The risk-taking channel of currency appreciation: A structural VAR investigation of Asian emerging market economies

Hyeon seung Huh, David Kim

Research output: Contribution to journalArticlepeer-review

Abstract

In this study, we analyze the impact of currency appreciation on sovereign spread and economic activities in Asian emerging market economies (EMEs) using a structural vector autoregression model. The key issue under scrutiny is the presence of a risk-taking financial channel and its strength against the conventional trade channel. The underlying structural shocks are identified by a mix of sign, size, and zero restrictions. Based on the various measures of country risk, we find empirical evidence that a currency appreciation is expansionary for Asian EMEs through the financial channel, compressing the sovereign spread and offsetting the trade channel. We provide the policy implications of these results.

Original languageEnglish
Pages (from-to)313-331
Number of pages19
JournalInternational Finance
Volume24
Issue number3
DOIs
Publication statusPublished - 2021 Dec 1

Bibliographical note

Publisher Copyright:
© 2021 John Wiley & Sons Ltd.

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development
  • Finance

Fingerprint

Dive into the research topics of 'The risk-taking channel of currency appreciation: A structural VAR investigation of Asian emerging market economies'. Together they form a unique fingerprint.

Cite this