Disorderly adjustments to the misalignments in the Korean won |
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Authors: | Kinkyo Takuji |
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Affiliation: | * Ministry of Finance, Japan, 3-1-1 Kasumigaseki, Chiyodaku, Tokyo 100-8940. Email: takuji.kinkyou{at}mof.go.jp. The views expressed here are those of the author and do not necessarily reflect the position of the Ministry |
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Abstract: | This paper estimates the equilibrium exchange rates for Korea'sreal effective rates using Clark and MacDonald's (1999) behaviouralequilibrium exchange rate (BEER) approach. The estimation resultsuggests that the real exchange rate was substantially overvaluedduring the period prior to the currency crisis of 1997–98.The subsequent adjustment, however, was disorderly in the sensethat the real exchange rate overshot its long-run equilibriumvalue. There was also a large deviation from the BEER, indicatingthat the sharp depreciation was not an equilibrium phenomenon. |
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Keywords: | Equilibrium real exchange rate Exchange rate misalignments |
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