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Intervention, sterilization, and monetary control in Korea and Taiwan

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  • Ramon Moreno

Abstract

This paper uses a four-variable vector autoregression model to explore how monetary authorities responded to shocks in Korea and Taiwan over the period 1981.1-1994.12. The analysis reveals that sterilization is an important element of the response to shocks to foreign assets in both economies. In particular, monetary authorities do not appear to be prepared to accept fluctuations in the exchange rate and the money supply that may result from changes in foreign assets, but more readily accept fluctuations in these variables that result from domestic credit shocks. There are also differences in the responses of Korea and Taiwan that suggest that the former may be more insulated from external shocks.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1996)
Issue (Month): ()
Pages: 23-33

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Handle: RePEc:fip:fedfer:y:1996:p:23-33:n:3

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Keywords: Korea ; Taiwan ; Foreign exchange rates ; Vector autoregression;

References

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  1. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  2. Reuven Glick & Ramon Moreno, 1994. "Capital flows and monetary policy in East Asia," Pacific Basin Working Paper Series 94-08, Federal Reserve Bank of San Francisco.
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Cited by:
  1. Menzie D. Chinn & Kenneth M. Kletzer, 1999. "International capital inflows, domestic financial intermediation and financial crises under imperfect information," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  2. David Cook & James Yetman, 2012. "Expanding central bank balance sheets in emerging Asia: a compendium of risk and some evidence," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 30-75 Bank for International Settlements.
  3. Kenneth Kletzer & Robert Dekle, 2001. "Domestic Bank Regulation and Financial Crises," IMF Working Papers 01/63, International Monetary Fund.
  4. Alice Y. Ouyang & Ramkishen S. Rajan & Thomas D. Willett, 2007. "China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients," Working Papers 102007, Hong Kong Institute for Monetary Research.
  5. Selim Elekdag & M. Ayhan Kose & Roberto Cardarelli, 2009. "Capital Inflows," IMF Working Papers 09/40, International Monetary Fund.

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