IDEAS home Printed from https://ideas.repec.org/p/sgo/wpaper/2307.html
   My bibliography  Save this paper

The Causal Effects of Equity Flows: Evidence from Korea

Author

Listed:
  • Jun Hee Kwak

    (Department of Economics, Sogang University, Seoul, Korea)

  • Bada Han

    (InternationalMonetary Fund, Strategy, Policy, and Review Department)

  • Jaeyoung Lee

    (Bank of Korea, Foreign ExchangeMarket Team)

Abstract

In this paper,we estimate the causal effects of gross equity inflows into an open economy using the Granular Instrument Variable (GIV) constructed from regulatory data on foreign investments in the Korean stock market. We find that a one-standard-deviation increase in monthly foreign inflows into the Korean stock market results in approximately a 2.2% rise in the Korean benchmark stock price index and a 1.0% appreciation of the Korean won against the US dollar. These foreign inflows also lead to drops in short-term treasury bond rates and improvements in dollar funding conditions. Our empirical results are consistent with the InelasticMarket Hypothesis.

Suggested Citation

  • Jun Hee Kwak & Bada Han & Jaeyoung Lee, 2023. "The Causal Effects of Equity Flows: Evidence from Korea," Working Papers 2307, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    • Handle: RePEc:sgo:wpaper:2307
    as

    Download full text from publisher

    File URL: https://zrr.kr/7E6f
    File Function: First version, 2023
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Foreign Investor; Capital Flow; Gross Equity Flow; Stock Price; Granular Instrument; InelasticMarket Hypothesis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sgo:wpaper:2307. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jung Hur (email available below). General contact details of provider: https://edirc.repec.org/data/risogkr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.