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Working Paper
Inflation and government budget constraint in Korea
The new classical theory of inflation implies that the choice between financing a given path of public spending through debt or tax (seigniorage) finance has no substantial effect on inflation. This paper tests this hypothesis for Korea by estimating a reduced-form relation between inflation, the monetary base, and central bank debt. The empirical evidence suggests that central bank debt carrying information on the expected future path of monetary policy has additional explanatory power for inflation, even after accounting for the effects of the monetary base. It also confirms the ...
Conference Paper
Private inflows when crises are anticipated: a case study of Korea
Working Paper
An examination of the market valuation effects of financial reform in Korea
This paper uses an event-study methodology to examine the wealth effects of Korea's recent move toward financial market liberalization. A government plan finalized in 1993 calls for further interest rate deregulation, greater autonomy for managers of financial institutions, and a blurring of the distinction between commercial banks, investment banks, and insurance companies. These changes will have complex and offsetting effects on the profitability of financial institutions, as they represent a combination of increased opportunity, which should enhance profitability, and increased ...
Journal Article
Understanding the Korean and Thai currency crises
This article reviews and interprets the recent currency crises in Korea and Thailand. The authors argue that a prime causes of the crises were large, unfunded government guarantees to railing financial sectors.
Journal Article
Financial developments in Korea
Journal Article
Do capital controls affect the response of investment to saving? evidence from the Pacific Basin
This paper examines the effect of capital controls on the response of investment to savings in Pacific Basin countries. A robust finding is that the size of the savings coefficient tends to be smaller (larger) in countries with relatively higher (lower) capital controls. Additionally, relaxation in capital controls for the most part had no discernible impact on the savings- investment relationship in individual country time-series regressions. At least a partial resolution to these puzzles is found in the government policy response: Countries with a relatively high saving-investment ...
Working Paper
Exchange rate constraints and money control in Korea
This paper applies two traditional empirical approaches to investigate how successfully Korea managed to control money supply in response to the changes in foreign reserves since 1980. One is to estimate offset coefficients and the other is to estimate sterilization coefficients. The estimation results are as follows. Reflecting strict and effective capital controls, the domestic monetary policies were partially offset mainly by short-term capital flows. The Bank of Korea pursued sterilization policies very actively. Particularly, sterilization was more active during the late 1980s of huge ...