The monetary approach to exchange rate determination: empirical observations from the Pacific Basin economies

Huy, C.; Ba, H.

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Decision Science Letters

ISSN 1929-5812 (Online) - ISSN 1929-5804 (Print) Quarterly Publication Volume 9 Issue 3 pp. 453-464 , 2020

The monetary approach to exchange rate determination: empirical observations from the Pacific Basin economies Pages 453-464 Download PDF

Authors: Chinh Le Huy, Huyen Le Hoang Ba

DOI: 10.5267/j.dsl.2020.3.001

Keywords: Pacific Basin, Vietnam, Monetary model, Exchange rate, Cointegration

Abstract: The paper studies the monetary approach to exchange rate for a group of five Pacific Basin economies, using quarterly data for the period of post – Asian financial crisis. Estimated results reveal that for Thailand and the Indonesia which were most affected by Asian financial crisis, monetary model did not work for explaining exchange rate movements. For Korea and Malaysia, the results show that there were long-run relationships between exchange rates and their monetary variables. However, the proportionality hypothesis of exchange rate to relative money supply did not hold for the two countries. Conversely, for Vietnam, it appears that the monetary model worked well in explaining exchange rate movements. Especially, the estimated coefficients of money and output variables are consistent with any traditional variants of monetary model.

How to cite this paper

 Huy, C & Ba, H. (2020). The monetary approach to exchange rate determination: empirical observations from the Pacific Basin economies.Decision Science Letters , 9(3), 453-464.

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