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Long memory property and central bank intervention during the currency crisis in the daily Korean won-US dollar exchange rates

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  • Long memory property and central bank intervention during the currency crisis in the daily Korean won-US dollar exchange rates
  • Han, Young Wook
  • The Association of Korean Economic Studies


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Title Long memory property and central bank intervention during the currency crisis in the daily Korean won-US dollar exchange rates
Similar Titles
Material Type Articles
Author(English)

Han, Young Wook

Publisher

[Seoul]:The Association of Korean Economic Studies

Date 2003
Journal Title; Vol./Issue The Journal of the Korean Economy:vol. 4(no. 1)
Pages 24
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Economy < Economic System
Holding AKES

Abstract

This paper considers the use of the long memory volatility process, FIGARCH, in representing Korean won – US dollar daily spot exchange rates. The spot returns are found to exhibit the widespread long memory property in their conditional variances and the FIGARCH model appears to be appropriate to represent the volatility process of the daily returns. The estimated long memory parameter during the crisis is found to be greater than that of the post-crisis period. This paper also quantifies the effectiveness of the interventions by the Bank of Korea (BOK) during the crisis. General conclusions provide evidences that the interventions of the BOK during the crisis were not effective in preventing depreciation of the Korean won and that they did not have any effect on market volatility. This study also finds that the interventions did not influence the risk premium or excess returns over uncovered interest parity (UIP).