The interrelationship between exchange-rate uncertainty and unemployment for South Korea and Taiwan: Evidence from a vector autoregressive approach

The goal of this paper is to estimate the effect between exchange-rate uncertainty and unemployment in South Korea and Taiwan. We use a vector autoregressive model to provide an efficient estimation between exchange-rate uncertainty and unemployment. We found that a long-run equilibrium relationship between exchange-rate uncertainty and unemployment exists in both Taiwan and South Korea when exchange-rate uncertainty is generated by two different measures. The exchange-rate uncertainly has a short-run impact on unemployment and vice versa, no matter which measure of uncertainty is used.