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Monetary Stabilization Policy during Economic Crisis: Case of Korea

Author

Listed:
  • Chae-Shick Chung

    (Sogang University)

  • Se-Jik Kim

    (International Monetary Fund)

Abstract

The paper evaluates the effectiveness of high interest rate policy in stabilizing the exchange rate during the Korean crisis, based on a nonlinear impulse response function approach. We find that high interest rates induce depreciation for a very short period, followed by a substantial appreciation for an extensive period. In contrast, a low interest rate policy would appreciate the exchange rate only for a very short period but have little impact afterwards. Our empirical findings suggest that the IMF's interest rate policy in Korea contributed to the stabilization of the exchange rate.

Suggested Citation

  • Chae-Shick Chung & Se-Jik Kim, 2004. "Monetary Stabilization Policy during Economic Crisis: Case of Korea," Korean Economic Review, Korean Economic Association, vol. 20, pages 157-174.
    • Handle: RePEc:kea:keappr:ker-20040630-20-1-08
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    File URL: http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-20040630-20-1-08.pdf
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    More about this item

    Keywords

    Crisis; High interest rate policy; Non-linear impulse response function;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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