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Characterising the inflation targeting regime in South Korea

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  • Characterising the inflation targeting regime in South Korea
  • Sanchez, Marcelo
  • European Central Bank


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Title Characterising the inflation targeting regime in South Korea
Similar Titles
Material Type Reports
Author(English)

Sanchez, Marcelo

Publisher

[Frankfurt am Main]:European Central Bank

Date 2009-02
Series Title; No Working Paper Series / 1004
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic Conditions
Economy < Economic Administration
Holding European Central Bank

Abstract

This paper attempts at characterising South Korean monetary policy in the period of explicit inflation targeting started in 1999. We explain Korean interest rates in relation to an estimated macro-model, assuming that monetary policy is set optimally. This allows us to obtain the central bank’s parameters in the policy objective function. During the IT regime, the data support that the Bank of Korea pursued optimal policy geared towards achieving price stability, with the degree of interest rate smoothing being estimated to be considerable. In addition, the central bank loss function is estimated to include negligible weights on output and exchange rate variability.