Korea paper considers spillover effects of currency hedging

Bank of Korea, Seoul

A Bank of Korea working paper, published on November 27, considers the rationale and the potential mechanics of an Exchange Stabilization Corporation. It would be a public institution and its objective would be to protect the economy's systemic stability.

The authors, Kyuil Chung, Hail Park and Hyun Song Shin, say the corporation would provide opportunities for Korean exporters to hedge their currency exposure without generating any short-term foreign currency liabilities.

To achieve this, the

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