Monetary Policy, Homeowner Balance Sheet Channel, and Integration: A Lesson from South Korea during the 2000s

Yejin Kim () and Wonmun Shin2 ()
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Yejin Kim: Department of Economics, Yonsei University, Republic of Korea, Postal: Yonsei University 50 Yonsei-ro Seodaemun-gu Seoul Republic of Korea
Wonmun Shin2: Department of Economics, Sejong University, Republic of Korea, Postal: Sejong University 209 Neungdong-ro Gwangjin-Gu Seoul Republic, of Korea

Journal of Economic Integration, 2024, vol. 39, issue 1, 178-197

Abstract: We estimate the household consumption function using the Korean labor and income panel data (2001-2012) with the instrument of the housing supply to figure out the homeowner balance sheet channel of monetary policy in South Korea during the 2000s and the early 2010s. We find that monetary policy has a significant effect through both the wealth and collateral effects comprising the homeowner balance sheet transmission channel. Furthermore, the wealth effect shows a significant result across all income quantile groups, whereas the collateral effect is significant in the low- and middle-income quantile groups. This finding implies that the lower-income groups are more sensitive to changes in the value of real estate assets. Based on the analysis, we derive policy implication that socio-economic integration will be enhanced under the considerately targetted monetary policy, which is a lesson for the emerging or developing countries whose current economic situation is similar to the past South Korea.

Keywords: monetary; policy; homeowner; balance; sheet; channel; wealth; effect; collateral; effect; economic; integration; panel; regression (search for similar items in EconPapers)
JEL-codes: E21 E52 E61 R20 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0898

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