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Comparing the Effectiveness of the Monetary Policies in Korea and Japan

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Authors
Kim, Sang-Kee; Yim, Geunhyung
Issue Date
2021-05
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.34 No.2, pp. 303-329
Keywords
Monetary policy transmission channelUnconventional monetary policyShadow policy rate
Abstract
This study conducts a comparative analysis of the monetary policy transmission channels and their effects in Korea and Japan using a sign restriction VAR model to determine whether a Japanese-style monetary policy can be implemented in Korea. Results indicate considerable differences between Korea and Japan in their monetary policy transmission channels. Conventional monetary policy transmission channels, such as the exchange rate channel, asset price channel, and bank lending channel, works relatively well in Japan. However, in Korea, the interest rate channel is effective but has only a short-term effect on the exchange rate, and the effects on asset prices and bank lending are hard to expect in general. Furthermore, some potential risks working through the housing market may hinder financial stability. Korea and Japan see a limited effect on production in the real sector. These results imply that Korea must be careful about implementing a similar monetary policy as Japan.
ISSN
1225-0279
Language
English
URI
https://hdl.handle.net/10371/174534
DOI
https://doi.org/10.22904/sje.2021.34.2.006
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.34 no.1~4 (2021)
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