The statistical relationship between price levels and interest rates, known as the "Gibson paradox," is, according to Keynes, "the most established fact in monetary economics." Since Barsky and Summers (1988), the Gibson Paradox has been interpreted as a phenomenon associated primarily with the...

In this essay, we investigate the contrasting performance of Korean and Japanese stock markets before and after the East Asian currency crisis. The Korean stock markets showed a sharper decline and a faster recovery than the Japanese stock markets. First, we theoretically explain these...