Analysis of Changes in the Relationship between the KRW/USD Exchange rate and JPY/USD Exchange Rate Before and After the Economic Crisis

Abstract

The purpose of this paper is to investigate the relationship between KRW/USD and JPY/USD exchange rates dividing the sample period into thress sub-periods: pre-crisis, and post-crisis. During the pre-crisis period, JPY/USD affects KRW/USD asymmetrically: the latter moved very closely with the former's depreciation but opposite is not the case. However, we cannot find such asymmetric relation during other periods. We also estimate KRW/USD volatilities using various GARCH models and find that economic hypothesis of JPY/USD affects volatilities of KRW/USD are firmly reject over all periods.

Keywords

• Exchange Rate
• Economic Crisis
• Won
• Dollar
• Yen
• GARCH Model