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Effectiveness of monetary policy in Korea due to time varying monetary policy stance : Trends and international comparison

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  • Effectiveness of monetary policy in Korea due to time varying monetary policy stance
  • Kim, Tae Bong
  • Korea Development Institute


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Title Effectiveness of monetary policy in Korea due to time varying monetary policy stance
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Sub Title

Trends and international comparison

Material Type Articles
Author(English)

Kim, Tae Bong

Publisher

Sejong, South Korea:Korea Development Institute

Date 2014-08
Journal Title; Vol./Issue KDI Journal of Economic Policy:vol. 36(no. 3)
Pages 23
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic Conditions
Economy < Economic Administration
Holding Korea Development Institute

Abstract

This paper has studied the monetary policy in Korea with a time varying VAR model using four key macroeconomic variables. First, inclusion of the exchange rate was a crucial factor in evaluating Korean monetary policy since the monetary policy demonstrated sensitivity to exchange rate movements during the crisis periods of both the Asian financial crisis of 1997 and the global financial crisis of 2008. Second, a specification of the stochastic volatilities in TVP-VAR model is important in explaining excessive movements of all variables in the sample. The overall moderation of variables in 2000s was more or less due to a reduction of the stochastic volatilities but also somewhat due to the macroeconomic fundamental structures captured by impulse response functions. Third, the degree of the monetary policy effectiveness of inflation was mitigated in recent periods but with increased persistence. (The rest omitted)