Monetary–Fiscal Policy Interactions in Korea: A QPM-Based Analysis

Alexander Borodin, Matteo Ghilardi, Tommy Lee and Victoria Petrenko

No 2026/172, IMF Working Papers from International Monetary Fund

Abstract: This paper develops a quarterly projection model for Korea with an integrated fiscal block, enabling analysis of monetary-fiscal interactions. The model is validated through historical decompositions and forecast evaluation. Scenario analysis comparing dynamics with and without debt-stabilizing fiscal rules reveals a fundamental trade-off: rules generate short-run procyclicality but prevent permanent debt drift. Without rules, temporary nominal GDP movements cause lasting debt-to-GDP changes. For Korea, facing age-related spending pressures, a medium-term fiscal framework could safeguard sustainability.

Keywords: Quarterly projection model; fiscal rules; fiscal anchor; monetary-fiscal interactions; debt sustainability; Korea (search for similar items in EconPapers)
Pages: 33
Date: 2026-08-14
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=578460 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2026/172

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().