Exchange Rate Movement Before and After Free Floating: Efficiency and Technical Trading Profitability Author: Sangdai Ryoo Full Text: EP_4_1_5.pdf Summary: This paper examines whether the Korean foreign exchange market has become efficient following introduction of the free-floating exchange rate regime by comparing exchange rate movements, autocorrelation coefficients and profitabilities of technical analysis before and after the free-floating regime. While the exchange rate can be closely approximated by a random walk after free floating, the sample autocorrelations of daily changes in the exchange rate are still large. Moreover, several technical analyses of the foreign exchange market are more profitable than before. These facts imply that the foreign exchange market is not efficient yet. That is, the exchange rate still moves in trends despite the increased exchange rate volatility after introduction of the free-floating system. This finding is supported by profitabilities in different filter sizes of filter rule. Exchange Rates, Exchange Rate Volatility and Investment in Korea: An Empirical Investigation Author: Changkyu Choi Full Text: EP_4_1_6.pdf Summary: Recently, several studies began to focus on the role of exchange rates and exchange rate volatility in investment. Exchange rates seem to play an important role in determining investments in Korea. In this paper, the effects of exchange rates and exchange rate volatility on investment are explained and tested empirically with Korean data from the first quarter of 1981 to the second quarter of 1998. Conditional variance from a GARCH model is used as exchange rate volatility and an error correction model is used. Investments proved to be decreasing as exchange rate volatility increased or exchange rates depreciated. The Optimal Currency Basket and the Currency Bloc in Asia Author: Tae-Joon Kim and Jai-Won Ryou Full Text: EP_4_1_7.pdf This paper attempts to clarify conditions for the optimal currency basket in Asia as an alternative to both the single currency peg and the flexible exchange rate regime. It compares and evaluates various types of currency blocs from the perspective that the monetary authorities pursue to stabilize real effective exchange rates. From the individual countrys perspective, the optimal currency basket is determined when the weight of each currency is set equal to the corresponding trade weight. Therefore, a substantial weight should be attributed to the yen in the currency basket. As far as a regional currency bloc is concerned, however, the adoption of a common currency unit such as the Asian Currency Unit (ACU) is shown to be the easily acceptable and realistic scheme. Similarly to the European Currency Unit (ECU) under the European Monetary System, the ACU would help not only to stabilize the real effective exchange rates of regional currencies, but also to avoid monopolization of the seigniorage gains by a member country (most possibly by Japan). It is also expected to add international liquidity for intra-regional transaction.