| Description |
1 online resource (46 pages) : color charts |
| Series |
IMF working paper ; WP/12/05 |
|
IMF working paper ; WP/12/05.
|
| Contents |
Cover; Executive Summary; Contents; I. Introduction; II. Background to the 2008-09 Crisis and its Impact; III. A Model for Korea's Monetary Policy; A. The Transmission of Shocks; B. What Role for Monetary Policy?; IV. Estimation of the Model for Korea; A. Data; B. Model Parameters; C. Sensitivity Analysis; V. The Monetary Transmission Mechanism; VI. The Role of Monetary Policy During the Crisis; A. Setting Up the Counterfactual Simulations; B. Results Based on the Counterfactual Simulations; C. How Do Our Results Compare with Those in the Literature?; D. What Role for Fiscal Policy? |
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VII. Summary and Main Policy ImplicationsAppendix; Figures; 1. Korea: Selected Macroeconomic Indicators; 2. Model Schematic; 3 Korea: The Monetary Transmission Mechanism; 4. Counterfactual Scenarios: The Role of Monetary Policy and Real GDP; 5. Counterfactual Scenarios: Monetary Policy and Real GDP Growth; 6. Counterfactual Scenarios: Any Role for Fiscal Policy?; Tables; 1. Calibrated Parameters; 2. Prior and Posterior Distributions; 3 Sensitivity Analysis; 4. The Role of Monetary Policy during the Global Financial Crisis 2008-09; 5. Summary of the Role of Monetary Policy; References |
| Summary |
Korea was one of the Asian economies hardest hit by the global financial crisis. Anticipating the downturn that would follow the episode of extreme financial stress, the Bank of Korea (BOK) let the exchange rate depreciate as capital flowed out, and preemptively cut the policy rate by 325 basis points. But did it work? This paper seeks a quantitative answer to the following question: Were it not for an inflation targeting framework underpinned by a flexible exchange rate regime, how much deeper would the recession have been? Taking the most intense year of the crisis as our baseline (2008:Q4-2009:Q3), counterfactual simulations indicate that rather the actual outcome of a - 2.1 percent contraction, the outturn would have been - 2.9 percent if the BOK had not implemented countercyclical and discretionary interest rate cuts. Furthermore, had a fixed exchange rate regime been in place, simulations indicate that output would have contracted by -7.5 percent over the same four-quarter period. In other words, exchange rate flexibility and the interest rate cuts implemented by the BOK helped substantially soften the impact of the global financial crisis on the Korean economy. These counterfactual experiments are based on an estimated structural model, which, along with standard nominal and real rigidities, includes a financial accelerator mechanism in an open-economy framework |
| Notes |
Title from PDF title page (IMF Web site, viewed January 11, 2012) |
|
"January 2012." |
| Bibliography |
Includes bibliographical references (pages 44-46) |
| Subject |
Monetary policy -- Korea (South) -- Econometric models
|
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Global Financial Crisis, 2008-2009.
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Financial crises -- Korea (South) -- Econometric models
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Economic history
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Financial crises -- Econometric models
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Monetary policy -- Econometric models
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| SUBJECT |
Korea (South) -- Economic conditions -- Econometric models
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| Subject |
Korea (South)
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| Form |
Electronic book
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| Author |
Elekdag, Selim, author.
|
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Lall, Subir, author.
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International Monetary Fund. Asia and Pacific Department, issuing body.
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| ISBN |
9781463930547 |
|
1463930542 |
|
9781463996840 |
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1463996845 |
|
