IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Characterising the inflation targeting regime in South Korea

  • Sánchez, Marcelo
Registered author(s):

    This paper attempts at characterising South Korean monetary policy in the period of explicit inflation targeting started in 1999. We explain Korean interest rates in relation to an estimated macro-model, assuming that monetary policy is set optimally. This allows us to obtain the central bank’s parameters in the policy objective function. During the IT regime, the data support that the Bank of Korea pursued optimal policy geared towards achieving price stability, with the degree of interest rate smoothing being estimated to be considerable. In addition, the central bank loss function is estimated to include negligible weights on output and exchange rate variability. JEL Classification: E52, E58, E61

    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: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1004.pdf
    Download Restriction: no

    Paper provided by European Central Bank in its series Working Paper Series with number 1004.

    as
    in new window

    Length:
    Date of creation: Feb 2009
    Date of revision:
    Handle: RePEc:ecb:ecbwps:20091004
    Contact details of provider: Postal: 60640 Frankfurt am Main, Germany
    Phone: +49 69 1344 0
    Fax: +49 69 1344 6000
    Web page: http://www.ecb.europa.eu/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Marcelo Sanchez, 2008. "The link between interest rates and exchange rates: do contractionary depreciations make a difference?," International Economic Journal, Taylor & Francis Journals, vol. 22(1), pages 43-61.
    2. Richard Dennis, 2006. "The policy preferences of the US Federal Reserve," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 55-77.
    3. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
    4. Glenn Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters, in: Monetary Policy Rules, pages 203-262 National Bureau of Economic Research, Inc.
    5. Arminio Fraga & Ilan Goldfajn & Andre Minella, 2003. "Inflation Targeting in Emerging Market Economies," NBER Working Papers 10019, National Bureau of Economic Research, Inc.
    6. Amato, Jeffery D. & Gerlach, Stefan, 2002. "Inflation targeting in emerging market and transition economies: Lessons after a decade," European Economic Review, Elsevier, vol. 46(4-5), pages 781-790, May.
    7. Michele Ca’ Zorzi & Elke Hahn & Marcelo Sánchez, 2007. "Exchange Rate Pass-Through in Emerging Markets," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(4), pages 84-102, November.
    8. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    9. Ronald McKinnon & Gunther Schnabl, 2003. "Synchronized Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate," Working Papers 022003, Hong Kong Institute for Monetary Research.
    10. Carare, Alina & Stone, Mark R., 2006. "Inflation targeting regimes," European Economic Review, Elsevier, vol. 50(5), pages 1297-1315, July.
    11. Athanasios Orphanides, 1998. "Monetary policy evaluation with noisy information," Finance and Economics Discussion Series 1998-50, Board of Governors of the Federal Reserve System (U.S.).
    12. Carlo A. Favero, . "Macroeconomic stability and the preferences of the Fed. A formal analysis, 1961-98," Working Papers 200, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    13. Alejandro Justiniano & Selim Elekdag & Ivan Tchakarov, 2005. "An Estimated Small Open Economy Model of the Financial Accelerator," IMF Working Papers 05/44, International Monetary Fund.
    14. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
    15. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
    16. Vittorio Corbo & Oscar Landerretche & Klaus Schmidt-Hebbel, 2001. "Assessing Inflation Targeting after a Decade of World Experience," Working Papers 51, Oesterreichische Nationalbank (Austrian Central Bank).
    17. Gongpil Choi, 2003. "Structural Changes and the Scope of Inflation Targeting in Korea," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 113-142.
    18. Efrem Castelnuovo & Paolo Surico, 2004. "Model Uncertainty, Optimal Monetary Policy and the Preferences of the Fed," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(1), pages 105-126, 02.
    19. Ellison, Martin, 2003. "The Learning Cost of Interest Rate Reversals," CEPR Discussion Papers 4135, C.E.P.R. Discussion Papers.
    20. Ahmed, Shaghil, 2003. "Sources of economic fluctuations in Latin America and implications for choice of exchange rate regimes," Journal of Development Economics, Elsevier, vol. 72(1), pages 181-202, October.
    21. Eichengreen, Barry, 2004. "Monetary and Exchange Rate Policy in Korea: Assessments and Policy Issues," CEPR Discussion Papers 4676, C.E.P.R. Discussion Papers.
    22. Alvaro Angeriz & Philip Arestis, 2007. "Monetary policy in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 31(6), pages 863-884, November.
    23. Alvaro Angeriz & Philip Arestis, 2007. "Assessing the Performance of 'Inflation Targeting Lite' Countries," The World Economy, Wiley Blackwell, vol. 30(11), pages 1621-1645, November.
    24. King, Mervyn, 1997. "Changes in UK monetary policy: Rules and discretion in practice," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 81-97, June.
    25. Selim Elekdag & Ivan Tchakarov, 2004. "Balance Sheets, Exchange Rate Policy, and Welfare," IMF Working Papers 04/63, International Monetary Fund.
    26. Mishkin, F.S., 1998. "International Experiences with Different Monetary Policy Regimes," Papers 648, Stockholm - International Economic Studies.
    27. Chung, Jaesik & Jung, Yongseung & Yang, Doo Yong, 2007. "Optimal monetary policy in a small open economy: The case of Korea," Journal of Asian Economics, Elsevier, vol. 18(1), pages 125-143, February.
    28. Söderlind, Paul, 1998. "Solution and Estimation of RE Macromodels with Optimal Policy," SSE/EFI Working Paper Series in Economics and Finance 256, Stockholm School of Economics.
    29. Cook, David, 2004. "Monetary policy in emerging markets: Can liability dollarization explain contractionary devaluations?," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1155-1181, September.
    30. Sean Collins & Pierre L. Siklos, 2004. "Optimal Monetary Policy Rules and Inflation Targets: Are Australia, Canada, and New Zealand Different from the U.S.?," Open Economies Review, Springer, vol. 15(4), pages 347-362, October.
    31. Goncalves, Carlos Eduardo S. & Salles, Joao M., 2008. "Inflation targeting in emerging economies: What do the data say?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 312-318, February.
    32. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
    33. Sack, Brian, 2000. "Does the fed act gradually? A VAR analysis," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 229-256, August.
    34. Ozlale, Umit, 2003. "Price stability vs. output stability: tales of federal reserve administrations," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1595-1610, July.
    35. Dueker, Michael & Kim, Gyuhan, 1999. "A monetary policy feedback rule in Korea's fast-growing economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(1), pages 19-31, January.
    36. Levin, Andrew T. & Natalucci, Fabio M. & Piger, Jeremy M., 2004. "Explicit inflation objectives and macroeconomic outcomes," Working Paper Series 0383, European Central Bank.
    37. Walsh, Carl E., 2005. "Endogenous objectives and the evaluation of targeting rules for monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(5), pages 889-911, July.
    Full references (including those not matched with items on IDEAS)

    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:ecb:ecbwps:20091004. 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: (Official Publications)

    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.