nep-ifn New Economics Papers
on International Finance
Issue of 2008‒09‒20
two papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Panel Cointegration and the Monetary Exchange Rate Model By Basher, Syed A.; Westerlund, Joakim
  2. The Impact of Capital Inflows on Emerging East Asian Economies: Is Too Much Money Chasing Too Little Good? By Kim, Soyoung; Yang, Doo Yong

  1. By: Basher, Syed A.; Westerlund, Joakim
    Abstract: This paper re-examines the validity of the monetary exchange rate model during the post-Bretton Woods era for 18 OECD countries. Our analysis simultaneously considers the presence of both cross-sectional dependence and multiple structural breaks, which have not received much attention in previous studies of the monetary model. The empirical results indicate that the monetary model emerges only when the presence of structural breaks and cross-country dependence has been taken into account. Evidence is also provided suggesting that the breaks in the monetary model can be derived from the underlying purchasing power parity relation.
    JEL: C32 F41 F31 C33
    Date: 2008–09–12
  2. By: Kim, Soyoung (Korea University); Yang, Doo Yong (Korea Institute for International Economic Policy)
    Abstract: In recent years, emerging East Asian economies have experienced large capital inflows-especially a surge in portfolio inflows-and an appreciation of asset prices such as equities, land, and both nominal and real exchange rates. The paper reviews why a surge in capital inflows can increase asset prices, and then empirically investigates the effects by employing a panel vector autoregression (VAR) model. The empirical results suggest that capital inflows have indeed contributed to the asset price appreciation in this region, although capital inflow shocks explain a relatively small part of asset price fluctuations. How to manage these capital inflows is also discussed.
    Keywords: Capital inflows; portfolio inflows; asset prices
    JEL: F10 F31 F32 G15 G18
    Date: 2008–05–01

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