Does greater exchange rate flexibility affect interest rates in post-crisis Asia?

Hwee Kwan Chow, Yoonbai Kim

Research output: Contribution to journalArticlepeer-review

9 Scopus citations


In post-crisis Asia, all crisis-hit countries (except Malaysia) announced a shift from an exchange rate based monetary policy framework to the adoption of inflation targeting which uses interest rates as the monetary policy operating instrument. In this study, we examine the empirical relationship between exchange rates and interest rates by applying a bivariate VAR-GARCH model to the Asian crisis countries, namely Indonesia, Korea, Philippines and Thailand. The findings suggest that, following the crisis, their currencies exhibit greater sensitivity to competitors' exchange rates, and that increased exchange rate flexibility stabilizes interest rates only in the short run.

Original languageEnglish
Pages (from-to)478-493
Number of pages16
JournalJournal of Asian Economics
Issue number3
StatePublished - Jun 2006


  • Bivariate VAR-GARCH model
  • Causation in volatilities
  • Exchange rate
  • Interest rate

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Does greater exchange rate flexibility affect interest rates in post-crisis Asia?'. Together they form a unique fingerprint.

Cite this