Contents

Decomposing Exchange Rates of Asia into Financial and Real Factors

Cho, Dongchul / Han, Kyuesook

Abstract

This paper imagines a foreign exchange market in which a net financial flow curve and a current account curve interact to simultaneously determine equilibrium levels of exchange rate and current account. To identify the two curves, we selected four Asian countries (Indonesia, Korea, Philippines, and Thailand) that drastically liberalized financial accounts and exchange rate systems after the 1997 crisis, and assumed that the institutional changes altered the slopes of net financial outflow curves while maintaining those of current account. The results indicate that currency depreciation greatly contributes to stabilizing foreign exchange markets by suppressing financial outflows (or attracting inflows), although the effects are not uniform across the countries in the short-run.

Issue Date
2017
Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
Keywords
Exchange rate; financial flow; current account; SVAR
Citation
ASIA-PACIFIC JOURNAL OF ACCOUNTING & ECONOMICS, v.24, no.3-4, pp.377 - 386, 2017
DOI
10.1080/16081625.2016.1166970
Journal Title
ASIA-PACIFIC JOURNAL OF ACCOUNTING & ECONOMICS
Start Page
377
End Page
386
ISSN
1608-1625
Language
English
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