The Effectiveness of Credit Policy: Evidence from the Republic of Korea

Abstract

In response to the global financial crisis and subsequent Great Recession, central banks embarked on a variety of unconventional measures. Among others, credit policy has been widely employed in many advanced economies. However, credit policy is far less understood than unconventional monetary policy by both policy makers and academic scholars. This paper sheds new light on what credit policy is, how it differs from other central bank policies, and what its risks and limitations might be. In particular, I examine whether credit policy has been effective in stimulating the real economy in the Republic of Korea.