Business

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Now showing 1 - 10 of 18
  • (2008) Kim, Suk-Joong; Nguyen, Tho
    Journal Article
    This paper examines the spillover impacts of the U.S. Fed’s and the European Central Bank (ECB)’s target interest rate news on the first two moments of the Asia-Pacific exchange rates against the US dollar and the euro over the period 1999-2006. The spillover effects on the mean are generally consistent with the literature where a majority of currencies depreciates against the USD and the EUR in response to unexpected rate rises. Both the Fed and the ECB news elicited tardy or persisting volatility responses. The Fed’s news tends to send a leading signal upon the upcoming decision of the ECB, while the ECB’s news tends to confirm the Fed’s decision. This relationship between the news tends to help reduce volatility in the Asia-Pacific currency markets.

  • (2008) Hooper, Vincent J; Hume, Tim P; Kim, Suk-Joong
    Journal Article
    The purpose of this paper is to examine the impact of sovereign rating changes on international financial markets using a comprehensive database of 42 countries, covering the major regions in the world over the period 1995-2003. In general, we find that rating agencies provide stock and foreign exchange markets with new tradable information. Specifically, rating upgrades (downgrades) significantly increased (decreased) USD denominated stock market returns and decreased (increased) volatility. Whereas the mean response is contributed evenly by the local currency stock returns and exchange rate changes that make up the USD returns, only the foreign exchange volatility was behind the USD denominated return volatility. In addition, we find significant asymmetric effects of rating announcements. The market responses - both return and volatility - are more pronounced in the cases of downgrades, foreign currency debt, emerging market debt, and during crisis periods. This study has important policy implications for international investors' asset allocation plans and for regulatory bodies such as the Basel Committee who increasingly rely upon Moody's, Standard and Poor's and Fitch's ratings for their regulatory regimes.

  • (2009) Hall, Yosuke Sandy; Kim, Suk-Joong
    Journal Article
    We investigate the Bank of Japan's (BOJ) Yen interventions for the period 13 May 1991 to 16 March 2004. The previous literature has been hampered by the coarse daily data and has been unable to identify intervention determinants beyond some embodiment of the first moment of Yen returns. We consider both lagged overnight off-shore (London and New York) and intradaily on-shore (Tokyo) market developments for their heterogeneous influences on the BOJ's intervention decisions. Using a friction model to estimate the reaction function, we find that the interventions were leaning against the wind during the Tokyo hours, in general. Prior to June 1995, there were significant responses to previous day's intradaily Yen returns and volatility. Post 1995, we report a broadening in the BOJ's monitoring to include overnight off-shore Yen returns until Dec 2002 and a broader measure of market disorderliness measured as a transactions cost band in one-month covered interest rate parity condition since Jan 2003. Moreover, there is some evidence that the BOJ secretly leaned into the wind in response to Yen depreciations during the recent period of 2003-2004.

  • (2008) Kim, Suk-Joong; Nguyen, Tho
    Journal Article
    This paper provides comprehensive evidence on the impacts of the Reserve Bank of Australia's (RBA) and the U.S. Fed's target interest rate announcement news on the Australian financial markets over the period 1998-2006. The RBA's news had a significant impact on the first moments of market returns/changes in line with a priori expectations, and the conditional volatility in most of the markets was significantly higher following the news. Asymmetric news effect is also observed for the Australian interest rates where markets tended to respond more strongly to unexpected rate rises than rate falls. While the U.S. Fed's news influenced only the USD/AUD exchange rate, the Australian market volatility was significantly lower in all market segments following the Fed's news.

  • (2008) Kim, Suk-Joong; Wu, Eliza
    Journal Article
    How does the sovereign credit ratings history provided by independent ratings agencies affect domestic previous termfinancialnext term sector development and international capital inflows to emerging countries? We address this question utilizing a comprehensive dataset of sovereign credit ratings from Standard and Poor's from 1995–2003 for a cross-section of 51 emerging markets. Within a panel data estimation framework, we examine previous termfinancialnext term sector development and the influence of sovereign credit ratings provision, controlling for various economic and corporate governance factors identified in the previous termfinancialnext term development literature. We find strong evidence that our sovereign credit rating measures do affect previous termfinancialnext term intermediary sector developments and capital flows. We find that i) long-term foreign currency sovereign credit ratings are important for encouraging previous termfinancialnext term intermediary development and for attracting capital flows. ii) Long-term local currency ratings stimulate domestic market growth but discourage international capital flows. iii) Short-term ratings (both foreign and local currency denominated) retard all forms of previous termfinancialnext term developments and capital flows. There are important implications in this research for policy makers to encourage the provision of longer-term credit ratings to promote previous termfinancialnext term development in emerging economies.

  • (2007) Kim, Suk-Joong
    Journal Article
    This paper investigates the intraday efficacy of Yen intervention conducted by the Bank of Japan. Segmenting a 24 h calendar day into three business hours – onshore and two offshore hours – I examine both contemporaneous and ex post intervention effects on the Yen/USD exchange rate. Prior to June 1995, intervention moved the exchange rate in the wrong direction and the level of volatility is significantly raised during Tokyo business hours. This is due to the well-known simultaneity bias. However, during the first overnight hours (London business hours) the simultaneity bias is significantly reduced and by the second overnight hours (New York afternoon hours) intervention successfully reversed the exchange rate trends and reduced the volatility. Post-June 1995, intervention had an immediate effect of reversing the exchange rate trend and it remained effective, although at reduced magnitude, throughout overnight horizons. A volatility reducing effect is significant from the first overnight horizon and its effectiveness rises in the second overnight horizon.

  • (2007) Hooper, Vincent; Kim, Suk-Joong
    Journal Article
    This paper examines the relationship between international capital flows and the opacity of recipient countries. We use the Price Waterhouse Coopers (PWC) [Price Waterhouse Coopers, 2001. The Opacity Index: A Project of the Price Waterhouse Coopers Endowment for the Study of Transparency and Sustainability] opacity index for the year 2000 and investigate its influence on three types of net international capital flows: foreign direct investment, portfolio capital and international bank lending. We find support for higher opacity leading to a reduction in capital inflows, in general. More interestingly, however, in some cases we find counterintuitive results of more capital flows when opacity relating to specific business climate increases—accounting and regulations for foreign direct investment flows, corruption and regulation for portfolio flows, and corruption and economic opacities for international lending flows. This may be because of potentially higher profit opportunities that may be present due to the greater role unofficial channels of investment practices play as these opacity indices rise. Also, we find international bank lending, in general, responded very differently from foreign direct investment and portfolio flows.

  • (2007) McKenzie, Michael; Kim, Suk-Joong
    Journal Article
    This paper focuses on the general determinants of autocorrelation and the relationship between autocorrelation and volatility in particular. Using UK stock market index and individual stock price data, a multivariate generalized autoregressive conditional heteroskedasticity (M-GARCH) model is used to generate estimates of conditional autocorrelation. The covariance equation of this model is modified to include the potential determinants of autocorrelation including volatility, which is proxied using the time series of filtered probabilities of a Markov regime switching model. Consistent with the previous literature, this paper documents a negative relationship between volatility and autocorrelation. The results suggest that an asymmetry exists in this relationship which is attributed to the constraints placed on short selling.

  • (2006) Kim, Suk-Joong; Pham, Cyril
    Journal Article
    We investigate the effects of the Reserve Bank of Australia's foreign exchange interventions on the USD/AUD market and 90-day and 10-year interest rate futures markets for the period July 1986–December 2003. Using recently released revised and updated intervention data, we investigate contemporaneous and disaggregated intervention influences and find significant evidence for (i) intervention effectiveness in moderating the contemporaneous exchange rate movements especially if interventions were cumulative and large, (ii) exchange rate volatility reducing effect with a day's lag, (iii) undesirable interest rate movements following interventions in some periods compromising monetary policy effectiveness, and (iv) a volatility reducing effect of cumulative interventions in the 90-day rate, and a volatility increasing effect of large interventions in both the 90-day and 10-year rate futures. These findings are a unique and significant contribution to the prevailing literature as they demonstrate that the RBA's interventions matter not only for the foreign exchange market but also for the debt markets.

  • (2006) Kim, Suk-Joong; Lucey, Brian; Wu, Eliza
    Journal Article
    In this paper, we examine the integration of European government bond markets using daily returns over the 1998–2003 period with a set of complementary techniques to assess the time varying level of financial integration. We find evidence of strong contemporaneous and dynamic linkages between Euro zone bond markets with that of Germany. However, there is much weaker evidence outside of the Euro zone for the three accession markets of Czech Republic, Hungary and Poland, and the UK. In general, the degree of integration for these markets is weak and stable, with little evidence of further deepening despite the increased political integration associated with further enlargement of the European Union (EU).