We empirically examines how foreign exchange reserves are associated with firm-investments using Korean firm-panel data. In national accounting, foreign reserve accumulation are increases in savings on foreign safe assets. Thus in principle, increase in foreign reserves could crowd out domestic savings on physical investments (firm-investments), if total savings are fixed.

Analyzing a firm panel from 1994 to 2017, we confirm that increases in foreign exchange reserves, if combined with high short-term debt, are correlated with decreases in corporate investments. The results, however, mainly come from non-exporting firms and disappear in the sample of exporting firms. We argue that nominal depreciation which comes with reserve accumulation might increase the profitability of exporting firms, which blur the effects of crowding out.

The empirics that growth rate of total factor productivity indeed has increased while foreign reserves increased could be supporting evidences that over-investment in physical capital before the financial crisis has replaced with investment on external safe assets after the crisis.

Preface
Executive Summary

Chapter 1 Introduction
　Section 1 Overview
　Section 2 Literature Review

Chapter 2 Macroeconomic Implications of Foreign Exchange Reserves and Their Impact on Firm Investment
　Section 1 Understanding National Accounting and Foreign Exchange Reserves
　Section 2 Corporate Investment and the Increase in Foreign Exchange Reserves

Chapter 3 Impact of Foreign Exchange Reserve Accumulation on Firm Investment
　Section 1 Empirical Methodology and Data
　Section 2 Empirical Results
　Section 3 Interpretation of Investment Decline: Productivity Growth After the Financial Crisis
　Section 4 Policy Implications

Chapter 4 Conclusion

References
ABSTRACT