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통화안정증권의 국채전환에 대한 경제적 효과분석(An empirical investigation on the economic impact of the conversion of monetary stabilization bonds to the government bonds)

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Title 통화안정증권의 국채전환에 대한 경제적 효과분석(An empirical investigation on the economic impact of the conversion of monetary stabilization bonds to the government bonds)
Similar Titles
Material Type Reports
Author(Korean)

정한영

Publisher

[서울]:한국금융연구원

Date 1999-11
Series Title; No 금융조사보고서 / 99-11
Pages 80
Subject Country South Korea(Asia and Pacific)
Language Korean
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding 한국금융연구원; KDI 국제정책대학원

Abstract

The balance of monetary stabilization bonds hovered at about 20 trillion won until 1997 but then rapidly increased to 52 trillion won as of June 1999, as the Bank of Korea absorbed the oversupplied market liquidity from financial restructuring. It is undeniable that monetary stabilization bonds have played a role in stabilizing prices by efficiently siphoning off liquidity. However, the recent rapid increase is causing inflationary concerns as a result of a snowballing interest burden on the Bank of Korea in the future.
The purpose of the paper is to investigate the economic impact of the conversion of monetary stabilization bonds to government bonds. First, Ricardian and non-Ricardian regimes are explained in order to illuminate the implicit meaning of outstanding government bonds. Second, the wealth effect of the conversion is tested for Korea, using the reduced consumption equation derived from the monetary model. Third, the paper analyzes the effect of the conversion on prices and market interest rates though the VAR model. Fourth, the crowing-out effect is tested, using IS-LM analysis. Finally, the paper forecasts the future trend of monetary stabilization bonds under the VAR model.
The empirical findings demonstrate that when monetary stabilization bonds are converted to government bonds, the eventual result is the rejection of the Ricardian regime. This occurs through the strengthening of the wealth effect, which raises consumption while prices and interest rates continue to increase.
In order to deter the rapid rise of macroeconomic variables, the paper suggests that conversions in the short-run should be modest and cautious. In addition, consumers should recognize that outstanding government bonds result in heavier future tax burdens. This knowledge should encourage rational consumption and savings behavior, minimizing the economic effects of conversion.