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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.

Capital movements--Korea (South). --- Korea (South). --- Exports and Imports --- Money and Monetary Policy --- International Investment --- Long-term Capital Movements --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- International economics --- Monetary economics --- Capital flows --- Foreign currency exposure --- Foreign assets --- Foreign liabilities --- Capital outflows --- Balance of payments --- Money --- External position --- Capital movements --- Investments, Foreign --- Foreign exchange market --- Korea, Republic of

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The paper examines the effects of increased financial integration on the economy and, specifically, the welfare of depositors and the business sector. A simple model of a small open economy with a fragile banking sector and imperfect capital mobility is developed. Increased international integration of the market for bank deposits makes runs on banks more likely and unambiguously hurts the domestic business sector. Depositors may gain or lose depending on the parameters. Even when depositors gain, the overall effect on the economy depends on the size of foreign assets held relative to the costs of bank crises.

Banks and Banking --- Corporate Finance --- Exports and Imports --- Financial Aspects of Economic Integration --- Open Economy Macroeconomics --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- International Investment --- Long-term Capital Movements --- Corporate Finance and Governance: General --- Banking --- International economics --- Ownership & organization of enterprises --- Foreign assets --- Bank deposits --- Corporate sector --- Foreign banks --- Banks and banking --- Investments, Foreign --- Business enterprises --- Banks and banking, Foreign

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We develop a theory-based model of equilibrium exchange rates incorporating factors that have been found to matter empirically. The model provides insights into how variables should be measured and what are appropriate cross-country restrictions. We estimate this model using a panel of 12 industrial countries. The model fits the data relatively well, implying relatively fast adjustment to equilibrium and outperforming a random walk at longer horizons. Furthermore, we find that the rate of adjustment depends on the distance from equilibrium, suggesting that part of the explanation for slow adjustment is inaccurate measures of equilibrium.

Electronic books. -- local. --- Equilibrium (Economics). --- Foreign exchange rates -- Econometric models. --- Exports and Imports --- Foreign Exchange --- Industries: Manufacturing --- Industry Studies: Manufacturing: General --- International Investment --- Long-term Capital Movements --- Currency --- Foreign exchange --- Manufacturing industries --- International economics --- Real exchange rates --- Exchange rates --- Manufacturing --- Foreign assets --- Purchasing power parity --- Investments, Foreign --- United Kingdom --- Foreign exchange rates --- Equilibrium (Economics) --- Econometric models.

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This paper presents a methodology for calculating bilateral equilibrium exchange rates for a panel of currencies in a way that guarantees global consistency. The methodology has three parts: a theoretical model that encompasses the balance of payments and the Balassa-Samuelson approaches to real exchange rate determination; an unobserved components decomposition in a cointegration framework that identifies a time-varying equilibrium real exchange rate; and an algebraic transformation that extracts bilateral equilibrium nominal rates. The results uncover that, by the start of Stage III of the European Economic and Monetary Union (EMU), the euro was significantly undervalued against the dollar and the pound, but overvalued against the yen. The paper also shows that the four major EMU currencies locked their parities with the euro at a rate close to equilibrium.

Exports and Imports --- Foreign Exchange --- Money and Monetary Policy --- Open Economy Macroeconomics --- 'Panel Data Models --- Spatio-temporal Models' --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- International Investment --- Long-term Capital Movements --- Currency --- Foreign exchange --- Monetary economics --- International economics --- Exchange rates --- Real exchange rates --- Currencies --- Foreign assets --- Purchasing power parity --- Money --- External position --- Investments, Foreign --- United States

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This paper describes some long-run aspects of the Swiss balance of payments, highlighting two macroeconomic phenomena that make Switzerland stand out among other countries: first, it has had a persistent current account surplus and the largest ratio of net foreign assets to GDP in the world; second, its real interest rates have been significantly lower than those of most other industrialized countries, earning it the label “interest rate island”. These two distinctive features may be related, and ultimately both may result from an excess of national savings over investment for many years. The real interest differential may largely be attributed to a foreign exchange rate risk premium, which compensates Swiss residents for holding net assets in foreign currency and foreign residents for bearing net liabilities in Swiss francs.

Banks and Banking --- Exports and Imports --- Foreign Exchange --- Interest Rates: Determination, Term Structure, and Effects --- International Investment --- Long-term Capital Movements --- Current Account Adjustment --- Short-term Capital Movements --- International economics --- Finance --- Currency --- Foreign exchange --- Foreign assets --- Real interest rates --- Current account surpluses --- Interest rate parity --- Purchasing power parity --- External position --- Financial services --- Balance of payments --- Interest rates --- Investments, Foreign --- Switzerland