Researchers including a real exchange rate term in the Taylor rule such that^r⁼^p⁺^d^p^-^p^*⁾⁺^BY^{^}⁺^R^{* -}^a^EP/PW⁾^{have found that, for the Germany} and Japan, a is

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Researchers have found that including a real exchange rate term in the Taylor rule for countries like Germany and Japan results in a positive coefficient. This suggests that for these economies, a real appreciation of the currency (increase in the real exchange rate) is associated with an increase in the interest rate, as part of the monetary policy response to maintain economic stability.

Researchers Including a Real Exchange Rate Term in the Taylor