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Long memory property and central bank intervention in foreign exchange market : The case of daily Korea Won-US Dollar exchange rate during the currency crisis

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  • Long memory property and central bank intervention in foreign exchange market
  • Han, Young Wook
  • The Association of Korean Economic Studies


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Title Long memory property and central bank intervention in foreign exchange market
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The case of daily Korea Won-US Dollar exchange rate during the currency crisis

Material Type Proceedings
Author(English)

Han, Young Wook

Publisher

[Seoul, South Korea]:The Association of Korean Economic Studies

Date 2002-07
Pages 25
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Macroeconomics
Holding Kar-yiu Wong website

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 both their conditional variances and also their absolute returns; hence the FIGARCH model is found to be the preferred specification for the daily returns data. Interestingly, the long memory parameter during the currency crisis is found to be greater relatively to that of the post-crisis period in which the period of the crisis is excluded, implying that the volatility process seems to be more persistent during the crisis. And, this paper quantifies the effectiveness of the interventions by Bank of Korea (BOK) to curtail the massive depreciation of Korean won during the crisis. General conclusions provide some econometric evidences that the interventions were not effective at all in preventing further depreciation of Korean won rather caused it to be worse. (The rest omitted)

User Note

For First Annual Conference of the AKES, July 21-22, 2002.