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Policy responses to dislocations in the FX swap market: the experience of Korea

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  • Naohiko Baba
  • Ilhyock Shim
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    Abstract

    During the financial crisis, Korea responded to dislocations in the FX swap market by both drawing on its swap line with the Federal Reserve and using its own international reserves to provide dollars to domestic banks. We show that the Bank of Korea's use of the Fed swap line was very effective in alleviating dislocations in the won/dollar FX swap market, whereas the provision of funds using its own foreign reserves was not.

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    Bibliographic Info

    Article provided by Bank for International Settlements in its journal BIS Quarterly Review.

    Volume (Year): (2010)
    Issue (Month): (June)
    Pages:

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    Handle: RePEc:bis:bisqtr:1006e

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    1. James McAndrews & Asani Sarkar & Zhenyu Wang, 2008. "The effect of the Term Auction Facility on the London Inter-Bank Offered Rate," Staff Reports 335, Federal Reserve Bank of New York.
    2. Robert McCauley & Patrick McGuire & Goetz von Peter, 2010. "The architecture of global banking: from international to multinational?," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:
    1. International Monetary Fund, 2011. "Impact of the Global Crisis on Banking Sector Soundness in Asian Low-Income Countries," IMF Working Papers 11/115, International Monetary Fund.
    2. Moessner, Richhild & Allen, William A., 2013. "Central bank swap line effectiveness during the euro area sovereign debt crisis," Journal of International Money and Finance, Elsevier, vol. 35(C), pages 167-178.
    3. Dong He & Robert N McCauley, 2013. "Transmitting Global Liquidity to East Asia: Policy Rates, Bond Yields, Currencies and Dollar Credit," Working Papers 152013, Hong Kong Institute for Monetary Research.
    4. Maurice Obstfeld, 2010. "Expanding gross asset positions and the international monetary system," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 463-478.
    5. Fernando Avalos & Ramon Moreno, 2013. "Hedging in derivatives markets: the experience of Chile," BIS Quarterly Review, Bank for International Settlements, March.

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