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Self-Fulfilling Feature of the Currency Crisis in Korea

Author

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  • Jeong-Hee Suh

    (Maeil Business Newspaper)

Abstract

Using a non-linear model, this paper examines the respective roles played by the fundamental and self-fulfilling speculation in the outbreak of the currency crisis in Korea. The model, due to Jeanne (1997), emphasizes roles for fundamentals and for self-fulfilling speculation. Results suggest that Korea was vulnerable to self-fulfilling speculation as early as January 1997. An extended phase of multiple equilibria started in October 1997. The fundamentals for Korea remained in this crisis zone until March 1998. Korea briefly entered a multiple equilibria zone again in May and June 1998 before stabilizing in July 1998. Overall, results are supportive of models emphasizing a role for self-fulfilling speculation in currency crises in addition to the .fundamentals.

Suggested Citation

  • Jeong-Hee Suh, 2001. "Self-Fulfilling Feature of the Currency Crisis in Korea," Korean Economic Review, Korean Economic Association, vol. 17, pages 25-40.
    • Handle: RePEc:kea:keappr:ker-200106-17-1-02
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    More about this item

    Keywords

    East Asia crisis; Korean currency crisis; self-fulfilling speculation;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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