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Reflections on interest rate policy in the last 20 years and lessons for the bank of Korea

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Frame of Image s the primary decision-maker over Korea’s monetary policies. Currently, adopting the optimal monetary policy appears to be a strenuous task, for equally compelling reasons behind either raising or lowering the interest rate coexist. Assuming the maxim “learn the new through looking into the old” as guidance, this essay gives a general view of monetary policies adopted by the BOK in the past 20 years. In this way, we may grasp the gist of the direction the BOK and its leadership should take. No one disputes the precept that the paramount task of the BOK is curbing inflation, nor the rationale behind it: we cannot expect a stable development of the economy without preventing the inflation from jumping to a runaway inflation. Records of severe inflation since the foundation of the Republic as well as the two Oil Shocks of the 1970s attest to the importance of this particular role of any central bank. On the other hand, we must keep in mind that inflation is not the sole factor that destabilizes the economy. These other factors include the current account deficit expansion of the mid to late 1990s, real estate bubble and household debt bubble from the early 2000s to the present. If the BOK is to ultimately aim for the healthy development of the national economy, it should look beyond merely curbing the inflation. It should, with a broader view, be able to find out and preempt potential hazards of the economy.
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Figure Ⅲ.2 Real GDP Trends
(%, y.o.y.) 15
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The BOK has undergone w


Full Text
Title Reflections on interest rate policy in the last 20 years and lessons for the bank of Korea
Similar Titles
Material Type Reports
Author(English)

Park, Jongkyu

Publisher

Korea Institute of Finance

Date 2014-07
Series Title; No Korean Economic and Financial Review
Pages 6
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Administration
Holding Korea Institute of Finance