Policy Responses to Dislocations in the FX Swap Market: The Experience of Korea

11 Pages Posted: 13 Aug 2012

See all articles by Naohiko Baba

Naohiko Baba

Bank of Japan - Financial Markets Department

Ilhyock Shim

Bank for International Settlements (BIS)

Date Written: June 2010

Abstract

During the financial crisis, Korea responded to dislocations in the FX swap market by both drawing on its swap line with the Federal Reserve and using its own international reserves to provide dollars to domestic banks. We show that the Bank of Korea’s use of the Fed swap line was very effective in alleviating dislocations in the won/dollar FX swap market, whereas the provision of funds using its own foreign reserves was not.

JEL Classification: G12, G13, G18

Suggested Citation

Baba, Naohiko and Shim, Ilhyock, Policy Responses to Dislocations in the FX Swap Market: The Experience of Korea (June 2010). BIS Quarterly Review, June 2010, Available at SSRN: https://ssrn.com/abstract=1632261

Naohiko Baba

Bank of Japan - Financial Markets Department ( email )

2-1-1, Hongoku-cho
Nihonbashi
Chuo-ku, Tokyo, 103
Japan

Ilhyock Shim (Contact Author)

Bank for International Settlements (BIS) ( email )

78F, Two International Finance Centre
8 Finance Street, Central
Hong Kong, n/a n/a
Hong Kong

HOME PAGE: http://www.bis.org/author/ilhyock_shim.htm

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