IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The Choice of Monetary Regime for Post-Crisis Asia. The Case of South Korea

  • Gongpil Choi
Registered author(s):

    In post-crisis Asian economies, as in emerging economies, the economic growth hugely relies on the competitiveness of exports, while financial flows are volatile and economic policy credibility fragile, so that the stability of the real exchange rate is important. On the other hand, changes in the exchange rate have immediate impact on inflation while the real exchange rate is determined by inflation differentials between countries. Since the stability of prices remains the ultimate standard for policy credibility in emerging economies, as it affects the real exchange rate, the long-term commitment to price stability also needs to be emphasized. If Asian countries do not peg their currencies it raises the question of what alternative monetary policy operating strategy to adopt, possibly within the regional cooperation policy. The aim of this paper is to examine the relative merits of current versus future price stability; it is demonstrated here that it is called for a set of monetary arrangements that is built on a flexible form of inflation targeting with forward-looking policy rules in order to maintain the real exchange rate in the neighbourhood of his trend.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: free

    File URL:
    Download Restriction: free

    Article provided by Presses de Sciences-Po in its journal Revue économique.

    Volume (Year): 54 (2003)
    Issue (Month): 5 ()
    Pages: 1137-1160

    in new window

    Handle: RePEc:cai:recosp:reco_545_1137
    Contact details of provider: Web page:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. R. Glenn Hubbard & Anil Kashyap, 1990. "Internal Net Worth and the Investment Process: An Application to U.S. Agriculture," NBER Working Papers 3339, National Bureau of Economic Research, Inc.
    2. Enrique G. Mendoza, 2002. "Credit, Prices, and Crashes: Business Cycles with a Sudden Stop," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 335-392 National Bureau of Economic Research, Inc.
    3. Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
    4. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
    5. Nicoletta Batini & Andrew Haldane, 1999. "Forward-Looking Rules for Monetary Policy," NBER Chapters, in: Monetary Policy Rules, pages 157-202 National Bureau of Economic Research, Inc.
    6. Hernandez, Leonardo & Montiel, Peter J., 2003. "Post-crisis exchange rate policy in five Asian countries: Filling in the "hollow middle"?," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 336-369, September.
    7. Charles Goodhart & Boris Hofmann, 2001. "Asset prices, financial conditions and the transmission of monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    8. Kenneth Kasa, 2001. "Will inflation targeting work in developing countries?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jan.12.
    9. Pierre-Richard Agénor, 2002. "Monetary Policy under Flexible Exchange Rates: An Introduction to Inflation Targeting," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 3, pages 079-170 Central Bank of Chile.
    10. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
    11. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
    12. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy Rules for Inflation Targeting," NBER Working Papers 6512, National Bureau of Economic Research, Inc.
    13. Roberto Chang & Andres Velasco, 1998. "Financial Crises in Emerging Markets," NBER Working Papers 6606, National Bureau of Economic Research, Inc.
    14. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "Paper Tigers? A Model of the Asian Crisis," NBER Working Papers 6783, National Bureau of Economic Research, Inc.
    15. Luis Catão & Sergio L. Rodriguez, 2000. "Banks and Monetary Shocks in Emerging Markets: How Far Can We Go with the "Credit View"?," IMF Working Papers 00/68, International Monetary Fund.
    16. Torsten Sløk & Peter F. Christoffersen, 2000. "Do Asset Prices in Transition Countries Contain Information About Future Economic Activity?," IMF Working Papers 00/103, International Monetary Fund.
    17. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-39, March.
    18. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
    19. Anil K Kashyap & Jeremy C. Stein, 1994. "The Impact of Monetary Policy on Bank Balance Sheets," NBER Working Papers 4821, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:cai:recosp:reco_545_1137. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jean-Baptiste de Vathaire)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.