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Exchange Rate Overshooting in East Asian Countries

Mohsen Bahmani-Oskooee () and Nisit Panthamit

Emerging Markets Finance and Trade, 2006, vol. 42, issue 4, 5-18

Abstract: Excess money supply was one factor among several contributing to the 1997 financial crisis in East Asian countries. The crisis resulted in abnormal currency depreciation. Using monthly data over the period 1987-2000 and error correction modeling techniques, we pay tribute to Rudiger Dornbusch by providing strong evidence for his "overshooting" hypothesis in Thailand, Korea, Indonesia, Malaysia, and the Philippines. We show that overshooting is a short-run phenomenon; in the long run, money seems to be neutral.

Keywords: East Asia; error correction modeling; exchange rate; overshooting (search for similar items in EconPapers)
Date: 2006
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Handle: RePEc:mes:emfitr:v:42:y:2006:i:4:p:5-18