Template-type: ReDIF-Paper 1.0
Author-Name: Seiha Ok
Author-Name-First: Seiha
Author-Name-Last: Ok
Author-Workplace-Name: National Audit Authority of Cambodia
Author-Name: Makoto Kakinaka
Author-Name-First: Makoto
Author-Name-Last: Kakinaka
Author-Email: kakinaka@iuj.ac.jp
Author-Workplace-Name: International University of University
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Author-Name: Hiroaki Miyamoto
Author-Name-First: Hiroaki
Author-Name-Last: Miyamoto
Author-Email: hmiyamot@iuj.ac.jp
Author-Workplace-Name: International University of University
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Title: Real Shock or Nominal Shock? Exchange Rate Movements in Cambodia and Lao PDR
Abstract: This paper discusses a primary factor responsible for exchange rate fluctuations of the Cambodian riel and the Laotian kip against the US dollar. The dynamic effects of real and nominal shocks are examined through applying a vector autoregression (VAR) model of real and nominal exchange rates under the assumption of the long-run neutrality of nominal shocks on real exchange rates. This approach allows us to decompose exchange rate movements into two components, real and nominal factors, in order to identify how these factors influence exchange rate fluctuations. The empirical analysis demonstrates that real shocks in direction of depreciation lead to real and nominal depreciation, while nominal shocks induce long-run nominal depreciation but real appreciation in the short-run.
Classification-JEL: 
Length: 35 pages
Creation-Date: 2010-04
Number: EMS_2010_05
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2010_05.pdf
File-Format: Application/pdf
File-Function: First version, 2010
File-Size: 361KB
Keywords: Real and nominal exchange rates, Real and nominal shocks, SVAR analysis, Cambodia and Lao PDR
Handle: RePEc:iuj:wpaper:EMS_2010_05