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Appropriate exchange rate regime in developing countries : The case of Korea

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  • Appropriate exchange rate regime in developing countries
  • Chung, Chae-Shick; Yang, Doo Young
  • Korea Institute for International Economic Policy


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Title Appropriate exchange rate regime in developing countries
Similar Titles
Sub Title

The case of Korea

Material Type Reports
Author(English)

Chung, Chae-Shick; Yang, Doo Young

Publisher

Seoul:Korea Institute for International Economic Policy

Date 2000-10
Series Title; No Working Paper / 00-08
ISBN 89-322-4085-x; 89-322-4026-4(세트)
Pages 67
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Macroeconomics
Holding Korea Institute for International Economic Policy

Abstract

The choice of exchange rate regime in developing countries carries critical importance to their self-protection from speculative attacks and currency crises, as well as achievement of long-term economic growth. Deep integration of developing countries to the global economy makes it difficult to keep the intermediate regime between the two polar solutions. Shifting to more extreme choices between free floating and credible institutional arrangement (monetary union, currency board, or even dollarization) is recommended for many developing countries.
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 VAR (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. (The rest omitted)