IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Monetary and Exchange Rate Policy in Korea: Assessments and Policy Issues

  • Eichengreen, Barry

This Paper considers monetary and exchange rate policy in Korea since the financial crisis of 1997-98. The Bank of Korea has adopted much of the apparatus of inflation targeting, with a band for target inflation and a Monetary Policy Report to the National Assembly. This regime has served the country well. But neither the Bank’s publications nor the statements of its Monetary Policy Committee make more than passing reference to the exchange rate. It would be surprising if in fact the exchange rate played little role in conduct of monetary policy, for in an economy as open and sensitive to foreign trade and investment as Korea, currency movements contain information useful for forecasting inflation and the output gap. My findings suggest that the Bank of Korea does care about the exchange rate – and not only because it movements provide information relevant for the inflation forecast. In addition, the central bank responds to movements in the exchange rate for other reasons, like its implications for the balance of investment in traded and nontraded goods and its implications for financial stability. My recommendations are thus for more clarity on the role of the exchange rate in the formulation and conduct of monetary policy. In particular, if the members of the Monetary Policy Committee are attentive to exchange rate movements, which is what is suggested by the evidence presented here, and especially if they care about such movements for reasons not limited to the utility of that variable for forecasting future inflation, then they should acknowledge this in their monthly press releases communicating the rationale for their decisions to the public and the markets.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4676.

in new window

Date of creation: Oct 2004
Date of revision:
Handle: RePEc:cpr:ceprdp:4676
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4676. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.