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Appropriate Exchange Rate Regime in Developing Countries : The Case of Korea

Author

Listed:
  • Choe Shick Chung

    (KIEP - Korea Institute for International Economic Policy)

  • Doo Yong Yang

Abstract

This paper examines the viability or appropriateness of two polar solutions, especially free-floating regime for developing countries. To do so, we investigate the Korean financial markets, which provide interesting case, utilizing multivariate GARCH and various VSR (Vector Auto-Regression) tools. We find that the slightest sign of either weakness of domestic economy or fragility of international financial markets might cause foreign investors to flock out of Korean financial markets and result in inviting another turmoil in Korea. In a limited sense, it is fair to say that the current transitory period from managed to flexible exchange rate regime is a very vulnerable period for Korean economy, and we need to be well equipped to another near international financial turmoil.

Suggested Citation

  • Choe Shick Chung & Doo Yong Yang, 2000. "Appropriate Exchange Rate Regime in Developing Countries : The Case of Korea," Finance Working Papers 21756, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:21756
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    File URL: http://www.eaber.org/node/21756
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    Citations

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    Cited by:

    1. Gwang-Ju Rhee & Eun Mo Lee, 2005. "Foreign exchange intervention and foreign exchange market development in Korea," BIS Papers chapters, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 196-208, Bank for International Settlements.
    2. Omar Bakkou, 2014. "The Suitable Exchange Rate Regime for the Moroccan Economy," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3), pages 612-621.

    More about this item

    Keywords

    exchange rate regime; Korea; speculative attacks; currency crises;
    All these keywords.

    JEL classification:

    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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