unexpected devaluation of the exchange rate band undermined market confidence, resulting in considerable depreciation of the forint. In June 2003, at the government’s request, the MNB agreed to devalue the central parity of the band by 2.26 percent, to Ft 282.36 per €1. This was initiated as part of a series of economic policy measures, resulting in support for exporters. However, it caused considerable confusion, and rising risk premiums caused the forint to take a sharp downward turn. In order to counter these developments, the MNB raised its key policy rate by 3 percentage points, to 9.5 percent, in two stages in June. The interest rate actions, together with the government’s announcement of Hungary’s euro changeover in 2008, 67 stabilized the forint rate, with marginal appreciation until October. But the market shifted its attention to imbalances in the Hungarian economy, particularly the budget and current account deficits, which fueled downward pressure on the exchange rate again in November 2003, representing a threat to the inflation target. As a result, the MNB was forced to raise the key policy rate by another 3 percentage points, to 12.5 percent, to offset the increasing risk premiums and stop the forint from depreciating further.

In the course of these developments, the MNB explicitly announced the narrower preferred range of the exchange rate apart from its wider ±15 percent band. In the policy statements and press releases, the monetary council repeatedly expressed its view that the exchange rate should stay in the (upper) range of Ft 250-260 per €1 in order for the inflation objectives to be met. This was supposed to stabilize inflation expectations by presenting the desirable exchange rate level. However, as this range became increasingly untenable in the face of strong depreciation pressure in late 2003, the announcement of the preferred range turned out to be ineffective. The narrower target was no longer announced after 2004.

In open transition economies like Hungary, the exchange rate plays an important role in inflation targeting. With a more open economy, the exchange rate channel is stronger, making it more relevant for achieving the targeted inflation rate. Moreover, during the transition process, with the authorities’ lower credibility, the exchange rate can function well as a nominal anchor to reduce high inflation rates in the absence of alternative monetary control systems. Furthermore, countries planning to enter the EMU have a particular concern about their exchange rates, which must eventually be fixed to the euro. For these countries, the exchange rate is an important factor driving monetary policy.

However, sudden changes in the market environment, characterized as risk-premium shocks, may cause tension between inflation targeting and the exchange rate consideration. Counteracting exchange market movements brings about large fluctuations in the policy interest rate. Particularly in the case of appreciation pressure, efforts to defend the exchange rate band can result in unintended monetary expansion, thereby undermining the inflation objective.

Presenting the preferred level of the exchange rate to the public makes policy intentions unclear. Although the measure is aimed at enhancing the transparency of the policy, it may deliver an ambiguous signal about whether monetary policy decisions are oriented toward the inflation target or the exchange rate objective. In addition, this can trigger speculative attacks aimed at revaluating the targeted exchange rate level. This is typically the case with narrower ranges of an announced specific target.

Recognizing this potential tension, the MNB abandoned the ±15 percent band in February 2008. The MNB judged that limiting exchange rate fluctuation under an inflation-targeting regime would not help to firmly anchor long-term inflation expectations. This move is seen as enhancing the credibility of the MNB’s inflation-targeting regime in the face of inflation rising above the target level. 68

The Central Bank of Iceland (CBI) takes the exchange rate into account in its inflation-targeting regime, recognizing that the effects of its actions on inflation are significant. Because the CBI does not attempt to manage the exchange rate by aiming at a specific level, there is not much tension between exchange rate considerations and a price-stability objective. The CBI simply responds to the impact of exchange rate movements on inflation and inflation expectations in order to attain the inflation target. An episode of financial turbulence in 2006 highlights how the CBI incorporates the exchange rate in the conduct of monetary policy.

Iceland introduced an inflation target in March 2001 with adoption of a floating exchange rate regime. 69 The framework is outlined as follows:

The CBI aims at an average rate of inflation, measured as the annual increase in the headline consumer price index, of as close to 2½ percent as possible.

The tolerance limit is now ±1½ percent above or below the target. The upper tolerance has been narrowed step by step since introduction of the inflation target; it was +3½ percent in 2001 and +2 percent in 2002.

If inflation deviates by more than ±1½ percent from the target, the CBI is obliged to submit a report to the government explaining the reasons for the deviation, how the CBI intends to react, and how long it will take to reach the inflation target again in the CBI’s assessment. The report must be made public. 70

The CBI provides an inflation forecast, projecting inflation two years into the future. The projection is outlined in its Monetary Bulletin, which is published three times a year.

The CBI’s inflation target takes priority over other objectives. The CBI cooperates with the government policies insofar as they do not conflict with the inflation target. The CBI also undertakes tasks that are consistent with its central banking functions, such as maintaining foreign reserves, promoting an effective and reliable financial system, issuing notes and coins, and regulating foreign exchange markets. 71

Monetary policy is decided by the board of governors of the CBI on previously announced dates. Interest rate decisions are currently made six times a year, approximately every two months, three of which are associated with publication of the Monetary Bulletin containing the inflation forecast. Policy decisions are published on the scheduled dates, followed by a press conference by the chairman of the board.

The inflation target is to be attained through the CBI’s monetary operations, with controlling the short-term interest rate as an operating target. A main instrument is collateral loan agreements with financial institutions. Auctions of seven-day instruments are held every week, the interest rate on which constitutes the CBI’s policy rate. In addition, the CBI provides a number of facilities available for financial institutions at their discretion, which prevents excessive swings in money market rates. These include remunerated current accounts, certificates of deposit with a maturity of 90 days, and overnight loans.

Foreign exchange market intervention became rarer after the exchange rate target was abandoned in 2001. The intervention is employed only if the CBI considers this necessary in order to promote its inflation target or sees exchange rate fluctuations as a potential threat to financial stability ( Table 9.1 ). 72

CBI: Exchange Rate Considerations in Monetary Policy during 2006

1 Annual change in consumer price index in the month.

2 Exchange rate index of the króna on the date; Dec. 31, 1991 = 100.

The CBI recognizes the exchange rate as an important transmission channel. Inflation targeting is understood to mean that a currency appreciation contributes to lower import prices, which has a direct effect on reducing inflation. The appreciation also makes imported goods and services relatively cheaper than domestic ones, decreasing demand for domestic products, which leads to lower inflation. This indicates that monetary policy is likely to accommodate currency movements if they are associated with demand shocks. The CBI’s macroeconomic model incorporates this exchange rate channel, 73 in addition to interest rate and asset price channels. The assessments of price developments and inflation forecasts that are included in the Monetary Bulletin also provide a great deal of analysis on the impact of exchange rate movements.

• Recent Episode of Policy Responses to Exchange Rate Developments

In 2006, Iceland experienced turbulence in its financial markets, in particular large swings in the exchange rate, in the face of mounting inflation pressures. This episode highlights how the CBI takes exchange rate movements caused by risk-premium shocks into account when conducting its inflation target. A distinctive feature is that the CBI did not attempt to manage the exchange rate but instead responded to the impact of exchange rate movements on inflation and inflation expectations. 74 The following divides the period into pre-2006 and post-2006.

Toward the end of 2005

A rapid expansion in domestic demand led to strong inflation pressures. The expansion was driven by new investment projects in the aluminum sector, introduced in late 2004. Consumption and housing demand were also promoted by active bank lending after structural changes in the mortgage market. As a result, in 2005 the current account deficit reached 16½ percent of GDP and the annual inflation rate edged up above 4 percent, the upper tolerance of the CBI’s inflation target. The economic expansion, together with favorable global market conditions, enabled Icelandic banks to extend their activities abroad, with a significant increase in foreign liabilities.

Higher interest rates caused the króna to appreciate, and it ended up at a historical high in late 2005. In response to growing inflation pressures, the CBI steadily raised its policy rate from 5.3 percent in spring 2004 to 10.5 percent at the end of 2005, inducing the currency appreciation. Indeed, monetary tightening was channeled primarily through the exchange rate, which was amplified by a large interest rate differential with the rest of the world. The real exchange rate reached its highest level since 1988. Nevertheless, bank credit continued to grow both in households and firms owing to relatively easy access to mortgage and global financing; thus, inflation had yet to be fully contained.

The CBI expressed concern about the sustainability of the appreciation of the króna. Given the large current account deficit, the CBI felt that a strong króna was unlikely to be maintained in the long run. It outlined in its Monetary Bulletin that a substantial part of the adjustment of imbalances would take the form of a króna depreciation, and it incorporated this view in its inflation forecast. The CBI concluded that a tighter monetary stance was needed for an extended period in order to meet the inflation target. Inflation targeting also emphasized that monetary policy was aimed at ensuring that the inevitable exchange rate adjustment would not result in a higher inflation rate than is compatible with the target.

Financial turbulence in 2006

Against the background of accumulating imbalances, a series of negative reports from rating agencies triggered financial turbulence in the first half of 2006. These reports, citing concerns over macro imbalances and vulnerabilities in the highly leveraged financial sector, caused a sharp depreciation of the króna by one-quarter and a fall in stock prices, also by one-quarter. Bond prices of banks fell significantly as well, hindering their access to foreign credit markets.

As the inflation outlook deteriorated owing to the króna depreciation, the CBI tightened its monetary stance sharply by raising its policy rate by 3.75 percentage points during 2006. Monetary tightening took place on seven out of eight policy decision dates, two of which were added to originally scheduled ones. Throughout these decisions, the CBI signaled a firm commitment to bring inflation back to the target after it had risen substantially. The CBI took into account the foreign exchange rate in its assessment and forecast of inflation, but did not set a specific target on the rate ( Table 9.1 ).

In addition, the CBI enhanced communication about the economy and financial stability. In the Monetary Bulletin and annual Financial Stability Report, the CBI provided more detailed and comprehensive explanations of the economy and the financial system, which helped international audiences follow the situation in Iceland. Moreover, the CBI, in cooperation with the financial supervisory authority, strengthened monitoring of banks’ financing, liquidity, and risk management.

Although financial markets had calmed significantly by mid-2006, inflation pressures remained, calling for a sustained tight monetary stance. The real exchange rate returned to close to the 25-year average in late 2006, and the króna has been fairly stable since. However, economic activity continues to be robust in all regards, and underlying inflation is still high, forcing the CBI to maintain the higher policy rate. Because the króna began gradually appreciating again in the beginning of 2007, the CBI has been cautious about the increasing probability of an eventual depreciation of the króna, a potential risk to inflation. 75

Pursuing price stability in a consistent manner is crucial for maintaining policy credibility. During the above-mentioned period, the CBI repeatedly cautioned against the idea that a tight monetary policy can be avoided by temporarily relaxing the inflation target. Such a “volte-face” policy would immediately raise inflation expectations, fuel higher wage increases, and result in a further depreciation of the króna and more inflation. The cost of such a policy is thought to be huge. On the contrary, the CBI chose to adhere to the inflation target to avoid making inflation a persistent problem. 76

Setting no exchange rate target can successfully avoid tensions between exchange rate considerations and the inflation target. Even though it takes account of the exchange rate in monetary policy, the CBI does not intend to manage it. The CBI simply reacts to the impact on inflation of exchange rate developments. This consistent policy prevents discrepancies within the monetary framework.

Financial stability provides a basis for a stable exchange rate and low inflation. Episodes in 2006 and early 2008 suggest that financial vulnerability can bring about abrupt depreciation of the króna, which induces inflation pressures. Mitigating financial imbalances is an important task in order for small and open economies to be resilient to external shocks.

Kazakhstan, a booming transition economy, has had an eclectic monetary policy framework. Price stability has been the primary objective of the National Bank of Kazakhstan (NBK) since the change of policy framework in 2003, but the NBK also pays attention to exchange rate developments. Kazakhstan has sustained a very strong macroeconomic performance since the start of the decade, with an average real GDP growth exceeding 10 percent. Oil-related inflows and improved confidence in the economy led banks to increase their external borrowing and extend loans domestically. Strong output and credit growth, coupled with resistance to allowing rapid appreciation, resulted in inflation pressures. In recent years, until mid-2007, the main challenge for the NBK was to strike a balance between inflation pressures and appreciation.

• The Monetary Policy Framework

The law governing the NBK states that its main goal is to ensure stability of prices in the Republic of Kazakhstan. This goal, which was introduced to the law by amendments in 2003, supported the adoption by the NBK of a new monetary policy framework, with price stability as its primary objective. In practice, the current policy framework of the NBK can be considered eclectic, using different indicators in conducting monetary policy to control inflation and rapid credit growth as well as giving attention to the exchange rate. Looking forward, the NBK announced plans to introduce an inflation-targeting regime. Preparations for full-fledged adoption of inflation targeting are under way. The NBK and the National Statistics Agency developed a set of core inflation indices, and the NBK stepped up its efforts to model and monitor macroeconomic developments.

The operational framework reflects a very low level of government debt and large oil-related foreign exchange reserves. The NBK has a limited stock of government securities to conduct monetary operations, and therefore had to issue central bank securities (NBK notes) to manage liquidity.

• Economic Background

Kazakhstan has sustained a very strong macroeconomic performance since 2000. Between 2000 and 2006, annual real GDP growth has averaged over 10 percent, and per capita income reached about five times the 1999 level in dollar terms. However, growth slowed to 5½ percent in the fourth quarter of 2007. Employment has expanded steadily since 2000, and social indicators have improved. The fiscal position has remained very strong, permitting substantial increases in public expenditures, especially social and infrastructure spending, as well as an accumulation of large savings in the National Fund (NFRK) for future generations ( Box 9.1 ). High prices for oil and gas, rapid growth of domestic consumption, and a rebound in investment were among the factors that contributed to the strong economic performance.

Nevertheless, monetary policy faces a number of challenges. Sharply rising oil revenues and capital inflows fueled inflation pressures and vulnerabilities in the banking sector. A major concern is external debt, which increased rapidly in recent years, almost all of it owed by private banks that extended loans to households and firms, with limited hedging possibilities. The very rapid growth in bank credit poses the risk of a sharp deterioration in loan quality. Containing inflation has also been a challenge for the NBK in an environment of rapid output and credit growth and large foreign exchange inflows. Inflation has been on an increasing trend since 2003, reaching 18.1 percent in March 2008. The challenge in this environment is to set appropriate monetary and exchange rate policy stances to slow the pace of bank credit growth and external borrowing and to contain inflation.

The National Fund of the Republic of Kazakhstan

Faced with a surge in foreign exchange earnings from higher oil production and prices, the authorities established the National Fund of the Republic of Kazakhstan (NFRK) in 2001 to reduce the impact of volatile market prices for natural resources on the economy and to smooth the distribution of oil wealth over multiple generations. The NFRK is domiciled in the National Bank of Kazakhstan (NBK), which has the responsibility of managing its assets on behalf of the government. All NFRK assets are invested exclusively abroad. As of mid-March 2008, $22.8 billion had accumulated in the fund.

The NFRK is a special account of the Ministry of Finance of Kazakhstan with the NBK. The NBK advises the Ministry of Finance on managing the assets of NFRK. A significant portion of the fund’s reserves are under management by the world’s leading private financial institutions, to ensure the transparency and accountability of the process.

Another challenge throughout the period has been to assess the impact of money growth on the economy. As a transition economy with strong growth and macroeconomic stability, there was a steady buildup of confidence in the banking system after the late 1990s, which was reflected in strong money demand and monetization. Relying on monetary aggregates for monetary policy in such an environment is challenging. On the other hand, the lack of some of the preconditions to do this, including the lack of effective interest rate channels, made it difficult to adopt this regime in the short term. The NBK’s eclectic approach reflects these challenges.

The 2003 monetary policy framework included inflation and exchange rate objectives. The NBK treated price stability as the key monetary policy objective, but continued to closely monitor the real exchange rate of the tenge against a basket of 24 currencies of key trading partners. The NBK intervened in the foreign exchange market, mainly through purchases aimed at preventing a rapid appreciation of the tenge. In an effort to stem upward pressure on the tenge while containing money growth, the NBK supplemented its exchange market intervention with continued large-scale sterilization operations. However, as sterilization costs mounted, the increase in the NBK’s reserves was not fully sterilized. As a result, reserve and broad money growth rose beginning in 2003. Moreover, although NBK policy rates were raised in 2005, 2006, and 2007, the increases were well short of the rise in international short-term rates, and interest rates were often negative in real terms.

• Policy Response to the Boom until Mid-2007

The authorities’ main concerns during the period were rapid appreciation, mounting vulnerabilities in the banking system, and inflation pressures. The authorities recognized that appreciation of the tenge was unavoidable amid high oil prices and increases in domestic production. Yet they believed that large and rapid nominal appreciation could prove disruptive. Resistance to rapid appreciation, however, brought about continued inflation pressures. Another major concern was banks’ external borrowing and rapid credit growth. A sudden stop or a reversal of flows posed the risk of funding problems for the banking system.

The NBK used a variety of tools to respond to the economic boom and rapid credit growth. Interest rates were increased by 100 basis points in 2006 and a further 100 basis points during the first half of 2007. Despite these measures, banks’ lending rates declined markedly in real terms, further fueling credit demand. During the first half of 2007, the NBK allowed a more rapid appreciation of the tenge by scaling back its interventions in the foreign exchange market.

Reserve requirements were another tool used to slow credit growth. To enhance its ability to absorb liquidity, in October 2005 the NBK broadened the coverage of required reserves to include net foreign liabilities. Reserve requirements were raised in mid-2006. Changes to the requirements were implemented in a phased manner to allow banks to adjust their balance sheets without undue disruption.

The financial position of the NBK was strengthened in 2005 to better cope with capital inflows. An amendment to the budget code enacted in mid-2005 envisaged capital injections to the NBK to cover losses related to monetary operations, including interest expenses for sterilization operations and revaluation losses resulting from tenge appreciation.

Prudential measures were implemented in response to rapid credit growth. These included bank-capital-related limits on borrowing, tighter asset-classification rules and risk weights, and stronger collateral requirements. Banks’ open foreign currency limits were reduced in early 2005, and capital adequacy requirements for market and operational risks were introduced. The risk weight for high-value property loans was raised, and the scoring system used by banks for loan classification was toughened. But the new regulations proved ineffective, partly because they appeared to be lax and were implemented too slowly.

Supervision was also strengthened. On-site inspections were intensified. Off-site supervision was strengthened and, since early 2006, banks have been required to submit additional information on their assets, contingent liabilities, and related party and holding operations. Banks are required to regularly submit stress test results—covering liquidity, credit, interest rate, exchange rate, oil, and real estate price shocks—and currency gap analyses to the financial supervisory authority.

Although these measures likely have had some impact, they have not fully addressed the authorities’ concerns. Rapid appreciation may have been avoided to some extent, but inflation has continued to rise. Despite measures to tighten liquidity, money and credit aggregates surged. External debt and credit continued to grow at a fast pace.

• Recent Developments

The volatility and liquidity problems that started after the subprime mortgage crisis in August 2007 hit the Kazakhstan banking sector hard. The banking system faced difficulties in external funding, and bond spreads in international markets jumped by 150-350 basis points during July-August. Liquidity conditions in the domestic money market tightened correspondingly, with interbank rates rising by 250 basis points despite large-scale redemption of NBK notes by banks as well as nonresidents. The tenge came under pressure, but NBK intervention helped limit its depreciation against the dollar to 3½ percent from end-June to end-August. The NBK responded by providing large-scale liquidity to the banks during August-October through repurchase agreements, foreign exchange swaps, the early redemption of NBK notes, and the easing of reserve requirements. It also intervened in the foreign exchange market, with 25 percent of reserves used to cool down the market and an effective peg of the tenge to the U.S. dollar after October 2007. After rising sharply, interbank rates have eased.

Concerns about rapid appreciation cause tension with the price stability objective. Resisting appreciation through intervention fuels liquidity growth, leading to inflation pressures. In a rapid-growth environment supported by a positive terms-of-trade shock, appreciation is unavoidable. The challenge for the NBK is to assess the equilibrium rate of the real exchange rate and keep the tenge around that level, no matter how rapid the appreciation may be. Otherwise, the risk remains that adjustment of the real exchange rate will take place through inflation, instead of nominal appreciation.

Regulatory measures are not sufficient to address vulnerabilities without a complementary monetary policy. Although the regulations themselves need to be strengthened, the fact that interest rates remained low or negative in real terms in Kazakhstan throughout the period has muted the overall policy impact.

Given high financial dollarization, the Central Reserve Bank of Peru (BCRP) takes the exchange rate into account in its framework. The BCRP has tried to prevent excess exchange rate volatility to avoid the risks associated with dollarization, as long as such a policy is consistent with the inflation objective. Strong depreciation pressure on the nuevo sol and its subsequent appreciation trend during 2005–06 highlighted the interaction and potential tension with exchange rate management.

To achieve its constitutional objective—preservation of monetary stability—the BCRP adopted inflation targeting in 2002. This replaced monetary targeting, because there was no longer a systematic association between inflation and the growth of the monetary base. The key aspects of the inflation-targeting regime are as follows:

The 2007 target was an annual inflation rate of 2 percent in terms of the CPI (for Metropolitan Lima), with a tolerance margin of ±1 percent. The central rate was reduced by 0.5 percent in February 2007, from 2.5 percent, the rate set when inflation targeting was introduced. The new target, closer to the inflation rates in Peru’s major trading partners, is expected to reinforce the BCRP’s commitment to maintain the purchasing power of the domestic currency in the long run and to help reduce financial dollarization.

The board of the BCRP decides on a reference rate for the interbank lending market on a previously announced date, usually at the beginning of each month. The decisions are based on forecast studies and macroeconomic simulations. To keep the interbank rates close to the reference rate, the BCRP conducts open market operations to inject liquidity into or withdraw it from the system. In addition, the BCRP provides lending and deposit facilities, which form a corridor of interbank rates.

The board’s decisions are immediately announced to the public along with the main reasons underlying the decisions. The BCRP also publishes an inflation report every four months, which analyzes recent inflation developments, outlines policy actions adopted by the BCRP, and presents the inflation forecast with the balance of risks. Exchange rate movements and their implications for inflation are also analyzed.

The first five years of inflation targeting were associated with good inflation control. The average annual inflation rate was 2 percent for 2002–06, indicating that inflation was within the target range. This outstanding performance apparently led to the reduction of the target rate (mentioned above).

Peru’s inflation-targeting regime and its exchange rate policy are also aimed at preventing the risks associated with financial dollarization and smoothing the way to dedollarization. Peru’s economy remains highly dollarized, although much less so in recent years, from more than 70 percent of deposits as of end-2000 to less than 40 percent as of March 2008. Financial dollarization poses risks stemming both from currency and maturity mismatches, which makes the economy more vulnerable to abrupt exchange variations, in particular an unexpected depreciation of the local currency. Inflation targeting contributes to a reduction in financial dollarization by reinstating confidence in the domestic currency. At the same time, a flexible exchange regime 77 is pursued to help stabilize the real return on domestic assets and avoid abrupt exchange rate fluctuations, which facilitates the dedollarization process. 78

The BCRP intervenes in the exchange market to prevent excessive volatility. In addition, purchasing foreign currencies can strengthen the BCRP’s foreign reserve position, which also enhances its ability to deal with strong depreciation pressures. 79 In its interventions, the BCRP does not strive for any particular exchange rate level; it emphasizes that the elimination of volatility in the exchange rate might prevent economic agents from promoting risk management in foreign currencies. Importantly, exchange interventions are conducted in line with the inflation-targeting regime, given the priority of achieving the target.

Strong depreciation pressures and the subsequent appreciation trend during 2005–06 highlighted the interaction between inflation targeting and exchange rate management. The BCRP addressed these market developments, taking account of risks under high financial dollarization.

Depreciation pressures during late 2005 and early 2006

Beginning in August 2005, the exchange market was subjected to depreciation pressures accompanied by an increase in the sovereign risk premium. Following an appreciation trend beginning in 2003, the nuevo sol once again weakened in August 2005, as a result of growing uncertainty about the results of the presidential election and shifts in institutional investors’ portfolios. Election-related uncertainty fueled the country risk premium increase as well. These downward currency movements ended in mid-January 2006, but volatility continued until the first round of elections in April 2006. Forward currency transactions also indicated rising expectations that the nuevo sol would deteriorate during the first several months of 2006.

To prevent the sol’s depreciation and excess exchange rate volatility, the BCRP raised the reference rates by 150 bps, to 4.5 percent, and conducted foreign exchange market interventions. The policy rate was raised six times from December 2005 to May 2006 (25 bps each month). Although the inflation rate was below the targeted level (2.5 percent) during the period, strong economic growth, together with a depreciating exchange rate, made it advisable to reduce monetary stimulation to avoid creating inflation pressures that could affect the ability to meet the inflation target in the future. The BCRP also countered the market until January 2006 through the sale of dollars (purchase of nuevos soles) and the placement of U.S. dollar-indexed certificates called readjustable certificates of deposit. These policy actions and operations were meant to check the negative impact of the excessively volatile exchange rate on economic activity in the context of heavy financial dollarization.

Appreciation trend after mid-2006

As election-related uncertainty dissipated, the appreciation of the sol resumed in mid-2006, prompting the BCRP to intervene in the opposite direction. The upward pressure was supported by the continuous favorable evolution of the external account and increasing remittances from Peruvian citizens abroad. In order to offset these pressures, the BCRP intervened in the exchange market and stepped up dollar purchase operations. This contributed to the restoration and subsequent strengthening of the BCRP’s foreign reserve position. As a result, the dollarized economy was in a better position to deal with associated risks. Meanwhile, the BCRP maintained the monetary policy reference rate at 4.5 percent until July 2007, when it began to express concern about the possibility of inflation because of the increase in domestic demand. In line with this policy stance, the BCRP sterilized excess liquidity through placements of nuevo soldenominated certificates of deposit. 80

A high degree of financial dollarization increases the role of the exchange rate in the monetary policy framework. To prevent risks associated with dollarization, the authorities sought to avoid excess exchange rate volatility, particularly strong exchange rate swings, which could seriously affect the economy’s balance sheet, given still significant dollarization. Peru has effectively succeeded in achieving this objective in line with its inflation-targeting regime, while increasing the economy’s reliance on the local currency; the level of financial dollarization in Peru has decreased significantly in recent years.

As long as depreciation pressures are accompanied by inflation risks, there is little conflict between inflation targeting and exchange rate considerations, as seen between late 2005 and early 2006. However, appreciation with inflation complicates the implementation of monetary policy, because dollar purchase interventions may cause excess liquidity. To mitigate the tension, the BCRP must sterilize the monetary impact of its intervention.

Supplemental measures to promote dedollarization help prevent potential conflicts between the inflation objective and concern about a volatile exchange rate. As pointed out by the BCRP, robust financial systems and sound fiscal positions help reduce risks associated with financial dollarization.

Philippines

The strong appreciation of the peso in 2006 revealed potential tension between foreign exchange interventions and the need to contain inflation pressures, complicating inflation targeting of the Bangko Sentral ng Pilipinas (BSP). Expanding sterilization operations and liberalizing capital controls have helped ease the problem to some extent.

The BSP adopted an inflation target in January 2002, after abandoning monetary targeting. The primary objective of the BSP’s monetary policy is “to promote price stability conducive to a balanced and sustainable growth of the economy,” which the inflation target aims to achieve. Core elements of the framework are as follows:

The BSP aims for an average year-over-year change in the headline CPI. The target for a given year is announced two years in advance (a two-year target horizon) and is set by the government in consultation with the BSP. The target for 2008 was 4 percent, with a tolerance of ±1 percentage point (or 3–5 percent). For 2009, the target is 3.5 percent ±1 percentage point (or 2.5–4.5 percent). 81

If the BSP fails to meet the inflation target, the BSP governor issues an open letter to the president to explain to the public why the target was missed, along with measures to be adopted to bring inflation toward the target. Open letters were issued January 16, 2004; January 18, 2005; January 25, 2006; January 19, 2007; and January 14, 2008. 82 This suggests that the target has been missed during most of the period.

Acceptable circumstances under which the BSP is allowed to fail to achieve its inflation target include price pressures arising from volatility in the prices of agricultural products; natural calamities or events that affect a major part of the economy; (3) volatility in the price of oil products; and (4) significant government policy changes that directly affect prices—for example, changes in the tax structure, incentives, and subsidies.

The BSP publishes a quarterly inflation report with inflation forecasts and the highlights of the meeting of the monetary board to help the public better understand monetary policy developments.

Monetary policy is decided by the monetary board, which meets every six weeks on pre-announced dates. To strengthen the decision-making process, an advisory committee was established to make recommendations to the monetary board. This committee, consisting of the BSP governor and representatives of several government agencies, meets a few days before each monetary policy meeting.

The primary instruments used to achieve the inflation target are overnight repos and reverse repos, whose interest rates form the BSP’s policy rates. Other regular monetary instruments include short-term repos, outright purchases and sales of securities, rediscounting, and reserve requirements. In addition, the BSP sometimes adopts a “tiering scheme” for banks’ aggregate placements at the BSP to encourage bank lending. 83 Moreover, the BSP implemented new liquidity management measures to improve capacity to absorb liquidity. 84

The BSP’s foreign exchange intervention is officially limited to countering disorderly market conditions. 85 The authorities took advantage of favorable market conditions to strategically build up reserves, thereby reducing vulnerability to external shocks. Over 2005– 07, absolute monthly intervention averaged 38 percent of daily foreign exchange market turnover ( Edison and others, 2007 ).

The BSP takes the exchange rate into account when carrying out monetary policy. Although the BSP does not attempt to keep the exchange rate at any particular level, it examines the impact of exchange rate movements on price developments in its overall inflation forecasts. The BSP also assesses external competitiveness through analysis of the real effective exchange rate. 86

• Recent Policy Responses to Exchange Rate Developments

After hovering around a historically low level in 2004–05, the peso strengthened markedly, which complicated the BSP’s monetary policy. During this period, the BSP continued to be vigilant against risks of inflation higher than the target, which revealed potential tensions between the inflation target and exchange rate considerations.

The BSP’s policy responses in 2005

In the face of inflation pressures, the BSP tightened its policy stance. Higher inflation in 2005 was attributed to price increases in food, energy-related products, and transportation, which are outside the control of monetary policy. Nevertheless, aware of increased risks for inflation, the BSP raised its policy rates in April, September, and October 2005 by a cumulative 75 basis points. In addition to supply shocks from high oil prices and their second-round effects, the BSP pointed out risks of exchange market pressure on inflation expectations, given the likelihood of declining differentials between domestic and foreign interest rates and a possible adverse shift in investors’ sentiment. The BSP also increased reserve requirement ratios by 100 basis points in July 2005 in order to mop up excess peso liquidity.

In addition, the BSP implemented other administrative and regulatory measures to stem peso depreciation pressures. In July 2005, the Currency Risk Protection Program was revised, with the addition of a more competitive pricing mechanism. This enabled eligible corporate and other foreign exchange users to purchase foreign exchange from banks at a predetermined rate in the future, which was expected to remove a significant amount of demand from the spot market. The BSP also tightened its foreign exchange regulations in January 2006 to require any person whose transactions are in foreign currency or foreign-exchange-denominated monetary instruments to furnish information on the source and purpose of these transactions.

The BSP’s policy responses in 2006–07

Despite the BSP’s concern about depreciation, the peso appreciated significantly during 2006 and 2007. Strong dollar inflows from remittances by Filipino workers abroad as well as from portfolio and foreign direct investment were the main sources of the peso’s appreciation. The latter reflected renewed investor confidence because of a positive economic outlook in the wake of fiscal reforms and stable macroeconomic performance.

Strong foreign exchange flows presented challenges for the BSP’s monetary and exchange policy. During 2006, a series of adverse supply shocks, including from food prices, international oil prices, and reforms to the value-added tax, failed to feed into underlying inflation. The retreat of inflation to within the target band and stable interest rates contributed to continued foreign exchange inflows, leading to further appreciation pressures. Although the BSP recognized that the stronger peso helped keep the prices of imported goods down, the appreciating peso adversely affected exporters and Filipino workers abroad. Against this background, the BSP intervened in the foreign exchange market to smooth out exchange rate fluctuations and build up reserves. However, the absence of full sterilization of interventions led to peso liquidity.

To curtail potential inflation pressures, the BSP implemented measures in 2007 to strengthen sterilization and increase demand for foreign exchange. As stated above, access to the special deposit account (SDA) window was expanded to more financial institutions in May 2007 to help withdraw liquidity from the system. The SDA grew quickly and helped contain the growth of liquidity. To increase demand for foreign exchange, the authorities accelerated prepayment of external debt in December 2006. 87 In addition, relaxation of foreign exchange controls on capital outflows began in April 2007, which included raising limits on banks’ foreign currency transactions to pre-Asian-crisis levels (before 1997). In late December 2007, a second round of liberalization was implemented.

The large scale of foreign exchange intervention can cause tension with the inflation target. Although appreciation can contain inflation pressures, the concerns of the BSP about excessive peso fluctuations and its goal of building up foreign reserves led to intervention and rapid growth of liquidity, which has the potential to conflict with the inflation objective.

Sterilization can alleviate the tension but may not be sustainable. Although recent sterilization efforts were successful, such operations carry quasi-fiscal costs, which are ultimately borne by the government. Thus, sterilization cannot be seen as a panacea for dealing with conflict between inflation and foreign exchange objectives.

Relaxation of capital controls on outflows can also ease the problem to some extent. However, its effects on exchange rate developments have not been verified. Moreover, this is not a direct solution when seeking to achieve balance between monetary policy objectives and exchange rate considerations.

Singapore’s monetary policy has been centered since 1981 on management of the exchange rate. The Monetary Authority of Singapore (MAS) adopts the exchange rate as an operational target by guiding a trade-weighted Singapore dollar within a policy band. This framework reflects the fact that the exchange rate is the most effective tool for maintaining price stability in the small and open Singapore economy, and indeed it has performed very well to date. However, growing capital flows have posed new challenges to this exchange-rate-centered framework.

In Singapore, monetary policy is centered on the management of the exchange rate, rather than monetary aggregates or interest rates. The primary objective of monetary policy in Singapore is to promote price stability 88 as a sound basis for sustainable economic growth. 89 To achieve this ultimate purpose, the MAS has used the exchange rate as the operational target since 1981, as outlined below.

The MAS manages the Singapore dollar vis-à-vis a trade-weighted basket of currencies of Singapore’s major trading partners and competitors (S$NEER). The composition of this basket is reviewed and revised periodically to take account of changes in trade patterns, but details concerning the index are not disclosed.

The trade-weighted exchange rate fluctuates within a policy band. The general direction of the band is announced semiannually, but details on the slope and width are not disclosed.

When the trade-weighted exchange rate breaches the policy band on either side, or when there is undue Singapore dollar volatility or speculation, the MAS intervenes in the foreign exchange market by using spot or forward transactions. 90 Intervention operations take the form of purchase or sale of Singapore dollars against U.S. dollars.

The exchange rate policy band is reviewed semiannually to ensure that it remains consistent with the economic fundamentals and market conditions, results of which are published in the Monetary Policy Statement . The MAS may change the slope of the band or shift it in response to changes in inflation pressures. Sometimes, for example, during periods of heightened volatility, the band may be widened to accommodate more volatile fluctuations in the exchange rate. 91

This framework reflects the fact that the exchange rate is the most effective tool in maintaining price stability in the small and open Singapore economy. Indeed, total exports and imports are each well in excess of 200 percent of GDP. Empirical research suggests that changes in the trade-weighted Singapore dollar have a greater influence on domestic inflation and the output gap than changes in interest rates. 92

Under the exchange-rate-centered framework with an open capital account, the MAS cedes control over domestic interest rates. The MAS’s money market operations are aimed at ensuring sufficient liquidity in the banking system to meet banks’ demand for reserve and settlement balances. To this end, in addition to daily market operations such as repos, foreign exchange swaps, and lending, the MAS provides an end-of-day liquidity facility, an intraday liquidity facility, and a standing facility. These facilities have helped contain interest rate volatility. In conducting its money market operations, the MAS takes into account the net liquidity impact of foreign exchange interventions in conjunction with various autonomous and other market factors. In this respect, the MAS’s foreign exchange interventions can be said to be sterilized in the broader sense that the liquidity in the system is always restored to a level sufficient to meet banks’ demand for reserves.

The MAS has made efforts to increase disclosure and enhance transparency on the policy stance and the rationale behind that stance. Recent initiatives include the publication of the Monetary Policy Statement soon after each semiannual review of monetary and exchange rate policy. This is supplemented by the release of the Macroeconomic Review , which provides the MAS’s background analysis and outlook for GDP growth and inflation for Singapore.

• Policy Developments under the Exchange-Rate-Centered Framework

Policy developments since 1981

It is generally observed that Singapore’s monetary policy has stabilized inflation pressures at a low level by guiding the exchange rate flexibly along an appreciation path. This has led to low and stable inflation with prolonged economic growth. Policy developments since 1981 are summarized in Table 9.2

Monetary Authority of Singapore: Policy Developments since 1981

Singapore’s monetary policy framework has proven flexible in the face of heightened market volatility and uncertainty. The flexibility is brought about by widening the policy band, which could facilitate greater exchange rate adjustments, thereby preventing adverse volatility in the real economy. One example of this flexibility was after the uncertainty caused by the Asian financial crisis. Another was soon after the September 11 terrorist attacks in the United States. In both cases, the MAS widened the policy band to allow more volatile fluctuations in the Singapore dollar.

Recent policy challenges

Strong capital flows have posed policy challenges for Singapore. As noted, the MAS has maintained a policy of modest and gradual appreciation of the Singapore dollar policy band since April 2004. Though this has contributed to the low and stable inflation environment amid robust economic growth, carrying out the policy has been complicated by appreciation pressures stemming from strong investment inflows into the region, weak U.S. dollar sentiment, and a relatively buoyant Singapore economy.

Since 2006, the trade-weighted Singapore dollar has stayed in the upper half of the policy band, and more recently it has fluctuated near its upper end. The appreciation pressures have forced the MAS to intervene in the foreign exchange market to keep the exchange rate within the policy band, as evident in the accumulation of foreign exchange reserves (to US$163 billion at end-2007 from US$116 billion at end-2005). 93 In April 2008, the MAS recentered the policy band at the prevailing level of the S$NEER to mitigate inflation pressures.

Heavy intervention has built up domestic liquidity and lowered domestic interest rates. Under the MAS’s money market operation framework, as explained, the extent to which the impact of foreign exchange interventions is sterilized depends on banks’ demand for reserve and settlement balances, which in the end affects money market rates. Against expectations that the U.S. dollar will appreciate and expectations about liquidity conditions in the market, the (three-month) interbank interest rate had come down to 2.9 percent by March 2007, from 3.4 percent in September 2006. The interest rate fell further to 1.3 percent at the end of March 2008. Although the interest rate in Singapore is neither a policy instrument nor an intermediary target, the decline of interest rates has partly offset tightening monetary conditions envisaged by the strong exchange rate.

Singapore’s exchange-rate-centered monetary framework has performed very well to date. It should be noted that the framework is supported by the small size and high degree of openness of Singapore’s economy. A key condition for the framework to be viable is that the exchange rate plays a significant role in the inflation dynamics in Singapore. Under the framework, there is relatively limited tension between the inflation objective and exchange rate management.

Increased capital flows pose challenges for the exchange-rate-centered framework. Growing gross capital flows highlight the importance of the MAS’s ability to keep the exchange rate within the policy band. There have been few problems so far, but future concern cannot be ruled out. At the same time, maintaining the equilibrium value of the exchange rate within the framework might be another important issue.

South Africa

The South African Reserve Bank (SARB) allows the exchange rate to be determined in the market, but it takes into account the rate’s impact on prices in the context of inflation targeting. This strategy has worked well, with little tension between the inflation objective and exchange rate policy. However, the rand remains vulnerable to the nation’s large current account deficit, causing higher fluctuations of the exchange rate, and this calls for relatively swift and sizable policy responses, as seen in recent episodes. Furthermore, large capital flows pose new challenges to the SARB’s monetary policy.

In February 2000, South Africa announced the adoption of formal inflation targeting as the monetary policy framework. The monetary policy of the SARB was already aimed at price stability, which is stipulated as its primary goal in the constitution and in the central bank law. But the SARB has relied mainly on monetary aggregates in the past, causing uncertainty among the public about the policy stance. To make monetary policy more transparent and accountable and improve coordination between monetary policy and other macroeconomic policies, inflation targeting was introduced in a more formal way.

The inflation target in terms of the CPIX (the overall consumer price index, excluding mortgage interest costs) is determined by the government in consultation with the SARB. Until 2003, the authorities specified the target in the form of the annual average rate of the CPIX for every calendar year. 94 But in November 2003, this was replaced by a continuous CPIX target of 3–6 percent on an annual basis for the period beyond 2006. This change aimed to prevent excessive interest rate volatility and ineffective management of inflation expectations.

The Monetary Policy Committee (MPC) decides the policy stance by changing the repo rate, the policy rate applied to the SARB’s refinancing operations, to achieve the inflation target. Currently, a meeting is held every two months. The result of the meeting is immediately made public at a press conference and broadcast live on national television. At the MPC meetings, a large number of indicators that could affect inflation as well as other exogenous factors are monitored.

To fully inform the public about monetary policy implementation, the SARB publishes a number of reports, including the Monetary Policy Review twice a year, which provides its core forecast of inflation in the form of a fan chart. In addition, a Monetary Policy Forum is convened by the SARB twice a year in the major cities, at which representatives of labor organizations, business, government, and academic institutions exchange views on monetary policy and economic development.

The SARB adheres to a floating exchange regime in the context of inflation targeting. Although the exchange rate is perceived as an important transmission mechanism for monetary policy that could affect inflation and economic growth, the SARB is of the view that too much concern about exchange rate stability can induce the wrong policy response. Wide fluctuations in the exchange rate of the rand could complicate monetary policy decision making; nevertheless, South Africa opted for a flexible exchange rate regime to maintain monetary policy flexibility. The MPC therefore monitors the exchange rate from the perspective of whether and how it influences the inflation rate and inflation forecast. Indeed, most policy statements mention the exchange rate as one of the factors affecting inflation.

The SARB intervenes in the foreign exchange market only to bolster its reserve position through purchases of dollars. While allowing the exchange rate to be determined by the market, the SARB aims at creating underlying economic conditions that are conducive to exchange rate stability. For this purpose, the SARB attempted to reduce its oversold forward book (net open position in foreign currency), which caused concern and contributed to a volatile exchange rate. After achieving this goal in May 2003, the objective of the exchange operations was shifted to increase foreign reserve holdings whenever circumstances permitted.

• Policy and Exchange Rate Developments in 2003 and 2006

Large fluctuations in the exchange rate of the rand have affected inflation, leading to relatively sizable monetary policy responses.

Recovery of the rand and monetary easing in 2003

After considerable depreciation until the beginning of 2002, the rand appreciated throughout 2003. The increased risk aversion of international investors created downward pressures on the rand, accelerating inflation well above the inflation target during most of 2002. The restored risk appetite toward emerging market economies, together with sound macroeconomic policy in South Africa and its improved credit ratings, changed the direction of the exchange rate and brought it back to the recovery trend. By mid-2003, the nominal effective exchange rate returned close to its end-2000 level—just before the start of the depreciation. This, in addition to other factors such as a slowdown in food price increases, contributed to lower inflation forecasts.

The SARB reduced its policy rate significantly as the inflation outlook improved. Favorable inflation projections enabled the SARB to ease its monetary policy beginnning in June 2003. The SARB cut the repo rate five times, to 8 percent by the end of the year, including at an unscheduled meeting in September, with a total reduction of the rate amounting to 550 bps. The inflation rate declined eventually within range of the inflation target in October 2003. Although the appreciation of the exchange rate somewhat affected the profitability and competitiveness of exporters, the recovery of the rand assisted materially in containing inflation, which was the basis for the SARB’s monetary easing.

Depreciation of the rand and monetary tightening

After remaining relatively stable, the exchange rate encountered depreciation pressures in 2006. In 2005, the rand was supported by high commodity prices, foreign direct investment flows, and positive economic data for South Africa, despite the growing current account deficit. However, the currency depreciated in mid-2006 amid volatility in global financial markets and uncertainty regarding the direction of U.S. interest rates. The SARB noted that a further widening of the current account deficit could trigger market concerns about its sustainability, which could have adverse impacts on the exchange rate. Along with higher oil prices and robust domestic demand, particularly strong household consumption, the rand’s depreciation led to inflation pressures through some pass-through effects on domestic prices.

In the face of upside risks to inflation, the SARB tightened monetary policy beginning in mid-2006. As inflation projections deteriorated, the SARB raised the repo rate by 50 bps at its June 2006 meeting, which was followed by a subsequent series of 50 bps increases at the August, October, and December meetings. In addition, the policy rate was increased by a total of 2 percentage points on four occasions in 2007 and by a total of 1 percentage point on another two occasions in the first half of 2008, taking it to 12 percent. These policy responses are intended to ensure that inflation, which breached the target in April 2007 for the first time since August 2003, returns to within the target range.

The SARB allows the exchange rate to be determined in the market while taking account of its impact on prices in the context of inflation targeting. In this respect, attainment of the inflation objective has not been naturally limited by the exchange rate consideration. The SARB simply accepts the currency movements without leaning against them. Consistently, interventions in the foreign exchange market are aimed primarily at strengthening the reserve positions, which is expected to be conducive to exchange rate stability.

However, the rand remains vulnerable to the country’s large current account deficit and exposure to commodity price movements. This causes concern about greater fluctuations in the exchange rate. Indeed, the rand was among the most volatile emerging currencies during the market turbulence of May–June 2006. In addition, the above episodes indicate that a large swing of the rand, at least in part, triggered relatively swift and sizable policy responses.

Large capital flows pose new challenges for the SARB’s monetary policy. The growing current account deficit has been adequately financed by capital inflows. At the same time, the large inflows are accompanied by rapid credit growth, particularly in the household sector, as well as increases in asset prices, which contribute to the risk of inflation. Therefore, monetary tightening by the SARB interacting with the exchange rate and capital flows could support sustainability of the current account deficit but bring about unexpected outcomes in domestic monetary conditions, thereby potentially complicating achievement of the inflation target.

The central bank law stipulates that the BoG’s fundamental objective is “to contribute to the creation and maintenance of the most favorable conditions for the orderly development of the national economy, for which, it will propitiate the monetary, exchange and credit conditions that promote stability in the general level of prices.”

Details such as equilibrium exchange rate and other parameters are not disclosed.

Details of the rule are reviewed every year. Under the current rule, when the exchange rate is equal to or less than the moving average in the previous five business days minus a fluctuation margin of 0.5 percent, the BoG convenes an auction to purchase U.S. dollars. On the other hand, when the exchange rate is equal to or greater than Q 7.815 per US$1, a dollar sale auction is offered when the exchange rate is equal to or greater than the five-day average plus 1 percent margin.

However, inflation recently edged up again, moving well above the upper limit of the inflation goal.

Policy statements did not mention the exchange rate developments and their impact on inflation and growth.

In 2005, no rule was prepared for the sale of U.S. dollars. As for 2006, the resistance threshold, Q 7.70 per US$1, was indeed not reached during the year, nor was the 2007 current threshold (Q 7.815 per US$1).

The ERM II is a regime under which every country planning to join the EMU has to participate for at least two years before introducing the euro. As one of the convergence criteria for the eventual adoption of the euro, the ERM II requires a currency fluctuation band of ±15 percent around the central rate against the euro. Hungary does not yet participate in ERM II.

According to the central bank law, the government, in agreement with the MNB, determines the exchange rate regime and all

This was devalued to Ft 282.36 per €1, as described below.

The medium-term target, announced in August 2005, was set at a level consistent with price stability for a longer period. The target is to be reviewed at the time of Hungary’s entry into ERM II, or after three years, whichever is sooner.

As of mid-2004, the council made an interest rate decision at its second meeting each month; it could hold an extraordinary meeting at any time to decide on changes in the rate.

The exchange rate is thought to influence prices of durables and import costs of fuels and energy, accounting for more than one-third of the consumer basket, and also indirectly to affect service prices and processed food prices. The MNB finds that exchange rate movements pass through to tradable goods’ prices very quickly.

As of 2006, the main inflation forecasts appear biannually in May and November; interim updates are issued in February and August.

In May 2004, the planned date of the euro changeover was revised to 2010.

The MNB admits that the exchange rate will continue to play an important role in influencing inflation even after removal of the ±15 percent band. It also acknowledges that the abandonment of the band constitutes a step toward the adoption of the euro, because a floating exchange rate provides better conditions to meet the nominal convergence criteria and finally to enter into the ERM.

Before introduction of the inflation target, the CBI adhered to a fixed exchange rate regime with some tolerance limits, which were gradually extended to ±9 percent early in 2000.

Three reports to the government on inflation beyond the tolerance limit have been published, dated June 20, 2001; February 18, 2005; and September 19, 2005. When the consumer price index increased beyond the tolerance limit in September 2007, a detailed report was not published, as it was deemed that the necessary explanation was already presented in the CBI’s Monetary Bulletin.

The central bank law grants the CBI authority to establish the basic exchange rate policy by saying “with the consent of the Prime Minister, the Central Bank determines the policy according to which the value of the Icelandic króna against foreign currencies is determined.”

Separately, the CBI makes a weekly purchase of $6 million in the interbank market, to meet Treasury foreign debt service needs and to strengthen the CBI’s foreign reserves. Monthly data regarding the foreign exchange market suggest that the CBI’s foreign exchange operations are limited to these regular purchases, which currently account for only about 0.5 percent of total market turnover.

In the CBI’s quarterly macroeconomic model, raising the policy rate by 1 percentage point causes immediate appreciation of the króna by 0.2 percent and leads to continuous appreciation with a peak at 0.8 percent after five quarters (Monetary Bulletin, November 2006).

The CBI appeared not to have intervened in the exchange market in this period.

In early 2008, the króna depreciated sharply, with credit spreads widening for the sovereign and the banking sectors. The currency depreciation fueled inflation pressures, pushing the CPI to a double-digit increase. In response, the CBI hiked the policy rate by 175 basis points in March and April, to clarify its determination to battle inflation.

At the same time, the CBI allowed inflation to deviate beyond the tolerance limit for more than a year. This strikes a delicate balance between maintaining the inflation target and providing some flexibility in the face of an external shock.

Peru’s exchange rate regime is currently classified as a managed float.

In addition, the BCRP points out that a high level of foreign reserves, a banking system with liquid foreign currency assets, appropriate banking supervision, and a strong fiscal position help reduce the risks involved in financial dollarization.

A portion of these purchases of dollars have served to meet the treasury’s demand for foreign currency to repay the external debt.

The BCRP explains that the sterilization operations have not led to negative effects on the BCRP financial outcome, because the interest rates on certificates of deposit have not been higher than the yield obtained on foreign reserves.

Until 2007, the target formula was a range target, for example, “4–5 percent,” but it was changed to a point target with a tolerance beginning in 2008, effectively widening the target band. This provides more flexibility to the BSP in steering inflation.

These letters outline price developments and adopted measures in the previous year and the outlook for the coming year.

Under the most recent tiering scheme (lifted in July 2007), the banks’ liquid funds placed at the BSP were given progressively lower interest rates: the policy rate for the first 5 billion Philippine pesos (PHLP), 200 basis points less for the next PHLP 5 billion, and 400 basis points less for amounts in excess of PHLP 10 billion.

Under the measure, government-owned and government-controlled corporations and trust entities are allowed to deposit with the BSP at a relatively high rate in a special deposit account.

The central bank law stipulates that the monetary board shall determine the exchange rate policy of the country.

The quarterly inflation reports of the BSP often discuss competitiveness based on real effective exchange rate developments.

In December 2006, the BSP prepaid its outstanding obligations to the IMF in the amount of US$220 million, marking its exit from the postprogram monitoring arrangement with the IMF.

The authorities do not provide any numerical target or definition of price stability.

According to the central bank law, one of the MAS’s objectives is to promote, within the context of the general economic policy of the government, monetary stability and credit and exchange conditions conducive to the growth of the economy.

The MAS explains that it will refrain from intervention as much as possible and allow market forces to determine the level of the Singapore dollar exchange rate within the policy band ( Monetary Authority of Singapore, 2007 ).

For example, the policy band was widened during the Asian crisis of 1997–98 and after the terrorist attacks in the United States in September 2001.

Parrado (2004a) found that the trade-weighted nominal exchange rate has relatively little impact on CPI inflation initially, but becomes more influential in the medium term. Khor, Robinson, and Lee (2004) also contend that the impact of an exchange rate appreciation on GDP, exports, and CPI is considerably greater than a corresponding increase in the interest rate.

The MAS sterilized in part the net liquidity impact of its foreign exchange intervention mainly through foreign exchange swaps, leading to rapid growth of the MAS’s forward position (to US$63 billion at end-2007).

This formula entailed revision of the targets, which complicated the implementation of inflation targeting and caused uncertainty among the public. For example, the initial CPIX targets of 3–5 percent for 2004 and 2005 were revised to 3–6 percent when it became clearer that they would be missed for a fairly protracted period.

Within Same Series

• III Why the Exchange Rate Plays a Large Role in Emerging Economies
• V Foreign Exchange Market Intervention in Inflation-Targeting Policy Implementation
• X Foreign Exchange Intervention Practices: Selected Cases
• VIII Case Studies
• III Exchange Rate Arrangements of Developing and Transition Countries
• V Limiting Exchange Rate Variability: The Target Zone Method
• IV Different Roles for the Exchange Rate and the Policy Trade-Offs
• VI Transitioning to Full-Fledged Inflation Targeting
• III Evaluation of the Present Exchange Rate System
• VI Monetary and Exchange Rate Policies

Other IMF Content

• Inflation Targeting and Exchange Rate Regimes in Emerging Markets
• Two Targets, Two Instruments: Monetary and Exchange Rate Policies in Emerging Market Economies
• Botswana’s Real Effective Exchange Rate Targeting Regime: Taking Stock and Looking Forward
• Inflation Targeting and Exchange Rate Rules in an Open Economy
• 9 Inflation Targeting Under a Crawling Band Exchange Rate Regime: Lessons from Israel
• Inflation Targeting Lite' in Small Open Economies: The Case of Mauritius
• Inflation Targeting and the IMF
• Monetary Policy Under an Exchange Rate Anchor
• Tunisia Monetary Policy Since the Arab Spring: The Fall of the Exchange Rate Anchor and Rise of Inflation Targeting
• 6 Monetary and Exchange Rate Regimes

Other Publishers Content

Asian development bank.

• Exchange Rates and Insulation in Emerging Markets
• How Does Inflation in Advanced Economies Affect Emerging Market Bond Yields? Empirical Evidence from Two Channels
• ADB Economics Working Paper No. 530: Exchange Rate Dynamics and United States Dollar-Denominated Sovereign Bond Prices in Emerging Markets
• Waste to Energy in the Age of the Circular Economy: Compendium of Case Studies and Emerging Technologies
• Developing a Local Currency Government Bond Market in an Emerging Economy after COVID-19: Case for the Lao People's Democratic Republic
• Real Exchange Rate Misalignment and Business Cycle Fluctuations in Asia and the Pacific
• Offshore Fears and Onshore Risk: Exchange-Rate Pressures and Bank Volatility Contagion in the People's Republic of China

Inter-American Development Bank

• Exchange Rate Policy and Inflation Targeting in Colombia
• Flexible Exchange Rate with Inflation Targeting in Chile: Experience and Issues
• Towards a "New" Inflation Targeting Framework: The Case of Uruguay
• Targeting Inflation in a Dollarized Economy: The Peruvian Experience
• Is Inflation Targeting Still on Target?: The Recent Experience of Latin America
• Inflation Targeting in Colombia, 2002-2012
• Liquidity and Exchange Rates
• Why Does the Peso-Dollar Exchange Rate Show a Depreciation Trend?: The Role of Productivity Differentials
• On the Credibility of Inflation Targeting Regimes in Latin America
• Monetary and Exchange Rate Policies for the Perfect Storm: The Case of the Bahamas, Barbados, Guyana, Haiti, Jamaica, Suriname, and Trinidad and Tobago

The World Bank

• Inflation Targeting and Exchange Rate Volatility in Emerging Markets
• Monetary policy under flexible exchange rates: an introduction to inflation targeting
• Inflation and Exchange Rate Pass-Through
• Does inflation targeting matter for output growth?: evidence from industrial and emerging economies
• Inflation in Emerging and Developing Economies: Evolution, Drivers, and Policies.
• Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports: A Case Study for Pakistan
• Understanding Inflation in Emerging and Developing Economies
• Exchange Rate and Inflation Dynamics in Zambia
• What triggers inflation in emerging market economies?
• Inflation Targeting in India: An Interim Assessment
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Table of Contents

Agénor , Pierre-Richard , C. John McDermott , and Eswar S. Prasad , 1999 , “Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts,” IMF Working Paper 99/35 ( Washington : International Monetary Fund ).

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Duttagupta , Rupa , Gilda Fernandez , and Cem Karacadag , 2004 , “From Fixed to Float: Operational Aspects of Moving Towards Exchange Rate Flexibility,” IMF Working Paper 04/126 ( Washington : International Monetary Fund ).

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Svensson , Lars E.O. , and Glenn D. Rudebusch , 1999 , “Policy Rules for Inflation Targeting,” CEPR Discussion Paper No. 1999 ( London : Centre for Economic Policy Research ).

Tapia , Matías , and Andrea Tokman , 2004 , “Effects of Foreign Exchange Intervention Under Public Information: The Chilean Case,” Central Bank of Chile Working Paper No. 255 ( Santiago : Central Bank of Chile ).

Taylor , John , 2000 , “Low Inflation, Pass-Through, and the Pricing Power of Firms,” European Economic Review , Vol. 44 , pp. 1389 – 1408 .

Taylor , John , 2001 , “The Role of the Exchange Rate in Monetary-Policy Rules,” American Economic Review , Vol. 91 ( May ), pp. 263 – 67 .

Tovar , Camilo , 2006 , “Devaluations, Output and the Balance Sheet Effect: A Structural Econometric Analysis,” BIS Working Paper No. 215 ( Basel : Bank for International Settlements ).

Truman , Edwin M. , 2003 , Inflation Targeting in the World Economy ( Washington : Peterson Institute for International Economics ).

Van der Merwe , E.J. , 2004 , “Inflation Targeting in South Africa,” Occasional Paper No. 19 ( Pretoria : South African Reserve Bank ).

Wollmershäuser , Timo , 2006 , “Should Central Banks React to Exchange Rate Movements? An Analysis of the Robustness of Simple Policy Rules under Exchange Rate Uncertainty,” Journal of Macroeconomics , Vol. 28 , pp. 493 – 519 .

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Managing Operational Risk in Foreign Exchange Activities Part 2 - Best Practice & Illustrative Case Study

20 enrolled.

The ability to manage all risks in a business environment is critical. This is perhaps even more important in the volatile world of international trade and investment in one of its most important facets – the foreign exchange market.

In part one of this course, we covered the basic principles and operational features of foreign exchange operations.

In part two we take a deep dive into best practices for the management of foreign exchange operational risk. This course offers a range of practices that will help mitigate some of the operational risks that are specific to the foreign exchange industry. Such best practice may help reduce operational costs because of the fact that less time and effort is needed to investigate and address operational problems.

To round off part two of the course we will examine a detailed case study relating to a recent series of events at a major global bank that will clearly serve to illustrate all that we have covered in parts 1 and 2 of this course.

Subjects that we cover in part two include:

• A detailed look at the foreign exchange trade processing cycle,
• Standards of best practice aimed at reducing foreign exchange operational risks,
• Seven critical aspects of the foreign exchange processing cycle (information flow, segregation of duties, staff understanding, operational risk, product development, product sign-off, control system access and audit and risk control).
• Illustrative case study.

On completing both parts of the course, participants will easily be able to implement these standards of best practice in their own working environment.

Learning Objectives

• Discover what foreign exchange operational areas are included in the best practice guidelines.
• Explore the key elements of best practice in managing operational risk in a foreign exchange environment.
• Identify the different components of the foreign exchange trade processing cycle.
• Recognize how best practice plays a key role in mitigating operational risks.
• Discover how to manage the risks involved in the foreign exchange process.

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Prerequisites

Completion of Part 1 of this course is a prerequisite for proceeding to Part 2.

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Schedule 2024

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View the interactive schedule on our Discord server: https://bit.ly/Discord-BPE2024

Monday June 10

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*Joint sessions will feature two half-sessions on related topics.

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With globalisation increasingly bringing business corporations nearer to various nations - each with its own diverse set of legal and economic systems - the need to study the mechanisms of international trade has become very essential. As long as a business functions within the realm of a domestic economy, it remains exposed to a legal and currency (economic) system that is relatively stable. Once in the global arena, however, international trade agreements and currency systems become relevant. Especially, exchange rate determination mechanisms can have a profound effect on the bottom lines of a company. Speaking more broadly, since such international agreements and exchange rates can also affect national economies, a company being only a subset of it, also is affected by it. Therefore, understanding financial management of a modern business corporation cannot leave out this branch of study.

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International Education’s Academic Benefit: Potential for Community College Virtual International Exchange

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• Published: 25 June 2024

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• Melissa Whatley   ORCID: orcid.org/0000-0002-7073-6772 1  

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This study focuses on the potential academic benefit of virtual international exchange for community colleges and the students they enroll through a comparison of virtual exchange and study abroad. Using data from two community colleges in the US Southeast, this study draws upon the notion of socioacademic integration. Specifically, this study theorizes that both virtual exchange and study abroad have a positive relationship with students’ academic outcomes given their potential to foster socioacademic integrative moments. However, given the scalability of virtual international exchange, it was expected that these programs are associated with a greater relationship to students’ academic outcomes in the aggregate. This study’s results generally confirm these expectations, although findings for virtual exchange are less positive compared to study abroad. Results have implications for the establishment and success of both approaches to international education programming at community colleges. The potential for virtual international exchange to reach a larger group of students compared to study abroad, thus having a greater aggregate impact on students’ success and outcomes, has key policy implications particularly for community colleges, for which service to the community is an integral component of institutional mission.

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Inclusive Learning: Perspectives on Virtual Exchange and Global Learning

Lessons from Virtual Exchange Programs and Hybrid Study Abroad Programs Before and During the COVID-19 Pandemic

The Benefits and Challenges of International Education: Maximizing Learning for Social Change

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The COVID-19 pandemic significantly altered how students engage in international education opportunities. With study abroad programs temporarily grounded, international educators sought alternative, virtual means of exposing students to the world beyond country borders (Redden, 2020 ). Notably, the pandemic also underscored long-standing inequities in access to international education, particularly study abroad, which has historically been dominated by white women from wealthy backgrounds attending 4-year institutions (Lingo, 2019 ; Lucas, 2018 ; Simon & Ainsworth, 2012 , among other key studies that examine study abroad participant characteristics). Virtual international exchange, defined as “the engagement of groups of learners in extended periods of online intercultural interactions and collaboration with partners from other cultural contexts or geographical locations” (O’Dowd, 2018 , p. 5), has recently been presented as a more accessible alternative to study abroad. Although virtual exchange programs existed long before the COVID-19 pandemic, their prominence as a means of offering international education has grown exponentially in recent years (O’Dowd, 2023a ).

One of the strongest arguments in favor of virtual exchange programming is that these programs can reach a larger number of students compared to study abroad, meaning that the benefits of participation accrue to more students and, subsequently, communities and society. These arguments have come from senior leaders in international education (e.g., Abdel-Kader, 2021 ; Whalen, 2020 ) and researchers who study student participation in virtual exchange programming (e.g., Poe, 2022 ). While some have argued that virtual exchange should not be compared to study abroad, but rather examined in its own right (e.g., O’Dowd, 2023b ), such arguments ignore that both international experiences often have similar aims to provide students with exposure to global contexts that enhance their academic and psychosocial outcomes. For example, Commander et al. ( 2022 ) include virtual international exchange alongside study abroad as a high impact educational practice (HIP) falling into the diversity/global learning category (Kuh, 2008 ). At many institutions, these two international-focused programs are developed and implemented in the same office on an institution’s campus.

Both virtual exchange and study abroad have the potential to foster students’ socioacademic integration, moments during which academic interactions among students and faculty, or students and their peers, take on a social function (Deil-Amen, 2005 , 2011 ). Moreover, these two learning experiences display characteristics of HIPs, such as “significant investment of concentrated effort by students over an extended period of time” and “interactions with faculty and peers about substantive matters”. Other key HIP characteristics include “experiences with diversity, wherein students are exposed to and must contend with people and circumstances that differ from those with which students are familiar” and “opportunities to discover relevance of learning through real-world applications” (Kuh et al., 2018 , p. 11).

Both socioacademic integrative moments and HIPs are thought to foster greater academic success among students, particularly those from marginalized backgrounds (Greenman et al., 2022 ). Indeed, Kuh et al. ( 2017 ) define HIPs as “a demonstrably powerful set of interventions to foster student success” (p. 9). By definition, virtual exchange programs take place “under the guidance of educators and/or expert facilitators”, which creates conditions for student-faculty interaction. These experiences also involve “the engagement of groups of learners in extended periods”, which fosters student-to-student peer interactions that develop over time (O’Dowd, 2018 , p. 5). Notably, these interactions involve both peers from a student’s own institution as well as peers from a different cultural context, thus creating contexts where students interact with diverse individuals and perspectives. Faculty-led study abroad programs also offer the potential for significant sustained student-faculty interaction, which by definition takes place in another country context (Sanderson, 2014 ). The small-group, experiential nature of these programs means that students are often required to interact with one another and with faculty both in and out of the classroom (Price & Tovar, 2014 ).

In line with the idea that study abroad is a HIP that fosters socioacademic integration, prior research has found strong and significant associations between study abroad participation and students’ academic outcomes, most notably for degree completion. While the majority of this research focuses on the 4-year sector (Bhatt et al., 2022 ; Hamir, 2011 ). Whatley and González Canché ( 2021 ) found that participation in study abroad is related to a 25% increase in the probability that a community college student will complete an associate’s degree or other credential, and study abroad participants attained a final cumulative GPA that was around half a point higher compared to non-participants. In contrast, very little is known about the benefits of virtual exchange programs or their potential as a HIP. One recent study is promising in that its findings indicated that virtual international exchange positively relates to measures of student success, namely GPA and graduation (Lee et al., 2022 ). However, the data in this study came from students attending a single large university with a decades-long focus on virtual exchange. Consequently, its findings are limited in generalizability to other institutions and contexts.

Although as HIPs, both study abroad and virtual exchange have the potential to promote student success through the cultivation of socioacademic integration, the argument in favor of virtual exchange is that it has the potential to reach students at scale, thus providing benefit to a greater number of students. That is, virtual exchange can accommodate a larger number of students with a smaller investment of time and money. Thus, its positive relationship to student outcomes in the aggregate can be much greater compared to study abroad. This potential to reach a larger number of students and thus promote positive outcomes is especially important in the community college context. These institutions have an explicit mission to serve not only individual students, but also community workforce needs, which increasingly require college graduates with academic credentials and skills that provide an entry into the middle class (Heelan & Mellow, 2017 ).

With this idea in mind, the purpose of this study is to consider how community college students, and subsequently institutions, communities, and society, benefit from virtual exchange and study abroad regarding student success outcomes, namely credential completion and cumulative GPA. In considering student outcomes in the aggregate rather than relying on analyses that explore benefits to individual students, this study provides empirical evidence of the extent to which community college international programming helps these institutions fulfill their mission to benefit the local community and society. This study’s guiding research question asks: What is the accrued academic benefit of virtual international exchange and study abroad, defined as change in average cumulative GPA and probability of completion in a whole student body, related to each experience?

Nowhere are international education’s equity and community benefit concerns more important than in the community college context. Because community colleges and their academic programs are explicitly open-access (Kisker et al., 2023 ), any democratizing function that virtual exchange might play in international education may be most obvious in this sector. Community college scholars and practitioners need a better understanding not only of the academic gains that an individual student might expect from participating in an international opportunity, but also the general gains that might be observed among students due to the existence of these opportunities on college campuses.

This study draws from data representing two community colleges located in the US Southeast. These two colleges have long-standing, well-established study abroad programs and offered virtual exchange options before the onset of the COVID-19 pandemic. They also represent two different environments for the implementation of international education programming. One is a large, urban community college while the other is small and located in a rural area. Consequently, the international education programs at these two colleges represent a broad array of programmatic features, as each college serves a different student population and local community.

The two outcomes that are the focus of this study, cumulative GPA and credential completion, are also key metrics under intense scrutiny among senior leadership at both these colleges. When initially approached about participating in the research represented here, international education professionals at both colleges mentioned the importance of both these metrics in current conversations at their institutions and expressed a particular interest in knowing whether their programs contributed to broader institutional goals to raise students’ academic profile (cumulative GPA) and foster greater credential completion.

Unlike the 4-year sector, community colleges are often marginalized or absent from conversations surrounding international education (Harder, 2010 ; Raby, 2012 ). The use of community college data to address timely and important questions in the field such as the one posed in this study is key to centering the international experiences available to community college students, who comprised over a quarter (27%) of all postsecondary enrollments in the United States in the fall 2019 term (Digest of Education Statistics, 2020 ). Recent data suggest that in the fall and winter 2020–2021 academic terms, 29% of community colleges either already offered or were currently developing virtual exchange opportunities (Cossey & Fischer, 2021 ). Data from the 2018–2019 academic year (the last year of data prior to the COVID-19 pandemic) show that around 31% of public, 2-year institutions offered study abroad (calculation based on Integrated Postsecondary Education Data System [IPEDS] data). As such, the international experiences studied here are not isolated incidences of programs at a few select colleges, but rather represent offerings at many community colleges.

Previous Literature

Underrepresented students and hips.

The community college represents an ideal context to study underrepresented student participation in HIPs. Kisker et al. ( 2023 ) summarize their description of student enrollment at community colleges as “number and variety” (p. 47). These authors highlight both the large number of students attending community colleges and the diversity of students who attend these institutions. Community college students represent a wide range of ages, attend college both full- and part-time, enroll for both credit and non-credit purposes, and represent a broad spectrum of academic preparedness (Kisker et al., 2023 ). Around 81% of full-time community college students received financial aid of some kind in the 2019–2020 academic year (Kisker et al., 2023 ). In 2020, 52% of community college students were students of color (Kisker et al., 2023 ).

HIPs have been shown to support a variety of positive outcomes for students in general. These outcomes include college persistence and completion (e.g., Kuh & Kenzie, 2018 ; McDaniel & Van Jura, 2022 ), GPA and number of credit hours attempted (e.g., Das et al., 2024 ), and critical thinking (e.g., Kilgo et al., 2015 ). However, some have argued that using HIPs as a blunt instrument to improve student success ignores important equity issues among students with different background characteristics (e.g., Seifert et al., 2014 ; Sweat et al., 2013 ; Valentine et al., 2021 ). Finley and McNair ( 2013 ) note that historically underserved students, including students of color, students with lower levels of academic preparation for postsecondary education, and low-income students, are less likely to participate in HIPs. These are precisely the student populations who often access higher education through community colleges (Kisker et al., 2023 ).

In a recent synthesis of the literature on HIPs, Greenman et al. ( 2022 ) critique higher education, noting that although unequal access to HIPs has been documented for years, very little has been done to “reimagin[e] the delivery of high-impact education as a way to overcome barriers to access, or to assessing the impacts of any creative HIPs implementation” (p. 268). These authors propose three categories of solutions for addressing inequitable access to HIPs. The first involves modified approaches to how higher education institutions provide and implement HIPs, such as through shortening study abroad programs so that they better fit within a student’s schedule (e.g., Coker & Porter, 2015 ) or providing learning community opportunities that are virtual rather than in-person (e.g., Sandeen, 2012 ).

The second involves curricular restructuring, such as embedding HIPs into required courses and offering HIPs across all years of a student’s educational trajectory, including the first year (e.g., Finley & McNair, 2013 ; Kuh & Kenzie, 2018 ). Greenman et al. ( 2022 ) highlight a role for community colleges in this area in particular. Since these institutions often serve students early in their academic careers, providing HIPs at community colleges can ensure that students have access regardless of whether they persist in higher education. Additionally, providing HIPs at community colleges can safeguard against students missing out on these opportunities when they transfer from their community college to a four-year institution. The third proposed solution that Greenman et al. ( 2022 ) offer is to increase institutional resources focused on providing HIP opportunities and to direct additional financial aid towards students so that they can participate. Again, these authors list community colleges as a key institutional context in need of resources to offer HIPs to underrepresented and minoritized student populations.

International Education Participation

Like HIPs in general, international-focused HIPs often exhibit patterns of unequal access. Prior research focused on the 4-year institutional context has found white students were more likely to intend to study abroad compared to students of other racial/ethnic identities (e.g., Kim & Lawrence, 2021 ; Salisbury et al., 2011 ). Study abroad participants were more likely to come from higher socioeconomic status families (e.g., Lingo, 2019 ) and more likely to be women (e.g., Lucas, 2018 ). In its most recent Open Doors report prior to the onset of the COVID-19 pandemic (the 2018–2019 academic year; IIE, 2020 ), the Institute of International Education (IIE) reported that of the 347,099 students who studied abroad, 67% were women and 69% were white. For comparison purposes, the Digest of Education Statistics ( 2020 ) indicated that these same two demographic groups comprised approximately 57% and 55%, respectively, of overall US postsecondary enrollment in the fall 2018 term.

Prior research has highlighted several barriers that students encounter when considering study abroad participation that may help explain these participation patterns. For example, in a study of 125 students enrolled in business courses at a regional university in the US Southeast, DeJong et al. (2010) found that most students are familiar with study abroad opportunities, but indicate that finances, work obligations, and family obligations prevent them from participating. Other studies provide similar results for particular groups of students, such as Asian American students (Brux & Fry, 2010 ) and students of color (Kasravi, 2018 ). Among students enrolled at a private liberal arts college, Paus and Robinson ( 2008 ) found that family support, whether for or against the idea of study abroad, was especially influential among African American students, and McClure et al. ( 2010 ) found similar results for Latin@ students.

In contrast to the majority of prior research, which has focused almost exclusively on the 4-year sector, data from the community college sector suggest that the open-access nature of international opportunities at these institutions often mitigates some of the demographic and socioeconomic status inequities in access observed broadly in the study abroad literature, although some groups (e.g., women) continue to access study abroad to a greater extent than others (e.g., men) at community colleges (IIE, 2020 ). For example, Whatley ( 2021 ) found that students across a variety of racial and ethnic identities were equally as likely to study abroad at one community college.

Unlike study abroad, virtual exchange does not benefit from decades of academic inquiry into the characteristics of the students who participate, nor is there a national organization such as IIE that collects annual data on participating student demographics. Several thought leaders have suggested that virtual exchange, alongside other virtual international experiences, has the potential to increase access to international education opportunities. De Wit ( 2016 ) suggests: “online intercultural learning is […] a logical next step towards a more inclusive, innovative approach to internationalisation” (p. 76). Abdel-Kader ( 2021 , n.p.) indicates that “with costly travel removed from the equation, the barrier to entry [to international education] became an internet connection rather than a plane ticket and a passport”. Whalen ( 2020 , n.p.) posits that education abroad should no longer be defined as literally crossing national borders, but rather described as “mobility of students’ minds” that “can be practiced in a wider variety of forms”.

However, researchers caution that empirical evidence to support claims of increased accessibility for virtual exchange is thin (Bali et al., 2021 ; Barbosa & Ferreira-Lopes, 2021 ; Satar, 2021 ). One recent study found that at two community colleges, access to virtual exchange appeared to be less equitable compared to study abroad (Whatley et al., 2022 ). For example, in this study, while students across a variety of racial and ethnic identities were equally as likely to participate in study abroad, virtual exchange participants were more likely to identify as white and less likely to identify as Black. The results of this study call into question the assumption that virtual international programming is inherently more equitable compared to study abroad.

Taken together, the literature on HIPs in general and the literature on internationally-focused HIPs specifically provide a nuanced perspective of who is likely to benefit from study abroad and virtual exchange. On the one hand, with the exception of the community college context, study abroad displays patterns of access that are reflective of HIPs more generally, wherein students who are already advantaged are the ones most likely to study abroad. On the other hand, many believe that virtual exchange programs have the potential to create access to international education opportunities, but evidence of this potential in practice is largely missing.

Virtual exchange certainly speaks to two of Greenman et al. ( 2022 )’s three categories of ways in which institutions can address the inequitable access to HIPs. Regarding the first category, they provide a modification to in-person international experiences in that students can participate without having to leave their homes and college campuses. Regarding the second, these programs can be embedded into students’ courses or degree programs and can be offered at multiple time points across students’ educational trajectories. Consequently, virtual international exchange holds much promise for supporting students’ academic success, particularly among students for whom access to other international experiences, like study abroad, is difficult or impossible due to financial or other life circumstances.

International Education and Students’ Academic Success

Key to the definition of a HIP is that these experiences have a positive association with student success (Kuh et al., 2017 ). Like inquiry into characteristics of students who participate in study abroad, considerable attention has been paid in the literature to the potential relationship between study abroad participation and student success outcomes, with several studies finding a strong positive association between study abroad and degree completion (Bhatt et al., 2022 ; Hamir, 2011 ; Xu et al., 2013 ). For community college students in particular, two prior studies have found a positive association between study abroad and retention, completion of college-level Math and English courses, completion of college-level credits, degree and certificate completion, GPA, and transfer to a four-year institution (Raby et al., 2014 ; Rhodes et al., 2016 ). Whatley and González Canché ( 2021 ) offer a recent robust estimation of the relationship between study abroad and various indicators of student academic success among community college students using propensity score weighting. These researchers found that study abroad is associated with an increased likelihood of degree or credential attainment, increased likelihood of transfer to a 4-year institution, a greater percentage of attempted credits passed, and a higher cumulative GPA.

Regarding virtual exchange, one recent study (Lee et al., 2022 ) explores the relationship between program participation and student success metrics at a large US university that has identified virtual exchange as a key component of its internationalization strategy. Drawing from data representing almost 50,000 students, this study found that virtual exchange was positively related to both GPA and graduation, even in models that used a matching approach to mitigate selection bias. This study found that gains in GPA as a result of virtual exchange participation were particularly prominent for several marginalized student groups, including Black and Hispanic students, Pell recipients, and females.

One uniting feature of the literature on academic outcomes and international education participation is that without exception, these studies focus on the benefits of participation that accrue to the individual student. The current study contributes to this body of literature through analyses that can speak to the broader potential benefits of offering these experiences in the community college context.

Theoretical Framework

Tinto’s ( 1975 , 1993 ) interactionalist theory of student departure provides a particularly useful framework for the current study. Within Tinto’s ( 1975 , 1993 ) original framework, which was developed to explain why students leave college prior to credential completion, students arrive to their higher education institutions with a set of family background characteristics, skills, and abilities, along with educational ambitions, commitments, and intentions. These indicators lead students to pursue academic and social experiences within the higher education environment. In turn, these experiences frame the extent to which students integrate into the college environment. Academic integration happens when students feel like they belong intellectually at their college, while social integration is fostered through connections outside the classroom. Integration may be formal or informal, such as through in-class academic group work with peers and organized campus clubs and events or through spontaneous group study sessions and social plans on the weekend. Within this framework, academic and social integrations, whether formal or informal, lead to students’ subsequent reframing of their goals and intentions regarding degree completion, which in turn encourages a decision to either depart postsecondary education or persist until degree completion.

Community college scholars have questioned the applicability of Tinto’s theory of student departure in the community college context because, in its original iteration, significant on-campus interaction was assumed (e.g., Bensimon, 2007 ). While such interaction is common on the campuses of residential, 4-year institutions, similar interaction is not likely to happen at many community colleges, where students are more likely to commute to campus and live at home, study part-time, maintain full-time employment, and have family commitments that take up their time outside work and the classroom (Renn & Reason, 2021 ). These students are less likely to have time to take part in clubs on campus or resources to participate in extensive weekend socializing.

However, this is not to say that social and academic integration does not happen for community college students, but rather that it happens differently. For example, Karp et al. ( 2010 ) found that community college students develop a sense of belonging in their college communities primarily through academic settings that foster group work and that involve clear faculty contact. For these students, social relationships begin as academic relationships, and retain a scholarly focus as they develop. Similarly, Deil-Amen ( 2011 ) found that while students’ integration happens primarily in academic settings, the social interactions that derive from academic relationships are deeply meaningful. For example, students whose families may not fully understand their decisions to seek further education find support among peers in similar situations. Bensimon ( 2007 ) highlighted the importance of faculty, staff, and peers in cultivating integration among community college students. Tinto ( 2012 ) echoes a similar sentiment in a call to focus on institutional action that can foster student success.

Importantly, socioacademic integration has been found to foster student persistence towards graduation among community college students. Using data from the National Center for Education Statistics’ Beginning Postsecondary Students Longitudinal Survey (BPS), Deil-Amen ( 2005 ) found that both academic and social integration positively related to persistence among a nationally-representative sample of community college students. Price and Tovar ( 2014 ) examined data from the Community College Survey of Student Engagement (CCSSE) and found that an active and collaborative learning environment positively predicted an institution’s graduation rate. Based on survey items, these authors recommended that faculty implement classroom practices that require students to work together on projects both in and out of class, encourage students to work together on assignments, and commit time to discuss course materials with students outside of class.

Socioacademic Integration in Faculty-Led Study Abroad and Virtual International Exchange

Curricular components such as collaborations with peers and discussion outside the classroom are often present in faculty-led study abroad (Sanderson, 2014 ) and virtual exchange program design (Giralt et al., 2022 ; Stevens Initiative, 2021 ; Whatley et al., 2022 ). Both these approaches to international education also tend to implement practices that can foster active and collaborative learning. Regarding study abroad, students’ social and academic involvement may be especially cultivated during faculty-led study abroad programs, which foster intense student engagement with at least one faculty member, tend to align study abroad curricular offerings with the curricular offerings on students’ home campuses, and often comprise smaller, more intimate groups of students (Sanderson, 2014 ).

As an online means of international engagement, virtual exchange also requires intense involvement on the part of at least one faculty member, especially when virtual exchange programming is embedded within a course that a specific faculty member is teaching or an academic program that is the faculty member’s responsibility (Giralt et al., 2022 ). Moreover, by definition, virtual exchange programs require students to work together online in small groups to carry out projects, develop and give presentations, or engage in language practice (Stevens Initiative, 2021 ).

These characteristics of both faculty-led study abroad and virtual exchange programs can create an environment that fosters socioacademic integration and subsequent student success. Perhaps it is unsurprising, then, that as both academic and social experiences, global learning opportunities have generally earned a reputation as HIPs, meaning that student engagement in these experiences leads to greater involvement in their academic environments. This greater involvement in turn positively impacts students’ educational outcomes, including both degree completion and academic achievement (defined as GPA) (Brownell & Swaner, 2010 ; Kuh, 2008 ).

Of course, returning to Tinto’s ( 1975 , 1993 ) framework, the extent to which students choose to participate in virtual exchange or study abroad programs is a function of a host of characteristics that students bring with them to higher education. Prior literature indicates that participation in international education opportunities does not happen on an even playing field, and some students are more likely to engage in these activities than others. The analytic approach adopted in this study accounts for observed differences in student participation before estimating the relationship between virtual exchange and study abroad and student success.

International Programs

The two community colleges that participated in this research provided annual administrative data on entering student cohorts spanning three academic years (2016–2017, 2017–2018, and 2018–2019) (see Table  8 in the Appendix for descriptive information about the students attending each college). These colleges have actively promoted international education opportunities among their students since 2010 in the case of one college and 2012 in the case of the other. The study abroad programs that these two colleges offer are short-term and faculty-led, usually lasting between 1 and 3 weeks. These programs go to a variety of countries across several continents, and students participate in programs as varied as learning Spanish in Peru, studying biology in South Africa, and earning general humanities credit in Ireland and Greece.

Virtual international exchange programs at these two colleges are diverse and speak to a variety of student needs and interests. Importantly, these programs are not virtual study abroad programs, wherein institutions might try to recreate the study abroad experience through virtual means. Instead, these programs exhibit key characteristics of true virtual international exchanges. Namely, they facilitate engagement across groups of learners in at least two country contexts for extended periods of time, most often culminating in a collaborative group project wherein students must work across countries and cultures with their peers. While these experiences are sometimes associated with particular courses that students take, others are stand-alone opportunities that students choose to participate in outside of their regular coursework. These virtual exchange programs typically last the entire span of an academic term and thus students are in contact with their peers in another country frequently and over the course of an extended period.

Two examples of virtual international exchange programs are illustrative of the types of programs offered at these two community colleges. The first involved the pairing of US students with students enrolled at institutions in either Jordan or Iraq. This program was 10 weeks long and included four bi-national sessions (involving US students and either Jordanian students or Iraqi students) that focused on identifying a common problem in sustainability in students’ local communities. In addition to these large group sessions, students worked in smaller, bi-national groups to propose a solution to the identified problem and create a video together outlining their plan. Although there was no set requirement for how much time students worked together in their small groups, the projects that students submitted for satisfactory completion of the program required substantial investment working together. This first program is an example of a program that was not required in any particular class that students took, but rather students chose to participate outside their regular course requirements. Many participating students earned a global distinction notation on their diplomas as acknowledgement of their participation.

A second program, which involved Spanish language exchange, is an example of a required virtual exchange program. Through this program, all students taking Elementary Spanish courses were required to participate in a total of six 30-min language exchange sessions with a Spanish speaker located elsewhere in the world. These sessions took place over the course of an eight-week term, which is standard at both community colleges. Sessions were recorded, and students were graded based on the extent and quality of their active participation.

This study’s dataset contained information about student demographics, namely race/ethnicity, age at enrollment, sex, and socioeconomic status (defined as a student’s eligibility for a Pell grant), and academic information corresponding to students’ first term of enrollment, namely the GPA they earned during that term and their declared degree program: Associate in Arts; Associate in Science; Associate in Applied Science; or a Certificate/Diploma. These variables were selected for the study’s dataset based on prior literature that points to these characteristics as salient predictors of study abroad participation.

While it may be the case in other contexts, such as the 4-year institutional context, that it is not students’ broad degree program but rather their specific academic area of focus that supports their participation in international education opportunities, in the community college contexts represented in this study these two academic indicators are often one in the same. Indeed, approximately 37% of the students in this dataset did not declare an academic focus area (such as a major concentration) apart from their general degree (Associate in Arts, etc.). Consequently, degree program rather than academic program was used to approximate students’ academic commitments in this study.

Because the two outcomes of interest in this study are academic in nature, a student’s GPA during their first term of enrollment is particularly important to consider as a measure of prior academic achievement. Given the open access nature of the two institutions in this study, a common feature of US community colleges, other measures of prior academic achievement, such as high school GPA or standardized test scores, are not consistently collected from all students. This dataset also contained information about students’ international experiences, namely participation in virtual exchange and study abroad. Finally, the dataset included students’ last recorded cumulative GPA (on a scale from 0.0 to 4.0) and a binary indicator of credential completion. Data were collected in summer 2021, and thus even the 2018–2019 entering cohort had at least three years (150% time for an Associate’s degree) to complete their credential.

Prior to analysis, several groups of students were removed from the dataset. First, students below the age of 18 when they first enrolled at the community college were removed (N = 4176), as permission was not granted from each institution’s respective institutional review board to use data from minors in this study. Second, students who were not residents of the United States (N = 1655) were removed, as these students presented substantial cases of missing data on a number of the variables included in this study. Next, several groups of students were removed because they were represented in the dataset in numbers too small for statistical analysis: students who initially declared an intention to earn an Associate in General Education (N = 38); students with no academic program declared during their first term (N = 32); and students without sex information (N = 8). This missing information for the final group of students presents concerns about the accuracy of other information corresponding to these same students in the dataset.

Finally, although ten students in the dataset participated in both virtual exchange and study abroad, the small size of this group precluded its inclusion in analyses. Future research with a larger dataset is needed to explore the relationship between participation in multiple international experiences and students’ academic outcomes. After these exclusions, a total of 26,738 students comprised the study’s analytic dataset. In total, 731 students participated in virtual exchange and 57 studied abroad. Around 17% completed a credential, and the average last-recorded cumulative GPA of all students was 2.29.

Analytically, this study adopts a potential outcomes framework (Lewis, 1973 ; Rubin, 2005 ) in that it is concerned with the average relationship between three experimental conditions, participation in virtual exchange, participation in study abroad, and no participation, and two measures of students’ academic success, last-recorded cumulative GPA and completion. Although a traditional potential outcomes framework is concerned with obtaining true treatment effects that receive a causal interpretation, this study does not claim a causal relationship between treatment conditions and academic outcomes due to ethical and data limitations. However, the potential outcomes framework remains useful for this study because the conditions under consideration can be conceptualized as an experiment, in that one could hypothetically randomize students into virtual exchange, study abroad, and no participation categories.

Because students’ choice to participate in virtual exchange, study abroad, or neither is not random and is likely determined by several factors not observed in this dataset, such as whether the student is employed full time, prior travel abroad, or intellectual interests in international topics beyond the classroom, a causal interpretation is not possible in this study. Instead, this study uses the potential outcomes framework to conceptualize average relationships between these three experimental conditions and students’ academic outcomes in observed data. This average relationship can be calculated at the individual student level but can also be calculated in the aggregate at the group level. This study’s analytic approach unfolded in two phases, an individual phase and group phase, with the latter ultimately providing an answer to this study’s research question.

Individual Phase

For exploring the relationship between experimental conditions and academic outcomes for the average student, two series of regression models were used. The first series employed unweighted linear regression to estimate the relationship between study abroad and virtual exchange and a student’s last-recorded cumulative GPA and completion, as in ( 1 ):

where \({y}_{ijt}\) represents a particular outcome, cumulative GPA or completion. The models for both outcomes are estimated using ordinary least squares. In the case of cumulative GPA, this produces a standard linear model of an outcome ranging from 0 to 4, whereas when the outcome is a binary indicator of completion, this is a linear probability model. In ( 1 ), \({\alpha }_{0}\) is an intercept term, and \({\beta }_{1}\) represents an estimate of the relationship between virtual exchange ( \({VE}_{ijt}\) ) and an outcome. Similarly, \({\beta }_{2}\) represents an estimate the relationship between study abroad ( \({SA}_{ijt}\) ) and a given outcome. \({\beta }_{3}\) is a vector of coefficients corresponding to control variables ( \({Controls}_{ijt}\) , see Table  1 ), and \({\varepsilon }_{ijt}\) is an error term. These models also included a fixed effect for both the college that a student attended ( \({\alpha }_{j}\) ), to account for any institutional effects on these academic outcomes, and their entry cohort ( \({\delta }_{t}\) ), to account for any secular trends that might explain students’ academic achievement over time.

While this first series of regression models follows standard analytic procedure in education research, it does not address the issue of student selection into one of the three experimental conditions, virtual exchange, study abroad, or neither experience. That is, students are not randomly distributed among these three conditions, and this non-random distribution ideally must be accounted for in analyses such as these. For this reason, a second series of regression models used inverse probability weighting (IPW), an analytic technique that accounts for individuals’ observed baseline characteristics prior to treatment (Lewis, 1973 ; Rubin, 2005 ). This second set of models tests the robustness of the first models, but even with this additional analytic rigor, weighted models are unable to estimate causal effects.

IPW is a useful approach where more than two experimental groups are involved, as in the current study, because it is able to account for selection into multiple groups, at least as far as observed characteristics are concerned. Balance among students belonging to each of this study’s groups (virtual exchange, study abroad, and neither experience) is important to this study’s design because it helps to address the possibility that students’ non-random distribution among experimental conditions explains results rather than their participation in international education.

In this study, the IPW approach was implemented in two steps. First, multiple paired comparisons among experimental conditions were conducted to estimate a student’s propensity towards selecting into a particular group: virtual exchange; study abroad; or neither experience, based on observed pre-treatment characteristics, namely demographics and first-term academic information. Within a regression context, treatment assignment was estimated using these pre-treatment characteristics to compare each treatment category and all other categories, for a total of three comparisons (virtual exchange-no participation, study abroad-no participation, virtual exchange-study abroad). Using these estimates, each student was assigned a numerical propensity toward selecting into a particular category.

In the second step, this estimated propensity score was used to assign an inverse probability weight to each student for each treatment condition. The inverse probability weight adjusts each individual observation by the inverse of the probability that that individual would select into a specific treatment group (Imai & Ratkovic, 2015 ). Students who were more likely to participate in a particular treatment were assigned a smaller weight, while students who were less likely to participate were assigned a larger weight, thus balancing treatment and comparison groups for each experimental category. This weighting corresponds to the average treatment effect on the treated (ATT), which estimates the relationship between treatment and a particular outcome on those who received the treatment.

Equation ( 2 ) describes ATT in a multivalued treatment context:

In ( 2 ), \(ATT_{{\tilde{t},\overset{\lower0.5em\hbox{$\smash{\scriptscriptstyle\smile}$}}{t} }}\) is the estimated average change in outcome \(y\) (e.g., cumulative GPA) of switching a student’s treatment category to \(\overset{\lower0.5em\hbox{$\smash{\scriptscriptstyle\smile}$}}{t}\) ( \(t = \overset{\lower0.5em\hbox{$\smash{\scriptscriptstyle\smile}$}}{t}\) ) among students receiving treatment \(\tilde{t}\) , as compared to a control group, \(0\) . For example, one might be interested in average change in cumulative GPA that would result if a student participating in study abroad ( \(\tilde{t}\) ) were to switch their choice of international education experience to virtual exchange ( \(\overset{\lower0.5em\hbox{$\smash{\scriptscriptstyle\smile}$}}{t}\) ), all while maintaining comparison to the outcome of non-participation ( \({y}_{0}\) ) as a reference. Common support for this analysis, meaning that there is sufficient overlap in propensity scores among the experimental groups, is found in Fig.  1 . Once an inverse probability weight was assigned to each student for each treatment condition, the same regression models summarized in ( 1 ) were conducted, only these models were weighted as just described.

Common support

Group Phase

While the individual phase of this study provides an estimate of the average academic benefit of study abroad and virtual exchange for an individual student, much like previous research, it does not provide an indication of the extent to which this relationship is reflected in the outcomes of entire groups of students, such as the population of students attending the two community colleges in this study. That is, while a few students may benefit from study abroad or virtual exchange participation, these benefits may be so small that they do not move the needle on key student success metrics for the students attending an institution broadly.

To address this limitation, the second phase of this study’s analytic approach used the regression models estimated in the first phase to predict eight counterfactual means reflecting scenarios wherein either virtual exchange or study abroad was not available to students. These counterfactual predictions were calculated using counterfactual datasets wherein either study abroad or virtual exchange participation were set to zero for all students, as would be the case if these institutions were to not offer one of these two experiences. Using these counterfactual datasets, predicted outcomes were first calculated for each student Footnote 1 and then these calculations were averaged. These averaged predictions produced four means for each regression approach (unweighted linear regression and inverse probability weighted regression): mean final cumulative GPA either in the absence of virtual exchange or in the absence of study abroad and mean probability of graduation either in the absence of virtual exchange or in the absence of study abroad. A comparison of these counterfactual means to predicted means calculated using actual observed treatment levels Footnote 2 provides a response to the study’s research question. Specifically, paired-samples t -tests were used to compare differences in the mean final cumulative GPA and mean probability of graduation in the observed data with these counterfactual predictions.

Limitations

Although this study presents robust estimations of the relationship between students’ participation in international education programs, namely virtual exchange and study abroad, and their academic outcomes, at least three limitations must be taken into consideration when examining the results.

First, the weighting approach used in this study is unable to account for any unobserved differences between treatment and control group students. For example, study abroad participants may have prior travel experience that non-participants do not have or may have qualitatively different academic interests compared to non-participants. Additionally, given its requirement to travel internationally, study abroad participation may have differential opportunity costs and effects for students with differing academic program interests. Indeed, program cost is often cited as a primary barrier to study abroad participation (Brux & Fry, 2010 ; De Jong et al., 2010 ; Kasravi, 2018 ). Regarding virtual exchange, participants may have better internet access in their homes compared to non-participants, which likely correlates with students’ socioeconomic status (Skinner, 2019 ). The dataset used in this study does not contain information about these and other variables that may differentiate between program participants and non-participants and thus this information is excluded from the analyses.

A second, related limitation is that not all the student characteristics that Tinto’s ( 1975 , 1993 ) framework would prescribe for statistical models are available in this study’s dataset. Most importantly, this study is unable to account for the educational ambitions, commitments, and intentions that students bring with them to the community college when they first enroll. A student’s declared degree program in their first term of enrollment may indicate this information to a certain extent, and its inclusion in this study is a step towards addressing this limitation. However, presence of additional information in the dataset, most notably students’ intended major or interest in specific academic programs as they move forward in their academic careers (e.g., through transfer to the 4-year sector), would be helpful in further addressing differences among students in each of this study’s treatment conditions.

In other cases, information about key variables, such as a student’s socioeconomic status, is only accounted for partially in the dataset. Here, a student’s status as a Pell recipient is taken as a measure of their socioeconomic status. However, other aspects of socioeconomic status that may have provided a more accurate representation of socioeconomic status, such as parental education attainment or family income, are not available (Rosinger & Ford, 2019 ). Despite these first two limitations, the results of this study remain valuable in that they speak to the relationship between international education experiences and students’ academic success among a group of students that is often absent from scholarly discussions in international education, community college students. Perhaps somewhat ironically, this lack of available data is perhaps one of the reasons why community college students are often absent from this conversation.

A final limitation of this study is that its dataset comprises information from students attending only two community colleges. This limitation is common in studies of international education in the community college sector, as there is no large, nationally-representative dataset that contains individual-level information about community college students’ participation in international education. To account for this limitation, this study uses data from two community colleges located in different settings. While the results in the following section are not generalizable to other community college contexts in the traditional sense, the implications of these results remain relevant for institutions seeking balance between traditional study abroad and newer virtual international exchange opportunities as we emerge from the COVID-19 pandemic shutdown.

Descriptive Statistics

Table 1 provides descriptive statistics for the entire sample used in this study alongside these same statistics for virtual exchange participants and study abroad participants separately. Footnote 3 Notably, this table indicates that a very low percentage of students (0.21%) participated in study abroad (N = 57), while around 3% participated in virtual exchange.

On average, students were around 23 years old, while virtual exchange participants and study abroad participants were around a year younger. Slightly over half of students in the dataset are female (53%), which is also true of virtual exchange participants (56%). In contrast, study abroad participants were overwhelmingly female (74%). The racial/ethnic composition of the full sample was 28% Black, 14% Hispanic, Footnote 4 46% white, and 12% of another group. In contrast, Black students comprised a smaller percentage of virtual exchange participants and study abroad participants (15% and 12%, respectively) and Hispanic students comprised a smaller percentage of virtual exchange participants (9%) and a greater percentage of study abroad participants (19%). Virtual exchange participants were also more likely to identify as white (64%), while the percentage of study abroad participants who identified as white was similar to the full sample (44%). Almost half (47%) of the full sample received Pell funding, while these students comprised 67% and 44% of the virtual exchange and study abroad groups, respectively.

Although the purpose of this study is not to understand why students chose specific virtual exchange or study abroad programs, these demographic differences between groups invite questions about these choices. Some of the patterns illustrated in Table  1 are reflective of national trends, most notably a greater percentage of female students participating in study abroad (IIE, 2020 ; Lucas, 2018 ). The greater percentage of virtual exchange participants who receive Pell funding may very well be indicative of this international opportunity increasing access to students who cannot afford to study abroad for financial reasons (Abdel-Kader, 2021 ; Poe, 2022 ; Whalen, 2020 ).

Regarding racial/ethnic identity, the greater percentage of Hispanic students who study abroad, as compared to participate in virtual exchange, could be reflective of study abroad program offerings that appeal to these students. Many of the study abroad programs offered at these two community colleges took place in Latin America. Latin America, particularly the Caribbean and Central America, is especially easy to access geographically from the US Southeast, where these two community colleges are located. Moreover, community college students and staff alike often perceive these locations as more affordable compared to destinations in Europe. Although a speculative explanation in this study, students who identified as Hispanic may have preferred programs in Latin America for linguistic or heritage-seeking purposes, a rationale that has been documented in previous literature (Kasun et al., 2023 ; Shively, 2018 ).

Regarding academics, the average first-term GPA for students in the dataset was 2.28 (Table  1 ). This average first-term GPA was slightly higher for virtual exchange participants (2.70) and much higher for study abroad participants (3.22). This difference in the initial measure of students’ academic achievement provides additional motivation for its inclusion as a predictor variable in this study’s analyses. With reference to degree program, half the students in the dataset chose an Associate in Applied Science degree program when they first enrolled at their community college, which contrasts starkly with the virtual exchange participant group, where only 15% of students declared this degree program upon entry. In the overall sample, 32% of students chose an Associate in Arts degree when they first enrolled, a percentage that is comparable to the study abroad participant group (28%). In contrast, Associate in Arts seekers comprised a greater percentage (56%) of the virtual exchange participant group. Both the full sample and study abroad participants were also similar in that a comparable percentage of students chose Associate in Science degrees at first enrollment (6% for the full sample and 7% for study abroad participants). However, a comparably large percentage of virtual exchange participants chose this degree program (25%). Finally, around 12% of the full sample chose a Certificate or Diploma program at first enrollment while 3% and 9% of virtual exchange participants and study abroad participants, respectively, did so.

Table 2 summarizes this study’s outcome variables in the aggregate and by experimental condition. The mean last recorded cumulative GPA for the entire sample was 2.29, while the mean GPA for virtual exchange participants and study abroad participants was higher (2.71 and 3.36, respectively). These higher mean GPAs contrast with the lower mean GPA among students who did not participate in either international education opportunity (2.28). A one-way analysis of variance (ANOVA) suggested that the mean cumulative GPAs of virtual exchange participants, study abroad participants, and students participating in neither international experience were significantly different from one another ( F (2,26,735) = 56.37, p  < .001). A similar pattern is observed when considering credential completion. While only 17% of students in the overall sample completed their degree program, 42% of virtual exchange participants and 79% of study abroad participants did so. Around 16% of students who participated in neither international education opportunity completed a credential. A chi-square test of independence indicated a significant difference in completion across virtual exchange participants, study abroad participants, and students participating in neither opportunity ( \({\chi }^{2}\) (2) = 499.75, p  < .001).

Last Cumulative GPA

Table 3 summarizes results of unweighted linear regression models estimating the relationship between study abroad and virtual exchange and a student’s final cumulative GPA. The first column in this table summarizes results of the model using the full data sample. The results in this column indicate a positive relationship between both international experiences and a student’s final cumulative GPA. Specifically, study abroad participants were estimated to have a final cumulative GPA that was 0.3 points higher compared to students who did not participate in an international education opportunity ( p  < .01), and virtual exchange participants were estimated to have a final cumulative GPA that was 0.143 points higher compared to non-participants ( p  < .001), on average and all else equal.

Researchers have previously noted complexities in using GPA as an outcome in regression models (Bacon & Bean, 2006 ). Notably, a variety of GPA options are available for use in research, including term-by-term GPAs and cumulative GPAs for each term. This study adopts Bacon and Bean’s ( 2006 ) recommendation in that it uses a student’s last recorded cumulative GPA as the outcome variable of interest. They find that this measure is the most reliable in capturing a student’s academic performance across all terms that a student is enrolled. However, this last recorded cumulative GPA may carry different meanings for different students in that for some students this GPA reflects their cumulative academic performance during the semester they graduated, while for others it represents their cumulative academic performance the semester that they dropped out. For an unknown number of students, this GPA reflects cumulative academic performance prior to transferring to another institution without completing a credential at the community college.

A table of descriptive statistics that allows for a comparison between the study’s full dataset and the subset students who graduated, in general and by treatment condition, can be found in Table  9 in this study’s Appendix. Notably, students who graduated were more likely to participate in both study abroad and virtual exchange compared to the study’s full sample (0.21% vs. 1% and 2.73% vs. 6.82%, respectively). Another important difference between completers and non-completers is that completers exhibited higher average first-term GPAs in the general and by treatment condition. General trends in demographic and academic differences between virtual exchange participants and study abroad participants and the full sample remained even after limiting the sample to only students who completed a degree.

The regression model summarized in the second column of Table  3 uses data only from students who graduated (N = 4489) to test the robustness of the results in the first column. These results indicate that the positive relationships observed in the first model between both international education opportunities and a student’s final cumulative GPA hold even when considering only credential completers. More specifically, this second model suggests that study abroad participation relates to a 0.159 point increase in final cumulative GPA compared to non-participation ( p  < .05) and participation in virtual exchange relates to a 0.072 point increase in GPA ( p  < .05).

Table 4 summarizes the results of weighted regression models. Again, this table includes results for a model using the full data sample (the first column) and a second model that uses only data from students who completed a credential (the second column). In the full sample, study abroad is associated with a 0.32 point increase in a student’s GPA compared to participation in neither international education opportunity ( p  < .001), while virtual exchange is associated with a 0.23 point increase in GPA compared to non-participation ( p  < .05). Among completers, study abroad is associated with a 0.16 point increase in final cumulative GPA ( p  < .001). However, the relationship between virtual exchange and final cumulative GPA is not significant. This lack of statistical significance, which contrasts with the unweighted model displayed in Table  3 , may be due to a reduction in selection bias in the weighted model (Table  4 ) as compared to the unweighted model (Table  3 ).

Table 5 summarizes results of the unweighted linear regression models estimating the relationship between study abroad and virtual exchange and a student’s likelihood of completion. The first column in this table summarizes results for the full sample, while the second column includes results for the subsample of students who declared an Associate in Arts or Associate in Science degree program upon entry to the community college (N = 10,350).

The rationale for this second model is to account for differences in students’ degree programs and academic goals. Notably, Associate in Arts and Associate in Science degree programs are typically longer than Certificate or Diploma programs. These two Associate degree programs are often designed for 2 years of full-time study, while Certificate and Diploma programs can be as short as a single academic term. Consequently, completion for Certificate/Diploma seekers can happen over the course of a much shorter timeline. Additionally, both Associate in Arts and Associate in Science degrees are designed for students intending to transfer to the 4-year sector, while both Associate in Applied Science and Certificate/Diploma programs are intended for students who want to immediately enter the workforce. Associate in Arts and Associate in Science students may leave the community college without completing their degrees when they transfer to a 4-year institution.

Results for the full sample (column 1 in Table  5 ) indicate that study abroad was related to an increased probability of completion of around 50% ( p  < .001) and virtual exchange was related to a similarly positive increase of around 4% ( p  < .01), as compared to students who did not participate in international education, on average and all else equal. Results for the model including only Associate in Arts and Associate in Science seekers were similarly positive in that study abroad was related to an increased probability of completion of around 40% ( p  < .001) and virtual exchange was related to an increased probability of around 26% ( p  < .01).

Finally, Table  6 summarizes the results of weighted regression models that estimate the relationship between international education experiences and completion. For the full sample (column 1 in Table  6 ), these results indicate that study abroad was related to an increased probability of credential completion of around 49% ( p  < .001) compared to students who participated in neither international education opportunity. However, the difference in likelihood of completion for virtual exchange participants was not statistically discernible from the group of non-participants in the weighted model. When considering only Associate in Arts and Associate in Science seekers, results are similar in that study abroad is associated with an increased probability of completion of around 39% ( p  < .001) while no significant relationship is present between virtual exchange and completion.

Table 7 summarizes the predicted means calculated in the second phase of this study. Regarding GPA, these predictions suggest that both study abroad and virtual exchange result in higher mean final cumulative GPAs compared to a situation where one international opportunity or the other does not exist. For example, using the weighted regression models, the predicted mean final cumulative GPA of the students in the dataset is 2.2783, while the counterfactual mean in the absence of study abroad is 2.2776 (a difference of 0.0007, p  < .001). For virtual exchange, the predicted counterfactual mean representing the absence of these programs is 2.2696 (a difference of 0.0087, p  < .001).

For completion, using the same weighted models, the predicted mean probability of completion is 0.1652. This predicted probability decreases to 0.1642 in the absence of study abroad (a difference of 0.0010, p  < .001) and to 0.1623 in the absence of virtual exchange (a difference of 0.0029). Across unweighted and weighted predictions and both academic outcomes, differences between observed and counterfactual means are significant ( p  < .001). Notably, when considering the size of these differences, although small across comparisons, the difference between observed and counterfactual means was consistently greater for virtual exchange compared to study abroad.

This study took as its point of departure the theoretical prediction that both virtual exchange and study abroad, as high impact educational practices (HIPs), foster socioacademic integration among community college students. In turn, these experiences positively contribute to their individual academic outcomes, which in turn have a positive impact on the communities where their institutions are located (Kuh & Kenzie, 2018 ). For example, McDaniel and Van Jura ( 2022 ) use nationally-representative data from the Educational Longitudinal Study (ELS) to show that students enrolled in four-year degree programs who participated in HIPs were more likely to graduate within 6 years. Das et al. ( 2024 ) use propensity score matching to show that participation in a first-year seminar, an additional example of a HIP, positively related to students’ cumulative GPA a semester after participation. The current study sought to explore the potential for a similar, positive relationship between participating in internationally-focused HIPs, virtual international exchange and study abroad, and student success outcomes.

Researchers have previously been critical of HIPs and how they are implemented in that historically underserved students, such as students of color, those with lower levels of academic preparation, and low-income students are less likely to have access to these opportunities (Finley & McNair, 2013 ; Greenman et al., 2022 ). Notably, the community college context, where the current research took place, is precisely where students with these marginalized identities tend to enroll when they begin their postsecondary studies (Kisker et al., 2023 ; Renn & Reason, 2021 ). Indeed, Greenman et al. ( 2022 ) identify community colleges as contexts where concerns regarding equity in access to HIPs can be addressed in higher education. For example, these authors suggest that because community colleges serve students early in their academic careers, they are ideal locations to ensure that marginalized and minoritized students have access to these opportunities.

Socioacademic integrative moments such as those fostered by HIPs are particularly relevant in the community college context because students are less likely to interact with one another and with faculty outside of the classroom, as compared to their counterparts who attend residential, 4-year institutions (Bensimon, 2007 ; Renn & Reason, 2021 ). Indeed, prior research indicates that academic settings are the primary venue wherein community college students develop a sense of belonging in their postsecondary communities and that the relationships that students form are deeply meaningful for their academic experiences (Karp et al., 2010 ). Based on semi-structured interview data, Deil-Amen ( 2011 ) found that in-classroom interactions with faculty and other students were deeply meaningful for community college students’ sense of comfort in their postsecondary institutional environment. These classroom connections, particularly with faculty, boosted students’ academic performance and had a positive impact on students’ self-worth and sense of belonging. Connections with other students in the classroom helped students address barriers, such as opaque institutional practices and policies, that otherwise may have negatively impacted their academic success. In such contexts, faculty, staff, and students themselves take on key roles in fostering socioacademic integration, which can lead to future student success (Bensimon, 2007 ; Tinto, 2012 ).

While the current study is unable to address the nature of these socioacademic integrative moments during virtual exchange and study abroad that fosters students’ academic success, this is an area that is ripe for future research. The results outlined here suggest that these international experiences, and especially study abroad, do indeed contribute to these outcomes. Socioacademic integration is a likely explanation for this boost in academic performance.

Study abroad was consistently positively associated with both final cumulative GPA and completion across statistical models in this study. These results are in line with an already-robust body of literature that finds a similar positive association with students’ academic outcomes in both the 4-year (Bhatt et al., 2022 ; Hamir, 2011 ; Xu et al., 2013 ) and 2-year sectors (Raby et al., 2014 ; Rhodes et al., 2016 ). Whatley and González Canché ( 2021 ) represents the most comparable study to the current study in that this study is both recent and makes use of data from community college students. Although this study and the current study focus on different institutional contexts and take somewhat different analytical approaches, it is striking that the results of the weighted models in both studies produce similar results with regard to the relationship between study abroad and both final cumulative GPA and completion.

Regarding GPA, Whatley and González Canché ( 2021 ) found that study abroad participants attained a final cumulative GPA that was around half a point higher compared to non-participants. The weighted models in the current study indicated that the relationship between study abroad and final cumulative GPA was around 0.32 points higher. Turning to completion, Whatley and González Canché ( 2021 ) found that study abroad was related to an increase of 25% in the probability that a student would complete their degree program, an analysis that included both associate-degree seekers and certificate seekers. In the current study, this increase was estimated to be 49%.

Results for virtual exchange were less consistent across models in the current study. While the unweighted models consistently suggested a positive, significant relationship between virtual exchange and both final cumulative GPA and completion outcomes, the statistical significance between virtual exchange and these two outcomes disappeared in the weighted model for GPA when the sample was limited only to degree completers and was not present at all in the weighted models that used completion as the outcome variable.

These results contrast somewhat with those of Lee et al. ( 2022 ), who found a consistent positive association between virtual exchange and students’ academic success in the context of a large university. It is possible that the virtual exchange programs represented in this study were not as robust or extensive as those represented in Lee et al. ( 2022 ) given the nature of the community college context. For example, because community college students are earlier in their academic careers compared to more advanced students in the four-year context, it may be that they are not prepared to benefit as substantially from these virtual programs. Design features of the virtual exchange opportunities represented across these two studies may also explain this difference in results. Future research is needed to further explore how virtual programs may be best designed to achieve desired student outcomes within a diversity of institutional contexts. At the same time, it is important to note that a positive, significant result for virtual exchange was found in some of this study’s statistical models, and this relationship was never negative. Offering virtual exchange opportunities does not appear to harm community college students academically, and may very well support their academic progress, at least to a certain extent.

Although the benefits of both study abroad and virtual exchange to the academic success of individual student participants appears to be positive, at least in the broad sense, individual students are not the only stakeholders with investment in their academic success. Outcomes such as improved academic performance and credential completion are key student outcomes in the community college context (e.g., Baldwin, 2017 ), and when approached to participate in this study, stakeholders at the two community colleges that participated in this study were particularly interested in how their international programs might contribute to institutional student success goals. Such concerns are not unfounded in a context where community colleges are funded not only based on how many students they enroll, but also how well their students perform on metrics related to academic success, most notably credential completion (Ortagus et al., 2020 ). This study’s research question guided attention to the contribution that virtual international exchange and study abroad have on students’ academic outcomes in the aggregate, which speaks to the benefit of offering these international opportunities not only to individual students, but also the colleges they attend and the communities they serve.

Compared to study abroad, virtual international exchange has the potential to reach a larger number of students (Abdel-Kader, 2021 ; de Wit, 2016 ; Whalen, 2020 ), which is indeed the case at the two colleges that contributed data to this study (731 students participated in virtual exchange while only 57 participated in study abroad). With appropriate technological resources and support, students can participate in virtual exchange at a much lower cost compared to study abroad, and these programs are also more flexible in that they can be offered in a variety of formats to accommodate a variety of learning preferences and life circumstances. These features address some of the primary barriers that students experience when considering study abroad, most notably, cost and obligations related to family or work (Brux & Fry, 2010 ; De Jong et al., 2010 ; Kasravi, 2018 ; Stroud, 2010 ).

In this sense, virtual exchange programs can address the first two of Greenman et al.’s ( 2022 ) solutions for providing HIP access to excluded students. These programs represent a modified approach to international education in that students participate virtually and can be located wherever is convenient for them. They can also be integrated into students’ studies at any point in their degree trajectory, including in early semesters, and can be included as part of a required course that students must take regardless. For example, Giralt et al. ( 2022 ) outline how virtual exchange can be offered as a stand-alone activity, meaning that students can participate in a program outside their normal courses as a way to address internship or elective requirements, and can also be offered as integrated into a particular course. Both types of virtual exchange programs were offered at the two colleges participating in this study. In contrast to this openness and flexibility of virtual exchange, access to study abroad may be limited in that these programs require international travel and often come with comparatively high costs.

This study’s results at the group level bear out this expectation, as virtual exchange offers greater advantage when considering student success outcomes in the aggregate. For example, when comparing counterfactual mean GPAs to the true mean (using the weighted model for prediction), the difference in means when the counterfactual was the absence of study abroad was − 0.0070, while the difference when the counterfactual was the absence of virtual exchange was larger at − 0.0087. These results suggest that virtual exchange holds particular promise for community college leaders and international educators interested in providing programming that boosts the academic performance of enrolled students in the aggregate.

The positive relationship between both virtual exchange and study abroad indicated in this study’s results highlights the importance of ensuring that these opportunities are accessible to students. Prior community college literature indicates that in many respects, study abroad is more accessible to students across a diversity of demographic and academic characteristics compared to the 4-year sector (Whatley, 2021 ), likely due to the open-access philosophy with which these institutions approach educational programming (Raby, 2020 ; Whatley & Raby, 2020 ).

Although research on the accessibility of virtual international exchange in the community college sector is limited, the work that does exist suggests that this accessibility may not extend to these international experiences, perhaps due to their unequal distribution across academic disciplines (Whatley et al., 2022 ). These results reflect a general concern among researchers that virtual exchange does not live up to its potential to provide international opportunity to students with diverse identities (Bali et al., 2021 ; Barbosa & Ferreira-Lopes, 2021 ; Satar, 2021 ). Given the potential for virtual international exchange to foster academic success among a numerically larger group of students compared to study abroad, this study’s results support increased attention to the characteristics of students who access these virtual experiences in future research and continued efforts among community college faculty and staff to make these experiences available to diverse students across a variety of degree programs and disciplines.

The purpose of this study was to explore the relationship between virtual exchange and study abroad and students’ academic success with a focus on the benefits of offering these two experiences to the broader institution and community. This study notably focused on students attending community colleges, a student population that is often marginalized and invisible in discussions of key issues in international higher education. Grounded in the hope that studies like this one will call attention to the role that community colleges can play in the democratization of international education opportunity, this study highlighted the importance of providing community college students with access to these international opportunities not only for individual students themselves but also the institutions they attend and the communities where they live and work. If international education is associated with positive academic outcomes among students, even if these benefits are small, it is certainly possible that these experiences are also associated with other outcomes that are beneficial to communities, such as increases in students’ intercultural communication skills or abilities to work across cultural differences. Balancing the scalability of virtual exchange for a larger group of students with the clear benefits of study abroad to a smaller group of individual students must be a key focus for community college international educators as we emerge from the COVID-19 pandemic.

Data Availability

A data availability statement is not applicable to this study. The data used are sensitive student records and I do not have permission to share them beyond my own use in any capacity.

These predictions were calculated using Stata 17’s ‘predict’ command.

The predicted mean with observed predictor values mathematically equals the observed means of the dependent variable, per the properties of the OLS estimator.

As the superscripts in Table  1 indicate, most of the differences among groups described here are significant at p  < .05 or less.

Use of the term Hispanic to identify a racial/ethnic category has received much attention in the literature recently, with many scholars considering that the term Latinx or Latine may be more appropriate or even preferred by students (e.g., Martínez & González, 2021 ). The term Hispanic as used in the current study comes directly from institutional records, which themselves draw from student-selected categories in their application materials. Other terms such as Latinx and Latine were not provided as options for students to select in these materials because these terms do not help institutions fulfill federal reporting requirements, which use the term Hispanic exclusively. It is not this study’s purpose to argue for or against a particular term to describe this group, nor is it the study’s purpose to debate the appropriateness of the terminology used for federal data reporting. Since students self-identified as Hispanic in their applications to attend these two community colleges and this is also the term used in the datasets themselves, this is the term used throughout this study.

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Acknowledgements

I am grateful to Brendan Cantwell, Chris Marsicano, Jamie Monogan, and Rachel Worsham, alongside two anonymous reviewers, for their constructive criticism and feedback on this manuscript at various stages. I am also grateful to my community college collaborators for their support in developing this study and their willingness to engage in intellectual conversation with me about the findings as I worked with their institutional data. All remaining errors are my own.

The funding was provided by Aspen Institute (8079054632).

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Whatley, M. International Education’s Academic Benefit: Potential for Community College Virtual International Exchange. Res High Educ (2024). https://doi.org/10.1007/s11162-024-09808-4

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