Economic Fundamentals on Exchange Rates under Different Exchange Rate Regimes:
This paper investigates the structural differences of the free floating exchange rate regime after the economic crisis compared to the managed float exchange rate regime before the economic crisis. This paper focuses on the relationship between exchange rates and economic fundamentals. It is well documented that the exchange rate is very difficult to predict using any theoretical models for the exchange rate determination. Korean exchange rates provide one of the unique opportunities to study the different behaviors or roles, if any, of managed float and free floating exchange rate regimes. Based on the simple monetary model, we found that the Korean exchange rates are more sensitive to the economic fundamentals under the free floating regime than under the managed float regime. Exchange rate path-through into the domestic variable, especially inflation rate, has become more stable under the floating regime than under the managed regime. This finding may contradict the traditional arguments for the managed regime. However, this finding is consistent with the view that the free floating regime is better for the economic growth in the long-run. In short, the fixed or managed regimes are short-run solutions for the economic growth. Exchange rate volatilities under the flexible regime could be reduced if there is a well-functioning futureâ€™s market
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- Mark, Nelson C. & Sul, Donggyu, 2001.
"Nominal exchange rates and monetary fundamentals: Evidence from a small post-Bretton woods panel,"
Journal of International Economics,
Elsevier, vol. 53(1), pages 29-52, February.
- Nelson Mark & Donggyu Sul, 1998. "Norminal Exchange Rates and Monetary Fundamentals: Evidence from a Small Post-Bretton Woods Panel," Working Papers 98-19, Ohio State University, Department of Economics.
- Maurice Obstfeld & Kenneth Rogoff, 1995.
"The Mirage of Fixed Exchange Rates,"
NBER Working Papers
5191, National Bureau of Economic Research, Inc.
- Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
- Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
14000, University Library of Munich, Germany.
- Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
- Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
- Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
- MacDonald, Ronald & Taylor, Mark P., 1994. "The monetary model of the exchange rate: long-run relationships, short-run dynamics and how to beat a random walk," Journal of International Money and Finance, Elsevier, vol. 13(3), pages 276-290, June.
- Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ecm:feam04:765. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.