자본이동하 금융자산가격간 상호연관성 분석

Analysis of the Interrelation among Financial Asset Prices under Capital Flows

A radical change in the global financial environment and financial liberalization since the early 1990s has substantially affected the interrelationships among foreign exchange market, financial market, and stock market in Korea. As a result, correlation among key financial assets such as exchange rate, interest rate and stock price, continues to increase. The meaning of such a change has to be carefully studied, not only by researchers of Korea’s macroeconomic problems, but by monetary authorities. This paper aims to clarify how the interrelationships among financial asset prices have been changed after the Korean currency crisis in 1997. In particular, we examine on how volatility of asset prices such as exchange rate, interest rate, and stock price, measured by the unconditional time varying variance, affects movement of these variables. Our empirical analysis shows that volatility of asset prices increases substantially in the case of stock price shock and exchange rate shock. The strong effect of a stock price shock on exchange rate and call rate implies that stabilization of stock market is important for sustaining financial stability.