Korea, Republic of, (South Korea) had a long period of more or less effective monetary targeting, after an initial period of exchange rate fixing with very limited monetary policy; but monetary targeting became increasingly difficult and it switched to inflation targeting in 1998.
| Years | Targets and attainment | Classification |
| 1974-8 | currency fixed to USD within narrow margins set by central bank, devaluation late 1974; official concerns include growth, balance of payments and prices; monetary policy operated mainly through reserve requirements and credit ceilings; monetary growth affected by fiscal deficits; monetary targets (M1) from 1976 overshot each year; banks highly regulated | augmented exchange rate fix AERF |
| 1979-87 | 1980 currency devalued, peg switched to basket, more depreciation; then currency managed with reference to basket with eye to competitiveness and balance of payments, more flexibly from 1985; converging monetary targets (mostly point targets, M2 from 1980), sometimes revised during year, met 2 years and near-met 2 years out of 9; more emphasis on lowering inflation; some gradual financial deregulation, with movement towards indirect monetary instruments; government’s stakes in banks sold 1982 | loose converging monetary targeting LCMT |
| 1988-1995 | monetary targets (3% or 4% range) met 7 years out of 8; exchange rate managed, with increasing flexibility from 1990; further financial liberalisation with growing use of OMOs as main monetary instrument | full monetary targeting FMT |
| 1996-7 | 1996 monetary target overshot, switch to new aggregates then monetary targeting downgraded | loosely structured discretion LSD |
| 1998-2023 | formal narrow inflation targets from 1998 attained or nearly attained 24 years, but undershot 2015 and overshot 2022, out of 26 years, with medium/long-term inflation expectations remaining broadly anchored in both 2015 and 2022; exchange rate now floating, with occasional interventions; M3 targeted in secondary role till 2000, then monitored; monetary policy operated via call money market rate; more use of macroprudential policies from 2008; rises in central bank independence, transparency and IT arrangements; strong medical, also fiscal and monetary, response to Covid-19; pressure on inflation from Ukraine war disruption 2022-23 | full inflation targeting FIT |
Selected IMF references: RED 1974 p52; RED 1977 pp10, 12; RED 1982 pp23-4, 68; RED 1984 Supplement 1; RED 1985 pp29-30; RED 1986 pp26-7, 33; RED 1988 pp31-2, 38; RED 1991 13-18, 21-3; RED 1993 pp19-20; RED August 1994 p27; BP 1995 chs II, III; SI 2001 pp18-19; SR 2001 pp33,35; SR 2006 p10; SR 2007 pp8-10; SR 2008 pp14, 20; SR 2011 pp14-18; SR 2018 pp12-13; SI 2018, pp4-15; SR 2019 pp16-21; SR 2022 p10; SR 2023 p32.
Additional sources: Bank of Korea (2012); Kim and Kim (2009); Kim and Park (2006); Bank of Korea, Monetary Policy Report 2024.3, p19.
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Monetary Policy Frameworks 