This paper examines the existence of currency substitution in Korea. By examining the money demand in Korea using quarterly 3-month forward exchange rate premium as a proxy for expected change in exchange rate, this paper concludes that currency substitution does not exist in Korea during the post financial crisis period after 1997. Monetary independence under a flexible exchange rate system appears to hold in Korea.
ArizeAugustine C.“Currency Substitution in Korea”. American Economist35, (1991). 67–72
2.
Bahmani-OskooeeM.RheeHyun J.“Long-run elasticities of the demand for money in Korea: Evidence from cointegration analysis”. International Economic Journal8, (1994). 83–93
3.
BordoMichael D.ChoudhriEhsan U.“Currency Substitution and the demand for money: some evidence for Canada”. Journal of Money, Credit and Banking14, (1982). 48–57
4.
BattenDallas A.HaferR. W.“Currency substitution: A test of its importance”. Federal Reserve Bank of St. Louis' Review, (August/September, 1984). 5–11
5.
KimIn C.AnKyoung A.A Monetary Model of Currency Substitution in Korea. International Areas Studies Review9, (2005). 244–260
6.
KleinB.“Competitive interest payments on bank deposits and the long-run demand for money”. The American Economic Review64, (1974). 931–949
7.
MilesMarc A.“Currency substitution, flexible exchange rates, and monetary independence”. The American Economic Review68, (1978). 428–436
8.
LeeTong H.ChungKeun J.“Further results on the long-run demand for money in Korea: A cointegration analysis”. International Economic Journal9, (1995). 103–113
9.
ParkHaesik“Recent developments in Korea's financial markets: Foreign exchange liberalization and the new real estate policy”. Korean's Economy22, (2006). 17–23
10.
SharmaSubhash C.KandilMagdaChaisrisawatsukSanti“Currency substitution in Asian countries”. Journal of Asian Economics16, (2005). 489–532
