This issue has attracted much public attention in Korea, in fact, as adding financial stability to our bank’s explicit objectives, in addition to price stability, has been one of the central issues related to the recent bill revising the Bank of Korea Act, which remains pending in our National Assembly. How to proceed in this regard is unclear, however.
In particular, there is controversy about the policy instruments that the central bank can use to ensure financial stability. One critical question here is whether monetary policy, the key policy tool of the central bank, should be used to preemptively tackle developing financial imbalances.