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Title: |
The Portfolio-Balance Model of Exchange Rates:
Short-Run Behavior and Forecasting (The Korean Won/U.S. Dollar Case). |
| Author: |
Min, Hong-Ghi;
McDonald, Judy |
| Author
Affiliation: |
Kyungnam U;
Lehigh U |
| Source: |
International Economic Journal, Winter 1993, v. 7, no. 4, pp. 75-87 |
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Publication Date: |
Winter 1993 |
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Abstract: |
This paper studies the relevance of the
asset-market model of exchange-rate determination theory for the Korean
won-U.S. dollar exchange rate. We find that the portfolio-balance model
produces better forecasts than the random-walk model when the structural
model is well specified. From this finding, we believe that the
portfolio-balance model can be a good frame of reference for explaining
movements of the Korean won-U.S. dollar exchange rate. We expect that
this model will become increasingly important for the Korean economy, as
well as other newly industrializing countries, as they undergo
full-scale capital-market liberalization. |
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