Inflation Targeting in Korea: An Empirical Exploration
IMF Working Papers, January 1, 1999
Source details
- Canonical URL
- Inflation Targeting in Korea: An Empirical Exploration
Other formats
Bibliographic details
- Authors: Willy A Hoffmaister
- Published: January 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451842395.001
Context and objective
- The revised Bank of Korea Act states that the primary goal of monetary policy is price stability, suggesting that monetary policy will move toward an inflation-targeting framework.
- The paper explores practical aspects of moving to inflation targeting for Korea.
Practical issues analyzed
- Predictability of inflation.
- Definition of the price index.
- The inflation target’s time horizon.
- The width of the inflation-target bands.
- Transmission lag and implications for the real interest rate.
- Role of exchange rate and food price inflation shock in inflation outcomes.
Empirical findings
- On balance, the empirical evidence suggests that Korea is likely to be successful in adopting an inflation-targeting framework over the medium term.
- Keywords and subject areas emphasized by the study include: agents inflation expectation, exchange rate, food price inflation shock, Inflation, inflation outcome, Inflation Targeting, IT country, IT experiment, IT framework, IT simulation, Korea, Monetary base, Monetary policy frameworks, price index, real interest rate, standard deviation, target band, target horizon, transmission lag, WP.
Policy implications and considerations
- Design choices for an inflation-targeting regime should address:
- Which price index to target.
- Appropriate time horizon for achieving the target.
- Width of permissible target bands to balance credibility and flexibility.
- The role of monetary base and interest rate policy in managing transmission lags.
- Communication strategies to shape agents’ inflation expectations.
Content in this bundle
- Inflation Targeting in Korea: An Empirical Exploration - WP/99/07