Disorderly adjustments to the misalignments in the Korean won

TLDR: The authors estimated the equilibrium exchange rates for Korea's real effective rates using Clark and MacDonald's (1999) behavioural equilibrium exchange rate (BEER) approach, which suggests that the real exchange rate was substantially overvalued during the period prior to the currency crisis of 1997-98.

Abstract: This paper estimates the equilibrium exchange rates for Korea's real effective rates using Clark and MacDonald's (1999) behavioural equilibrium exchange rate (BEER) approach. The estimation result suggests that the real exchange rate was substantially overvalued during the period prior to the currency crisis of 1997-98. The subsequent adjustment, however, was disorderly in the sense that the real exchange rate overshot its long-run equilibrium value. There was also a large deviation from the BEER, indicating that the sharp depreciation was not an equilibrium phenomenon.