The Foreign Exchange Market With the Cryptocurrency and "Kimchi Premium"

Konferenzbeitrag

This paper explores the remarkable roles of exchange rates when a cryptocurrency is adopted and commonly used as another type of foreign currency in the international economy. First, in order to examine its movement, we describe the price of a cryptocurrency as the relative price in terms of a standard currency using the exchange rate formula. Second, we identify three determinants of the "Kimchi premium" from the equilibrium condition in the foreign exchange market: the gaps in the rates of return of the cryptocurrency, the interest rates of the standard currencies, and the expected cryptocurrency exchange rates. Finally, using the money market and the foreign exchange market rationalities, we demonstrate the process that the new cryptocurrency in a country can cause a rise in the money supply, a fall in the interest rate, and a rise in the exchange rate in the end.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: 22nd Biennial Conference of the International Telecommunications Society (ITS): "Beyond the Boundaries: Challenges for Business, Policy and Society", Seoul, Korea, 24th-27th June, 2018

Classification and Topics

• Classification: Wirtschaft
• Subject: Cryptocurrency ; "Kimchi premium," Exchange rate ; Interest Rate

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Oh, Jeong Hun
• Event: Veröffentlichung
• (who): International Telecommunications Society (ITS)
• (where): Calgary
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/190386
• Last update: 10.03.2025, 11:41 AM CET