• East Asian Economic Review
• /
• 제28권2호
• /
• pp.221-244
• /
• 2024

This study examines how the independence of monetary policy changes in situations where the interest rate differential between domestic and foreign rates inverts, utilizing the trilemma indices. For analysis, this paper uses the trilemma indices developed by Kim et al. (2017) to analyze the relationship between the monetary policy independence index and the other two trilemma indices, namely the capital account openness index and the exchange rate stability index, across 45 countries from 2002 to 2018. The analysis reveals that the trilemma's validity is contingent. In particular, no statistically significant negative correlation was found between the monetary policy independence index and exchange rate stability index during periods of interest rate differential inversion. A positive correlation emerges between exchange rate stability and the independence of monetary policy, particularly when the inverted interest rate differential exceeds a certain threshold. This situation, where the exchange rate remains stable despite low domestic interest rates, implies that the central bank is effectively managing monetary policy to appropriately respond to economic conditions, which is reflected in the monetary policy independence index.

• The Journal of Asian Finance, Economics and Business
• /
• 제9권2호
• /
• pp.29-36
• /
• 2022

This study uses the panel probit model to investigate and evaluate the relationship between exchange rate regimes, political stability, and carbon dioxide during currency crises. To understand currency crisis times, we study a panel dataset of seven South Asian nations that contain annual observations from 1996 to 2020. Furthermore, we created the EMPI exchange market pressure indicator to detect crises. Our results strongly suggested that fixed exchange rate is negatively associated with currency crises, with good regulatory quality and better effective governments. Simultaneously, the floating exchange rate is positively related to the currency crises in those countries where the rule of law has less adequately flowed. However, CO₂, exports, and interest rates are buoyantly associated with crises. The floating exchange rate, the rule of law, exports, and interest rate are associated positively and contribute more prone to the crisis episodes. Negatively associated variables contributed less amid crises episodes: fixed exchange rate regime, government effectiveness, and regulatory quality. Meanwhile, CO₂ has a positive relationship with a currency crisis and contributes more likelihood to the probability of a currency crisis. Countries that adopted the fixed exchange rates with effective governments and regulatory quality faced more minor currency crises.

• The Journal of Asian Finance, Economics and Business
• /
• 제8권3호
• /
• pp.1-10
• /
• 2021

This study examines the dynamic pattern of the exchange rate volatilities of the ASEAN-5 currencies from January 2006 to August 2020. The exchange rates applied in this study comprise bilateral and effective exchange rates in order to investigate the influence of the US dollar on the stability of the ASEAN-5 currencies. Since a volatility model employed in this study is a natural cubic spline volatility model, the Monte Carlo simulation is consequently conducted to determine an appropriate criterion to select a number of quantile knots for this model. The simulation results reveal that, among four candidate criteria, Generalized Cross-Validation is a suitable criterion for modeling the ASEAN-5 exchange rate volatilities. The estimated volatilities showed the inconstant dynamic patterns reflecting the uncertain exchange rate risk arising in international transactions. The bilateral exchange rate volatilities of the ASEAN-5 currencies to the US dollar are more variable than their corresponding effective exchange rate volatilities, indicating the influence of the US dollar on the stability of the ASEAN-5 currencies. The findings of this study suggest that the natural cubic spline volatility model with the quantile knots selected by Generalized Cross-Validation is practical and can be used to examine the dynamic patterns of the financial volatility.

• 산업경영시스템학회지
• /
• 제21권48호
• /
• pp.133-144
• /
• 1998

International capital movement has made progress at global liberalization of finance and foreign exchange, international monetary norm changing into floating exchange rate system, easiness of collection of information and trade at improvement of information communication technology from early of 1970's. Results of empirical test for relation between foreign exchange rate or various determination factors of foreign exchange rate and interest rate are followed by next sentences. First, according to relation between foreign exchange rate and interest rate, correlation for each of variables after OECD entrance is increased. But, long-term & short-term interest rate is affected by Hanbo & Kia's bankruptcy, continuous large scale corporates bankruptcy and crisis of foreign exchange. Therefore, financial instability is occured. If portfolio investment fund has been inflow as it is mollified by continuous shortage of foreign exchange and fall of country's credit rating, it is expected to have positive effect for long-term & short-term interest rate from appreciation of won against dollar. Second, results from relation between determination factor of foreign exchange rate and interest rate are followed by next sentences. If surplus of current account and goods account is continued, yield of corporate bond is to be stable. But, margin of surplus is expected to diminish after second quarter 98, and difference between external and domestic interest (after adjusting foreign exchange rate) is to be diminished. And if net inflows of foreign investor's fund (stock and bond) is diminished, it is to have negative effect for yield of corporate bond. According to foreign investor's investment movement of previous years, hedge fund were stayed at least during two years in Mexico. It means that sudden capital outflow is not to be happened at Korea. But if external factors from depreciation of yen and China's renminbi are instable, interest rate is expected to increase from capital's outflows. Third, if it is to decrease instability of foreign exchange rate from increase in surplus of future current account, credit rating's upwardness, stability of yen and renminbi, foreign exchange rate is expected to be stable. It is expected to have continuous stability from short-term interest rate to long-term interest rate in this empirical test.

• 대한안전경영과학회:학술대회논문집
• /
• 대한안전경영과학회 2002년도 추계학술대회
• /
• pp.305-319
• /
• 2002

International capital movement has made progress at global liberalization of finance and foreign exchange, international monetary norm changing into floating exchange rate system, easiness of collection of information and trade at improvement of information communication technology from early of 1970's. Results of empirical test for relation between foreign exchange rate or various determination factors of foreign exchange rate and interest rate are followed by next sentences. First, according to relation between foreign exchange rate and interest rate, correlation for each of variables after OECD entrance is increased. But, long-term ＆short-term interest rate is affected by Hanbo ＆ Kia's bankruptcy, continuous large scale coporates bankruptcy and crisis of foreign exchange. Therefore, financial instability is occured. If portfolio investment fund has been inflow as it is mollified by continuous shortage of foreign exchange and fall of country's credit rating, it is expected to have positive effect for long-term & short-term interest rate from appreciation of won against dollar. Second, results from relation between determination factor of foreign exchange rate and interest rate are followed by next sentences. If surplus of current account and goods account is continued, yield of corporate bond is to be stable. But, margin of surplus is expected to diminish after second quarter 98, and difference between external and domestic interest (after adjusting foreign exchange rate) is to be diminished. And if net inflows of foreign investor's fund (stock and bond) is diminished, it is to have negative effect for yield of corporate bond. According to foreign investor's investment movement of previous years, hedge md were stayed at least during two years in Mexico. It means that sudden capital outflow is not to be happened at Korea. But if external factors from depreciation of yen and China's renminbi are instable, interest rate is expected to increase from capital's outflows. Third, if it is to decrease instability of foreign exchange rate from increase in surplus of future current account, credit rating's upwardness, stability of yen and renminbi, foreign exchange rate is expected to be stable. It is expected to have continuous stability from short-term interest rate to long-term interest rate in this empirical test.

• 유통과학연구
• /
• 제14권12호
• /
• pp.79-87
• /
• 2016

Purpose - Since 1990, the sudden stop in capital flows has caused the economic crisis. The purpose of this research is to suggest the policy measures to mitigate the risk of the sudden stop in capital flows. To this end, we examine the theoretical framework and analyze the case study for countries which are faced with the sudden stop. Also we examine the structural problems of the foreign exchange market in Korea and derive the policy implications to prevent the sudden stop. Research design, data, and methodology - The criteria of whether the sudden stop in capital flows occurs are based upon Calvo et al. (2008). In case the proxy variable for the balance of capital account decreases from the average by over twice standard deviation, we determine that the sudden stop occurs for that country. The sample period is from January 1990 to December 2008, as in Calvo (2014). The sample countries are 17 developed countries and 19 emerging market countries, which are different from those of the previous papers as Agosin and Huaita (2012), and Calvo (2014). When the exchange market pressure index(EMPI) is deviated from the average by over three times standard deviation, we determine that the foreign exchange market is unstable for that country. Results - We find that the characteristics of the sudden stop in capital flows are the bunching or contagion among countries, the rapid drop in real effective exchange rate, and the huge decrease in foreign exchange reserves. Many countries tried to increase foreign exchange reserves and regulate capital flows. Also the foreign exchange market in Korea are found to be the volatile exchange rate, the vulnerable external debt and careless management of the foreign exchange derivatives transaction risk. Conclusions - To lessen the risk in the sudden stop of capital flows, this research suggests the some useful policy measures. To enhance the foreign exchange and distribution market stability, we should improve the price mechanism of exchange rate, hold the appropriate level of foreign exchange reserves, prevent excessive inflows of foreign exchange and promote sound transactions of foreign exchange derivatives.

• 한국항만경제학회지
• /
• 제27권1호
• /
• pp.235-245
• /
• 2011

본 논문은 조선산업의 경기가 환율 및 환율 변동성에 유의미한 영향을 미치는 것을 보이고 있다. 조선업 경기중에서 수주량과 건조량이 환율 및 환율 변동성에 선제적이 장기적인 영향을 미치는 것으로 나타났다. 이것은 조선업의 경기가 환율 및 환율 변동성을 파악하는 데 중요한 요인임을 시사한다. 이것은 선물환 매도와 같은 조선산업의 환헤지가 영향을 미치는 것으로 짐작된다. 본 논문 결과는 정책당국이 외환시장 안정을 위해 조선업 경기에 대한 모니터링이 필요함을 정책적 시사점을 제시하고 있다.

• KDI Journal of Economic Policy
• /
• 제28권1호
• /
• pp.193-218
• /
• 2006

본 논문은 한국의 근본적인 거시경제변수가 두 가지 다른 환율제도(자유변동 환율제도와 시장평균 환율제도)하에서 어떻게 다르게 반응하는가를 분석 연구한다. 이와 아울러 같은 기간 동안의 일본과 호주의 거시경제구조에 대한 비교 분석도 곁들인다. 한국은 1997년의 경제위기를 전후하여 환율정책을 시장평균 환율제도에서 자유변동 환율제도로 전환하였다. 이 시점을 계기로 한 한국의 외환정책 변경은 두 가지 환율제도를 비교 분석하는 데 아주 좋은 기회를 제공한다. 화폐경제이론에 기초한 환율결정 모델을 사용하여 대미환율과 거시경제변수에 대한 관계를 분석해 본 결과, 대미환율은 시장평균 환율제도하에서보다 자유변동 환율제도하에서 근본적인 거시경제변수에 더 민감하게 반응하는 것으로 나타났다. Impulse Response Analysis 분석결과에 의하면, 환율변동이 물가상승률에 미치는 영향은 시장평균 환율제도하에서 보다 자유변동 환율제도하에서 단기적으로 더 큰 것으로 나타났다. 이러한 결론은 개발도상국가에서는 안정적인 관리 환율제도가 경제성장을 위해 필요하다는 일반적인 견해와 일치하는 것이다.

• 산업경영시스템학회지
• /
• 제22권50호
• /
• pp.105-125
• /
• 1999

The results of analysis on foreign exchange market, stock and financial market after January of 1997 are that foreign exchange market will be affected by stock and financial market volatility about 1999. This means that stock and financial market are more stable than foreign exchange market. This also is supported by ‘financial market forecast of 1999 in Daewoo Economic Research Institute’. After won/dollar (end of period) will be increasing in 1,430 at second quarter of 1999, this is to downward 1,200 fourth quarter of 1999. This is somewhat based on government's higher exchange rate policy. But, after yield of corporate bond is to 11.0% at first quarter of 1999, this will be stable to 10.2% at fourth quarter. During the first quarter of 1999, yield of corporate bond is to somewhat increasing through sovereign debt and public bonds, technical adjustment of interest rate. After this, yield of corporate bond will be stable according to stability of price, magnification of money supply, restucturing of firms. So, stock market is favorably affected by stability of financial market. But, the pension and fund of USA, i.e., long-term portfolio investment fund, are injected through international firm's management. It is included by openness of audit, fair market about foreign investors. Finally, Moody's strong rating on the won-denominated bonds suggest that Korea's sovereign debt ratings could be restored to an investment grade in the near future. It sequentially includes inflow of foreign portfolio investment fund, fall of won/dollar foreign exchange rate (appreciation of won) and stability of yield of corporate bond.

• 산경연구논집
• /
• 제8권7호
• /
• pp.7-12
• /
• 2017

Purpose - This research examines the short-run and long-run effect of external shocks (oil price and exchange rate) on domestic food price in Indonesia. Research design, data, and methodology - Three variables are used in this research. The variables are food price index, Rupiah's exchange rate of Indonesia, and crude oil price from 1998 until 2015 using Vector Error Correction Model (VECM). Results - The increasing of oil price and the depreciation of Rupiah's rate push the domestic food price in long-run, but do not impact significantly in short- term. The response of food price to oil prices shock and exchange rate shock are positive and persistent throughout the entire sample period. The exchange rate and oil price shocks have a small proportion explaining for the fluctuations of food price index but increasing over time. Conclusions - The policymaker should concern on solving the problem of oil price increase and depreciation of exchange rate on Indonesia's food price as they are important factors that can affect the price stability. The government should not rely on food imports because the price is strongly influenced by the movements in the exchange rate.