Download or read book Volatile Capital Flows in Korea written by K. Chung and published by Springer. This book was released on 2014-12-17 with total page 285 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatility in Korean Capital Markets summarizes the Korean experience of volatile capital flows, analyzes the economic consequences, evaluates the policy measures adopted, and suggests new measures for the future.

Download or read book What Makes International Capital Flows So Volatile written by Tae-Joon Kim and published by . This book was released on 2017 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the determinants of financial capital flows in Korea, which provides an intriguing case for examining the volatility of such flows as an almost fully opened capital market. Our empirical analysis finds both pull and push factors have significantly affected all three types of foreign capital flows- foreign equity investment, foreign bond investment and foreign other-type investment- in Korea, though the relative importance of each factor varies by sample period and type of financial capital. First, the determinants of capital inflows changed substantially following the 1997 currency crisis. The impact of push factors on foreign investment strengthened, rendering the Korean stock and bond market more susceptible to external shocks. Second, the global financial crisis, which increased global financial instability and preference for safe assets, appears to have had a negative effect on other-type investment. However, foreign equity investment showed a quick recovery in the wake of global financial crisis. Third, the effects of capital account liberalization on capital flows appear more complicated than expected. Korea's opening up of the stock market to foreign investors in 1992 did not usher in foreign equity investment. The liberalization of foreign portfolio investment after the 1997 crisis produced a significant effect on equity, but not on bond investment. Still, how to stabilize capital flows amid more deeply integrated domestic and foreign financial markets is another matter.

Download or read book Recent Shifts in Capital Flow Patterns in Korea An Investor Base Perspective written by Mr.Niels-Jakob H Hansen and published by International Monetary Fund. This book was released on 2019-11-27 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Koreas cross border capital flows have tended to respond negatively in global risk-off episodes, resulting in volatility in the foreign exchange market and occasional policy responses in the form of foreign exchange interventions. We study the relationship between Korean capital flows and global volatility up to 2018. The response of capital flows during risk-off episodes have become more muted over time, and occasional safe-haven type flows into Korean bond markets have helped counterbalance the tendency for portfolio investors to leave. We describe these changing patterns and relate them to shifts in Korea’s domestic investor base. We discuss whether they reflect a sustained shift in the sensitivity of Koreas capital flow pressures to global risk-off episodes, and implications for monetary and exchange rate policies.

Download or read book Analysis of the Cross border Capital Flows by Foreign Bank Branches and Macroprudential Policy written by Jisung Moon and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Korean economy has suffered two financial crises in 1997 and 2008, mainly due to volatile capital flows by foreign bank branches in Korea. Therefore, it is very important to understand the economic drivers and mechanisms of their capital flow management decisions. So far, it is known that foreign bank branches tend to actively adjust their borrowings from headquarters in response to changes in monetary policy in their home countries. However, in the first chapter, I find statistically significant evidence that Covered Interest Parity deviation and home macroprudential policies are more important factors than home monetary policy. I also demonstrate that no single country (or single currency) can play a dominant role in interoffice borrowings between headquarters and their branches in Korea. In the second chapter, I find evidence that the leverage cap regulation introduced by the Korean government in 2010 as one of the foreign exchange related macroprudential policy measures contributed to enhancing financial stability without hampering the positive roles of foreign bank branches in Korea. Specifically, foreign bank branches responded to changes in leverage cap regulation by adjusting their capital, and their business activities were not affected by the regulatory changes. In the third chapter, I review the challenges that Korea has faced due to the volatile cross-border capital flows and the Korean government's efforts to achieve successful economic growth and financial stability, especially focusing on the development of a prudential regulatory system during three phases: 1) before the 1997 Asian Financial Crisis, 2) between the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis, and 3) after the 2008 Global Financial Crisis to the present.

Download or read book Are Capital Controls Effective The Case of the Republic of Korea written by Soyoung Kim and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital controls have recently attracted interest as capital surges in emerging market economies threaten to bring about economic instability and heighten difficulties in implementing macroeconomic policies. While an option that can be taken to deal with huge capital inflows involves the use of capital controls, there is no consensus on their effectiveness. Against this background, our paper aims to investigate the effectiveness of capital controls in the Republic of Korea. This paper first reviews the history of capital account policy, which can be divided into five stages: (i) gradual liberalization during the 1980s and early 1990s, (ii) acceleration of liberalization during the early and mid-1990s, (iii) the big-bang approach to liberalization during the Asian financial crisis, (iv) liberalization for facilitation of capital market development beginning the late 1990s, and (v) the conservative approach during the global financial crisis. To quantify the trends, this paper constructs measures of capital account control/liberalization based on the official record of government policies. In the second part, it discusses the effects of capital account control/liberalization in four ways. First, the behavior of key macro variables in the Republic of Korea is reviewed by comparing the periods before and after serious capital account liberalization. Second, the effects of shocks to the capital account control/liberalization indexes on capital flows are examined using a VAR model. Third, the effects of the United States (US) monetary policy shocks on capital flows and the interest rate of the Republic of Korea are examined for the period of capital controls and the period of capital account liberalization. Fourth, a simple event study is conducted of recent capital control measures. The empirical results based on VAR models show that shocks to capital account controls do not have significant effects on capital flows in most cases. However, capital flows, the current account, and the exchange rate were far more volatile in the period of a liberalized capital account. It is also interesting that during the latter period, the Republic of Korea did not gain monetary autonomy despite adopting a freely floating exchange rate. This result may be related to volatile capital flows under a liberalized capital account. Finally, the results of the event study tend to support the effectiveness of capital controls in altering the composition of capital flows.

Download or read book Understanding the Determinants of Capital Flows in Korea written by and published by . This book was released on 2002 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Volatile Capital Flows in Korea written by K. Chung and published by Springer. This book was released on 2014-12-17 with total page 311 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatility in Korean Capital Markets summarizes the Korean experience of volatile capital flows, analyzes the economic consequences, evaluates the policy measures adopted, and suggests new measures for the future.

Download or read book Capital Mobility in Asia written by Juthathip Jongwanich and published by ISEAS-Yusof Ishak Institute. This book was released on 2017-08-24 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Asia has benefitted greatly from its integration into the world economy. But globalization has its challenges, including those that are the subject of this excellent new study: how to manage the interface with global capital markets, especially in the current, highly unusual monetary policy settings in the major economies. Dr Juthathip Jongwanich has been researching these issues for several years. In this volume she writes with great authority, providing a comprehensively, succinct and accessible examination of the many complex issues. A must-read volume for policymakers and academics alike." -- Hal Hill, H.W. Arndt Professor of Southeast Asian Economies, Australian National University span, SPAN { background-color:inherit; text-decoration:inherit; white-space:pre-wrap } "A very timely and excellent book on capital volatility. Jongwanich provides a superb analysis on the impact of capital flows on home country, exchange rates and the capital account policies. A very important book, especially for academia and policymakers." -- Muhamad Chatib Basri, Former Finance Minister of Indonesia "This timely book presents outstanding research on the determinants and effects of capital flows as well as the effectiveness of capital control policies in dealing with volatile capital flows in emerging Asian countries. It will be a useful and valuable reading for researchers and policymakers to understand the nature of cross-border capital movement and design the policies conducive to more stable and sustainable economic growth." -- Jong-Wha Lee, Professor of Economics and Director of Asiatic Research Institute, Korea University "This is an important book. Ever since the East Asian financial crisis, it has been recognized that emerging market economies are vulnerable to both excessive inflows of capital and sudden outflows. But up until now there have been few detailed empirical studies of this issue. This book looks at the key factors determining capital mobility, considers the impact of capital flows, especially on real exchange rates, and examines the possibility of effective capital controls. Jongwanich draws two key conclusions: shifting the mix of inflows towards FDI is possible and desirable, and well-functioning domestic financial markets are essential if capital inflows are to be well used." -- David Vines, Professor of Economics and Fellow of Balliol College, University of Oxford

Download or read book International Reserves Management and Capital Mobility in a Volatile World written by Joshua Aizenman and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper characterizes the precautionary demand for international reserves driven by the attempt to reduce the incidence of costly output decline induced by sudden reversal of short-term capital flows. It validates the main predictions of the precautionary approach by investigating changes in the patterns of international reserves in Korea in the aftermath of the 1997-8 crisis. This crisis provides an interesting case study, especially because of the rapid rise in Korea's financial integration in the aftermath of the East-Asian crisis, where foreigners' shareholding has increased to 40% of total Korean market capitalization. We show that the crisis led to structural change in the hoarding of international reserves, and that the Korean monetary authority gives much greater attention to a broader notion of 'hot money,' inclusive of short-term debt and foreigners' shareholding"--NBER website

Download or read book FX Funding Risks and Exchange Rate Volatility Korea s Case written by Mr.Jack Ree and published by International Monetary Fund. This book was released on 2012-11-07 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book South Korea s Experience with International Capital Flows written by Marcus Noland and published by . This book was released on 2005 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: "South Korea's experience is unparalleled in its combination of sustained prosperity, capital controls, and financial crisis. Over several decades, South Korea experienced rapid sustained growth in the presence of capital controls. These controls and the de-linking of domestic and international financial markets were an essential component of the country's state-led development strategy. As the country developed, opportunities for easy technological catch-up eroded, requiring more sophisticated corporate and financial sector decision-making, but decades of financial repression had bequeathed a bureaucratized financial system and a formidable constellation of incumbent stakeholders opposed to transition to a more market-oriented development model. Liberalization undertaken in the 1990s was less a product of textbook economic analysis than of parochial politicking. Capital account liberalization program affected the timing, magnitude, and particulars of the 1997-98 crisis. Despite considerable reforms undertaken since the crisis, concerns remain about both South Korea's lending culture and its authorities' capacity to successfully regulate the more complex financial system. The main lesson of the South Korean case appear to be that while the state-led model may deliver impressive initial gains, transitioning out of this approach presents an exceedingly complex challenge of political-economy"-NBER website.

Download or read book Liberalizing Capital Flows and Managing Outflows Background Paper written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2012-03-14 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liberalization of capital flows can benefit both source and recipient countries by improving resource allocation, reducing financing costs, increasing competition and accelerating the development of domestic financial systems. The empirical evidence, however, is mixed on the benefits, and it suggests that countries benefit most when they meet certain thresholds related to institutional and financial development. The principal cost of capital flow liberalization stems from the economic instability brought on by volatile capital flows. In extreme cases, sudden stops or reversals in capital inflows can trigger financial crises followed by prolonged periods of weak growth.

Download or read book Capital Liberalization Capital Flows and Monetary Policy Responses on Exchange Market written by Jae-Ho Chung and published by . This book was released on 2001 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines some of the most vital aspects of Korea's experience with capital flows, such as the determinants of capital flows, the monetary policy on exchange market, and the relationships among capital liberalization, capital flows, domestic credit, and exchange market. I construct indexes of capital liberalization on controls of capital inflows and outflows based on documented policy changes made by the Koran government. I use EMP (Exchange Market Pressure) as well as nominal and real exchange rate as terms of exchange market. The main findings of this paper are as follows. (1) Interest rate differentials as a variable of portfolio theory do not explain capital flows in Korea. The interest rate differential terms are often of the wrong sign, so Korea's capital flows are not explained by the portfolio theory. On the other hand, the changes of domestic credit are generally significant in capital flow. This result suggests that the monetary approach may be good in explaining capital flows. (2) Using VAR framework, I find that the change of domestic credit is a good stance of the monetary policy, and the negative shock to the change of domestic credit affect the appreciation of nominal and real exchange rate. A contractionary monetary policy leads to continuous appreciation and leads to reduce exchange market pressure. (3) I cannot reject the null hypothesis that CLI is not Granger-caused by any variables. The capital liberalizations in Korea are exogeneous. (4) I find that capital inflows increase persistently after shocks to liberalization policy while capital outflows increase temporally. I also find that shocks to liberalization of capital outflows attract capital inflows. (5) Domestic credit responds negatively on capital inflows and positively on capital outflows. The sterilization was effective for one month after capital inflows. (6) The responses of nominal and real exchange rates to capital inflows are negative and exchange rates are appreciated as in theory and empirical tests.

Download or read book South Korea s Experience Woth International Capital Flows written by and published by . This book was released on 2005 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Managing Capital Flows written by Masahiro Kawai and published by Edward Elgar Publishing. This book was released on 2010-01-01 with total page 465 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managing Capital Flows provides analyses that can help policymakers develop a framework for managing capital flows that is consistent with prudent macroeconomic and financial sector stability. While capital inflows can provide emerging market economies with invaluable benefits in pursuing economic development and growth, they can also pose serious policy challenges for macroeconomic management and financial sector supervision. The expert contributors cover a wide range of issues related to managing capital flows and analyze the experience of emerging Asian economies in dealing with surges in capital inflows. They also discuss possible policy measures to manage capital flows while remaining consistent with the goals of macroeconomic and financial sector stability. Building on this analysis, the book presents options for workable national policies and regional policy cooperation, particularly in exchange rate management. Containing chapters that bring in international experiences relevant to Asia and other emerging market economies, this insightful book will appeal to policymakers in governments and financial institutions, as well as public and private finance experts. It will also be of great interest to advanced students and academic researchers in finance.

Download or read book Korea S Recent Capital Flows written by Sung-hee Jwa and published by . This book was released on 1995 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The US Monetary Policy Normalization written by Tae Soo Kang and published by . This book was released on 2019 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most previous studies have shown that push factors have had a greater impact on capital outflows in emerging economies than pull factors. Meanwhile, in May 2018, the US Federal Reserve Chairman Jerome Powell addressed the controversy over capital movements to emerging economies after the global financial crisis. Powell said the inflows of capital into emerging economies are unlikely to have been caused by the Fed's interest rate policy. Powell's speech contains "implied" warnings that the US monetary policy is not a triggering force of a capital outflow in emerging economies. This is why Powell's speech is adding to the difficulty of policy responses in emerging countries. This, in turn, suggests that it is necessary to check the determinants of global capital flows. In addition, the impact of US monetary policy on Korea's financial markets and capital outflows needs to be analyzed in depth. In this paper, the discussion of push (external) vs. pull (internal) factors of capital flow is examined using panel data of 47 countries. Our empirical results show that the push and pull factors determining capital flows to advanced economies and emerging market economies are different. This study also analyzes the impact of the normalization of US monetary policy on the domestic financial market and foreign exchange market by using the TVP-VAR model. Our analysis shows that US credit spread shock, which is an indicator of uncertainty in international financial markets, has had a negative impact on domestic financial markets and capital inflows. On the other hand, the impact of the US policy rate hike after 2015 was limited.