Rare disaster risk and exchange rates: An empirical investigation of South Korean exchange rates under tension between the two Koreas

Cheolbeom Park; Suyeon Park

doi:10.1016/j.frl.2019.101314

Rare disaster risk and exchange rates: An empirical investigation of South Korean exchange rates under tension between the two Koreas

Cheolbeom Park, Suyeon Park

Department of Economics

Research output: Contribution to journal › Article

Abstract

We investigate the rare disaster hypothesis. Assuming that news articles reporting North Korea's actions that raise tensions on the Korean peninsula affect the probability and expected damage of a disastrous war in the region, we find by applying nonparametric regression that the South Korean exchange rate depreciates as the number of such news articles increases. We also find through an event study that the South Korean exchange rate depreciates immediately after nuclear tests, although its duration is short. The response of the exchange rate to news escalating tension levels varies over time, which is similar to the habituation learning process.

Original language	English
Article number	101314
Journal	Finance Research Letters
DOIs	https://doi.org/10.1016/j.frl.2019.101314
Publication status	Accepted/In press - 2019 Jan 1

Fingerprint

Disaster

Empirical investigation

Exchange rates

News

Damage

Nonparametric regression

Learning process

Event study

North Korea

Keywords

Event study
Exchange rate
Nonparametric regression
Rare disasters

ASJC Scopus subject areas

Finance

Cite this

Park, C., & Park, S. (Accepted/In press). Rare disaster risk and exchange rates: An empirical investigation of South Korean exchange rates under tension between the two Koreas. Finance Research Letters, [101314]. https://doi.org/10.1016/j.frl.2019.101314

Rare disaster risk and exchange rates : An empirical investigation of South Korean exchange rates under tension between the two Koreas. / Park, Cheolbeom; Park, Suyeon.

In: Finance Research Letters, 01.01.2019.

Research output: Contribution to journal › Article

Park, C & Park, S 2019, 'Rare disaster risk and exchange rates: An empirical investigation of South Korean exchange rates under tension between the two Koreas', Finance Research Letters. https://doi.org/10.1016/j.frl.2019.101314

Park C, Park S. Rare disaster risk and exchange rates: An empirical investigation of South Korean exchange rates under tension between the two Koreas. Finance Research Letters. 2019 Jan 1. 101314. https://doi.org/10.1016/j.frl.2019.101314

Park, Cheolbeom ; Park, Suyeon. / Rare disaster risk and exchange rates : An empirical investigation of South Korean exchange rates under tension between the two Koreas. In: Finance Research Letters. 2019.

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Access to Document

10.1016/j.frl.2019.101314