Disorderly adjustments to the misalignments in the Korean won
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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.read more
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References
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Exchange Rates and Economic Fundamentals: A Methodological Comparison of Beers and Feers
TL;DR: The analysis of exchange rate behavior has been a perennial topic in international monetary economics as discussed by the authors, and one strand of this literature relates to the explanation of observed movements in nominal and real exchange rates in terms of relevant economic variables, while another strand focuses on assessing exchange rates relative to economic fundamentals and coming to a judgement as to whether a particular exchange rate is misaligned, i.e., over- or undervalued.
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Some tests for parameter constancy in cointegrated VAR-models
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TL;DR: In this article, two different ways of re-estimating the VAR-model are proposed; one in which all parameters are estimated recursively based upon the likelihood function for the first observations, and another in which the cointegrating relations are estimated from a likelihood function, where the short-run parameters have been concentrated out.
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