Monetary shocks on the Korean stock index: structural VAR analysis

This paper investigates the impact of monetary policies in 3 countries (the Republic Korea, China and United States) on Korean stock markets (e.g., KOSPI), using a structural Vector Autoregression. We find that positive shock Money Supply (M2) all is to but degree response differs from one another. Surprisingly, KOSPI was largest China’s M2, reflecting Korea’s trading partner. From responses industrial production CPI, we speculate possibility liquidity trap not ruled out some periods. also responded negatively policy rate while it rarely shocks US federal fund rate. consider did affect economic activities as main tool. determination fully free thus any substantially mitigated KOSPI.