The purpose of this paper is two-fold. First, we have examined the relative importance of the monetary aggregate, GDP and the exchange rate on the price change in Korea during the period of accelerating capital liberalization. The exchange rate was found to have the largest influence on the price followed by the monetary aggregate and GDP. In addition, it was found that the price responses immediately to the shock to the exchange rate, whereas it takes a few quarters for the price to reflect the shocks to the monetary aggregate and GDP.
Secondly, we have examined the effectiveness of sterilized foreign exchange intervention in Korea, and found mixed results. The foreign exchange intervention was estimated to have a significant influence on the real effective exchange rate of the Korean won. However, the real effective exchange rate was found to move in opposite direction to the intention of the monetary authority after the intervention. Also, the sterilized intervention to curb the appreciation of the Korean won caused the domestic interest rate to rise, but it in turn resulted in capital outflow rather than capital inflow as predicted by the interest parity condition.
자본자유화시대 하에서 우리나라의 통화 및 환율정책(Korea's monetary and foreign exchange policies in a period of capital liberalization)
[서울] : 한국금융연구원
|Series Title; No||금융조사보고서 / 2001-01|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|