South Korea Bank of Korea Reverse Repurchase Agreement Purchases

The outstanding balance of repurchase agreement purchases (환매조건부채권매입) by the Bank of Korea, an asset-side instrument where the BOK temporarily purchases government securities from counterparty banks and provides cash, injecting liquidity into the interbank market. This is the mirror operation to RP sales (KRBOKRPSALE), which sits on the liability side and absorbs liquidity. RP purchases typically have maturities of 7 to 91 days and are used alongside RP sales to fine-tune the supply of reserves in the overnight and short-term interbank markets.

Because RP purchases are an asset-side item, they are already embedded in KRBOKASSET (BOK total assets) and are not subtracted in the Net Liquidity formula (KRNETLIQ). They are, however, subtracted in the Net OMO Position formula (KRBOKNETOMO) to represent the liquidity-supplying side of BOK open market operations.

A rising RP purchase balance indicates that reserves are being net supplied to the banking system, while a falling balance indicates that this supply is being reversed.

Sourced from the repurchase agreement purchase item of the Bank of Korea's Key Accounts statistical release. Reported as end-of-period values at monthly frequency. The raw value in billions of KRW is converted to trillions of KRW by dividing by 1,000.

RP purchases serve as the Bank of Korea's primary liquidity-supply tool in short-term open market operations, complementing RP sales as the liquidity-absorption tool. Bindseil (2004) provides the foundational framework for understanding central bank standing facilities and open market operations as dual instruments for managing the reserve supply. When the BOK executes RP purchases, it temporarily injects reserves into the banking system, and the operation reverses at maturity. Borio (1997) documents how central banks in practice calibrate the balance between liquidity-supplying and liquidity-absorbing operations to steer overnight rates toward their target.

During episodes of acute funding stress, RP purchases expand sharply as the BOK acts as lender of last resort through its repo operations. The October 2022 Legoland ABCP default crisis is a prominent Korean example, where the BOK's RP purchase volume surged to stabilize short-term funding markets. Friedman and Kuttner (2011) situate this type of emergency liquidity provision within the broader framework of central bank intervention in money markets.

RP purchases and sales together define the boundaries of the BOK's operational framework. Whitesell (2006) analyzes how the design of standing facilities and open market operations determines the width and effectiveness of the interest rate corridor, with the two operations forming those boundaries. Bech and Keister (2017) extend this analysis to show how voluntary reserve holdings interact with the central bank's operational tools in determining equilibrium money market rates.

For money market participants, the outstanding RP purchase balance serves as a direct gauge of the BOK's active liquidity-supply stance. Duffie, Gârleanu, and Pedersen (2005) model how search frictions in over-the-counter markets determine equilibrium prices and how central bank repo operations reduce these frictions by providing an elastic supply of reserves. In the Korean interbank market, elevated RP purchase balances signal that the BOK is actively counteracting tightening pressures.

For Korean financial institutions managing short-term funding portfolios, monitoring the RP purchase balance alongside the RP sales balance (KRBOKRPSALE) enables assessment of the net directional stance of BOK repo operations. Krishnamurthy, Nagel, and Orlov (2014) demonstrate that the size and composition of central bank repo operations affect the pricing of collateral and the availability of funding in secured markets. Copeland, Martin, and Walker (2014) show that the microstructure of repo markets, including the central bank's operational footprint, determines the distribution of funding costs across market participants.

For financial stability monitoring, tracking both directions of central bank repo operations is essential. Adrian, Begalle, Copeland, and Martin (2013) document the systemic importance of repo and securities lending markets, reinforcing the value of monitoring both sides of central bank repo activity. Gorton and Metrick (2012) argue that repo market dynamics are central to understanding systemic crises, with central bank repo operations serving as the primary stabilization tool.

Over 435 observations from 1990-01-31 to 2026-03-31, the Bank of Korea repo purchases gives an ambiguous reading on the level, since the Dickey and Fuller (1979) and Phillips and Perron (1988) tests reject a unit root at p = 1.0 and p = 0.0 while the Kwiatkowski et al. (1992) test also rejects stationarity, so no clean order is assigned. On the first difference the Ljung and Box (1978) portmanteau rejects white noise at lags 12 and 24, Q = 111.82 and Q = 157.31 at p = 0.000 and p = 0.000. The Bai and Perron (1998, 2003) procedure finds no break in the mean, a reading consistent with the parameter-instability inference of Andrews (1993) on the differenced object (Perron 1989).

This series is an unadjusted monthly aggregate, so the seasonal battery is appropriate and is run, with the HEGY seasonal-unit-root test of Hylleberg et al. (1990), the QS seasonal portmanteau, and the seasonal-dummy F cross-read with Canova and Hansen (1995) finding deterministic seasonality rather than seasonal unit roots (Beaulieu and Miron 1992; Ghysels and Osborn 2001).