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Changes in misalignment of the Korean won: Towards a flexible exchange rate regime

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  • Gab-Je Jo

Abstract

This paper investigates whether the adoption of a more floating exchange rate regime with inflation targeting has improved the vulnerability of the exchange rate, by looking at the Korean case. Using the NATREX model, I estimate the equilibrium real exchange rate of the Won and its misalignment. The unit-root test for misalignment and the unrestrictive vector autoregressive (VAR) impulse response function test show that under a more flexible exchange rate regime, the vulnerability of the exchange rate regime to external shocks has declined.

Suggested Citation

  • Gab-Je Jo, 2004. "Changes in misalignment of the Korean won: Towards a flexible exchange rate regime," Global Economic Review, Taylor & Francis Journals, vol. 33(1), pages 69-83.
    • Handle: RePEc:taf:glecrv:v:33:y:2004:i:1:p:69-83
    DOI: 10.1080/12265080408449842
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    References listed on IDEAS

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    1. Ronald McKinnon & Gunther Schnabl, 2006. "The East Asian Dollar Standard, Fear of Floating, and Original Sin," Chapters, in: Volbert Alexander & Hans-Helmut Kotz (ed.), Global Divergence in Trade, Money and Policy, chapter 3, pages 45-71, Edward Elgar Publishing.
    2. Ogawa, Eiji & Ito, Takatoshi, 2002. "On the Desirability of a Regional Basket Currency Arrangement," Journal of the Japanese and International Economies, Elsevier, vol. 16(3), pages 317-334, September.
    3. John Williamson, 2000. "Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa60, April.
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