Deviation from Covered Interest Rate Parity in Korea
This paper tested the factors which cause deviation from covered interest rate parity (CIRP) in Korea, using regression and VAR models. The empirical evidence indicates that the difference between the swap rate and interest rate differential exists and is greatly affected by variables which represen...
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| Format: | Article |
| Language: | English |
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Korea Institute for International Economic Policy
2003-06-01
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| Series: | East Asian Economic Review |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.11644/KIEP.JEAI.2003.7.1.104 |
| _version_ | 1811318140242493440 |
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| author | Seungho Lee |
| author_facet | Seungho Lee |
| author_sort | Seungho Lee |
| collection | DOAJ |
| description | This paper tested the factors which cause deviation from covered interest rate parity (CIRP) in Korea, using regression and VAR models. The empirical evidence indicates that the difference between the swap rate and interest rate differential exists and is greatly affected by variables which represent the currency liquidity situation of foreign exchange banks. In other words, the deviation from CIRP can easily occur due to the lack of foreign exchange liquidity of banks in a thin market, despite few capital constraints, small transaction costs, and trivial default risk in Korea. |
| first_indexed | 2024-04-13T12:21:40Z |
| format | Article |
| id | doaj.art-91a8bb52a4054d95ad9817e0c9233f4e |
| institution | Directory Open Access Journal |
| issn | 2508-1640 2508-1667 |
| language | English |
| last_indexed | 2024-04-13T12:21:40Z |
| publishDate | 2003-06-01 |
| publisher | Korea Institute for International Economic Policy |
| record_format | Article |
| series | East Asian Economic Review |
| spelling | doaj.art-91a8bb52a4054d95ad9817e0c9233f4e2022-12-22T02:47:12ZengKorea Institute for International Economic PolicyEast Asian Economic Review2508-16402508-16672003-06-0171125141http://dx.doi.org/10.11644/KIEP.JEAI.2003.7.1.104Deviation from Covered Interest Rate Parity in KoreaSeungho Lee 0The Bank of KoreaThis paper tested the factors which cause deviation from covered interest rate parity (CIRP) in Korea, using regression and VAR models. The empirical evidence indicates that the difference between the swap rate and interest rate differential exists and is greatly affected by variables which represent the currency liquidity situation of foreign exchange banks. In other words, the deviation from CIRP can easily occur due to the lack of foreign exchange liquidity of banks in a thin market, despite few capital constraints, small transaction costs, and trivial default risk in Korea.http://dx.doi.org/10.11644/KIEP.JEAI.2003.7.1.104Covered Interest Rate ParitySwap RateCurrency Liquidity |
| spellingShingle | Seungho Lee Deviation from Covered Interest Rate Parity in Korea East Asian Economic Review Covered Interest Rate Parity Swap Rate Currency Liquidity |
| title | Deviation from Covered Interest Rate Parity in Korea |
| title_full | Deviation from Covered Interest Rate Parity in Korea |
| title_fullStr | Deviation from Covered Interest Rate Parity in Korea |
| title_full_unstemmed | Deviation from Covered Interest Rate Parity in Korea |
| title_short | Deviation from Covered Interest Rate Parity in Korea |
| title_sort | deviation from covered interest rate parity in korea |
| topic | Covered Interest Rate Parity Swap Rate Currency Liquidity |
| url | http://dx.doi.org/10.11644/KIEP.JEAI.2003.7.1.104 |
| work_keys_str_mv | AT seungholee deviationfromcoveredinterestrateparityinkorea |