Republic of Korea: Selected Issues

IMF Staff Country Reports, February 13, 2018

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The chapter outlines a strategy to navigate a more challenging monetary environment through enhanced communication of policy interest rate intentions and inflation-forecast targeting.
The reduction in the inflation target by a percentage point to 2 percent in January 2016 weakened the nominal anchor.
Recommendation: adopt inflation-forecast targeting to rebuild the credibility of the nominal anchor more rapidly.
Strengthening the monetary policy framework requires enhancing communications to make policy intentions and inflation outlooks clearer and more predictable.

An effective, credible monetary policy cannot address all macroeconomic challenges facing Korea.
Monetary policy can foster robust growth with low inflation and provide a stable, predictable environment that allows other policies to work more effectively.
Fiscal policy can reinforce the effectiveness of monetary policy, as illustrated by model scenarios contained in the chapter.
Structural policies can support monetary policy by, for example, boosting potential growth.

Subject areas covered: Employment, Labor, Labor markets, Minimum wages, Public debt, Wage adjustments, Wages.
Keywords included: chaebol, chaebols firm, CR, debt, Eastern Europe, Employment, firm, GDP ratio, Global, GVC integration, household debt, ISCR, Labor markets, minimum wage hike, Minimum wages, temporary worker, wage, Wage adjustments.

Republic of Korea: Selected Issues (IMF Staff Country Reports 2018, 041).