Short-term external debt and foreign exchange rate volatility in emerging economies: Evidence from the Korea Market

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3 Citations (Scopus)

Abstract

We empirically analyze the main determinants of foreign exchange rate (FX) volatility in emerging market economies using the data of Korea corporations and financial institutions. We find that short-term external debt is more important than trading volume of foreign investors in explaining FX volatility. Our results suggest that short-term debtcontrolling measures, such as a tax levy on short-term borrowing, can be more effective in moderating FX volatility than can the measures affecting the trading volume, such as a Tobin tax.

Original languageEnglish
Pages (from-to)138-157
Number of pages20
JournalEmerging Markets Finance and Trade
Volume50
DOIs
Publication statusPublished - 2014 Jan 1

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Korea
Trading volume
External debt
Foreign exchange rates
Exchange rate volatility
Emerging economies
Tax
Financial institutions
Borrowing
Tobin tax
Emerging market economies
Foreign investors

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics, Econometrics and Finance(all)

Cite this

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abstract = "We empirically analyze the main determinants of foreign exchange rate (FX) volatility in emerging market economies using the data of Korea corporations and financial institutions. We find that short-term external debt is more important than trading volume of foreign investors in explaining FX volatility. Our results suggest that short-term debtcontrolling measures, such as a tax levy on short-term borrowing, can be more effective in moderating FX volatility than can the measures affecting the trading volume, such as a Tobin tax.",
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AB - We empirically analyze the main determinants of foreign exchange rate (FX) volatility in emerging market economies using the data of Korea corporations and financial institutions. We find that short-term external debt is more important than trading volume of foreign investors in explaining FX volatility. Our results suggest that short-term debtcontrolling measures, such as a tax levy on short-term borrowing, can be more effective in moderating FX volatility than can the measures affecting the trading volume, such as a Tobin tax.

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