Divisia monetary model of exchange rate determination: the case of Philippines
Divisia monetary model of exchange rate determination: the case of Philippines
Author(s): Choi-Meng Leong, Chin-Hong Puah, Shafinar IsmailSubject(s): Economy, Financial Markets
Published by: Institute of Society Transformation
Keywords: Divisia Monetary Aggregate; Monetary Policy; Exchange Rate; Autoregressive Distributed Lag; Monetary Model of Exchange Rate;
Summary/Abstract: In literature, inferior performance still prevails as one of the unresolved issues with regard to the monetary model of exchange rate. A money demand function that is unstable can contribute to the inferior performance of the model. One of the causes for an unstable money demand function is the application of the simple sum monetary aggregate in the estimation. Therefore, an alternative measurement of money, the Divisia monetary aggregate, is applied in the estimation of the monetary model of exchange rate. The results show that cointegration exists between monetary fundamentals and the exchange rate in the Divisia model. Consequently, to estimate the exchange rate for the Philippines, the Divisia monetary aggregate can be used as an alternative money supply.
Journal: Економічний часопис - ХХІ
- Issue Year: 172/2018
- Issue No: 7-8
- Page Range: 9-13
- Page Count: 5
- Language: English