FX Funding Risks and Exchange Rate Volatility–Korea’s Case

Author/Editor:

Jack J Ree ; Kyoungsoo Yoon ; Hail Park

Publication Date:

November 7, 2012

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines how exchange rate volatility and Korean banks’ foreign exchange liquidity mismatches interacted with each other during the Global Financial Crisis, and whether the vulnerability stemming from this interaction has been reduced since then. Structural and cyclical changes after the crisis, including decreasing demand for currency hedges and the diversifying investor base for bonds, point to a possible weakening of the interaction mechanism; and we find evidences are strongly supportive of this. 

Series:

Working Paper No. 12/268

Subject:

Banks Capital flows Capital markets Exchange rate variability Exchange rates External shocks Financial crises Financial systems Foreign exchange International financial markets Korea, Republic of

English

Publication Date:

November 7, 2012

ISBN/ISSN:

9781475565171/1018-5941

Stock No:

WPIEA2012268

Format:

Paper

Pages:

29

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