Inflation Targeting in Korea: An Empirical Exploration

Abstract

The revised Bank of Korea Act states that the primary goal of monetary policy is price stability, suggesting that monetary policy will move toward an inflation-targeting framework. The paper explores some of the practical aspects of this move, including such issues as the predictability of inflation, the definition of the price index, the inflation target`s time horizon, and the width of the inflation-target bands. On balance, the empirical evidence suggests that Korea is likely to be successful in adopting an inflation-targeting framework over the medium term.

Keywords: Inflation Targeting, Korea

JEL Classification: E5, E3, C5