Study on the Interrelationships of Foreign Exchange Rate Among TWD, JPY, CNY, KRW, HKD, and SGD

• Main Authors: Wu Meng-Hsia, 吳孟霞
• Other Authors: Dr. Chen, Dar-Hsin
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/57700584788705276900

碩士 === 國立臺北大學 === 國際財務金融碩士在職專班 === 99 === Since the financial tsunami, the scale of capital flows to Asian emerging economies has reached a record high, not only driving the rapid appreciation of Asian currencies, but also complicating the policy management of the national macro-economy. As these countries are small open economies countries, the opening of capital markets and the liberalization of financial transactions will help the economic development of these countries; however, large capital inflows make these countries exposed to the risk of a sudden stop of capital inflows or even a reverse of capital flow. The relations in economy, trade and investment have always been very close between Taiwan and neighboring Asian countries. Since 2007, seven of the top ten trading partners of Taiwan locate in East and Southeast Asia. The total trade volume of these seven countries has surpassed that of the U.S., making the group of seven countries the third largest trading partner of Taiwan. In view of the highly inter-related international financial markets, an exchange rate of one country cannot be isolated from exchange rates of other countries. Therefore, this study focused on the correlation of currency exchange rates among such Asian countries that have close geographic and economic links with Taiwan. The currencies under study are Yen, RMB, HK, Korean won, Singapore dollar and New Taiwan dollar. The research data comprises 19-year exchange rates of this six currencies against the US dollar. The empirical results are as follows: First, the currency prices of NT dollar and each of other 5 Asian currencies do not have the long-run equilibrium of the co-integration relationship. Second, the Granger causality test results showed that: 1. Completely non-causality: RMB does not have any causal relationship with other 5 currencies. 2. One-way lead-lag relationship: One-way lead-lag relationship was identified in the currency pairs of yen / HK dollar, korean won / HK dollar, Singapore dollar / HK dollar, NT dollar / Hong Kong dollar, Yen / Singapore Dollar, and Japanese Yen / NT dollar. 3. Two-way feedback relationship: Both cause and effect relationship was found in the currency pairs of the Japanese yen / Korean won, Singapore dollar / Korean won, Taiwan dollar / Korean won, and Taiwan dollar / Singapore Dollar., The movement of one currency has affected the movement of the other, demonstrating a two-way feedback relationship. Third, The results of the impulse response analysis for New Taiwan Dollar and other Asian currencies: All currencies have valid results in the impulse response analysis. Spontaneous changes in the currency variables have the greatest short-term impact on themselves. As for the impact to other currency variables, Korean won has the greatest exchange rate reaction, followed by Japanese yen and New Taiwan dollars. Among all currencies Hong Kong dollar has the least reaction to the spontaneous impulse and to the impact of increasing one unit of standard deviation of the exchange rate against other currencies. Fourth, the forecast error variance decomposition: Except Singapore Dollar which is relatively more vulnerable to the exchange rate fluctuations than other currencies, the rest of the currencies have high degree of self-interpretation ability. The RMB has up to 99.78% level, followed by 97% level in Japanese yen and HK dollar and 90% level in NT dollar and Korean won, indicating that these 5 currencies are not easy to be affected by external factors and explanations.