Money Supply And Exchange Rate
journal article
Journal of Economic Integration
Published By: Center for Economic Integration, Sejong University
https://www. jstor .org/stable/23000540
The purpose of this paper is to re-examine the issue of exchange rate dynamics when the central bank undertakes a change in the growth rate of the money supply. The original analysis of exchange rate dynamics, the seminal model of Dornbusch, assumed that the growth rate of the money supply was zero and that the central bank permanently changed the money stock. In reality, however, central banks typically maintain money supply growth targets rather than money stock targets. Therefore, it seems appropriate to re-examine the issue of exchange rate dynamics using the money supply growth rate as the central bank's policy instrument. The paper analyzes the problem using a variable output version of the Dornbusch model. Perhaps the most significant finding in the paper is that money supply growth causes the exchange rate to either overshoot or undershoot. In addition, the real exchange rate depends inversely on the real interest rate during part of the adjustment process, in contrast to the real interest differential model.
Journal of Economic Integration aims to provide relevant policy implications on the world economy that has been evolving all the time in all aspects. The Journal is founded by Dr. Choo, Myung-Gun in the second half of the 1980s who was particularly interested in the papers studying the group of economies as the object of investigation, expecting the concept of "Economic Integration" gives birth to the new phenomena. We believe that the insightful policy implications of the world economy need to be discussed in order to manage the closely integrated world economy in a more efficient and desirable way and thus hopefully hunger, poverty, and crisis become almost forgotten words in the near future. To achieve it, we need to be intellectually ready for the economic integration, with a deep understanding on the past and the present of financial, trade, and political-economic integrations.
Founder of this Journal is Dr. Myung-Gun, Choo who has imagined in the 1980s that "economic integration" will be one of the most important pheonmena and would like to establish an economic journal touching upon the issue. He is now a board member of the foundation for Sejong University. Since then, Professor Hwan-Ho Lee at Sejong University has been devoted to develop the Journal for more than 20 years up until. 2010 . The Journal is managed at Center for Economic Integration within Sejong University.
Money Supply And Exchange Rate
Source: https://www.jstor.org/stable/23000540
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