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The Stabilizing Effects of Active KRW-JPY Transactions on KRW Exchange Rate Movements (in Korean)

Author

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  • Sangwon Suh

    (Institute for Monetary and Economic Research, The Bank of Korea)

Abstract

While there are customer foreign exchange transactions involving the Korean Won and the Japanese Yen in Korea, inter-bank KRW-JPY foreign exchange transactions do not take place through a formal exchange. It is demonstrated theoretically in this paper that active inter-bank KRW-JPY transactions would change the dynamics of the KRW exchange rate. The results from the analysis show that the KRW exchange rate would be more stable with a liquid inter-bank FX market for KRW-JPY transactions than they are without such a market, in terms of both the deviation from the desired exchange rate level and exchange rate volatility.

Suggested Citation

  • Sangwon Suh, 2006. "The Stabilizing Effects of Active KRW-JPY Transactions on KRW Exchange Rate Movements (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 12(3), pages 79-115, September.
  • Handle: RePEc:bok:journl:v:12:y:2006:i:3:p:79-115
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    More about this item

    Keywords

    inter-bank foreign transaction; arbitrage-motivated transaction; exchange rate stability; dynamics of the exchang rate;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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