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Monetary and Macroprudential Policies Considering Business and Financial Cycles (in Korean)

Author

Listed:
  • Yong Min Kim

    (Monetary Policy & Markets Department, The Bank of Korea)

  • Jung Yeoun Lee

    (Financial Stability Department, Bank of Korea)

Abstract

For the maximization of the social welfare, it is critical to choose an optimal coordination between monetary and macroprudential policies depending on the phase of business and financial cycles in which the current economy is placed. In this context, we examine a conceptual framework of operation of monetary and macroprudential policies considering business and financial cycles. In general, it is known that monetary policy is better suited for stabilizing the real economic fluctuations while macroprudential policy for preserving financial stability. However, the use of each policy needs to consider the effects from monetary policy on financial stability and from macroprudential policy on real economic stability. When business and financial cycles are in the same phase, it is desirable for each policy to be implemented with a lower intensity than the case where monetary and macroprudential policies target business and financial cycles respectively. On the contrary, when business and financial cycles are in the different phase, each policy should be performed with a greater intensity.

Suggested Citation

  • Yong Min Kim & Jung Yeoun Lee, 2015. "Monetary and Macroprudential Policies Considering Business and Financial Cycles (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 21(1), pages 125-143, March.
    • Handle: RePEc:bok:journl:v:21:y:2015:i:1:p:125-143
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    More about this item

    Keywords

    Business cycle; Financial cycle; Monetary policy; Macroprudential policy;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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