The Determinants of won/dollar Exchange Rate Volatility and Policy Recommendations

Chae-Shick Chung
Additional contact information
Chae-Shick Chung: Korea Institute for International Economic Policy

East Asian Economic Review, 1998, vol. 2, issue 3, 27-48

Abstract: This thesis analyzed the feature and different points of the changing of the exchange rate of Korea won against US dollar, then discussed the direction of the completion of Korea exchange rate system. The prediction result of the model GARCH which vividly shows the phenomenon of the auto-regression of the exchange rate has indicated the level of the exchange rate yesterday could explain the circumstance of the change of exchange rate today. Meanwhile, the policy of the US exchange rate will affect the exchange rate of Korea won against US dollar and the volatility of foreign exchange rate. In the present situation of Korean economy in which the liberalization of capital and the independence of the central bank has been established, the choosing range of the exchange system could only be completely changeable exchange rate system or exchange rate system of multilateral arrangement like Europe. However, in terms of the condition of the world economy, the introduction of the latter system is too early. There is an idea that under the changeable exchange rate system which is the only choice, it is the right time to activate the main body of private economy, the financial derivatives market in which the exchange risk could be trade-off. Government should work on and create a policy that would be able to satisfy the expectations of the market participants.

Keywords: Exchange Rate Volatility; Dollar; Won; GARCH Model (search for similar items in EconPapers)
JEL-codes: C15 C52 C54 F31 (search for similar items in EconPapers)
Date: 1998
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.11644/KIEP.JEAI.1998.2.3.23 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0294

Access Statistics for this article

East Asian Economic Review is currently edited by JE Lee

More articles in East Asian Economic Review from Korea Institute for International Economic Policy [30147] 3rd Floor Building C Sejong National Research Complex 370 Sicheong-daero Sejong-si, Korea. Contact information at EDIRC.
Bibliographic data for series maintained by JE Lee ().