Inflation Dynamics in the Post-Crisis Period: Korea's Experience

Abstract

This note presents preliminary evidence of recent structural changes to inflation dynamics in Korea, and sets out some possible causes and policy implications. First, the estimated Phillips curve changed significantly during 2011–12, which helps to better explain the prolonged low inflation in the post-2012 period. Second, various measures of trend inflation are estimated to have fallen to about 2% in the post-2012 period from about 3% before 2011, which provides further evidence of changes in the inflation process during the recent past. Third, we focus on the role of changes in economic structures following the global financial crisis in driving changes in the inflation dynamics in the post-2012 period, and discuss some implications for monetary policy.

Full Publication: Inflation Mechanisms, Expectations and Monetary Policy

Keywords: Inflation dynamics, Phillips curve, trend inflation, changes in economic structures, monetary policy

JEL Classification: E31, E52