Korean Flow-of-Funds and Policy Evaluation: Comparison between Monetary Stabilization Bonds and Korean Treasury Bonds
This study evaluates the authorities' monetary policies on a "from-whom-to-whom" basis for Korean FOF tables and using the input–output analysis method. In order to compare the monetary policy of the central bank with that of the government, net induced investments (NII) are calculated and decomposed. The notable findings of this study are as follows. After the Asian financial crisis in 1997, negative investments by the financial sectors, induced by the central bank, increased drastically. The sign of total NII finally turned negative during the period of credit card distress. However, the global financial crisis in 2008 was a turning point, in which the NII of the financial sectors, and especially banks, switched to being positive. In contrast, net investments induced by the Korean government have shown a steady increase. In addition, other than in 2008, the effects of changes in the government portfolio have been positive and constant.
In addition, the NII of a combination of financial instruments are used to analyze monetary or fiscal policy simulations. This method will provide useful indicators for policy authorities when needing to select optimal amounts and types of financial instruments for open-market operations.
Keywords: monetary policy evaluation, flow-of-funds, asset-liability-matrix
JEL classification: C67, E01, E58, G38
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