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Reference rates and monetary policy effectiveness in Korea

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Title Reference rates and monetary policy effectiveness in Korea
Similar Titles
Material Type Articles
Author(English)

Jung, Heung Soon; Gwon, Tae Hyo

Publisher

[Seoul]:The Bank of Korea

Date 2015
Journal Title; Vol./Issue BOK Working Paper:no.(2015-27)
Pages 46
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Administration
Holding The Bank of Korea; KDI국제정책대학원

Abstract

This paper empirically examines the role of the reference rates for effective monetary policy in Korea. Desirable reference rates should have strong interconnectedness with macroeconomic variables, and be robust so that their actual paths do not deviate largely from expectations. We first compare some widely used reference rates in Korea using an impulse response analysis based upon Factor Augmented Vector Autoregression. We find that the KORIBOR delivers the largest responses to macroeconomic variables, while the differences in responses among the reference rates are moderate. To compare the robustness of the reference rates, we compute their impulse responses at multiple conditional quantile levels and examine the probability of the actual responses differing greatly from market expectations. We also find that the probability increases after an expansionary monetary policy shock, and that the KORIBOR shows relatively small increase. (The rest omitted)