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Analysis of Changes in Determinants of Foreigners¡Ç Bond Investment before and after the Global Financial Crisis: The Case of Korea (in Korean)

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  • Bok-Keun Yu

    (Economic Research Institute, The Bank of Korea)

Abstract

This study employs regression analysis and variance decomposition based on portfolio selection and interest rate parity theories to examine whether the determinants of foreigners' bond investment for Korea, such as the degrees of arbitrage opportunities as well as global and country risks, have changed after the global financial crisis. Empirical results show that arbitrage opportunities played a more important role in the pre-crisis period (2004-07), while risk factors were more influential in the post-crisis period (2010-17). In addition, the explanatory power of the regression model decreased after the crisis, which implies that the influence of variables other than arbitrage opportunities and risk factors may have increased.

Suggested Citation

  • Bok-Keun Yu, 2018. "Analysis of Changes in Determinants of Foreigners¡Ç Bond Investment before and after the Global Financial Crisis: The Case of Korea (in Korean)," Working Papers 2018-18, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1818
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    Cited by:

    1. Choi, Woo Jin, 2020. "Effects of US Monetary Policy on Gross Capital Flows: Cases in Korea," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 42(4), pages 59-90.
    2. Soohyon Kim, 2018. "Determinants of Capital Flows in the Korean Bond Market," Working Papers 2018-44, Economic Research Institute, Bank of Korea.

    More about this item

    Keywords

    Foreigners' bond investment; Arbitrage opportunity; Global risk; Country risk;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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