Korea's Monetary Policy Stance May Have Been Too Accommodating.
The natural interest rate is the real interest rate that matches the economy's long-term balance. It moves with the potential GDP growth rate. By comparing real and natural interest rates, we can determine the best long-term monetary policy. A study estimated these rates in Korea and the US using a new model. The results show that Korea's real interest rate has been lower than its natural rate since the 2000s, suggesting a very accommodating monetary policy.