The Stabilizing Effects of Active KRW-JPY Transactions on KRW Exchange Rate Movements (in Korean)

Sangwon Suh ()
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Sangwon Suh: Institute for Monetary and Economic Research, The Bank of Korea

Economic Analysis (Quarterly), 2006, vol. 12, issue 3, 79-115

Abstract: While there are customer foreign exchange transactions involving the Korean Won and the Japanese Yen in Korea, inter-bank KRW-JPY foreign exchange transactions do not take place through a formal exchange. It is demonstrated theoretically in this paper that active inter-bank KRW-JPY transactions would change the dynamics of the KRW exchange rate. The results from the analysis show that the KRW exchange rate would be more stable with a liquid inter-bank FX market for KRW-JPY transactions than they are without such a market, in terms of both the deviation from the desired exchange rate level and exchange rate volatility.

Keywords: inter-bank foreign transaction; arbitrage-motivated transaction; exchange rate stability; dynamics of the exchang rate (search for similar items in EconPapers)
JEL-codes: F31 G14 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:bok:journl:v:12:y:2006:i:3:p:79-115

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