On the won and other East Asian currencies

No 97-07, Pacific Basin Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: A sticky price monetary model (Frankel, 1979) of exchange rates is applied to quarterly data on seven currencies: the Indonesian rupiah, Korean won, Malaysian ringgit, Philippine peso, Singapore dollar, Taiwanese dollar and the Thai baht. The model proves empirically unsuccessful, except in the case of the baht, and to a lesser extent, the Singapore dollar. A monetary model, augmented by the relative price of nontradables, is developed. This relative price variable proxies for the Balassa-Samuelson effect in East Asian real exchange rates identified in Chinn (1997b). The Korean won is best described by this modified model, while the Indonesian rupiah, Philippine peso and Taiwanese dollar also fit the model's long run predictions. On the other hand, the Malaysian ringgit proves difficult to econometrically model. This inability is disappointing because these two currencies have recently been allowed to float more freely.

Keywords: Won, Korean; Econometric models; Foreign exchange rates; East Asia (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: On the Won and Other East Asian Currencies (1999)
Working Paper: On the Won and Other East Asian Currencies (1998)
Working Paper: ON the Won: And Other East Asian Currencies (1997)
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