The Operation of Macroprudential Policy Measures : The Case of Korea in the 2000s

This paper draws implications for the effective operation of an MaPP framework based on the experiences during the 2000s of Korea. Korea had in fact operated several MaPP measures, but could not shield itself from the impacts of the global financial crisis in 2008 because of a new type of financial imbalance accumulated in the 2000s. The implications are summarized with respect to the objectives, scopes, and other elements of the MaPP policy framework: that the objectives of MaPP measures should be set in the macroprudential dimension rather than from a microprudential perspective; that the MaPP measures should be devised in ways that reduce the possibility of regulatory arbitrage or minimizes the boundary problems; that MaPP measures in the forms of ratio regulations may need to be supplemented, with for example caps on borrowings or debts; that when revising MaPP measures it will be very important to maintain their initially intended purposes; that MaPP measures need to be flexible to incorporate structural changes in the financial and real sectors preemptively; that, in the case where several MaPP measures are applied simultaneously, consideration should be given to the issue of their coordination and the interrelationships among them