TY - JOUR
T1 - Asymmetric exchange rates and unofficial exchange rate interventions
T2 - The case of South Korea
AU - Park, Ki Young
PY - 2011/9
Y1 - 2011/9
N2 - Applying Milton Friedman's 'plucking' model of output fluctuations, we investigate the behavior of the Korean won/dollar exchange rate using a state-space model with Markov switching, which incorporates both symmetric and asymmetric shocks. We find that the Korean won/US dollar exchange rate rarely falls below its trend, but is plucked upward from time to time by transitory shocks. This asymmetry suggests that the monetary authority unofficially intervenes in the foreign exchange market to support its own target level from below. Further evidence from changes in reserve assets indirectly supports our finding.
AB - Applying Milton Friedman's 'plucking' model of output fluctuations, we investigate the behavior of the Korean won/dollar exchange rate using a state-space model with Markov switching, which incorporates both symmetric and asymmetric shocks. We find that the Korean won/US dollar exchange rate rarely falls below its trend, but is plucked upward from time to time by transitory shocks. This asymmetry suggests that the monetary authority unofficially intervenes in the foreign exchange market to support its own target level from below. Further evidence from changes in reserve assets indirectly supports our finding.
KW - Asymmetry
KW - Government intervention
KW - Won/dollar exchange rate
UR - http://www.scopus.com/inward/record.url?scp=80052892788&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=80052892788&partnerID=8YFLogxK
U2 - 10.1080/10168737.2011.607259
DO - 10.1080/10168737.2011.607259
M3 - Article
AN - SCOPUS:80052892788
SN - 1016-8737
VL - 25
SP - 359
EP - 371
JO - International Economic Journal
JF - International Economic Journal
IS - 3
ER -