The Korean Economic Forum
Full Employment Mandate for Bank of Korea
Soyoung Kim (Seoul National University) and Yeil Lee (Seoul National University)Year 2021Vol. 14No. 2
This paper reviewed the issues related to ‘adopting employment mandate as monetary policy objective in Korea’. Considering the possibility of increasing inflationary pressure after the COVID-19 pandemic and restoring inflation-output trade-off, and the recent surge in asset prices and credit, there is a concern that employment mandate will lead to excessive stimulus in the economy, resulting in a sharp decline in welfare by rapid inflation and financial instability. Limitation of labor statistics, discrepancy between output and employment, and an increase in policy discretion can add some difficulties. The Bank of Japan and European Central Bank have not introduced the mandate yet. At this point, rather than introducing the employment mandate, it is worth taking the time to review this issue while monitoring key economic conditions such as inflation pressure,inflation-output trade-off growth-inflation relations, and financial stability and watching other major central banks’ positions on the issue. If employment mandate should be introduced now, it is desirable to first consider introducing it as a hierarchical responsibility that prioritizes price stability so as to minimize side effects.