BOK Working/Discussion Papers

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Monetary Policy of the Bank of Korea during the First Sixty Years

Economic Research Institute (02-759-5405) 2011.02.16 3349

This paper provides an analytic overview of the history of monetary policy in Korea, since the founding of the Bank of Korea in June 1950 through the Spring of 2010. In light of the dramatic socio-economic transformation over this period, the sixty years are divided into four phases which provided a different environment for the conduct of monetary policy. An organizing analytical framework is proposed for each phase, with the hope of facilitating further research.


Ⅰ. Introduction 1

Ⅱ. Overview of History 2

Ⅲ. War and its Aftermath 5

1. Chronology (1950-1964) 5

2. Unpleasant Monetarist Arithmetic 5

Ⅳ. Big Push 6

1 Chronology (1965-1984) 6

2 Dual Financial Market―Financial Repression and Fiscal Dominance on the Lite 7

Ⅴ. Liberalization 10

1 Chronology (1985-1998) 10

2 Liberalization and Transition 11

3 Crash—the Asian Crisis 14

Ⅵ. Open Macro-Economy 15

1 Inflation Targeting 15

Ⅶ. Great Recession 19

1 Global crisis and Response in Korea 19

2 Challenges—Volatility in Financial Flows 20

Ⅷ. Conclusion 24

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