|
|
|
|
Title: |
Money, Interest Rate and Foreign Exchange Rate As Indicator Variables of
Monetary Policy |
| Author: |
Lee, Tong Hun;
Hwang, Hoyoung |
| Author
Affiliation: |
Ajou U;
Electronics & Telecommunications Research Institute |
| Source: |
International Economic Journal, Summer 2001, v. 15, no. 2, pp. 77-98 |
|
Publication Date: |
Summer 2001 |
|
Abstract: |
Since monetary policy operations affect
the ultimate targets such as real income and prices with considerable
time lags, this paper attempts to identify the indicator variables of
monetary policy in Korea by using autoregression tests, variance
decompositions of VAR forecasts and cointegration analyses. The results
show that in Korea unlike the U.S., a broad concept of money, interest
rate and foreign exchange rate, taken together, could serve as the
indicator variables. In particular, M3, but not M2 nor MCT, is
significantly related to real income both in the short-run and in the
long-run. Such a finding rejects the practice of controlling either M2
or MCT which the Korean monetary authority had exercised before
implementing the recent IMF financial-reform program. |
|
