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Title: |
Exchange Rate Effects on Korea's Economy |
| Author: |
Kwack, Sung Y. |
| Author
Affiliation: |
Howard U |
| Source: |
International Economic Journal, Summer 1988, v. 2, no. 2, pp. 101-109 |
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Publication Date: |
Summer 1988 |
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Abstract: |
Korea has been under growing pressure to
appreciate its exchange rate to reduce the trade surplus, particularly
with the United States. A change in the external currency value of a
country has direct effects on the trade via changes in relative prices
and indirect effects via induced changes in income and monetary
conditions. The note presents some estimates of these effects, using the
available price elasticity estimates and a macroeconomic model of Korea.
Even though the estimates presented are not very precise, an exchange
rate appreciation is shown to lower the trade balance, price levels, and
overall economic growth of Korea. Then, this note suggests the policy
course Korea should take to meet Korea's desire to reduce its external
debt and to avoid the global consequences of the large continuing U.S.
deficits. |
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