Republic of Korea: Selected Issues

International Monetary Fund

No 2011/247, IMF Staff Country Reports from International Monetary Fund

Abstract: The recent global financial crisis has exposed the limitations of a conventional inflation targeting framework in insulating an economy from all shocks, and demonstrated that its rigid application may aggravate the effect of shocks on output and inflation. Possible refinements to the inflation targeting framework in Korea were investigated by taking into account developments in the financial sector. The findings indicate that incorporating financial stability considerations will ease business cycle fluctuations by mitigating the buildup of factors that lead to large fluctuations in output and inflation.

Keywords: ISCR; CR; central bank; risk premium; economy; IT framework; inflation targeting policy; ITFS rule; inflation targeting rule; sector risk premium; reaction function; Return on investment; Financial sector stability; Housing prices; Financial statistics; Credit; Global (search for similar items in EconPapers)
Pages: 20
Date: 2011-08-04
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