Works in Progress:

“Classifying Korean Exchange Rate Policy”    (Working Paper - with Thomas D. Willett)

There has been considerable controversy over how best to characterize South Korean exchange

rate policy since the 1997-98 Asian crisis. Claims have run all the way from a free floating to a

soft dollar peg regime. This paper attempts to resolve this controversy by making use of the

concept of exchange market pressure (EMP). The idea is to see how much of changes in

exchange market pressure are met by official intervention as opposed to changes in the exchange

rate. This gives an index of how heavily the exchange rate is managed. By accounting for

shocks, this gives a better measure than looking at the behavior of the exchange rate alone since

the latter may be influenced by the size of shocks as well as the intervention policy. Although

Korean authorities claimed they were practicing a freely floating exchange rate regime, in the

early post crisis period, Korea was actually practicing a “managed floating regime.” During the

first decade after the Asian crisis, Korea accumulated a huge amount of reserves, and in general,

intervention policy was asymmetrically focused on limiting appreciation and rebuilding reserves

rather than symmetrical leaning against the wind. This tendency has remained during the post

global financial crisis period.


“Extrinsic and Intrinsic Motivations in Solving Collective Action Problems for Kye ( ) (in preparation)