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Estimating the effects of FX-related macroprudential policies in Korea

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  • Kim, Kyungmin
  • Lee, Joo Yong

Abstract

This paper provides an empirical assessment of the effects of FX-related macroprudential policies introduced in Korea since 2010. Our main findings are as follows. First, Korea's recent FX-related macroprudential measures have been effective in curbing excessive capital inflows. In particular, these measures have contributed to mitigating FX market vulnerability. Second, the leverage caps had a relatively larger dampening effects on short-term foreign borrowings of foreign bank branches compared to those of domestic banks. By contrast, macroprudential stability levy has worked as a device to limit foreign borrowings for domestic banks, but not for foreign bank branches.

Suggested Citation

  • Kim, Kyungmin & Lee, Joo Yong, 2017. "Estimating the effects of FX-related macroprudential policies in Korea," International Review of Economics & Finance, Elsevier, vol. 50(C), pages 23-48.
    • Handle: RePEc:eee:reveco:v:50:y:2017:i:c:p:23-48
    DOI: 10.1016/j.iref.2017.03.030
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    Cited by:

    1. JaeBin Ahn & Youngju Kim & Hyunjoon Lim, 2022. "For Whom the Levy Tolls: The Case of a Macroprudential Stability Levy in South Korea," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(3), pages 520-559, September.
    2. Iñaki Aldasoro & Kyounghoon Park, 2018. "Bank solvency risk and funding cost interactions in a small open economy: evidence from Korea," BIS Working Papers 738, Bank for International Settlements.
    3. Oguzhan Ozcelebi & Kaya Tokmakcioglu & Emre Su, 2021. "Revisiting the asymmetric impacts of the exchange market pressure on the inflation, interest rate and foreign trade balance in Eastern Europe," Empirical Economics, Springer, vol. 61(5), pages 2517-2538, November.

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    More about this item

    Keywords

    FX-related macroprudential policies; Qual VAR; Bayesian VAR; Conditional forecasts;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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