| Summary: | 碩士 === 國立臺灣大學 === 國際企業學研究所 === 94 === The interest rate has been frequently adjusted recently in many countries. It shows that the worries about inflation, which have already replaced economic recovery, have become the main economic subject. Because of the dramatic impact on global economy, we discuss the price level in South Korea, which its economic situation is similar to Taiwan’s.
Adopting Johansen cointegration test, we used the monthly data from January 1987 to April 2005 and observed that whether the long-run relation existed between the price level and relevant macroeconomic factors. The empirical result is as follows.
According to the result of Max-Eigenvalue test, one cointegration existed between these variables. When the interest rate and exchange rate raised, the money supply increased, and the real GDP decreased, the price level in South Korea raised. The results fit in with what we anticipated in Chapter Three of this thesis. The price level is positive to the balance of payment. We inferred that it might be caused by that the government intervened in the exchange rate system. When the balance of payment increased, the government bought the foreign currency to prevent the currency from appreciation and the money supply increased. As the result, the price level raised.
When the government makes the relevant policies, it should be observed that each factor impacts the price level closely. When the Government wants to keep the price level steady, what kind of role should the exchange rate policy play? When the money supply fluctuates because of the intervention to exchange rate, how do the price-level and the domestic economy be influenced? These are worth considering carefully.
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