This paper develops a simple signaling model of foreign currency borrowing that yields predictions about firm survival and performance during a currency crisis. Using a large panel of firm level data for South Korea we offer empirical support for many of the predictions of our model, while others support predictions that cannot be tested using our data. Our paper demonstrates that although firms that borrow in foreign currency are more likely to exit after the currency collapses, those that continue to produce perform better. Among them, the best performers are exporters whose foreign sales are more competitively priced under a devalued currency.

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This paper examines the impact of foreign participation in Korean Treasury Bond (KTB) futures and its role in price discovery, using daily transactions data from the over‐the‐counter market and from the Korea Exchange for the futures. Our analysis suggests that foreign trading in the KTB futures market leads the price discovery process for the underlying bonds. Empirical results show that foreigners’ daily net long positions in the futures market exert significant influence in KTB and KTB futures prices. We also find that it is the unexpected component of foreign investors’ net long futures positions that explains a significant share of the pricing effects. Our empirical results also suggest that information transmission between cash and futures markets has improved significantly in the crisis and post‐crisis period while local market participants have become better in extracting information content from market transactions. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:23–51, 2017

session participants for very useful comments and suggestions, which were provided at the research seminar held at the Bank of Korea, July 2013. ContentsⅠ . Introduction ··············································································· 1 Ⅱ . The related literature ······························································ 2 Ⅲ . Model, data and estimation methodology ·························· 4 1. The model ································································································ 4 2. Data ··········································································································· 6 3. Econometric methodology ····································································· 8 Ⅳ . Estimation results ······································································ 8 1. The baseline estimations ······································································· 8 2. Foreign bank branches: US bank branches vs. non-US bank branches ···· 11 3. Global vs. regional foreign bank branches ····································· 13 4. Robustness tests ···················································································· 15 Ⅴ . Conclusion ················································································ 17 References ······················································································ 18 Appendix ························································································ 21This paper examines the impact of foreign banks on the monetary policy transmission mechanism in the Korean economy during the period from 2000 to 2012, with a specific focus on the lending behavior by banks with different types of ownership. Using the bank-level panel data of the banking system in Korea, we present consistent evidence on the buffering impact of foreign banks, especially foreign bank branches including American bank branches, on the effectiveness of the monetary policy transmission mechanism in Korea from the bank-lending channel perspective during the period of the global financial crisis of 2008-2009.Findings of this paper suggest that foreign bank branches reduced their lending when the Bank of Korea lowered its base rate substantially to conduct expansionary monetary policy during the global financial crisis period. One of the underlying reasons for this buffering effect by foreign bank branches is the existence of internal capital markets operated by multinational banks to overcome capital market frictions faced when the foreign banks finance their loans.