Author: Keun Yeong Lee(Sungkyunkwan University)

Abstract

The paper investigates how the degree of comovement between yen/dollar and won/dollar exchange rates has changed over time, by estimating a TVP-VAR model with stochastic volatility. According to the empirical results, a comovement phenomenon was consistently increasing between November 1991 and May 2002, while decreasing from November 2004. It came alive from July 2013. Its impact on exports and imports varies depending on Korean trade partners and products, while it generally decreases import changes bigger than
export changes. It also has the most positive effect on trade with China. It implies that if a recent comovement trend will be persisting in the near future, Korean trade balance can be improved further.