Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316571 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] East Asian Economic Review (EAER) [ISSN:] 2508-1667 [Volume:] 24 [Issue:] 2 [Year:] 2020 [Pages:] 165-184
Publisher: 
Korea Institute for International Economic Policy (KIEP), Sejong-si
Abstract: 
Applying Ismailov and Rossi (2018), I newly construct the Korea FX uncertainty based on the density distribution of historical forecast errors. This uncertainty index properly captures the rare but significant events in the Korean currency market and provides information distinct from other uncertainty measures in recent studies. I show that 1) FX uncertainty arising from unexpected depreciation has a stronger impact on Korea- U.S. exchange rates and that 2) macro variables, such as capital flows or interest rate differentials, have predictive ability regarding Korea FX uncertainty for short horizons. These findings enable us to predict the events of sudden currency crashes and understand the Korea-U.S. exchange rate dynamics.
Subjects: 
Exchange Rate
Uncertainty
Currency Risk
Uncovered Interest Rate Parity
Uncertainty Index
JEL: 
C10
F20
F30
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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