Bounds Testing Approach to the Exchange Rate Overshooting in Taiwan

摘要

We employ the newly developed ARDL-ECM-MAIC bounds test(Pesa-ran ,Shin and Smith ,2001 )testing for the exchange rate overshooting phenomenon in Tai-wan over 1986:01～2003:04. The ARDL approach is appropriate to test for the dynamicmodeling irrespective of whether the variables are I(0) or I(1). We find the evidencethat there do not exist a short- run overshooting phenomenon, which implies that no abnormal fluctuation of exchange rate in the presence of speculative bubble occurs duringthe sample period considered in Taiwan. The empirical finding also provides the evidence for no existence of a long - run relationship between exchange rate and macroeco-nomic variables( money supply, industrial production, interest rate, and inflation rate),which objects the Dornbusch's (1976) stick price model of monetary approach to exchange rate determination.