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Level of Korean Won

 
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regicide



Joined: 01 Sep 2006
Location: United States
PostPosted: Sun Feb 11, 2007 2:18 pm    Post subject: Level of Korean Won Reply with quote
Since the Korean won has been hovering around 950 to the dollar level for some time now, most of us have been able to send home more dollars for each won earned than any other time since I can remember. ( it was 1996 actually) But is this necessarily good? Not according to an article by three Professor's of Finance and Business in a recent article on exchange rate exposure of exporting and importing firms. But why would that effect us, we are not "firms" ? Because of the "dual effect" hypothosis contained in the article. Under the dual effect scenario, the prices of local goods will also rise because of the weak local currency. Therefore the net of the effect of the stronger dollar will be closer to zero.

But wait, what about the strong Yen versus the Won that we have been experiencing lately?

Here is the complete article:

http://www.blackwell-synergy.com/doi/abs/10.1111/j.1745-6622.2005.00047.x
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kalkamagi



Joined: 17 Jul 2006
Location: Seoul
PostPosted: Sun Feb 11, 2007 4:12 pm    Post subject: Re: Level of Korean Won Reply with quote
regicide wrote:

Here is the complete article:

http://www.blackwell-synergy.com/doi/abs/10.1111/j.1745-6622.2005.00047.x


actually, it's a link to the abstract of the article. are you trying to get us to buy a subscription to the journal now?

regicide wrote:
Under the dual effect scenario, the prices of local goods will also rise because of the weak local currency. Therefore the net of the effect of the stronger dollar will be closer to zero.



also, i think you mean "strong local currency" and "weaker dollar".

regicide wrote:
But wait, what about the strong Yen versus the Won that we have been experiencing lately?


usually, economic models are based on a two-country, two currency model.

i didn't read the article, but it sounds like they are going off of 1) what is called the "classic dichotomy", where nominal variables (exchange rate) don't effect real variables (relative prices).
and 2) if you wanted to look up on it, the endogenous growth model, which says that the only thing that effects the level of real income (standard of living) in an economy is it's productivity factor.

i think the particulars of these arguments are a little over my head, but to answer your question, yes, i think that a stronger korean currency is good for us that get paid by it.
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regicide



Joined: 01 Sep 2006
Location: United States
PostPosted: Sun Feb 11, 2007 9:11 pm    Post subject: Re: Level of Korean Won Reply with quote
kalkamagi wrote:


also, i think you mean "strong local currency" and "weaker dollar".

regicide wrote:
But wait, what about the strong Yen versus the Won that we have been experiencing lately?


usually, economic models are based on a two-country, two currency model.

i didn't read the article, but it sounds like they are going off of 1) what is called the "classic dichotomy", where nominal variables (exchange rate) don't effect real variables (relative prices).
and 2) if you wanted to look up on it, the endogenous growth model, which says that the only thing that effects the level of real income (standard of living) in an economy is it's productivity factor.

i think the particulars of these arguments are a little over my head, but to answer your question, yes, i think that a stronger korean currency is good for us that get paid by it.




Regarding the Japanese Yen versus the Korean Won. Someone had compared using Won, Euro, Japenese Yen and dollars on the NW flight to Japan now that drinks are not free.

Yen seemed to be the cheapest and with the $/yen at over 120 right now, and the Won - dollar at around 950-$1 , the Yen/ Won exchange rate is currently favorable to earners of Korean Won. I bought Yen at 820 last fall , and now it is around 780!
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