<Abstract>

This paper analyses the impact of tariffs and non-tariff measures on trade in decarbonization technology products and the relationship between tariffs and non-tariff measure. The results vary by income group. The impact of tariffs on export price was not statistically significant across all income groups, but non-tariff measures had a statistically significant positive effect on high income and upper-middle income countries. As for import volumes, non-tariff measures have a bigger influence on the import flow of decarbonization technology products than tariffs in high income countries, while both tariffs and non-tariff measures are important factors in upper-middle income, lower-middle income, and in low income countries. The results of the relationship between tariffs and NTBs suggest that they have substitution effects.

<Abstract>

This study visits a recent issue in the offline distribution market. Specifically, we analyze the effects of hypermarket closing on sales in nearby local shopping districts. We looked at the Lotte Marts in Dobong and Guro districts that closed in November and December 2020, respectively. Local shopping areas neighboring these closed stores were taken as the treatment group, and the commercial districts near the Lotte Mart locations in adjacent districts in Dobong and Guro branches were taken as the control group for a difference-in-differences analysis. Findings indicate that the closing of these hypermarkets led to an immediate decline in sales at nearby local businesses within a 2 km radius, with an overall decrease of about 5.3% in sales, decomposed as a 5.0% drop in weekday sales and a 7.8% fall in weekend sales. Mom-and-pop stores experienced a 7.5% sales drop, and the number of transactions decreased by 8.9%. Traditional markets and developed commercial districts also saw changes in sales, but these were not statistically significant. The study’s conclusions remain consistent across various analytical models. Further analysis revealed that the decline in sales in the surrounding districts was due to a decrease in foot traffic following the closing of the larger retailer. These findings offer new insights into the dynamics between hypermarkets and small, local stores, highlighting the need for new strategies to ensure the survival of conventional retail in an era of growing online sales.

<Abstract>

We estimate housing policy uncertainty (HPU) in Korea, employing the economic policy uncertainty (EPU) method by Baker et al. (2016). The uncertainty index is measured by the frequency of texts in Korean newspapers that imply housing policy uncertainty during 1997-2022. The HPU index was high during the presidences of Roh Moo-hyun and Lee Myung-bak and has risen again since 2020. Also, HPU tends to increase when there are large housing market policy announcements, political instability, or changes in administrative regimes. We also analyze the effects of HPU on housing markets by estimating a vector autoregressive (VAR) model. The VAR results suggest that a rise in HPU negatively affects housing prices and residential construction but increases housing price volatility. Meanwhile, a positive shock in housing prices endogenously raises HPU, which suggests that uncertainty was typically more significant under policies that aim to stabilize the housing market and prevent from overheating.

   In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

- This is a translation prepared by the Bank's staff

  based on the original Korean text released on December 28, 2023.

  In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

  The Bank of Korea is pleased to release the 2022 edition of its Financial Statement Analysis (FSA), published annually since 1960 to provide research on and analysis of the business performance and financial conditions of Korean corporations.

  This edition contains the financial statement analysis report for Korean corporations during 2022, the concepts behind and methods for calculating their major financial ratios, and their financial statements and major indicators, all classified by industry and by company size. In addition, quartile statistics are enhanced, by adding non-manufacutring category and including more detailed classifications by company size, and subdividing manufacturing sector classifications to provide more useful information. To facilitate cross-country comparisons, the major financial ratios as used in the U.S., Japan and Germany are also included here, as well.

  For a more in-depth analysis, the full text of this book is available at the Bank of Korea’s website (www.bok.or.kr) and at the website for its Economic Statistics System (ECOS) (http://ecos.bok.or.kr). Furthermore, the related data files can be found at the ECOS website, and major indicators are also available at the ECOS mobile website (http://ecos.bok.or.kr/mobile).

  We hope that this book will be helpful to the government sector in drawing up its economic policies, to companies in framing their business strategies, to financial institutions in assessing their credit risks, and to members of academia in conducting their research. Finally, we wish to express our sincere appreciation to all of the cooperating institutions whose efforts have helped to make this work possible.

                                                                                                                   December 2023

                                                                                                                   Shin, Seung Chul

                                                                                                                   Director General

                                                                                                                   Economic Statistics Department
                                                                                                                   Bank of Korea

<Abstract>

In the event of an economic crisis, financial stability will also deteriorate if companies' performance falls sharply and profitability does not improve thereafter. Accordingly, there is a high need to select industries for liquidity support, and this paper proposes a plan and applies it to the COVID-19 case. Using financial data from external audit companies between 2008 and 2020, this paper analyzes financial stability through estimating the probability of cash crunch risk by industry. Then it derives liquidity support targets and evaluates liquidity support effects. Together with this, it evaluates the inefficiency of resource allocation through estimating the effect on productivity of companies vulnerable to financial stability by industry, and it presents implications for efficient support when government funding is limited. The result of this analysis is that when considering the inefficiency of resource allocation over the support effect in liquidity support due to the COVID-19 shock, transportation and lodging-and-restaurant industries are prioritized support targets, and construction industries are subordinated support targets among the industries in 18 KSIC sections. In addition, among the manufacturing industries in 24 KSIC divisions, automobile-and-trailer manufacturing industries become prioritized support targets, and other-transportation-equipment manufacturing industries become subordinated support targets.

<Abstract>

The Great East Japan Earthquake triggered a paradigmatic shift in Japan’s trade patterns, accentuated by an increased asymmetry between yen exchange rate fluctuations and export flows. Using a Vector Autoregression with exogenous variables (VARX) model, this study conducted an empirical analysis of the dynamic interactions between the yen/dollar exchange rate and Japanese exports with time series data from January 2001 to March 2023. Our findings reveal that yen exchange rate fluctuations impact exports in an asymmetrical manner. Firstly, a yen depreciation led to a notable increase in yen-denominated exports, but dollar-denominated export values remained largely unchanged. Secondly, the influence of the exchange rate on exports significantly decreased in the aftermath of the Great East Japan Earthquake. Lastly, even when a depreciation in the exchange rate results in an uptick in yen-denominated export values, it does not necessarily translate to a corresponding increase in export quantities—a trend more evident after the earthquake. This study further explores both micro and macro-level factors contributing to the subdued responsiveness of Japanese exports to exchange rate changes.

<Abstract>

According to the monetary policy trilemma, countries cannot simultaneously achieve the three goals of exchange rate stability, monetary independence, and capital openness. In this study, we offer empirical evidence on the monetary and financial quadrilemma regarding the trade-off relationship between financial stability and the traditional trilemma variables. Further, we investigate whether macroprudential policy can mitigate this trade-off relationship of four objective variables. Using a data set from 116 countries for the period 2000–2013, we find that macroprudential policy has the potential to relax the traditional trilemma and quadrilemma constraints.

   In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

  In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

<Abstract>

 This paper estimates the respective knowledge production functions considering population structure change, using time series data for the 1970-2019 period and panel data including the 2003-2021 period and spanning 30 industries. Using the time series data, R&D intensity makes a positive effect on the TFP growth rate, but the effect declines due to a decreasing trend in the ratio of productive population to elderly one. A reduction in the TFP differential between the U.S. and Korea and the TFP’s decreasing returns to scale both have negative effects on the TFP growth rate. When using the panel data, the R&D intensity positively affects the TFP growth rate, but a decreasing trend in the difference between productive population ratio and elderly one reduces the positive effect of R&D intensity. According to the estimation by industrial group, the R&D intensity of R&D intensive groups can have positive effects on the TFP growth rate. By the way, that of the high R&D intensive group shows very lower effect than that of the medium R&D intensive group and, moreover, loses its statistical significance differently from the medium R&D intensive one. As for the other service group, its R&D intensity plays an important role in absorbing the technological spillover from other industries.

<Abstract>

 We study the regime-dependent existence of unspanned macro risks in the Korean government bond market. To this end, we modify the arbitrage-free Nelson-Siegel model of Christensen, Diebold, and Rudebusch (2011) to make three candidate models. In the three models, unspanned macro risks affect the market prices of risks with (i) zero coefficients, (ii) regime-switching coefficients, and (iii) constant non-zero coefficients. Our Bayesian methodology compares them using monthly data of 13 bond maturities and two macro variables (the industrial production index growth rate and inflation). In our sample period of 2001 to 2022, the Bayesian methodology selects Case (ii). Our specification uses a two-state Markov chain, and the unspanned macro risks exist under regime-state two. However, their existence is not statistically significant under state one. During most of the period, the bond market is in regime-state one, but it remains in regime-state two from October 2008 to February 2009. Regarding term premium estimates, unspanned macro risks are also only present during the Global Financial Crisis.

<Abstract>

 This paper examines changes in the labor market due to demographic changes and estimates the changes in the number of employed people by industry over the next 10 years using the Population Projection and the Regional Employment Survey. The results show that the number of people employed in the service sector is expected to increase, while the number of people employed in manufacturing is expected to decrease, especially in low-skilled manufacturing. In response to the long-term decline in the labor force, a policy to promote the employment of women aged 30-44, who have a high proportion of career breaks, is found to increase the number of high-skilled service workers by about 380,000 relative to baseline estimates. A policy to increase the number of older workers is expected to prevent the decline of workers in high-skilled manufacturing (from a decline of 40,000 to an increase of 30,000 relative to the baseline estimate) and increase employment in low-skilled services (by 680,000 relative to the baseline estimate).

In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

- This is a translation prepared by the Bank's staff

  based on the original Korean text released on June 21, 2023.

  In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

Payment and Settlement Systems Report 2022

- Please refer to the attached file.

2. Contents 

    Preface by the Governor PDF download

    Ⅰ. Economic Trends PDF download

    Ⅱ. Bank of Korea's Conduct of Business PDF download

    Ⅲ. Management Status PDF download

Appendix PDF download

Executive Summary for Payment and Settlement Systems Report 2022

The remainder of the report will be uploaded in a few weeks.

- Please refer to the attached file.

<Abstract>

 This paper examines which specific generation contributed to the pro-cyclicality of household consumption during the contraction phase following the Global Financial Crisis. Analyzing generation-specific household consumption is crucial because certain generations may inadvertently experience negative effects during business cycle fluctuations, as policies and other factors can affect all generations uniformly. The findings indicate that the pro-cyclicality of household consumption is primarily driven by a decline in spending among the MZ and pre-Baby Boom generations. These results suggest an increased likelihood of household consumption pro-cyclicality in future contraction phases. This is attributed to the potential decrease in income for the emerging dominant generation of consumer, the MZ generation, during contraction phases. As a result, there is a probability of household consumption slowdown, especially in selective consumer goods, leading to the pro-cyclicality of household consumption.

Author: Junha Park (Bank of Korea), Dooyeon Cho (Sungkyunkwan University)

<Abstract>

 This study investigates how the pattern of demand-side secular stagnation changed in countries such as Korea, the US, and Japan before the COVID-19 pandemic. First, we analyze how the natural rate of interest is determined theoretically using the overlapping generations model with imperfect competition in a goods market and with liquidity constraints imposed on the household. A firm's mark-up rate plays a key role as a wedge between the natural rate of interest and the marginal product of capital. In particular, we find that with an additional condition, an increase in the mark-up ratio reduces the natural interest rate without affecting the marginal product of capital. Based on a theoretical analysis, we also empirically analyze whether a decline in natural interest rates in Korea, the US, and Japan is caused by capital accumulation or by an increase in the markup. The estimation results indicate that while natural interest rates in each country tend to fall and the marginal product of capital in Korea and Japan also declines in a trend, the marginal product of capital in the US shows a distinct pattern compared to the trend of declining natural interest rates. This implies that, unlike the case for Korea and Japan, the decline in the natural interest rate in the US appears to result from the markup rather than capital accumulation.

Author: In Do Hwang(Bank of Korea)

<Abstract>

 Although an increasing number of studies demonstrate the importance of trust in economic growth, most of them only focus on interpersonal trust. This paper considers various types of trust including interpersonal trust (i.e., trust in most people), institutional trust (e.g., trust in the fair administration of justice, or trust in the protection of property rights), and political trust (e.g., trust in government or political parties), and investigates their impacts on growth. Using novel cross-country survey data, this paper finds that institutional trust is most robustly related to the economic growth in a cross-section of 46 countries. This paper also shows that there is a causal relationship between institutional trust and growth using panel data from those 46 countries. Hence, in contrast with the previous trust literature which focuses on trust in “people” as a “time-invariant cultural feature,” this paper stresses trust in the “social system” as an “institutions-dependent feature.”

In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

As the use of electronic media has increased and the BOK has released many other reports, however, we believe it will be more useful to post articles from the Monthly Bulletin more frequently on the BOK website.

Therefore, the Monthly Bulletin will be released in paper and as an e-book (pdf) only until March 2023. The existing contents, including articles, will continue to be available through the following channels:

- Articles : Economic Outlook, BOK Issue Note, etc.

(http://www.bok.or.kr > Research Papers > Periodicals)

- Statistics : Economic Statistics System (ECOS)

(http://ecos.bok.or.kr)

- Minutes : Press Releases

(http://www.bok.or.kr > Monetary Policy Board > Minutes)

If you have any questions, please contact the Overall Research & Forecasting Team (Tel: 02-759-4166) of the Research Department.

To begin, we analyze capital flow data in emerging economies during the three past periods of U.S. monetary policy tightening: Tightening Period 1 (June 2004 - June 2006), Tightening Period 2 (November 2014 - April 2019), and Tightening Period 3 (October 2021 - September 2022, currently in process). The results show that during the first two periods, there was a net capital inflow, while a significant net outflow was observed during the current tightening period. Net outflows were conspicuous during the early stages of Tightening Period 2, which followed a prolonged period of significant monetary policy easing, and Tightening Period 3, in which the pace of interest rate hikes have exceeded market expectations.

We then conduct a panel regression to analyze the impact of variables related to growth (growth rate differentials and commodity prices), interest rates (Federal Funds Rate (FFR) and domestic and foreign interest rate differentials), and risk (VIX and EMBI) on capital flows in emerging economies. We also compare the impact of the above determinants of capital flows between Korea and other emerging economies using a Bayesian hierarchical linear model.

Our empirical results show that growth- and risk-related variables have a statistically significant impact on capital flows in emerging economies, with a higher accountability than interest rate-related variables. However, during the current period of U.S. monetary tightening, we observe a slightly increased impact of changes in Federal Fund Rate, possibly resulting from the Fed's rapid rate hikes. Furthermore, our comparison of the impacts of capital flow determinants between Korea and other emerging economies indicates that growth rate differential and VIX have a greater impact in Korea than in other emerging economies on average, while the impact of interest rate-related variables is similar.

Our data analysis and empirical results imply that forecasting of and analyzing of capital flows in emerging economies require comprehensive consideration of various factors including the U.S. monetary policy. Importantly, the pace of interest rate hikes and the degree of monetary policy easing prior to a shift to a tightening cycle should also be taken into account. Moreover, it is crucial to note that if the Fed's monetary tightening is faster than expected or if its shift to a tightening cycle starts after a prolonged period of easing, it could result in net capital outflows and increased volatility in the external sector of emerging economies.

  In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

The results show that growth in GVCs stagnated in the 2010s and that the chains tended to have become shorter, especially in the late 2010s, due to negative shocks including some geopolitical risks and the COVID-19 pandemic. Among the various shocks, geopolitcial risks, such as the rise in protectionism and nationalism, have reduced the length of GVCs and have also diversified GVCs. The COVID-19 pandemic also contributed to shortening these GVCs, but the extent of its contribution was relatively smaller than that of geopolitical risks. This can be interpreted as meaning that corporations view policy uncertainties caused by geopolitical risks as being more persistent than shocks such as the COVID-19 pandemic.

Comparisons of the effects of GVC linkages on Korean exports from sector to sector show that the high tech manufacturing sector contributed more to export growth than low tech manufacturing, and contributions from the service sector to export growth were greater than those of the manufacturing sector. However, by period (former half and latter half of the 2010s), the positive effects of GVC linkages on export growth in the second half of the 2010s were weaker than in the first half. This was attributable to the intensification of geopolitical risks due to the U.S.-China trade dispute that took place in the second half of that period, and to factory shutdowns and logistics disruptions arising from the spread of COVID-19. Meanwhile, our exports were impacted negatively by the COVID-19 pandemic, especially through the effects of backward linkages rather than forward linkages. This can be understood that our exports were affected greatly by worldwide lockdown measures, as Korea heavily relies on overseas input factors for exports.

We can draw the following implications from the above results. First, in order to reduce the transmission effects of adverse shocks through GVCs, it is necessary to enhance substitutability through supply chain diversification. Moreover, as it is more effective for high value added industries, such as the high tech manufacturing industry and the business services industry, to participate in GVCs in order to boost exports, it is required to seek ways to invigorate these industries’ participation. Last, countries led by the U.S. are trying to exclude China and Russia, which are non-market economies, from GVCs and restructure GVCs to center on allies. As this move is expected to greatly change GVCs going forward, there is a need to establish active measures to tackle this.

<Abstract>

 This study analyzes the effect of school starting age on academic achievement from fourth grade to 12th grade, and how the effects change as students advance into higher grades. Since the actual school starting age is determined by an endogenous choice of the parents, such as early entry or postponement of entering school, we estimate the causal effect of school starting age on academic achievement using the mandatory school starting age determined by the school-entry cutoff date, and the date of birth as an instrument for the actual school starting age. The IV estimation results show that older students at school entry have higher test scores in Korean, math, and English in elementary and middle schools. The positive effects are observed even in high school. This study suggests that systems and policies are needed to help younger students learn and adapt to school.

<Abstract>

 Using Dahlquist and Pénasse's (2022) present value approach, this paper examines the predictive power of the Korea-U.S. interest rate differential and real exchange rate for the dollar-carry currency return on the Korean won (KRW). For comparison purposes, the currency portfolio of seven developed countries (G7 average) is also analyzed. First, the variance decomposition of the dollar-carry returns on the KRW and G7 average shows that the risk premium shock has a higher contribution than the interest rate differential shock. Second, the KRW temporarily devalues when the interest rate differential between Korea and the U.S. widens, but then gradually appreciates. Third, the predictive ability of the current level of real exchange rate for the future exchange rate is relatively higher than that of the G7 average.

<Abstract>

  This study examines the impact of Korea's debtor-in-possession (DIP) system on the performance of distressed firms after 10 years of implementation. While the DIP system was introduced in Korea to encourage distressed firms to file for rehabilitation by guaranteeing management rights, there have been discussions on improving the system. The results show that DIP firms have a lower degree of earnings management than non-DIP firms, but there is no significant difference in financial performance. Overall, Korea’s DIP system and related policies may need to be revisited to ensure they achieve their goals.

This is the full version of the paper 「Incidence Analysis of Balance of Trade: The Comparison of Gross, Value-Added, and Income Trade」.

- This is a translation prepared by the Bank's staff

  based on the original Korean text released on December 22, 2022.

- This report is the English version of the Bank of Korea's Monetary Policy Report published on March 9, 2023.

In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

The key empirical findings are as follows. First, rising earnings variance is dominated by rising between-industry variance. While the variance of earnings has been increasing since the Global Financial Crisis, a decomposition of the variance shows a reduction in intra-industry factors, but a hike in inter-industry factors.

Second, a small share of industries (10 out of 72 categories) accounts for most of the increase in the inter-industry earnings variance. More specifically, job growth in the high-wage industries takes place with a relatively larger increase in earnings, while that in the low-wage industries occurs with smaller hikes.

Third, a combination of an increased industry premium gap and changing composition of workers through sorting and segregation leads to the widening of inter-industry earnings variance. This reflects how firms organize themselves in terms of their workforce. However, caution is needed in this process, given that excessive sorting and segregation could result in further escalation of earnings inequality and a possible restriction to labor mobility between industries in the long term.

Lastly, an increase in the employment share of large firms (500 employees or above) coupled with a significant reduction of the size premium in low-income industries also partly contributes to the rise in inter-industry differences in earnings.

  In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

First of all, we did an empirical analysis using Korean data based on the methodology of existing studies. The results show that every 1%p increase in the share of old-age population will lead to a 5.9% drop in the impact on economic growth from government spending. These results are overall consistent with those from previous studies conducted in the U.S. and in OECD countries (including Korea).

Next, previous studies noted that an aging population can act as one of the major transmission channels that weaken the growth effect of fiscal expenditure. This happens through a reduction in the labor supply, the quality of employment, and propensity to consume. This led us to develop a DSGE model that reflects the situation in Korea, and to see if an ageing population weakens the growth effect of fiscal expenditure through the aforementioned channels. It turns out that the cumulative fiscal multiplier fell from 0.78 to 0.73 two years after the proportion of elderly households with a low labor supply, low employment quality, or a weakened consumption tendency increased by 1%p. This means that in Korea, too, an aging population can weaken the growth effect of fiscal spending through the channels mentioned above.

The implications drawn from the findings of this paper are as follows. First, considering that an aging population is likely to require a heavier fiscal burden due to rising welfare expenditures and the weakened growth effect of fiscal expenditure, it is noteworthy that Korea will need to focus its efforts on securing fiscal capacity with the long-term perspective in mind. Second, as any economic downturn with an aging population will require a larger scale of fiscal expenditure than before, it is necessary to be prepared by further strenghtening fiscal soundness preemptively when the economy is in a stable condition. 

This paper calculates the balance of trade using value-added and income-based trade concepts whose importance has recently attracted more attention. We compare them with the traditional gross-based balance of trade and draw policy implications.

A comparison between 2014 and 2020 shows that among Korea’s trading partners, the share of countries with lower value-added or incomes than gains on a gross basis declined, while the share of countries with higher value-added increased. By country, Korea’s trade surplus with China was smaller on value-added and income bases than on a gross basis. However, Korea’s trade surplus with the U.S. was larger on value-added and income bases than on a gross basis. Therefore, if we calculate gains from trade only on a gross basis, we should be mindful that this can be quite different from the gains on a value-added or income basis.

In the meantime, we analyzed the bilateral trade balance of Korea’s major trading partners. We found that China’s trade with the U.S. saw the generation of value-added and income grow in 2020 compared to 2014. This implies that China’s role in global production shifted from simply delivering exports to the U.S. to gaining value-added from the U.S.

The global trade environment is changing rapidly due to changes in the industrial structure after COVID-19, trade conflicts between the U.S. and China, and the war in Ukraine. Under these circumstances, it is necessary to continously monitor the balance of trade, not only on a gross basis, but also on value-added and income bases, which can help assess the gains and losses of trade from multiple perspectives, and then to use them in setting up trade policies. 

<Abstract>

 In the digital transformation, central bank digital currency (CBDC) is to play the following essential roles in improving the stability and efficiency of the monetary system as well as stimulating innovation in the payment system. First, in the face of reduced cash use and reduced cash-related infrastructure such as ATM, CBDC can secure access to payment and settlement services for those highly dependent on cash by expanding infrastructure for digital fiat currency. Second, CBDC can not only promote competition and innovation but also contribute to user data and privacy protection by providing open payment service infrastructure under the increasing market dominance and data concentration following the entry of big tech into the payment service market. Third, amid the proliferation of private cryptocurrencies with high price volatility, CBDC can contribute to maintaining the reliability and soundness of the digital economy's monetary system by serving as a means of payment with public trust and a reserve asset for private cryptocurrencies. Finally, CBDC can reduce the digital divide across generations/regions and improve the efficiency of cross-border payment between countries.

<Abstract>

 I looked into the impact of the introduction of CBDC in Korea on the payment market variables like card fees and social welfare by extending the static model in Li, McAndrews, and Wang(2020). The optimal CBDC remuneration rate, the concept of benefits paid to the transaction volume, was estimated at 59bp which is equal to the transaction cost of cash for consumers. But the optimal rate can be changed by specific designs such as accessibility and protection of privacy. The introduction of CBDC can improve social welfare through two channels. The first direct channel is that they can provide consumers with a better means of payment than cash. The second indirect channel comes from the reduction of card fees and the price of trading goods due to the reaction of the card network to defend their business area from CBDC. The introduction of CBDC lowers the hurdle for card usage, which has a positive effect on financial inclusion but can widen inequality due to the regressive-transfer structure of the benefits.

- This report is the English version of the Bank of Korea's Monetary Policy Report published on December 8, 2022.

  In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

- Inquiries: tel 82-2-759-4143, email bokmpcm@bok.or.kr

  The Bank of Korea is pleased to release the 2020 edition of its Financial Statement Analysis (FSA), published annually since 1960 to provide research on and analysis of the business performance and financial conditions of Korean corporations.

  This edition contains the financial statement analysis report for Korean corporations during 2020, the concepts behind and methods for calculating their major financial ratios, and their financial statements and major indicators, all classified by industry and by company size. In addition, financial statements and statistics from middle-market -enterprises to facilitate accession to more detailed information. To facilitate cross-country comparisons, major financial ratios as used in the U.S., Japan and Germany are also included here, as well.

  For a more in-depth analysis, the full text of this book is available at the Bank of Korea’s website (www.bok.or.kr) and at the website for its Economic Statistics System (ECOS) (http://ecos.bok.or.kr). Furthermore, the related data files can be found at the ECOS website, and major indicators are also available at the ECOS mobile website (http://ecos.bok.or.kr/mobile).

  We hope that this book will be helpful to the government sector in drawing up its economic policies, to companies in framing their business strategies, to financial institutions in assessing their credit risks, and to members of academia in conducting their research. Finally, we wish to express our sincere appreciation to all of the cooperating institutions whose efforts have helped to make this work possible.

                                                                                                                 October 2020

                                                                                                                 Hwang, Sang Pil

                                                                                                                 Director General

                                                                                                                 Economic Statistics Department

                                                                                                                 Bank of Korea

  The Bank of Korea is pleased to release the 2021 edition of its Financial Statement Analysis (FSA), published annually since 1960 to provide research on and analysis of the business performance and financial conditions of Korean corporations.

  This edition contains the financial statement analysis report for Korean corporations during 2021, the concepts behind and methods for calculating their major financial ratios, and their financial statements and major indicators, all classified by industry and by company size. In addition, quartile statistics for frequently used major indicators are also released. To facilitate cross-country comparisons, the major financial ratios as used in the U.S., Japan and Germany are also included here, as well.

  For a more in-depth analysis, the full text of this book is available at the Bank of Korea’s website (www.bok.or.kr) and at the website for its Economic Statistics System (ECOS) (http://ecos.bok.or.kr). Furthermore, the related data files can be found at the ECOS website, and major indicators are also available at the ECOS mobile website (http://ecos.bok.or.kr/mobile).

  We hope that this book will be helpful to the government sector in drawing up its economic policies, to companies in framing their business strategies, to financial institutions in assessing their credit risks, and to members of academia in conducting their research. Finally, we wish to express our sincere appreciation to all of the cooperating institutions whose efforts have helped to make this work possible.

                                                                                                                   October 2022

                                                                                                                   Hwang, Sang Pil

                                                                                                                   Director General

                                                                                                                   Economic Statistics Department

Bank of Korea

This is the full version of the paper 「Asymmetrical Effects of U.S. Inflation Expectations & Term Premium on Korea's Yield Curve」.

A decomposition of the factors behind the increase in the number of workers among the older population shows that the contribution of the employment rate has climbed gradually, with the rise in the senior employment rate being mainly driven by the labor supply (the increase in the labor force participation rate). Despite the poor quality of elderly jobs, primarily due to low wages, the supply of elderly labor has increased significantly.

The empirical analysis shows that the increase in the elderly employment rate has been driven mainly by economic reasons, including a reduction in private income transfers from descendants and a sharp growth in living expenses relative to income from public pensions and assets, as well as by sociodemographic changes, such as the increase in spouses’ employment and improvements in health conditions. The employment rate rose faster in the group with no or low non-wage income from a public pension, private income transfers, or assets.

While the increase in elderly employment is natural considering the downward trend in the economically active population (aged between 15 and 64), an environment must be created where involuntary labor supply is reduced and voluntary supply is encouraged. It is important to broaden the income base for the low-income elderly group that has to work involuntarily, even when supplying labor is difficult for health or other reasons, by increasing social welfare spending and the size of the basic pension. It is also necessary to induce an efficient use of accumulated human capital by creating an environment where seniors can stay longer at their work through re-employment after retirement.

First of all, this paper calculates interest rate sensitivity through analyses of aggregate and micro data. Changes in household loans have a negative correlation with interest rate movements, and their sensitivity to interest rates is higher during a period of rising interest rates. For borrowers, the higher their incomes and loan-to-income ratios, the more sensitive they are to the movements of interest rates. By loan type, mortgage loans are relatively more sensitive to interest rate movements compared to credit loans. However, other factors that can affect interest rate sensitivity such as the degree of financial imbalances and the proportion of floating rate household debt were not considered in these data analyses. Accordingly, this paper also performs a stricter estimation of interest rate sensitivity using a VAR, panel fixed-effect model in order to consider additional determining factors. Our estimation results show that after the COVID-19 pandemic, the interest rate sensitivity of household debt has risen higher than before. Moreover, if interest rate levels are high, rate rises of the same degree have greater effects in terms of curbing the increase in household loans. By category, the interest rate sensitivity of high-income, highly-leveraged and younger borrowers is estimated to be higher than that of counterparts.

With respect to the estimation of interest rate sensitivity, it is judged that the policy rate hikes which started from mid-2021 not only contributed to reining in household debt growth but also had no small impact on the mitigation of financial imbalances which had been intensified. In this process, however, as for vulnerable groups such as low-income families, the elderly and vulnerable borrowers, whose interest rate sensitivity is relatively low, the effect of curbing growth in borrowing is not so great even if interest rates rise, and their burden of debt repayment could instead grow more significantly. Therefore, in times of intensifying interest rate pressure, the delinquency risk of vulnerable groups could increase, and the asset quality of non-bank financial institutions that extended loans largely to these groups could be undermined. Therefore, while continuing to make policy efforts to ease the buildup of household debt, we need to prepare for the possibility of mounting credit risk among vulnerable groups. 

  In case of any inconsistency, the original version in Korean will prevail.

- Data for figures are available in the attached Excel file.

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