Asymmetric exchange rates and unofficial exchange rate interventions: The case of South Korea

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Applying Milton Friedman's 'plucking' model of output fluctuations, we investigate the behavior of the Korean won/dollar exchange rate using a state-space model with Markov switching, which incorporates both symmetric and asymmetric shocks. We find that the Korean won/US dollar exchange rate rarely falls below its trend, but is plucked upward from time to time by transitory shocks. This asymmetry suggests that the monetary authority unofficially intervenes in the foreign exchange market to support its own target level from below. Further evidence from changes in reserve assets indirectly supports our finding.

Original languageEnglish
Pages (from-to)359-371
Number of pages13
JournalInternational Economic Journal
Volume25
Issue number3
DOIs
Publication statusPublished - 2011 Sep 1

Fingerprint

South Korea
Exchange rates
Output fluctuations
Transitory shocks
Markov switching
Milton Friedman
Asymmetric shocks
Asymmetry
Assets
State-space model
Authority
Foreign exchange market

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

Cite this

@article{b5e2392c8f174e5eb0a276d3b7e6c031,
title = "Asymmetric exchange rates and unofficial exchange rate interventions: The case of South Korea",
abstract = "Applying Milton Friedman's 'plucking' model of output fluctuations, we investigate the behavior of the Korean won/dollar exchange rate using a state-space model with Markov switching, which incorporates both symmetric and asymmetric shocks. We find that the Korean won/US dollar exchange rate rarely falls below its trend, but is plucked upward from time to time by transitory shocks. This asymmetry suggests that the monetary authority unofficially intervenes in the foreign exchange market to support its own target level from below. Further evidence from changes in reserve assets indirectly supports our finding.",
author = "Park, {Ki Young}",
year = "2011",
month = "9",
day = "1",
doi = "10.1080/10168737.2011.607259",
language = "English",
volume = "25",
pages = "359--371",
journal = "International Economic Journal",
issn = "1016-8737",
publisher = "Routledge",
number = "3",

}

Asymmetric exchange rates and unofficial exchange rate interventions : The case of South Korea. / Park, Ki Young.

In: International Economic Journal, Vol. 25, No. 3, 01.09.2011, p. 359-371.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Asymmetric exchange rates and unofficial exchange rate interventions

T2 - The case of South Korea

AU - Park, Ki Young

PY - 2011/9/1

Y1 - 2011/9/1

N2 - Applying Milton Friedman's 'plucking' model of output fluctuations, we investigate the behavior of the Korean won/dollar exchange rate using a state-space model with Markov switching, which incorporates both symmetric and asymmetric shocks. We find that the Korean won/US dollar exchange rate rarely falls below its trend, but is plucked upward from time to time by transitory shocks. This asymmetry suggests that the monetary authority unofficially intervenes in the foreign exchange market to support its own target level from below. Further evidence from changes in reserve assets indirectly supports our finding.

AB - Applying Milton Friedman's 'plucking' model of output fluctuations, we investigate the behavior of the Korean won/dollar exchange rate using a state-space model with Markov switching, which incorporates both symmetric and asymmetric shocks. We find that the Korean won/US dollar exchange rate rarely falls below its trend, but is plucked upward from time to time by transitory shocks. This asymmetry suggests that the monetary authority unofficially intervenes in the foreign exchange market to support its own target level from below. Further evidence from changes in reserve assets indirectly supports our finding.

UR - http://www.scopus.com/inward/record.url?scp=80052892788&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=80052892788&partnerID=8YFLogxK

U2 - 10.1080/10168737.2011.607259

DO - 10.1080/10168737.2011.607259

M3 - Article

AN - SCOPUS:80052892788

VL - 25

SP - 359

EP - 371

JO - International Economic Journal

JF - International Economic Journal

SN - 1016-8737

IS - 3

ER -