Search

PurposeThis study aims to re-examine the money stock determination process for South Korea under the assumption of the existence of potential asymmetric (non-linear) relations (a mechanism) between the money stock and the monetary base. Because, the true and detailed diagnosis of this mechanism is crucially important for the Bank of Korea’s (BOK)’ monetary policy, as this country has been adopting an inflation targeting policy (ITP) for a long-time.Design/methodology/approachThis paper applies the non-linear autoregressive distributed lag model by Shinet al.(2014). This model separates the original series of the monetary base into their increases (+) and decreases (−). The increases (+) and decreases (−) done by the BOK correspond to expansionary and contractionary monetary policies, respectively, in this study.FindingsThe empirical findings are two-fold. First, the money stock determination process in Korea has a non-linear (asymmetric) structure. This means that increases (+) and decreases (−) in the monetary base have asymmetric (different) impacts on money stock. Second, the BOK’s only expansionary monetary policy exhibits exogenous nature money stock determination with an almost stable money multiplier. These findings may help the BOK to take preventive precautions in its monetary policy implementations.Originality/valueThis study with its methodology may help the BOK to take preventive measures in its ongoing ITP proactively.

Purpose This study aims to examine the impacts of changing US trade policy uncertainty (henceforth, TPU Index) on US bilateral trade balance with China from a nonlinear methodology perspective. Design/methodology/approach The nonlinear auto regressive distributed lag (ARDL) model, recently developed by Shin et al. (2014), is applied. This model decomposes the TPU Index series into its increases (TPU+) and decreases (TPU−) and creates two new TPU Index series. Findings Empirical findings indicate that increases in the TPU Index improve the US bilateral trade balance only in the short-run (no long-run impact). However, decreases in the TPU Index worsen the US trade balance in the short run but improve it in the long run. Apart from these effects detected on US–China bilateral trade balances, this empirical study draws the conclusion that changing trade policy uncertainty plays a significant determining role for bilateral trade volumes. Originality/value Decomposed TPU index with the nonlinear ARDL model enables us to examine the separate impacts of the changes in TPU+ and TPU− indexes on US bilateral trade balance with China. Therefore, this model may discover potentially concealed-hidden true impacts of TPU index on US bilateral trade balance with this country.

Purpose This paper aims to investigate the presence of the Fisher effect for the USA from a new methodological perspective differing it from all previous studies using the common linear representation of the Fisher equation. Design/methodology/approach The nonlinear ARDL model, recently developed by Shin et al. (2014), is applied for the 10-year US Government bond rates over the period of 1985M1-2017M10. Findings The empirical findings indicate that the US Federal Reserve (FED) is a more predominant arbiter in the determination of interest rates during periods of declining inflation rates than periods of rising inflation rates. This finding may allow the FED to apply more proactive and prudent monetary policy. Additionally, this study newly describes and introduces a different version of the partial Fisher effect and extends the Fisher equation to some degree in terms of the partial Fisher effect. Originality/value To the best the authors’ knowledge, this method is applied for the first time in testing the Fisher effect for the USA.