IV ECM Threshold Cointegration Tests and Nonlinear Monetary Policy in Korea

Autor:	Walter Enders, Lee, Jun soo, Marck C. Strazicich
Jazyk:	English<br />Korean
Rok vydání:	2007
Předmět:	Monetary Policy(통화정책) Korea(한국) Taylor Rule(테일러 룰) Threshold Cointegration(분계점 공적분) Social Sciences Industries. Land use. Labor HD28-9999 Economic theory. Demography HB1-3840
Zdroj:	KDI Journal of Economic Policy, Vol 29, Iss 2, Pp 135-157 (2007)
Druh dokumentu:	article
ISSN:	2586-2995 2586-4130
DOI:	10.23895/kdijep.2005.29.2.135
Popis:	The goal of this paper is to examine the validity of nonlinear Taylor rules in Korea. To perform our tests, we utilize new IV ECM threshold cointegration tests that are invariant to nuisance parameters. The new tests have a standard chi-square distribution and the same critical values can be used throughout. This is in contrast to OLS ECM threshold cointegration tests, which depend on nuisance parameters and have nonstandard distributions. After finding significant support for nonlinear cointegration, we find that the Bank of Korea raises the call rate of interest only when inflation is above a threshold rate. We additionally find that the Bank of Korea increases the call rate of interest to possibly counter domestic currency deprecation only when the rate of currency deprecation exceeds a threshold.
Databáze:	Directory of Open Access Journals
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