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Modeling the Behavior of the KRW/USD Exchange Rate and Policy Implications

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  • Yu Hsing

Abstract

This paper examines the behavior of the KRW/USD exchange rate based on four major models. Using the mean absolute percent error (MAPE) as the criterion, the purchasing power parity (PPP) model using the relative producer price index (PPI) performs the best, followed by the extended investment saving-liquidity preference money supply (IS-LM) model, the Frankel model, the purchasing power parity model based on the relative consumer price index (CPI), the Dornbusch model, the Frenkel model, and the uncovered interest parity model. The generalized Box-Cox model indicates that the log-log form for the PPP model can be rejected.

Suggested Citation

  • Yu Hsing, 2009. "Modeling the Behavior of the KRW/USD Exchange Rate and Policy Implications," Global Economic Review, Taylor & Francis Journals, vol. 38(2), pages 205-214.
    • Handle: RePEc:taf:glecrv:v:38:y:2009:i:2:p:205-214
    DOI: 10.1080/12265080902891826
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    References listed on IDEAS

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    1. Maurice Obstfeld, 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," NBER Working Papers 8369, National Bureau of Economic Research, Inc.
    2. Cheung, Yin-Wong & Chinn, Menzie D. & Pascual, Antonio Garcia, 2005. "Empirical exchange rate models of the nineties: Are any fit to survive?," Journal of International Money and Finance, Elsevier, vol. 24(7), pages 1150-1175, November.
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