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Monetary and Exchange Rate Policy in the Aftermath of the Asian Financial Crisis: The Case of Korea

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  • Jounghyeon Kim

    (Korea University)

Abstract

This paper extends the structural VAR model of Bernanke and Mihov (1998) to one under a small-open economy in order to explore how the operating procedures of the monetary and foreign exchange policy in Korea changed in the aftermath of the 1997 Asian financial crisis. It finds strong evidence of apparent regime changes in the monetary and exchange rate policy after the financial crisis. The implications for monetary policy in Korea are that the operating procedure switched to a call rate target in the post-crisis period, but that its stance on monetary policy may remain in transition under an inflation targeting framework and a freely floating exchange rate regime. Moreover, the exchange rate presumably plays an important role in monetary policy or as an intermediate monetary policy target in order to stabilize prices.

Suggested Citation

  • Jounghyeon Kim, 2012. "Monetary and Exchange Rate Policy in the Aftermath of the Asian Financial Crisis: The Case of Korea," Korean Economic Review, Korean Economic Association, vol. 28, pages 91-116.
    • Handle: RePEc:kea:keappr:ker-20120630-28-1-05
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    References listed on IDEAS

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    Cited by:

    1. Jounghyeon Kim, 2013. "Remittances and Currency Crisis: The Case of Developing and Emerging Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(6), pages 88-111, November.

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    More about this item

    Keywords

    Monetary Policy; Exchange Rate Policy; Asian Financial Crisis; Structural VAR model;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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