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Comments on: “Inflation targeting in Korea: a model of success?” by Soyoung Kim and Yung Chul Park

  • Economics


Comments on: 'Inflation targeting in Korea: a model of success?' by Soyoung Kim and Yung Chul Park - Bis Papers No 31, December 2006. 168 BIS Papers No 31 Comments on: “Inflation targeting in Korea: a model of success?” by Soyoung Kim and Yung Chul Park Yang Woo Kim1 First of all, I would like to thank the HKIMR and BIS for giving me an opportunity to attend this very important conference. I should start with the usual disclaimer. The view I am about to express is my own and not necessarily that of the Bank of Korea. Professors Park and Kim have given us a quite comprehensive explanation on the Korean monetary policy system, its operation, performance and tasks. I would like to say in advance that I agree with many of the main findings of this paper. I will by and large not argue with the empirical findings except a few minor points, although I have some reservations on the conclusion. Having said that, I would like to start section by section. In Sections I and II, I think the history of monetary policy implementation and the policy system of the Bank of Korea are well described in a objective manner. However, I would like to point out two things. First, the authors argue that “the expansionary monetary policy since 2000 has not been effective in bringing about economic recovery”. In my opinion, however, while the expansionary monetary policy did not bring about a noticeable economic recovery, it did prevent business activities from sliding into a deeper slump. In a small open economy like Korea, it is typical that the demand management policy has limitations, especially during the course of an economic downturn arising from external shocks. While monetary policy is inevitably in a passive stance, its role to support economic activities should not be downgraded. Therefore, I think the monetary policy played its own expected role in that sense, in a rapidly changing economic environment involving various domestic and overseas shocks. I will come ba

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