The Impact of the US Dollar Futures of Korea
Date Issued
2014
Date
2014
Author(s)
Fei, Guan-Shin
Abstract
This paper focuses on the US Dollar Futures launched by the Korea Futures Exchange which is the predecessor of Korea Exchange in 1999. Owing to the Asian Financial Crisis in 1997, Korea suffered from a recession in the real economy and was left no choice but to call upon International Monetary Fund for financial aids. The depreciation of Korea won to US dollar was 51% during that period. Even experienced the suffering of the financial crisis, the Korea Futures Exchange released the first US Dollar Futures on April 23, 1999. This paper uses the exchange rate of Korea won from 1989 to 2013 as the main research object. By using the Regression Model, I analyze the relationship between the crucial economic factors and exchange rate of Korea. We then use the Intervention Model to analyze whether or not the launch of the US Dollar Futures caused the increase of the exchange rate volatility of Korea and thus was a negative decision to Korea’s economy. The result of the Regression Model is consistent with the prior study except the effects of the GDP factor and the Export/Import factor. We also discovered that the economic factors become more relevant after considering the launch of the US Dollar Futures. Besides, the result of the Intervention Model indicates that the interventions aroused in November 1997 and September 2008 respectively. These two interventions were the consequences of global financial crisis and were thus no relationship to the launch of the US Dollar Futures in 1999.
Subjects
Currency Futures
Intervention Model
Financial Crisis
Type
thesis
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