Analysis of changes in the relationship between exchange rates, interest rates, and capital flows before and after the economic crisis

Seung-Ho Lee; Chae-Shick Chung

doi:10.11644/KIEP.JEAI.1999.3.3.45

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East Asian Economic Review Vol. 3, No. 3, 1999. pp. 3-26.

DOI https://dx.doi.org/10.11644/KIEP.JEAI.1999.3.3.45

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Analysis of changes in the relationship between exchange rates, interest rates, and capital flows before and after the economic crisis

Author
Seung-Ho Lee
Chae-Shick Chung

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 purpose of this paper is to investigate the interrelationships among KRW/USD exchange rate, interest rate, and foreigner’s portfolio investment to Korea before and after the crisis. Our finding is that interest rate and the exchange rate move closely with positive relation after the crisis, which was not the case before the crisis. We also examine cross dependencies among three variables using a multivariate GARCH model and find that all of restricted models such as uni-directional spillovers are firmly rejected over both periods.

JEL classification: F21, F31, F32

Keywords

Asian financial Crisis, Capital movement, GARCH model, Korea

Language

Korean

References

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