Floating exchange rates and macroeconomic independence
Document Type
Article
Publication Date
3-1-2016
Abstract
In this paper, we evaluate macroeconomic independence during different time periods categorized by different exchange rate systems and degree of capital mobility. A cointegration VAR framework is developed to evaluate the performance of floating exchange rates in increasing macroeconomic independence in Japan vis-à-vis the U.S. Using this empirical framework, we test various hypotheses related to international transmission and the movement of interest rates and goods prices. Our results show that Japan's monetary independence has declined over time, but retains some degree of monetary autonomy due to the floating exchange rate system. In contrast, although capital controls in place prior to the 1980s do not enhance monetary independence, they do help to improve goods market independence.
Publication Title
International Review of Economics and Finance
Volume
42
First Page
23
Last Page
35
Digital Object Identifier (DOI)
10.1016/j.iref.2015.10.041
ISSN
10590560
Citation Information
An, Kim, Y., & You, Y. (2016). Floating exchange rates and macroeconomic independence. International Review of Economics & Finance, 42, 23–35. https://doi.org/10.1016/j.iref.2015.10.041