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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

Listed:
  • Lee , Seung-Ho

    (The Bank Of Korea)

  • Chung, Chae-Shick

    (Korea Institute for International Economic Policy)

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.

Suggested Citation

  • Lee , Seung-Ho & Chung, Chae-Shick, 1999. "Analysis of changes in the relationship between exchange rates, interest rates, and capital flows before and after the economic crisis," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 3(3), pages 3-26, September.
    • Handle: RePEc:ris:eaerev:0271
    DOI: 10.11644/KIEP.JEAI.1999.3.3.45
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    More about this item

    Keywords

    Asian Financial Crisis; Capital Movement; GARCH Model; Korea;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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