Findings from Bank of Korea Update Understanding of Macroeconomics (Transmission of monetary policy in times of high household debt)

2020 MAY 14 (NewsRx) -- By a News Reporter-Staff News Editor at South Korea Daily Report -- A new study on Economics - Macroeconomics is now available. According to news reporting originating in Seoul, South Korea, by NewsRx journalists, research stated, “This paper explores whether the degree of household indebtedness can affect the effectiveness of monetary policy. We take an interacted panel VAR approach, using a panel of 23 countries, thereby obtaining several interesting findings, such as the responses of consumption and investment to monetary shocks are stronger in high levels of household debt.”

The news reporters obtained a quote from the research from the Bank of Korea, “Furthermore, such responses become larger in a contractionary monetary policy stance rather than in an expansionary one, which suggests that monetary policy shocks have asymmetric effects. We have also found that monetary policy has a relatively larger impact in countries with higher share of adjustable-rate loans. Finally, we have found that when a country is in a high-debt state and in a contractionary policy stance, monetary policy is more powerful in countries with a higher share of adjustable-rate loans.”

According to the news reporters, the research concluded: “We conjecture that these findings support the presence of a cash-flow channel with respect to the transmission of monetary policy in a high household debt state.”

For more information on this research see: Transmission of monetary policy in times of high household debt. Journal of Macroeconomics, 2020;63():103168. Journal of Macroeconomics can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of Macroeconomics - http://www.journals.elsevier.com/journal-of-macroeconomics/)

Our news correspondents report that additional information may be obtained by contacting H. Lim, Bank of Korea, 39 Namdaemun Ro Jung Gu, Seoul 04531, South Korea.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jmacro.2019.103168. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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