This paper tries to analyze the effect of capital flows on won/dollar real effective exchange rate and exchange market pressure in Korea. First, we calculate the weight-varying real effective exchange rate and then split the real effective exchange rate into two parts, permanent component and transitory component, using the unobserved components model with heteroskedasticity. We find that the transitory component caused by the imbalance of international payments plays a key role in a high-variance state such as financial crisis.
Next, we measure the exchange market pressure in Korea using the Eichengreen-Rose-Wyplosz method (1996). It is found that Korea was in the high-risk range during November and December of 1997 and March, April, and July of 1998. The time-series analysis shows that the exchange market pressure starts with a change in the nominal exchange rate, and a change in the foreign exchange liquidity and the domestic interest rate followed. We also find that capital account gives more influence to exchange market pressure than current account does.
This paper offers some valuable implications to policy-makers. First, a sound macroeconomic policy should be maintained to prevent speculative short-term capital movements across borders. Second, safeguard facilities such as VDR should be well-prepared against emergencies. Third, market substructure, prudential regulation, and risk management systems should be strengthened to enhance financial market stability.
자본유출입이 실질실효환율과 외환시장압력에 미친 영향
[서울] : 한국금융연구원
|Series Title; No||금융조사보고서 / 99-10|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|