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The Operation of Macroprudential Policy Measures: The Case of Korea in the 2000s

Author

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  • Jong Kyu Lee

    (Economic Research Institute, The Bank of Korea)

Abstract

This paper draws implications for the effective operation of an MaPP framework based on the experiences during the 2000s of Korea. Korea had in fact operated several MaPP measures, but could not shield itself from the impacts of the global financial crisis in 2008 because of a new type of financial imbalance accumulated in the 2000s. The implications are summarized with respect to the objectives, scopes, and other elements of the MaPP policy framework: that the objectives of MaPP measures should be set in the macroprudential dimension rather than from a microprudential perspective; that the MaPP measures should be devised in ways that reduce the possibility of regulatory arbitrage or minimizes the boundary problems; that MaPP measures in the forms of ratio regulations may need to be supplemented, with for example caps on borrowings or debts; that when revising MaPP measures it will be very important to maintain their initially intended purposes; that MaPP measures need to be flexible to incorporate structural changes in the financial and real sectors preemptively; that, in the case where several MaPP measures are applied simultaneously, consideration should be given to the issue of their coordination and the interrelationships among them.

Suggested Citation

  • Jong Kyu Lee, 2013. "The Operation of Macroprudential Policy Measures: The Case of Korea in the 2000s," Working Papers 2013-1, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1301
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    Citations

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    Cited by:

    1. Ghosh, Atish R. & Ostry, Jonathan D. & Qureshi, Mahvash S., 2018. "Taming the Tide of Capital Flows: A Policy Guide," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262037165, April.
    2. Eric Wong & Andrew Tsang & Steven Kong, 2016. "How Does Loan-To-Value Policy Strengthen Resilience of Banks to Property Price Shocks - Evidence from Hong Kong," International Real Estate Review, Global Social Science Institute, vol. 19(1), pages 120-149.
    3. Marcin Czaplicki, 2022. "Measuring the restrictiveness of (macro)prudential policy: the case of bank capital regulation in Poland," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(3), pages 322-338, September.
    4. Lo Duca, Marco & Hallissey, Niamh & Jurca, Pavol & Kouratzoglou, Charalampos & Lima, Diana & Pirovano, Mara & Prapiestis, Algirdas & Saldías, Martín & Tereanu, Eugen & Bartal, Mehdi & Giedraitė, Edita, 2023. "The more the merrier? Macroprudential instrument interactions and effective policy implementation," Occasional Paper Series 310, European Central Bank.
    5. Eric Wong & Andrew Tsang & Steven Kong, 2014. "How Does Loan-To-Value Policy Strengthen Banks' Resilience to Property Price Shocks - Evidence from Hong Kong," Working Papers 032014, Hong Kong Institute for Monetary Research.
    6. Péter Fáykiss & Alexandr Palicz & János Szakács & Márton Zsigó, 2018. "Experiences of Debt Cap Regulations in Hungarian Retail Lending," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 17(1), pages 34-61.

    More about this item

    Keywords

    Macroprudential policy; Financial regulation; Liquidity ratio regulation; Loan-to-value limits; Debt-to-income limits; Financial imbalances;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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