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Effects of monetary policy shocks on the exchange rate in the Republic of Korea : Capital flows in stock and bond markets

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  • Effects of monetary policy shocks on the exchange rate in the Republic of Korea
  • Kim, Soyoung
  • MIT Press


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Title Effects of monetary policy shocks on the exchange rate in the Republic of Korea
Similar Titles
Sub Title

Capital flows in stock and bond markets

Material Type Articles
Author(English)

Kim, Soyoung

Publisher

[Cambridge, U.S.]:MIT Press

Date 2013-05
Journal Title; Vol./Issue Asian development review:vol. 31(no. 1)
Pages 15
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic Administration
Economy < Economic System
Holding SSRN

Abstract

Several studies have suggested that the prediction of standard theory on the effects of monetary policy on the exchange rate might not be applicable to or in the case of the Republic of Korea because participation of foreign investors is weak in the bond market but strong in the stock market. The current study examines the effects of monetary policy shocks on the exchange rate in the Republic of Korea by using structural vector autoregression models with sign restrictions. To determine the channels by which monetary policy shocks affect the exchange rate, I investigate the effects on various components of capital flows. The main empirical findings are as follows. First, a contractionary monetary policy shock, which increases the interest rate, appreciates the Korean won significantly in the short run as predicted by most theories. (The rest omitted)