Republic of Korea: Selected Issues
IMF Staff Country Reports, May 13, 2019
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- Republic of Korea: Selected Issues
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Bibliographic details
- Published: May 13, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498314824.002
Overview
- Publication date: May 13, 2019
- Type: IMF Staff Country Report (Country Report No. 2019/133)
- Pages: 76
- Volume: 2019
- Issue: 133
- DOI: https://doi.org/10.5089/9781498314824.002
- Stock No: 1KOREA2019002
- ISBN: 9781498314824
- ISSN: 1934-7685
- Subjects: Economic sectors; Employment; Financial sector policy and analysis; Labor; Labor markets; Macroprudential policy; Manufacturing; Output gap; Production
- Keywords: CR; Employment; EU limit; financial condition; Global; ISCR; labor market slack; Labor markets; Macroprudential policy; Manufacturing; opt-out agreement; opt-out option; Output gap; tail risk financial condition outcome
Major findings on monetary policy and macroprudential interaction
- The paper analyzes: monetary policy and financial cycles; the evolution of macroprudential policies in Korea; the efficacy of prudential policies in taming financial excess and building financial resilience; and the interaction between monetary policy and macroprudential policies.
- Evidence for Korea suggests that financial stability will not necessarily materialize as a natural by-product of a so-called appropriate monetary policy stance.
- Although the effects of monetary and macroprudential instruments may overlap, they are not perfect substitutes.
- Macroprudential policies can impact the banking system by affecting bank funding costs through the net interest margin.
- In certain circumstances borrower-based prudential measures and monetary policy can complement one another.
- Macroprudential policies can impact banks profitability.
- Policymakers should be mindful that macroprudential policy is not free of costs and that there may be trade-offs between the stability and the efficiency of financial systems.
Policy implications and recommendations (as presented)
- Recognize that monetary policy alone may not achieve financial stability; targeted macroprudential measures are necessary.
- Consider the overlapping but non-identical effects of monetary and macroprudential instruments when designing policy mixes.
- Account for the impact of macroprudential measures on bank funding costs and net interest margins when assessing banking sector resilience and profitability.
- Where appropriate, deploy borrower-based prudential measures in coordination with monetary policy to achieve complementary effects.
- Weigh trade-offs between financial stability and financial system efficiency when implementing macroprudential policies.
International Monetary Fund. Republic of Korea: Selected Issues (IMF Staff Country Reports 2019, 133).
Content in this bundle
- Republic of Korea: Selected Issues; IMF Country Report No. 19/133; April 22, 2019