The relationship between macroeconomic factors and exchange rate -The empirical analysis of Taiwan and South Korea before and after Asian financial crisis

• Main Authors: Lee Ko-Han, 李可涵
• Other Authors: Wu Shue-Jen
• Format: Others
• Language: en_US
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/45716801873227440023

碩士 === 國立暨南國際大學 === 國際企業學系 === 94 === After the collapse of Bretton Woods System in 1973, the fluctuation of exchange rate has become the topic for discussion of economists and policy-makers, and every kind of exchange rate determination models were constantly proposed. This research is based on portfolio balance model proposed by Branson (1997) as a theoretical frame; Johansen’s multivariate co-integration test (1988, 1990) as an empirical method; and employs Taiwan and South Korea as empirical subjects. Primarily, the discussion is about whether there is a long-run equilibrium relationship between the four macroeconomic variables (money supply, domestic holdings of domestic bonds, domestic holdings of foreign bonds and foreign interest rate) and exchange rate before and after Asian financial crisis? And the extent of its influence on exchange rate, the effect is positive or negative, are they consistent with the theory? The empirical result reveals that there is one co-integrating relationship in both periods for Taiwan and South Korea. The overall conclusion describes that the Asian financial crisis did not significantly affect the long run equilibrium relationship among exchange rate, money supply, domestic holdings of domestic bonds, domestic holdings of foreign bonds and foreign interest rate for two countries considered in this research. Moreover, we can find that each variable is consistent with theory except foreign interest rate. Besides, money supply and domestic holdings of foreign bonds are the most significant variables to exchange rate for both countries through co-integrating vector and coefficient test.