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The determinants of a country foreign exchange have been noticed by this country’s government bureaus, private corporations and house - holders. A country''s foreign exchange rate not only influence this country’s import and export, but also influence the economic development conditions such as government spending, business investment and householders consumption.
The purpose of this paper is examining the impacts of a country''s monetary policy variables on the movements of this country''s foreign exchange rate. We are taking the financial markets of Taiwan as the study subject.
The research study time length is taking the time period from 2009 .1.1 to 2016.12.31 and the monetary policy variables are including discount rates, prime lending rates, commercial paper rates, 10 years government bond rates, changes in current accounts, changes in trading accounts, changes in financial accounts, foreign direct investment accounts, changes in capital investment in securities markets, foreign exchange reserves, and consumer price index.
We applied the multiple regression models, and provided the basic statistical properties analysis, ADF unit root analysis, and correlation analysis. For receiving the reasonable experimental results, we examines the value for regression coefficients, and investigated the R2, Adjusted R2, F value, DW, AIC, Schwarz, HQ, Log likelihood, for the regressions.
The output is not to dedicate the predictions of the foreign exchange policy variables in Taiwan, but it is for examining the relationship between the monetary policy variables and foreign exchange rate in Taiwan''s financial markets.
The finding result has concluded the foreign exchange reserves which is a level variable does show significant evidences in supporting the testing hypothesis. The ending conclusive remark is indicating that foreign exchange reserves should be considered as a critical element in adjusting the foreign exchange policies in Taiwan.
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