Real Exchange Rates And The Korea-Us Real Interest Rate Differential: A New Approach

• 발행기관: People & Global Business Association
• 저자명: Min-Joon Kim
• 간행물 정보: 『Global Business and Finance Review』Vol.30 No.7, 107~118쪽, 전체 12쪽
• 주제분류: 경제경영 > 경영학
• 파일형태: PDF
• 발행일자: 2025.07.31

국문 초록

Purpose: Grasping the connection among real interest rate differentials and real exchange rate is essential for the effective management of macroeconomic policy. However, despite considerable scholarly inquiry, the nature of this connection remains ambiguous, both in theoretical and empirical terms. The study examines the impact of real interest rate differentials between Korea and the United States on the real exchange rate. Design/methodology/approach: This study employs the Fourier autoregressive distributed lag (FARDL) model to capture the short-run and long-run effects of real interest rate differentials. Incorporating the Fourier function as an exogenous variable has proven to be an effective tool for identifying structural changes in the data, providing valuable insights into the potential effects of real interest rate differentials. For the analysis, data spanning from the first quarter of 1991 to the fourth quarter of 2023 were utilized. Findings: The empirical findings reveal that, contrary to theoretical predictions, the real interest rate differential exerts an insignificant influence on the real exchange rate in the short term. Nevertheless, over the long run, a negative connection among variables emerges. Research limitations/implications: This study employed the 3-month Treasury bill rate as a proxy for short-run interest rate, omitting the consideration of other components that may influence interest rates. Furthermore, real interest rate and real exchange rate were not disaggregated among tradable and non-tradable goods. These limitations recommend potential avenues for future research. Originality/value: The findings of this study may prove valuable to policymakers in the formulation and manage-ment of an exchange rate regime that effectively mitigates external shocks. Moreover, it is essential to consider both variables concurrently in order to promote stability and support the long-run development of the national economy.

목차

I. Introduction

II. Methodology and Data

III. Empirical Findings

IV. Conclusion

References

키워드

FARDL Fourier function Korea real exchange rate real interest differential