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Does the Expectations Hypothesis of the Term Structure Hold in Korea after the Asian Financial Crisis? Some Empirical Evidence (1999-2017)

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  • Tronzano, Marco

    (Università degli Studi di Genova, Scuola di Scienze Sociali, Dipartimento di Economia, Genova, Italia)

Abstract

This paper explores the validity of the Expectations Hypothesis of the Term Structure (EHTS) in Korea after the 1997-1998 Asian financial crisis. In line with the EHTS, one common stochastic trend is found in the term structure of interest rates, although the validity of the “symmetry” restriction is rejected. Moreover, significant liquidity premia and a causal relationship from long to short-term interest rates are documented. The main policy implications are that monetary policy should be implemented in a gradual manner, and putting greater emphasis on the expectations channel through which agents anticipate its future path. La validità della “Expectations Hypothesis” sulla struttura a termine dei tassi di interesse in Corea dopo la crisi finanziaria asiatica. Alcune evidenze empiriche (1999-2017) L’articolo analizza la validità ella “Expectations Hypothesis” sulla struttura a termine dei tassi di interesse in Corea dopo la crisi finanziaria asiatica del 1997-1998. In linea con la “Expectations Hypothesis”, l’analisi empirica documenta l’esistenza di un trend stocastico comune nella struttura a termine dei tassi di interesse, anche se la restrizione di “simmetria” viene respinta. Inoltre, si riscontrano significative componenti di premio per la liquidità ed una relazione di causalità dai tassi di interesse a lungo termine ai tassi di interesse a breve termine. Le più rilevanti implicazioni di politica economica sono che la politica monetaria dovrebbe essere implementata in modo graduale, e ponendo una maggiore enfasi sul canale delle aspettative attraverso il quale gli agenti economici cercano di prevederne l’evoluzione futura.

Suggested Citation

  • Tronzano, Marco, 2018. "Does the Expectations Hypothesis of the Term Structure Hold in Korea after the Asian Financial Crisis? Some Empirical Evidence (1999-2017)," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(2), pages 191-226.
  • Handle: RePEc:ris:ecoint:0827
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    More about this item

    Keywords

    Term Structure of Interest Rates; Expectations Hypothesis; Asian Emerging Markets; South Korea; Cointegration; Monetary Policy;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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