South Korea should expand currency swap arrangements with major countries to better cope with possible fallout stemming from mounting financial market uncertainties, a local think tank said Tuesday.
The LG Economic Research Institute (LGERI) report said the recent global economic downturn and growing volatility "would have adverse effects on the South Korean economy," pointing out that a possible crisis from European banks will cause "knock-on shocks as was the case in 2008."
"What is most worrisome is that no suitable policy options appear to be on hand for now," the institute said, adding that major countries' financial strategies like quantitative easing or tinkering with interest rates no longer seem to be having the desired effect.
Calling on the government to strengthen monitoring to prevent any sudden capital outflows, LGERI stressed,
"The expansion of currency swap agreements with major countries would help relieve investors' anxiety over local financial soundness."
A currency swap deal allows a country to borrow money using its currency at a predetermined rate, which can come in handy when defending against financial turmoil.
While the government has been seeking to expand deals to settle trade payments and reduce its dependency on the U.S. dollar, it ended its 10 billion dollar deal with Japan last year that had been maintained since 2001.
Central bank chief Lee Ju-yeol said a new swap agreement could be forged down the line, although the country is currently not taking any steps in that direction. (Yonhap)
The LG Economic Research Institute (LGERI) report said the recent global economic downturn and growing volatility "would have adverse effects on the South Korean economy," pointing out that a possible crisis from European banks will cause "knock-on shocks as was the case in 2008."
"What is most worrisome is that no suitable policy options appear to be on hand for now," the institute said, adding that major countries' financial strategies like quantitative easing or tinkering with interest rates no longer seem to be having the desired effect.
Calling on the government to strengthen monitoring to prevent any sudden capital outflows, LGERI stressed,
"The expansion of currency swap agreements with major countries would help relieve investors' anxiety over local financial soundness."
A currency swap deal allows a country to borrow money using its currency at a predetermined rate, which can come in handy when defending against financial turmoil.
While the government has been seeking to expand deals to settle trade payments and reduce its dependency on the U.S. dollar, it ended its 10 billion dollar deal with Japan last year that had been maintained since 2001.
Central bank chief Lee Ju-yeol said a new swap agreement could be forged down the line, although the country is currently not taking any steps in that direction. (Yonhap)
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