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FX Funding Risks and Exchange Rate Volatility–Korea’s Case

Author

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  • Jack J Ree
  • Kyoungsoo Yoon
  • Hail Park

Abstract

This paper examines how exchange rate volatility and Korean banks’ foreign exchange liquidity mismatches interacted with each other during the Global Financial Crisis, and whether the vulnerability stemming from this interaction has been reduced since then. Structural and cyclical changes after the crisis, including decreasing demand for currency hedges and the diversifying investor base for bonds, point to a possible weakening of the interaction mechanism; and we find evidences are strongly supportive of this.

Suggested Citation

  • Jack J Ree & Kyoungsoo Yoon & Hail Park, 2012. "FX Funding Risks and Exchange Rate Volatility–Korea’s Case," IMF Working Papers 12/268, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/268
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    Cited by:

    1. 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.
    2. Maurice Obstfeld, 2014. "Never Say Never: Commentary on a Policymaker’s Reflections," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(4), pages 656-693, November.

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