TY  - JOUR
AU  - Chinn,Menzie D.
AU  - Maloney,William F.
TI  - Financial and Capital Account Liberalization in the Pacific Basin: Korea and Taiwan during the 1980's
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5814
PY  - 1996
Y2  - November 1996
UR  - http://www.nber.org/papers/w5814
L1  - http://www.nber.org/papers/w5814.pdf
N1  - Author contact info:
Menzie D. Chinn
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI 53706
Tel: 608/262-7397
Fax: 608/262-2033
E-Mail: mchinn@lafollette.wisc.edu
AB  - 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.
ER  -