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

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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.

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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All Science Journal Classification (ASJC) codes

  • Finance
  • Economics, Econometrics and Finance(all)

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