An Empirical Study of Japanese and South Korean Exchange Rates Using the Sticky-Price Monetary Theory

Works, Richard and Haan, Perry (2017): An Empirical Study of Japanese and South Korean Exchange Rates Using the Sticky-Price Monetary Theory. Published in: International Academy of Business Review , Vol. 3, No. 1 (1 March 2017): pp. 12-25.

Abstract

Researchers have studied connections between exchange rates and macroeconomic variables for developed and emerging market economies. However, few address whether relationships differ by market classification. This study examines the impact that macroeconomic variables in the sticky-price monetary theory has on exchange rates for Japan and South Korea. Results show money supply and inflation differentials constitute a significant impact for South Korea, whereas no macroeconomic variable within the model had a significant impact on Japan. In addition, the autoregressive error analyses yielded small coefficients for South Korea. Given those estimates and low error variance, the study suggest there may not be a significant difference in how the sticky-price monetary theory predicts exchange rates by market classification. Therefore, firms may use forecasting techniques similarly between developed and emerging market economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Developed economies, Emerging economies, Exchange rates, Sticky-price
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F37 - International Finance Forecasting and Simulation: Models and Applications

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