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

Richard Works () and Perry Haan

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Developed economies; Emerging economies; Exchange rates; Sticky-price (search for similar items in EconPapers)
JEL-codes: F31 F37 (search for similar items in EconPapers)
Date: 2017-03-01
New Economics Papers: this item is included in nep-mon
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Published in International Academy of Business Review 1.3(2017): pp. 12-25

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