The Centre is pleased to announce the acceptance and publication of a paper authored by Dr Cynyoung Park, SEACEN Executive Director, and Dr Kwanho Shin from Korea University, Seoul in the Journal of International Money and Finance, Volume 154, April 2025.
The paper, titled “The Development of Local Currency Bond Markets and Uncovered Interest Rate Parity” is available via Elsevier ScienceDirect.
This study examines how the growth of local currency bond markets influences the uncovered interest parity (UIP) condition. The dynamic patterns of UIP premiums in EMEs have become assimilated to those in advanced economies, with tightening in UIP premiums. Especially, in EMEs with large local currency bond markets, capital flows exhibit increased sensitivity to UIP premiums. However, the development of local currency bond markets may amplify actual exchange rate depreciation in EMEs during times of financial stress with strong evidence of the ’original sin redux.’
Read the paper at this link (Elsevier ScienceDirect login required).
