The central banks of Cambodia and South Korea signed an agreement on Friday to jointly conduct research and analyse the relationship between exchange rates and inflation in the Cambodian economy, according to bank officials.

Under the memorandum of understanding, the National Bank of Cambodia (NBC) and the Bank of Korea (BoK) will seek to produce findings on how to better formulate effective monetary policy for Cambodia’s economic development.

Speaking to reporters after the signing ceremony, Chea Serey, director-general of the NBC, said the two parties will commence research immediately and expect to issue a report on their findings by December.

“Cambodia is a highly dollarised economy and so far the [fluctuation of] the inflation rate is influenced significantly by the exchange rate,” she said. “The research will look in detail at how strong the relationship is between the exchange rate and inflation so that we can better address monetary policy in order to maintain price stability.”

The joint research initiative is supported by the Bank of Korea Knowledge Partnership Program (BoK-KPP), while South Korea’s Global Management Research Institute (GMRI) has agreed to assist with technical analysis.

Soon-Won Chung, senior adviser for BoK-KPP, said the initiative will provide NBC staff the opportunity to collaborate with BoK and GMRI researchers, and together conduct empirical analysis on the Cambodian economy.

He added that the joint project would contribute to enhancing the capacity of NBC staff and provide a macroeconomic model of the Kingdom’s economy for better analysis.

“This is a very important opportunity to share the knowledge and experiences of Korea’s economic development for Cambodia’s economy,” he said.