A note on the exchange market pressure: the Korean experience, 1980–1987

Abstract

This paper applies the exchange market pressure (EMP) model to Korea under a managed floating exchange rate. We show that the EMP model is superior to one concentrating solely on foreign reserve or exchange rate changes. Given that the balance of paymnets in Korea experienced a drastic turn to surplus during the estimated period, we checked the stability of the coefficients. The results show that the coefficients have remained stable.