Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Real Exchange Rate Dynamics and Demographic Structure in Korea

Vol.26, No.3, September , 1–14



  •   (Department of Economics, Korea University)

  •   (Department of Economics, Korea University)

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Abstract  

We employ a non-parametric approach to examine the real exchange rate and the entire age distribution in South Korea. We find that movements of the real exchange rate are tightly related to the evolution of the demographic structure and that the estimated age response function is consistent with a life-cycle model in which older generation and younger generation have a positive effect on the real exchange rate. Finally, the real exchange rate is forecasted to appreciate gradually, which suggests that the growing proportion of the older population has a stronger impact than the falling proportion of the younger generation on the real exchange rate.


Keywords
   Aging; Demographic structure; Exchange rate; Life-cycle income hypothesis; Non-parametric approach

JEL classification codes
   J11, F31, C14
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