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Journal of Economic Integration 2024 March;39(1) :178-197.
DOI: https://doi.org/10.11130/jei.2024011
Monetary Policy, Homeowner Balance Sheet Channel, and Integration: A Lesson from South Korea during the 2000s

Yejin Kim 1 and Wonmun Shin 2

1Department of Economics, Yonsei University, Republic of Korea
2Department of Economics, Sejong University, Republic of Korea
Corresponding Author: Yejin Kim ,Email: kimyejin87@yonsei.ac.kr
Copyright ©2024 Journal of Economic Integration
ABSTRACT
We estimate the household consumption function using the Korean labor and income panel data (2001-2012) with the instrument of the housing supply to figure out the homeowner balance sheet channel of monetary policy in South Korea during the 2000s and the early 2010s. We find that monetary policy has a significant effect through both the wealth and collateral effects comprising the homeowner balance sheet transmission channel. Furthermore, the wealth effect shows a significant result across all income quantile groups, whereas the collateral effect is significant in the low- and middle-income quantile groups. This finding implies that the lower-income groups are more sensitive to changes in the value of real estate assets. Based on the analysis, we derive policy implication that socio-economic integration will be enhanced under the considerately targetted monetary policy, which is a lesson for the emerging or developing countries whose current economic situation is similar to the past South Korea.

JEL Classification
E21: Consumption; Saving; Wealth
E52: Monetary Policy
E61: Policy Objectives; Policy Designs and Consistency; Policy Coordination
R20: General
Keywords: monetary policy | homeowner balance sheet channel | wealth effect | collateral effect | economic integration | panel regression
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