International Reserves and Firm Investment: Identification through Bank Credit Reallocation

Woo Jin Choi, Ju Hyun Pyun and Youngjin Yun ()
Additional contact information
Woo Jin Choi: University of Seoul
Ju Hyun Pyun: Korea University

No 2024-6, Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research

Abstract: A central bank's accumulation of foreign reserves can reallocate domestic savings and influence investments across different firms. Leveraging institutional features in Korea and connecting firms to their lending banks for the 2004-2019, we examine how reserve accumulation and sterilization impact credit allocation within the banking system and firm investment. We track the bonds issued by the central bank to sterilize/fund reserve purchases. Different banks take varying amounts of sterilization bonds, and those more responsive adjust their loan supply to firms. As a result, firms heavily dependent on these banks for credit decrease investment during reserve accumulation.

Keywords: international reserves; sterilized intervention; firm investment; bank balance sheet (search for similar items in EconPapers)
JEL-codes: C23 E22 E58 F21 F31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2024-08
New Economics Papers: this item is included in nep-cba and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://drive.google.com/file/d/1RZaR7wYyHyLUwr5JK ... gcK/view?usp=sharing First version, 2024 (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:inh:wpaper:2024-6

Access Statistics for this paper

More papers in Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Youngjin Yun ().