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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Other Authors: | , , |
Format: | Book |
Language: | English |
Published: |
Washington, D.C. :
International Monetary Fund,
2001
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Series: | IMF Working Papers ;
Working Paper No. 01/210 IMF Working Papers; Working Paper ; No. 2001/210 IMF eLibrary |
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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) |
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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. |