The Role of Money and Banking in Monetary Policy: Does It Matter Quantitatively for the Korean Economy? (in Korean)

The novelty of the model is the embedding into a variant of the standard monetary general equilibrium framework of a micro-founded banking sector motivated by Goodfriend and McCallum (2007, GM henceforth), which allows for the presence of an external finance premium as a source of business fluctuations. A closed economy DSGE model is implemented quantitatively by applying the Bayesian likelihood approach, with calibration based on the Korean data. The presence of the external finance premium in the model turns out to matter quantitatively for the transmission of monetary policy, due to the potential for amplification of the real effects of expansionary monetary policy through a countercyclical banking "accelerator." Meanwhile the magnitude and persistence of the real effects are relatively weaker than those in Christiano, Eichenbaum and Evans (2005) and others, owing to the presence of a banking "attenuator" at work to attenuate the accelerator effect as in GM (2007). As another experiment, the desired monetary policy responses to a positive goods productivity shock and a negative collateral shock are compared to what is required when a central bank does not consider the effect of the presence of banking. The results reveal that, in order to stabilize modest deflation, monetary policy needs to be more accommodative in response to each shock than what is implied in the model without a banking sector. Finally, among the relative welfare performances of alternative monetary policy rules that include financial variables such as credit aggregates and asset prices as independent arguments in a standard Taylor rule (including output gap), we find that the central bank invariably attains a lower level of loss, and thereby stabilization gain, when responding positively to credit aggregates than it does when responding to other financial variables. The evidence provides renewed insight on the potential benefits of considering credit (monetary) aggregates in the interest rate policy actions.