Self-Fulfilling Feature of the Currency Crisis in Korea

Jeong-Hee Suh
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Jeong-Hee Suh: Maeil Business Newspaper

Korean Economic Review, 2001, vol. 17, 25-40

Abstract: Using a non-linear model, this paper examines the respective roles played by the fundamental and self-fulfilling speculation in the outbreak of the currency crisis in Korea. The model, due to Jeanne (1997), emphasizes roles for fundamentals and for self-fulfilling speculation. Results suggest that Korea was vulnerable to self-fulfilling speculation as early as January 1997. An extended phase of multiple equilibria started in October 1997. The fundamentals for Korea remained in this crisis zone until March 1998. Korea briefly entered a multiple equilibria zone again in May and June 1998 before stabilizing in July 1998. Overall, results are supportive of models emphasizing a role for self-fulfilling speculation in currency crises in addition to the .fundamentals.

Keywords: East Asia crisis; Korean currency crisis; self-fulfilling speculation (search for similar items in EconPapers)
JEL-codes: F33 F41 (search for similar items in EconPapers)
Date: 2001
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