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The Effect of the COVID ‐19 Pandemic on S outh K orea's Stock Market and Exchange Rate
Author(s) -
Hoshikawa Takeshi,
Yoshimi Taiyo
Publication year - 2021
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/deve.12276
Subject(s) - covid-19 , monetary economics , volatility (finance) , exchange rate , stock (firearms) , depreciation (economics) , pandemic , stock exchange , stock market , business , economics , financial economics , biology , medicine , finance , geography , economic growth , human capital , archaeology , horse , paleontology , financial capital , disease , infectious disease (medical specialty) , capital formation
This study examines COVID‐19 pandemic effects on the stock market and exchange rate of South Korea. With daily data from January 2, 2019 to August 31, 2020, we show that a new infection spike increases stock price index volatility and decreases foreign investors' holdings of domestic stocks, and indirectly leads to the depreciation of the South Korean won. We indicate that investors may have repurchased the South Korean won seven days after an infection spike, thereby slightly increasing its value. We also find that the Bank of Korea's foreign exchange intervention had a short‐run effect with a limited impact. The intervention did not have a significant effect on exchange rate volatility.