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East Asian Economic Review Vol. 4, No. 1, 2000. pp. 33-61.

DOI https://dx.doi.org/10.11644/KIEP.JEAI.2000.4.1.59

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In Search for a Measure of Currency Misalignment: the Case of the 1997 Asian Currency Crisis

Author

Daekeun Park

Hanyang University
Creative Commons Attribution License

EAER is an open access journal distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license.

Abstract

The paper searches for an appropriate measure of currency misalignment in light of the 1997 Asian currency crisis. A couple of measures of currency misalignment, one based on purchasing power parity and the other based on equilibrium real exchange rate that is consistent with internal and external equilibrium are used to estimate the degree of currency misalignment for Korea, Indonesia, Malaysia, and Thailand before the 1997 currency crisis. The paper finds that the purchasing power parity based methods show that the Asian currencies were not significantly overvalued on the eve of the crisis. On the other hand, measures based on the equilibrium real exchange rate concept demonstrate that the Asian currencies were significantly overvalued. In consequence, the equilibrium real exchange rate based method seems to be a useful candidate for a measure of currency misalignment.

JEL classification: F31, F33, G12

Keywords

Asian Currency Crisis, Asian Financial Crisis, Measure Currency Misalignment

Language

Korean

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