To read this content please select one of the options below:

Money stock determination process and money multiplier: case of South Korea

Serdar Ongan (Department of Economics, St. Mary’s College of Maryland, St. Mary’s City, Maryland, USA)
Ismet Gocer (Department of Economics, Adnan Menderes University, Aydin, Turkey)

Journal of Financial Economic Policy

ISSN: 1757-6385

Article publication date: 22 February 2021

Issue publication date: 28 June 2021




This study aims to re-examine the money stock determination process for South Korea under the assumption of the existence of potential asymmetric (non-linear) relations (a mechanism) between the money stock and the monetary base. Because, the true and detailed diagnosis of this mechanism is crucially important for the Bank of Korea’s (BOK)’ monetary policy, as this country has been adopting an inflation targeting policy (ITP) for a long-time.


This paper applies the non-linear autoregressive distributed lag model by Shin et al. (2014). This model separates the original series of the monetary base into their increases (+) and decreases (−). The increases (+) and decreases (−) done by the BOK correspond to expansionary and contractionary monetary policies, respectively, in this study.


The empirical findings are two-fold. First, the money stock determination process in Korea has a non-linear (asymmetric) structure. This means that increases (+) and decreases (−) in the monetary base have asymmetric (different) impacts on money stock. Second, the BOK’s only expansionary monetary policy exhibits exogenous nature money stock determination with an almost stable money multiplier. These findings may help the BOK to take preventive precautions in its monetary policy implementations.


This study with its methodology may help the BOK to take preventive measures in its ongoing ITP proactively.



Conflict of Interest: The authors confirm that this work is original and has not been published elsewhere nor is it currently under consideration for publication elsewhere.


Ongan, S. and Gocer, I. (2021), "Money stock determination process and money multiplier: case of South Korea", Journal of Financial Economic Policy, Vol. 13 No. 4, pp. 479-490.



Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

Related articles