Contents of the Bank of Korea’s Monetary Policy Instruments and Suggestions for Improvement

The Bank of Korea was founded on June 12, 1950 under the Bank of Korea Act. The primary purpose of the Bank, as prescribed by the Act, is the pursuit of price stability. The Bank sets a price stability target in consultation with the Government and draws up and publishes an operational plan including it for monetary policy. For this purpose, the Bank carries out the typical functions of a central bank: issuing banknotes and coins, formulating and implementing monetary and credit policy, serving as the bankers’ bank and the government’s bank. Besides, the Bank of Korea undertakes the operation and oversight of the payment and settlement systems, and manages the nation’s foreign exchange reserves. In addition, it conducts supervisory functions for financial institutions as stipulated in the Bank of Korea Act. This paper deals with objectives of monetary policy, monetary policy framework, and monetary policy instruments in turn, and finally suggests improvement suggestions for monetary policy instruments.