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Asian Financial Crisis and Exchange Rate Pass-Through in Korea

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  • Lee, Minsoo

Abstract

This paper empirically examines the asymmetric price setting behavior on exchange rate volatility from foreign firms of Korea’s major trading partners which causes an incomplete exchange rate pass-through into import prices in Korea. The study demonstrates that there exists a significant difference between the exchange rate pass-through to aggregate import prices in Korea during the post-Asian financial crisis period and its counterpart during the pre-crisis period. The results from time series data support that both short-term and long-term exchange rate pass-through elasticities to import prices in the Korean economy during the post-Asian financial crisis period are greater than those during the pre-crisis period. The pass-through can be endogenous to the monetary policy regime. For the case of Korea, pass-through rates into import prices at least during the post-crisis period are more a function of macroeconomic conditions and international markets than the domestic monetary policy.

Suggested Citation

  • Lee, Minsoo, 2005. "Asian Financial Crisis and Exchange Rate Pass-Through in Korea," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 1(1), pages 1-20, June.
    • Handle: RePEc:ags:reapec:143484
    DOI: 10.22004/ag.econ.143484
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    References listed on IDEAS

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