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Do Exchange Rate Changes Have Symmetric or Asymmetric Effects on the Demand for Money in Korea?

Author

Listed:
  • Mohsen Bahmani-Oskooee

    (Bayesian Institute for Research & Development)

  • Jungho Baek

    (Bayesian Institute for Research & Development)

Abstract

"Previous studies that included the exchange rate in the Korean demand for money assumed that the effects of the exchange rate changes are symmetric and adjustment process is linear. They found no significant effects. In this paper we apply Shin et al.’s (2014) Nonlinear ARDL approach to cointegration and error-correction modeling and test the symmetric versus asymmetric effects of exchange rate changes on the demand for money in Korea. Using quarterly data over the period 1973-2014, the results show that indeed the effects are asymmetric in the short run. In the long run, however, although the effects are symmetric but both won depreciation and won appreciation have significantly negative effects on the demand for money, supporting the wealth effects argument."

Suggested Citation

  • Mohsen Bahmani-Oskooee & Jungho Baek, 2017. "Do Exchange Rate Changes Have Symmetric or Asymmetric Effects on the Demand for Money in Korea? ," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 9(2), pages 155-168, December.
    • Handle: RePEc:ren:journl:v:9:y:2017:i:2:p:155-168
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