International Debt Impact on the Value of South Korean Currency

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Song, Wonjin
Economics; International Economics
article description
AbstractThis paper will analyze how international debt for South Korea affected the value of Korean currency from 1983 to 2014 by using the Ordinary Least Square model. The result is that international debt for South Korea had a clear influence on the value of Korean Won. The exchange rate of Korean currency per US dollar moves the same direction as amounts of international debt. In other words, as the Korean Won depreciates, more Won must be spent to purchase U.S dollars. That is, Korean currency depreciates when amounts of international debt increase. As the result, Korea has not yet reached the stage of having a developed and stable economy. In order to improve Korea's economy, the structure of Korean economy should not rely on capital from abroad. Korea has to develop its own economy based on its main industries, such as a technology-intensive industry or human capital rather than the high dependence on international debt.