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

_IMF Working Papers, August 14, 2026_

## Source details

**Canonical URL:** [Monetary–Fiscal Policy Interactions in Korea: A QPM-Based Analysis](https://www.imf.org/en/publications/wp/issues/2026/08/14/monetaryfiscal-policy-interactions-in-korea-a-qpm-based-analysis-578460)

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## Bibliographic details
- Authors: Alexander Borodin, Matteo Ghilardi, Tommy Lee, Victoria Petrenko
- Published: August 14, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229056519.001

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### Model and validation
- Develops a quarterly projection model for Korea with an integrated fiscal block to analyze monetary–fiscal interactions.
- Model validation approaches:
  - Historical decompositions.
  - Forecast evaluation.

### Core findings from scenario analysis
- Debt-stabilizing fiscal rules versus no-rules comparison:
  - Rules generate short-run procyclicality.
  - Rules 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.

### Key themes and mechanisms
- Interaction channels emphasized:
  - Monetary policy shocks and monetary–fiscal interactions.
  - Impact of temporary nominal GDP movements on public debt dynamics.
  - Role of fiscal anchors and fiscal rules in stabilizing debt-to-GDP.
- Relevant shocks and factors considered:
  - Supply shock.
  - Energy inflation.
  - Exchange rates.
  - Output gap and inflation dynamics.

### Policy implications and recommendations
- Implementing debt-stabilizing fiscal rules:
  - Trade-off: accept short-run procyclicality to avoid permanent debt drift.
  - Support for a medium-term fiscal framework in Korea to address age-related spending pressures and safeguard debt sustainability.
- Importance of integrating fiscal considerations into macroeconomic projection models to capture monetary–fiscal feedbacks.

*Monetary–Fiscal Policy Interactions in Korea: A QPM-Based Analysis, by Alexander Borodin, Matteo Ghilardi, Tommy Lee, Victoria Petrenko; August 14, 2026.*

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2026/08/14/monetaryfiscal-policy-interactions-in-korea-a-qpm-based-analysis-578460_