Pub Date : 2011-03-31DOI: 10.11644/KIEP.JEAI.2011.15.1.227
J. H. Lee, Jinyoung Hwang
The existing literature has shown that the relationship between output volatility and growth depends on data and/or estimation methods. In this paper, an empirical examination is made of the link between output volatility and growth in Korea, China and Japan, using monthly data on the index of industrial product from 1990 to 2009. Specifically, a country's growth and output volatility are measured by the ratio of change in industrial product and its conditional standard error, respectively. Using EGARCH-M model, provided by Nelson (1991), to accommodate the asymmetry of economic fluctuation, estimates indicates that output volatility is negatively and significantly associated with the growth in Korea. However, the relationship between output volatility and growth is positive and statically significant in China, whereas there exists very little evidence in Japan. Moreover, unexpected positive shocks have positive impacts on growth in Korea and China, whereas the impacts are very small in Japan. Regression results also suggest that the impacts of unexpected negative shocks on growth are negative in all countries, and the magnitude is the biggest in Korea and the lowest in Japan.
{"title":"Output Volatility and Growth in Korea, China and Japan","authors":"J. H. Lee, Jinyoung Hwang","doi":"10.11644/KIEP.JEAI.2011.15.1.227","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2011.15.1.227","url":null,"abstract":"The existing literature has shown that the relationship between output volatility and growth depends on data and/or estimation methods. In this paper, an empirical examination is made of the link between output volatility and growth in Korea, China and Japan, using monthly data on the index of industrial product from 1990 to 2009. Specifically, a country's growth and output volatility are measured by the ratio of change in industrial product and its conditional standard error, respectively. Using EGARCH-M model, provided by Nelson (1991), to accommodate the asymmetry of economic fluctuation, estimates indicates that output volatility is negatively and significantly associated with the growth in Korea. However, the relationship between output volatility and growth is positive and statically significant in China, whereas there exists very little evidence in Japan. Moreover, unexpected positive shocks have positive impacts on growth in Korea and China, whereas the impacts are very small in Japan. Regression results also suggest that the impacts of unexpected negative shocks on growth are negative in all countries, and the magnitude is the biggest in Korea and the lowest in Japan.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"15 1","pages":"87-111"},"PeriodicalIF":0.8,"publicationDate":"2011-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64812059","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-12-31DOI: 10.11644/KIEP.JEAI.2010.14.2.221
Changmo Ahn
This paper examines whether the USD/KRW spot market is efficient in processing new information by employing both the Runs Test and the foreigners' securities trading rule profitability approach. Excluding the period of 2008 financial crisis, the USD/KRW spot market is efficient in terms of close rates, but not efficient in terms of open rates. The foreigners' securities trading rule can also produce statistically significant profits if the trades are based on open prices, though not high. This implies that traders can predict future exchange rates, to some degree, with the information on foreign net purchases of securities in the Korean stock/ bond markets. If we consider the related interest differentials and transaction costs, however, the profits fade out to marginal level or below. This result implies that traders can expect the existence of predictability in the USD/KRW spot market, but not profitability.
{"title":"Informational Efficiency in the USD/KRW Spot Market: Some Evidence from a Joint Runs Test and Foreigners’ Trading Rule Profits","authors":"Changmo Ahn","doi":"10.11644/KIEP.JEAI.2010.14.2.221","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.2.221","url":null,"abstract":"This paper examines whether the USD/KRW spot market is efficient in processing new information by employing both the Runs Test and the foreigners' securities trading rule profitability approach. Excluding the period of 2008 financial crisis, the USD/KRW spot market is efficient in terms of close rates, but not efficient in terms of open rates. The foreigners' securities trading rule can also produce statistically significant profits if the trades are based on open prices, though not high. This implies that traders can predict future exchange rates, to some degree, with the information on foreign net purchases of securities in the Korean stock/ bond markets. If we consider the related interest differentials and transaction costs, however, the profits fade out to marginal level or below. This result implies that traders can expect the existence of predictability in the USD/KRW spot market, but not profitability.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"9 1","pages":"139-165"},"PeriodicalIF":0.8,"publicationDate":"2010-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64811919","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-12-31DOI: 10.11644/KIEP.JEAI.2010.14.2.218
Gab-Je Jo
In this paper I investigate the link between Korea's trade balance and the exchange rate, using both aggregated and disaggregated data. Employing the bounds testing approach to cointegration, and error-correction modeling, when I use the aggregate trade balance as a dependent variable, I find no support for the J-curve in the short-run; and also find that in the long-run, the exchange rate had a significant positive impact on the trade balance. However, in both the short and the long-run, I find that the exchange rate does not play a significant role in deterIn this paper I investigate the link between Korea’s trade balance and the exchange rate, using both aggregated and disaggregated data. Employing the bounds testing approach to cointegration, and error-correction modeling, when I use the aggregate trade balance as a dependent variable, I find no support for the J-curve in the short-run; and also find that in the long-run, the exchange rate had a significant positive impact on the trade balance. However, in both the short and the long-run, I find that the exchange rate does not play a significant role in determining the bilateral trade balance between Korea and China, nor does it improve the disaggregated trade balance. This is because the exchange rate elasticity of the trade balance depends on the nature of the commodity. Especially if the commodity is an intermediate good or a raw material, the exchange rate elasticity in trade balance could be inelastic because the demand for the intermediate good is a derived demand from the final good.
{"title":"The Role of Exchange Rates in Korea’s Commodity Trade with China","authors":"Gab-Je Jo","doi":"10.11644/KIEP.JEAI.2010.14.2.218","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.2.218","url":null,"abstract":"In this paper I investigate the link between Korea's trade balance and the exchange rate, using both aggregated and disaggregated data. Employing the bounds testing approach to cointegration, and error-correction modeling, when I use the aggregate trade balance as a dependent variable, I find no support for the J-curve in the short-run; and also find that in the long-run, the exchange rate had a significant positive impact on the trade balance. However, in both the short and the long-run, I find that the exchange rate does not play a significant role in deterIn this paper I investigate the link between Korea’s trade balance and the exchange rate, using both aggregated and disaggregated data. Employing the bounds testing approach to cointegration, and error-correction modeling, when I use the aggregate trade balance as a dependent variable, I find no support for the J-curve in the short-run; and also find that in the long-run, the exchange rate had a significant positive impact on the trade balance. However, in both the short and the long-run, I find that the exchange rate does not play a significant role in determining the bilateral trade balance between Korea and China, nor does it improve the disaggregated trade balance. This is because the exchange rate elasticity of the trade balance depends on the nature of the commodity. Especially if the commodity is an intermediate good or a raw material, the exchange rate elasticity in trade balance could be inelastic because the demand for the intermediate good is a derived demand from the final good.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"14 1","pages":"49-76"},"PeriodicalIF":0.8,"publicationDate":"2010-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64811840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-12-31DOI: 10.11644/KIEP.JEAI.2010.14.2.222
Yongyul Kim
The purpose of this paper is to explore empirically whether export competitiveness of Korea and Japan has changed since 1990s. Unlike existing literature, we tried to grasp changing patterns of export competitiveness by new methodology such as belonging quadrant and moving direction, rather than simply showing its trend or comparison classified by industry. And we categorized 48 sectors into some technological levelsThe purpose of this paper is to explore empirically whether export competitiveness of Korea and Japan has changed since 1990s. Unlike existing literature, we tried to grasp changing patterns of export competitiveness by new methodology such as belonging quadrant and moving direction, rather than simply showing its trend or comparison classified by industry. And we categorized 48 sectors into some technological levels, then analyzed how the change of export competitiveness is distributed by each technological level. When seeing 'revealed comparative advantage' and 'trade specification index', we found considerable changes in export competitiveness. Competitiveness of Korea has rapidly improved while that of Japan has been continuously decreasing. Especially the gap of competitiveness between Korea and Japan has largely reduced around the midterm of 2000s. Shrinking of the gap in export competitiveness has begun from the latter half of 1990s and first half of 2000s. Change of export competitiveness shows different trend by technology level. Korea has gained more competitiveness than Japan in high and middle level of technology. Korea shows upward tendency of competitiveness in mid and high technology, while Japan in low technology. Competitiveness gap between Korea and Japan is rapidly decreasing since the late 1990s, and curtailment of the gap is mainly happening in the high level of technological capabilities.
{"title":"Changing Pattern and Relation with Technological Level of the Korean and Japanese Export Competitiveness","authors":"Yongyul Kim","doi":"10.11644/KIEP.JEAI.2010.14.2.222","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.2.222","url":null,"abstract":"The purpose of this paper is to explore empirically whether export competitiveness of Korea and Japan has changed since 1990s. Unlike existing literature, we tried to grasp changing patterns of export competitiveness by new methodology such as belonging quadrant and moving direction, rather than simply showing its trend or comparison classified by industry. And we categorized 48 sectors into some technological levelsThe purpose of this paper is to explore empirically whether export competitiveness of Korea and Japan has changed since 1990s. Unlike existing literature, we tried to grasp changing patterns of export competitiveness by new methodology such as belonging quadrant and moving direction, rather than simply showing its trend or comparison classified by industry. And we categorized 48 sectors into some technological levels, then analyzed how the change of export competitiveness is distributed by each technological level. When seeing 'revealed comparative advantage' and 'trade specification index', we found considerable changes in export competitiveness. Competitiveness of Korea has rapidly improved while that of Japan has been continuously decreasing. Especially the gap of competitiveness between Korea and Japan has largely reduced around the midterm of 2000s. Shrinking of the gap in export competitiveness has begun from the latter half of 1990s and first half of 2000s. Change of export competitiveness shows different trend by technology level. Korea has gained more competitiveness than Japan in high and middle level of technology. Korea shows upward tendency of competitiveness in mid and high technology, while Japan in low technology. Competitiveness gap between Korea and Japan is rapidly decreasing since the late 1990s, and curtailment of the gap is mainly happening in the high level of technological capabilities.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"14 1","pages":"167-194"},"PeriodicalIF":0.8,"publicationDate":"2010-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64812325","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-12-31DOI: 10.11644/KIEP.JEAI.2010.14.2.220
Tae-Joon Kim, Jai-Won Ryou
This paper analyzes the determinants of financial capital flows in Korea, which provides an intriguing case for examining the volatility of such flows as an almost fully opened capital market. Our empirical analysis finds both pull and push factors have significantly affected all three types of foreign capital flows- foreign equity investment, foreign bond investment and foreign other-type investment- in Korea, though the relative importance of each factor varies by sample period and type of financial capital. First, the determinants of capital inflows changed substantially following the 1997 currency crisis. The impact of push factors on foreign investment strengthened, rendering the Korean stock and bond market more susceptible to external shocks. Second, the global financial crisis, which increased global financial instability and preference for safe assets, appears to have had a negative effect on other-type investment. However, fThis paper analyzes the determinants of financial capital flows in Korea, which provides an intriguing case for examining the volatility of such flows as an almost fully opened capital market. Our empirical analysis finds both pull and push factors have significantly affected all three types of foreign capital flows- foreign equity investment, foreign bond investment and foreign other-type investment- in Korea, though the relative importance of each factor varies by sample period and type of financial capital. First, the determinants of capital inflows changed substantially following the 1997 currency crisis. The impact of push factors on foreign investment strengthened, rendering the Korean stock and bond market more susceptible to external shocks. Second, the global financial crisis, which increased global financial instability and preference for safe assets, appears to have had a negative effect on other-type investment. However, foreign equity investment showed a quick recovery in the wake of global financial crisis. Third, the effects of capital account liberalization on capital flows appear more complicated than expected. Korea's opening up of the stock market to foreign investors in 1992 did not usher in foreign equity investment. The liberalization of foreign portfolio investment after the 1997 crisis produced a significant effect on equity, but not on bond investment. Still, how to stabilize capital flows amid more deeply integrated domestic and foreign financial markets is another matter.
{"title":"What makes international capital flows so volatile? Push vs. pull factors in the case of Korea","authors":"Tae-Joon Kim, Jai-Won Ryou","doi":"10.11644/KIEP.JEAI.2010.14.2.220","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.2.220","url":null,"abstract":"This paper analyzes the determinants of financial capital flows in Korea, which provides an intriguing case for examining the volatility of such flows as an almost fully opened capital market. Our empirical analysis finds both pull and push factors have significantly affected all three types of foreign capital flows- foreign equity investment, foreign bond investment and foreign other-type investment- in Korea, though the relative importance of each factor varies by sample period and type of financial capital. First, the determinants of capital inflows changed substantially following the 1997 currency crisis. The impact of push factors on foreign investment strengthened, rendering the Korean stock and bond market more susceptible to external shocks. Second, the global financial crisis, which increased global financial instability and preference for safe assets, appears to have had a negative effect on other-type investment. However, fThis paper analyzes the determinants of financial capital flows in Korea, which provides an intriguing case for examining the volatility of such flows as an almost fully opened capital market. Our empirical analysis finds both pull and push factors have significantly affected all three types of foreign capital flows- foreign equity investment, foreign bond investment and foreign other-type investment- in Korea, though the relative importance of each factor varies by sample period and type of financial capital. First, the determinants of capital inflows changed substantially following the 1997 currency crisis. The impact of push factors on foreign investment strengthened, rendering the Korean stock and bond market more susceptible to external shocks. Second, the global financial crisis, which increased global financial instability and preference for safe assets, appears to have had a negative effect on other-type investment. However, foreign equity investment showed a quick recovery in the wake of global financial crisis. Third, the effects of capital account liberalization on capital flows appear more complicated than expected. Korea's opening up of the stock market to foreign investors in 1992 did not usher in foreign equity investment. The liberalization of foreign portfolio investment after the 1997 crisis produced a significant effect on equity, but not on bond investment. Still, how to stabilize capital flows amid more deeply integrated domestic and foreign financial markets is another matter.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"197 1","pages":"111-135"},"PeriodicalIF":0.8,"publicationDate":"2010-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64811905","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-12-31DOI: 10.11644/KIEP.JEAI.2010.14.2.223
Chang-soo Lee, Namdoo Kim
In this paper, we estimate the cost of the GHG abatement target by Korean government using a trade-based model, GTAP-E, after updating all the database of industrial and trade structures as well as carbon dioxide emissions of most of regions of the world. Major findings of this paper are as follows. First, estimates of the costs, GDP and welfare costs as well as abatement cost, of the GHG abatement target differ substantially by two things: (1) assumption on carbon reductions in other countries (the reduction only in Korea or commitments with Annex I countries), (2) assumption on international emission trading. Second, governmental policy to set sectoral abatement target would increase the costs than otherwise in spite of the same level of the carbon reduction. But in the case of mild adjustments of sectoral targets by the government, the policy with more reductions in industrial sectors than private consumptions are absolutely better than the other (reducing more in private consumptions).
{"title":"A Study on GHG Abatement Costs in Korea: International Emissions Trading and Major Sectors of Carbon Reduction","authors":"Chang-soo Lee, Namdoo Kim","doi":"10.11644/KIEP.JEAI.2010.14.2.223","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.2.223","url":null,"abstract":"In this paper, we estimate the cost of the GHG abatement target by Korean government using a trade-based model, GTAP-E, after updating all the database of industrial and trade structures as well as carbon dioxide emissions of most of regions of the world. Major findings of this paper are as follows. First, estimates of the costs, GDP and welfare costs as well as abatement cost, of the GHG abatement target differ substantially by two things: (1) assumption on carbon reductions in other countries (the reduction only in Korea or commitments with Annex I countries), (2) assumption on international emission trading. Second, governmental policy to set sectoral abatement target would increase the costs than otherwise in spite of the same level of the carbon reduction. But in the case of mild adjustments of sectoral targets by the government, the policy with more reductions in industrial sectors than private consumptions are absolutely better than the other (reducing more in private consumptions).","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"14 1","pages":"197-231"},"PeriodicalIF":0.8,"publicationDate":"2010-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64812458","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-06-30DOI: 10.11644/KIEP.JEAI.2010.14.1.213
Sangjoon Jun
This paper investigates the savings-investment relationship, also known as the Feldstein-Horioka puzzle, for a panel of 30 OECD countries over 1960-2006. It utilizes the recently-developed panel cointegration techniques to test and estimate the long-run equilibrium relationship between savings and investment. Investment and savings rates are found to have unit roots and to be cointegrated, based on 5 different panel unit root tests and 3 types of panel cointegration tests. The estimated coefficients on the savings rate employing CCR, DOLS, and FMOLS techniques, exhibit a declining trend over subsample periods. Moreover, the magnitude of the estimated saving-retention coefficients is much smaller than those reported by Feldstein and Horioka (1980), who did not consider the nonstationarity of data and the resulting spurious regression problem. It suggests that international capital mobility in the OECD economies has almost quadrupled over 1960-2006 and substantially increased in the 1990s and 2000s. The empirical findings in this paper provide evidence against the Feldstein-Horioka puzzle in OECD countries over 1960-2006.
{"title":"International Capital Mobility: A Panel Analysis for OECD Countries","authors":"Sangjoon Jun","doi":"10.11644/KIEP.JEAI.2010.14.1.213","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.1.213","url":null,"abstract":"This paper investigates the savings-investment relationship, also known as the Feldstein-Horioka puzzle, for a panel of 30 OECD countries over 1960-2006. It utilizes the recently-developed panel cointegration techniques to test and estimate the long-run equilibrium relationship between savings and investment. Investment and savings rates are found to have unit roots and to be cointegrated, based on 5 different panel unit root tests and 3 types of panel cointegration tests. The estimated coefficients on the savings rate employing CCR, DOLS, and FMOLS techniques, exhibit a declining trend over subsample periods. Moreover, the magnitude of the estimated saving-retention coefficients is much smaller than those reported by Feldstein and Horioka (1980), who did not consider the nonstationarity of data and the resulting spurious regression problem. It suggests that international capital mobility in the OECD economies has almost quadrupled over 1960-2006 and substantially increased in the 1990s and 2000s. The empirical findings in this paper provide evidence against the Feldstein-Horioka puzzle in OECD countries over 1960-2006.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"31 1","pages":"197-235"},"PeriodicalIF":0.8,"publicationDate":"2010-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64812014","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-06-30DOI: 10.11644/KIEP.JEAI.2010.14.1.215
Dong-Yop Oh, Kyttack Hong
This paper examines, using various models including a non-linear one, that the Balassa-Samuelson (BS) effect can account for the persistence of deviations from PPP in the long-run movements of won/dollar and won/yen real exchange rates. In test for PPP hypothesis that incorporates the BS effect, using the generalized Johansen' cointegration method, it is found that a cointegration relationship exists between each of won/dollar and won/yen real exchange rate and the productivity variables of two countries. And in test for PPP hypothesis that incorporates other fundamentals such as cumulative current account balance, foreign exchange reserve, terms of trade as well as productivity differentials, using a behavioral equilibrium exchange rate approach, it is found that a cointegration relationship exists between each of won/dollar and won/yen real exchange rate and all of these fundamentals. However, the plus sign of the estimated coefficient of the productivity differentials variable, which means that domestic productivity improvement produces increase in each of won/dollar and won/yen real exchange rate is not coincident with the result that the BS effect expects theoretically. Finally, in test for PPP hypothesis that incorporates the BS effect, using a non-linear STAR model, it is found that the adjustment process in case of won/dollar real exchange rate from the long-run equilibrium level can be adequately explained by a non-linear LSTAR model. But, the evidence of diagnostic statistics, which shows the existence of autocorrelation of the residuals in most of lags, might suggest the inadequacy of LSTAR model specification.
{"title":"Balassa-Samuelson Effect in Won/Dollar and Won/Yen Exchange Rates","authors":"Dong-Yop Oh, Kyttack Hong","doi":"10.11644/KIEP.JEAI.2010.14.1.215","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.1.215","url":null,"abstract":"This paper examines, using various models including a non-linear one, that the Balassa-Samuelson (BS) effect can account for the persistence of deviations from PPP in the long-run movements of won/dollar and won/yen real exchange rates. In test for PPP hypothesis that incorporates the BS effect, using the generalized Johansen' cointegration method, it is found that a cointegration relationship exists between each of won/dollar and won/yen real exchange rate and the productivity variables of two countries. And in test for PPP hypothesis that incorporates other fundamentals such as cumulative current account balance, foreign exchange reserve, terms of trade as well as productivity differentials, using a behavioral equilibrium exchange rate approach, it is found that a cointegration relationship exists between each of won/dollar and won/yen real exchange rate and all of these fundamentals. However, the plus sign of the estimated coefficient of the productivity differentials variable, which means that domestic productivity improvement produces increase in each of won/dollar and won/yen real exchange rate is not coincident with the result that the BS effect expects theoretically. Finally, in test for PPP hypothesis that incorporates the BS effect, using a non-linear STAR model, it is found that the adjustment process in case of won/dollar real exchange rate from the long-run equilibrium level can be adequately explained by a non-linear LSTAR model. But, the evidence of diagnostic statistics, which shows the existence of autocorrelation of the residuals in most of lags, might suggest the inadequacy of LSTAR model specification.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"14 1","pages":"263-305"},"PeriodicalIF":0.8,"publicationDate":"2010-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64811671","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-06-30DOI: 10.11644/KIEP.JEAI.2010.14.1.211
F. Matambalya
In principle, there is consensus among World Trade organisation members (WTO) on the need to establish Special Safeguard Mechanisms (SSM) for use by developing countries. Building on a survey of literature, empirical studies, and exchange of ideas through participation in the international debate on the subject matter, this paper outlines the architecture of a pro-development SSM. The elaboration is based on ten dimensions: country eligibility, criteria for selection of special products, triggers of safeguard action, precondition for application of safeguard action, geographic coverage, permissible remedies, restrictions on the levels of compensation, time scale, other rules, and treatment of developing countries. Compared to the SSG, it allows trigger levels at lower volumes and higher prices. Also, it differentiates demand increase and import surges, maintains linkages of domestic producers to long-run world market dynamics, and allows the computation of the price trigger on consignment by consignment basis.
{"title":"Making the Outcomes of the Doha Development Round Favourable for Developing Countries: Reflections on a Feasible Proposal for a Special Safeguard Mechanism","authors":"F. Matambalya","doi":"10.11644/KIEP.JEAI.2010.14.1.211","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.1.211","url":null,"abstract":"In principle, there is consensus among World Trade organisation members (WTO) on the need to establish Special Safeguard Mechanisms (SSM) for use by developing countries. Building on a survey of literature, empirical studies, and exchange of ideas through participation in the international debate on the subject matter, this paper outlines the architecture of a pro-development SSM. The elaboration is based on ten dimensions: country eligibility, criteria for selection of special products, triggers of safeguard action, precondition for application of safeguard action, geographic coverage, permissible remedies, restrictions on the levels of compensation, time scale, other rules, and treatment of developing countries. Compared to the SSG, it allows trigger levels at lower volumes and higher prices. Also, it differentiates demand increase and import surges, maintains linkages of domestic producers to long-run world market dynamics, and allows the computation of the price trigger on consignment by consignment basis.","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"27 1","pages":"121-172"},"PeriodicalIF":0.8,"publicationDate":"2010-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64811949","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-06-30DOI: 10.11644/KIEP.JEAI.2010.14.1.214
Chae-Shick Chung
In this paper, we test the role of order flows in KRW/USD. We use transaction based high frequency data (electronic broker) happened in 2006. For robustness check, we extend our analysis by combining exchange rates (indicative quotes v.s. transaction rate), frequency (transaction based time v.s. 1 minute through 1 day), and order flows (sign v.s. signed volume). The results show that order flow is an important variable for explaining the KRW/USD regardless of frequency and of choice of quotes. Based on Hasbrouck's measure we find that 14-28% of permanent exchange rate variation is due to private information. The magnitude is smaller than that of international currency presenting, for example, in Payne (2003). The discrepancy arises both from currency choice and from too short data span in Payne (2003).
{"title":"The Role and Magnitude of Order Flows in Seoul Foreign Market","authors":"Chae-Shick Chung","doi":"10.11644/KIEP.JEAI.2010.14.1.214","DOIUrl":"https://doi.org/10.11644/KIEP.JEAI.2010.14.1.214","url":null,"abstract":"In this paper, we test the role of order flows in KRW/USD. We use transaction based high frequency data (electronic broker) happened in 2006. For robustness check, we extend our analysis by combining exchange rates (indicative quotes v.s. transaction rate), frequency (transaction based time v.s. 1 minute through 1 day), and order flows (sign v.s. signed volume). The results show that order flow is an important variable for explaining the KRW/USD regardless of frequency and of choice of quotes. Based on Hasbrouck's measure we find that 14-28% of permanent exchange rate variation is due to private information. The magnitude is smaller than that of international currency presenting, for example, in Payne (2003). The discrepancy arises both from currency choice and from too short data span in Payne (2003).","PeriodicalId":41122,"journal":{"name":"East Asian Economic Review","volume":"14 1","pages":"237-260"},"PeriodicalIF":0.8,"publicationDate":"2010-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64811633","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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