The effect of exchange rate on Open Microeconomic activities： The practical analysis of SVAR model in Taiwan and Japan
Date Issued
2007
Date
2007
Author(s)
Liu, Huang-Miao
DOI
zh-TW
Abstract
The thesis presents a relationship of monetary policy reaction function and exchange rate regime in open economy of Taiwan and Japan using SVAR model. The economic variables of the model are including domestic interest rate, consumer price index, industrial index, nominal exchange rate, and foreign interest rate. The research uses 206 panel data, from 1989:05 to 2006:06 to examine the role of exchange rate as a shock-absorber or source of shocks. The results of the empirical research are summarized as follows:
The shock between Taiwan and United States belongs to symmetric shock. The interest rates of United States and Taiwan respond in the same way to real shock, so foreign monetary policy shock has a great effect on domestic monetary policy. It is little need for the exchange rate to act as a shock-absorber to stabilizing economy. It is effective for Taiwan to join optimal currency area than use exchange rate policy or monetary policy to stabilizing economy.
The shocks are idiosyncratic between Japan and United States，so the exchange rate can absorb such shocks. Exchange rate market disturbance resulted in exchange rate variation; the reactions of monetary policy to supply shock and demand shock are influential. For Japan, it is better to have independent of monetary policy and exchange rate policy as shock absorption to stabilize economy.
Subjects
SVAR
匯率制度
貨幣區域
開放總體經濟
Exchange rate System
Currency area
Open Macroeconomics
Type
thesis
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