On the Won and Other East Asian Currencies

31 Pages Posted: 12 Nov 1998 Last revised: 25 Sep 2022

See all articles by Menzie David Chinn

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: August 1998

Abstract

Five East Asian currencies -- the Indonesian rupiah, Korean won, Singapore dollar, Taiwanese dollar, and the Thai baht -- are modeled in the framework of a monetary specification augmented by the relative price of nontradables. This relative price variable proxies for the Balassa-Samuelson effect in East Asian real exchange rates identified in Chinn (1997b). All of the currencies fit the long run implications of various types of monetary models, according to Johansen (1988) multivariate cointegration tests. Exchange rates do the bulk of adjustment toward equilibrium, except in the cases of the Thai baht and the New Taiwan dollar. For these currencies, interest rates and money supplies move to restore equilibrium. In ex post simulation, the out-of-sample fit of the estimated models is relatively good for the won, Singapore and New Taiwan dollars, and for the baht, although in no case is the exact magnitude and timing of the currency clashes predicted. The estimated model completely fails to track the rupiah out-of-sample.

Suggested Citation

Chinn, Menzie David, On the Won and Other East Asian Currencies (August 1998). NBER Working Paper No. w6671, Available at SSRN: https://ssrn.com/abstract=122468

Menzie David Chinn (Contact Author)

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

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