Convertibility Risk : The Precautionary Demand for Foreign Currency in a Crisis /

This paper presents theoretical work linking money demand to the perceptions of households about the risk that domestic currency may become inconvertible or that it may be devalued. An empirical investigation of the size of this effect is carried out using both cross section data and then monthly da...

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Bibliographic Details
Main Author:	Mourmouras, Alex
Other Authors:	Black, Stabley W, Black, Stabley, Christofides, Charalambos
Format:	Book
Language:	English
Published:	Washington, D.C. : International Monetary Fund, 2001
Series:	IMF Working Papers ; Working Paper No. 01/210 IMF Working Papers; Working Paper ; No. 2001/210 IMF eLibrary
Subjects:	Change in inflation Cointegration Convertibility Cross section analysis Dummy variable Econometrics Equation Equations Estimation procedure Estimation technique Financial statistics Foreign currency Foreign exchange Inflation rate Inflation Instrumental variables Macroeconomic performance Monetary aggregate Monetary policy Money stock Nominal interest rates Prediction Predictions Price inflation Probabilities Probability Real interest rate Real interest rates Real money Real output Regression equation Relative price Significance level Standard errors Statistic Statistical significance Statistics Time series Banks and Banking Currencies Currency markets Currency Demand for Money Demand for money Exchange rates Finance Finance: General Financial markets Financial services Foreign Exchange Foreign exchange market Government and the Monetary System Interest Rates: Determination, Term Structure, and Effects Interest rates International Financial Markets Monetary Systems Monetary economics Money and Monetary Policy Money Payment Systems Regimes Standards Korea, Republic of
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Summary:	This paper presents theoretical work linking money demand to the perceptions of households about the risk that domestic currency may become inconvertible or that it may be devalued. An empirical investigation of the size of this effect is carried out using both cross section data and then monthly data for Korea to estimate an augmented demand for money equation. It is found that the fear of inconvertibility arising from the 1997 Korean currency crisis may have caused broad money demand to fall by 4-5 percentage points, equivalent to the loss of reserves of This paper presents theoretical work linking money demand to the perceptions of households about the risk that domestic currency may become inconvertible or that it may be devalued. An empirical investigation of the size of this effect is carried out using both cross section data and then monthly data for Korea to estimate an augmented demand for money equation. It is found that the fear of inconvertibility arising from the 1997 Korean currency crisis may have caused broad money demand to fall by 4-5 percentage points, equivalent to the loss of reserves of $6-72 billion (or about 30 percent of reserves as measured at end-November 1997)
Item Description:	Bibliographic Level Mode of Issuance: Monograph Part of the IMF eLibrary collection
Physical Description:	1 online resource (29 pages)
ISBN:	1-282-39188-7 1-4519-1938-7 1-4527-9443-X 1-4623-4058-X 1451874804: 9786613820310
ISSN:	1018-5941 2227-8885
Access:	Restricted for use by site license Restricted for use by site license.

Convertibility Risk : The Precautionary Demand for Foreign Currency in a Crisis /

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