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

Jack Ree, Kyoungsoo Yoon and Hail Park

No 2012/268, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; exchange rate; debt; bank branch; FX market; liquidity; liquidity mismatch; Foreign exchange liquidity mismatch; exchange rate volatility; capital flows; macroprudential measures; dollar funding market; derivative position; short-term debt; foreign currency; FX derivatives position; Exchange rates; Foreign banks; Currency markets; Global (search for similar items in EconPapers)
Pages: 29
Date: 2012-11-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40087 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2012/268

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().