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Structural break in the real exchange rates : The Asian crisis

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  • Structural break in the real exchange rates
  • Chung, Hoe Sang; Kim, Young-Yong
  • Korea Institute for International Economy Policy


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Title Structural break in the real exchange rates
Similar Titles
Sub Title

The Asian crisis

Material Type Articles
Author(English)

Chung, Hoe Sang; Kim, Young-Yong

Publisher

[Seoul]:Korea Institute for International Economy Policy

Date 2009-06
Journal Title; Vol./Issue Journal of East Asian Economic Integration:vol. 13(no. 1)(June 2009)
Pages 22
Subject Country Japan(Asia and Pacific)
South Korea(Asia and Pacific)
Language Korean
File Type Link
Subject Economy < Macroeconomics
Holding Korea Institute for International Economy Policy

Abstract

This study estimates the break point in the residual variance and in the propagation mechanism of the real exchange rates at about the time of the Asian crisis that occurred in 1997, and provides some explanations for the breaks. The breaks in the residual variance increased the volatility of the real exchange rates, which given the overall effects of common adverse shocks to the countries seems to be reinforced by the sudden withdrawal of Japanese commercial banks’ lending to the region. And the subsequent breaks in the propagation mechanism reduced the volatility, which reflects the change in the government policy stance to result in smoothing the pace of appreciation. In addition, the breaks in the nominal exchange rates rather than in the price ratios are mainly responsible for the breaks in the real exchange rates.