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Exchange Market Pressure and Net Foreign Assets in Korea (in Korean)

Author

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  • Yongbok Kim

    (Economic Research Institute, The Bank of Korea)

Abstract

Net foreign asset (NFA) has become an important supply route of liquidity in Korea during the postcrisis period. We investigate how the NFA responds against various shocks such as exchange market pressure (EMP), exchange rate, kospi, and risk-free interest rate difference through the Markov-Switching VAR and the reduced VAR models. we estimate the EMP based on a small open economy model developed by Weymark (1997) taking the exchange rate pass-through into account. We find that changes in exchange rates have become more vital to reduce the EMP in the postcrisis period. We also find that the NFA responds more steadily against EMP shocks than exchange rate shocks; the NFA has an especially close relationship with the EMP under the highly volatile foreign exchange market. Our analysis suggests that the EMP is a key variable to analyze changes in the NFA. Especially, EMP provides useful information on how NFA changes in volatile foreign exchange market.

Suggested Citation

  • Yongbok Kim, 2009. "Exchange Market Pressure and Net Foreign Assets in Korea (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 15(1), pages 39-72, March.
    • Handle: RePEc:bok:journl:v:15:y:2009:i:1:p:39-72
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    More about this item

    Keywords

    Exchange Market Pressure; Exchange Rate; Net Foreign Assets;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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