NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Financial and Capital Account Liberalization in the Pacific Basin: Korea and Taiwan during the 1980's

Menzie D. Chinn, William F. Maloney

NBER Working Paper No. 5814
Issued in November 1996
NBER Program(s):   IFM

This paper presents an alternative method of testing for financial capital mobility in the absence of forward exchange markets. A model of domestic interest rate determination during liberalization is applied to Korean and Taiwanese data. A variety of diagnostic and recursive tests are used to isolate structural breaks in the data. It is shown that Korean interest rates behave as if determined domestically until late 1988 or early 1989, while Taiwanese rates exhibit this behavior until early 1989. Thereafter, these economies' interest rates appear tightly linked to the EuroYen rate. These results contrast with those obtained by Reisen and Yches (1993) which indicated a single opening and closing for Korea, and no structural break for Taiwan. They also differ from those results of Jwa (1994) indicating two temporary openings for Korea. Greater integration of these domestic markets with world financial markets suggests that it will be more difficult for these countries to stabilize their economies in the face of capital inflows and outflows.

download in pdf format
   (1185 K)

email paper

This paper is available as PDF (1185 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5814

Published: International Economic Journal, Vol. 12, no. 1 (Spring 1999): 53-74. citation courtesy of

Users who downloaded this paper also downloaded these:
Edwards w1702 The Behavior of Interest Rates and Real Exchange Rates During a Liberalization Episode: The Case of Chile 1973-83
Prasad w14658 Some New Perspectives on India's Approach to Capital Account Liberalization
Chinn and Ito w8967 Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence
Kaminsky and Schmukler w9787 Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization
Nam and Kim Evaluation of Korea's Exchange Rate Policy
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us