Do Exchange Rate Changes have Symmetric or Asymmetric Effects on the Demand for Money in Korea?

Bahmani‐Oskooee, Mohsen; Baek, Jungho

doi:10.15353/rea.v9i2.1439

Cited by 4 publications

(4 citation statements)

References 22 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Inflation, interest rate, and real GDP have no significant effects on money demand in longrun for the three Tunisian considered money aggregates over 2010M01-2019M07 period. These findings contradict the previous findings of (Haider et al, 2017;Mahmood and Alkhateeb, 2018;Bahmani-Oskooee and Baek, 2016;Bahmani-Oskooee and Baek, 2017;Suliman and Dafaalla, 2011).…”

Section: Long-run Estimatescontrasting

confidence: 87%

Revisit of Tunisia’s Money Demand Function: What About Oil Price and Exchange Rate Effects?

Neifar¹,

Kammoun²

2022

IJEFI

View full text Add to dashboard Cite

This paper examines the long run and short run dynamic relationship between real broad money and macroeconomic factors in Tunisia for the period 2010M01 to 2019M07. We employ linear and NARDL bound testing approach for co-integration between the money demand measure and its determinants. Three real broader money demand variables (M2, M3, and M4) are considered to show that exchange rate have asymmetric significant effects once we introduce nonlinearity in the long run as well as in the short run association. Then, by using the (Shin et al., 2014) NARDL approach, we show that currency appreciation and depreciation could affect the demand for money in an asymmetric manner. However, in the long run, it is only the oil price and Tunisian Dinar (TD) depreciation and appreciation which have significant effect out of the five considered macroeconomic factors (real income, interest rates, inflation, oil price, and the exchange rate). Besides, the QSUMSQ stability tests results reveal that only real M3 money demand function which is clearly stable. In implementing monetary policy, the Tunisian central bank (TCB) should target the M3 monetary aggregate and take into account of the exchange rate changes stabilization.

show abstract

Section: Long-run Estimatescontrasting

confidence: 87%

Revisit of Tunisia’s Money Demand Function: What About Oil Price and Exchange Rate Effects?

Neifar¹,

Kammoun²

2022

IJEFI

View full text Add to dashboard Cite

show abstract

“…Consistent with our findings, Yang [121] and Guzman et al [122] observed the effectiveness of exchange rate stabilization policies in reducing economic volatility. Conversely, Fornaro [123], Bahmani-Oskooee and Baek [124], and Ha et al [125] reported lesser impacts on inflation. Buera and Shin [126], Korinek [127], and Suh [128] highlighted the unintended consequences of increased capital outflows, aligning with our observations of heightened domestic financial pressure under Policy 1.…”

Section: Monetary Balancementioning

confidence: 97%

Navigating Uncharted Waters: The Transformation of the Bank of Korea’s Monetary Policy in Response to Global Economic Uncertainty

He,

Teng

2024

Mathematics

View full text Add to dashboard Cite

The evolving global economic landscape necessitates adaptive monetary policies, especially for economies like South Korea that are deeply integrated with global markets. This research explores the strategic recalibrations of the Bank of Korea’s monetary policy amid fluctuations in global economic uncertainty. Utilizing a sophisticated microeconomic theoretical framework, this study employs Bayesian estimation techniques and impulse response analysis to dissect the dynamic effects of these global shocks on South Korea’s macroeconomic stability and policy direction. Our findings reveal that the Bank of Korea has adeptly navigated through turbulent economic conditions induced by external shocks through well-coordinated policy adaptations. These adaptations, which include both traditional and innovative monetary tools, have been crucial in stabilizing the financial environment and promoting economic growth. By detailing the tailored application of the Taylor rule within the Korean context and strategic foreign exchange interventions by the central bank, this study contributes significantly to the broader discourse on the efficacy of monetary policy in open economies and offers insights on integrating advanced analytical methods into economic policy analysis.

show abstract

“…Nevertheless, ambiguity about the sign of the exchange rate in the money demand function indicates the nonlinear behavior of money demand. There is empirical evidence to support that appreciation and depreciation of the domestic currency can have asymmetric effects on the money demand equation (Bahmani‐Oskooee & Baek, 2017; Bahmani‐Oskooee & Bahmani, 2015; Bahmani‐Oskooee & Fariditavana, 2016; Ivanovski & Churchill, 2019). Hsieh and Hsing (2009) provide evidence for a nonlinear behavior in Hungary's money demand function.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In another example, Bahmani-Oskooee and Fariditavana (2016) study nonlinear autoregressive distributed lag (ARDL) to show the symmetric effect of exchange rates on trade balance. Nonlinear ARDL approach in estimating the demand for money has been studied in various counties such as Turkey by , Korea by Bahmani-Oskooee and Baek (2017), and Australia by Ivanovski and Churchill (2019). The method used in these studies is based on a simple linear ARDL for the symmetrical effect and nonlinear ARDL for the asymmetric effect, thereby allowing us to observe the behavior of the demand for money when the exchange rate is increasing or decreasing.…”

Section: Introductionmentioning

confidence: 99%

The demand for money and the real exchange rate misalignments in emerging European countries: A nonlinear approach

Akdogan

2022

Bulletin of Econ Res

View full text Add to dashboard Cite

This paper investigates the extent to which domestic and foreign money balances in emerging European countries are influenced by foreign exchange considerations.A well-specified and stable relationship between real money demand and the exchange rate can be perceived as an important part of a successful monetary policy.This study examines the long-run determinants of real exchange rates (RERs)associated with the behavioral equilibrium exchange rate (BEER) approach and identifies currency misalignments in these countries. The misalignment is later used to test the nonlinear behavior of the demand for money. The results indicate that the RER misalignments have a significant impact on domestic money demand. When the currencies are overvalued, there is a reduction in domestic money demand, and when they are undervalued, there is an increase in domestic money demand. Furthermore, it can be concluded that overvaluation causes an increase in foreign money demand indicating a shift of preference from domestic to foreign currency. K E Y W O R D Sbehavioral equilibrium exchange rate, demand for money, misalignments, real exchange rates, smooth transition regressionThis is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

show abstract

Do Exchange Rate Changes have Symmetric or Asymmetric Effects on the Demand for Money in Korea?

Cited by 4 publications

References 22 publications

Revisit of Tunisia’s Money Demand Function: What About Oil Price and Exchange Rate Effects?

Revisit of Tunisia’s Money Demand Function: What About Oil Price and Exchange Rate Effects?

Navigating Uncharted Waters: The Transformation of the Bank of Korea’s Monetary Policy in Response to Global Economic Uncertainty

The demand for money and the real exchange rate misalignments in emerging European countries: A nonlinear approach

Contact Info

Product

Resources

About