NABO Economic Trends & Issues (Issue No. 64)
Ⅰ. Economic Trends
The Korean economy has recently been showing a steady increase in exports with improved global demand and increased export unit prices, but the recovery appears to be weakening as the value of completed construction dropped to a record low and the construction market deteriorates. Consumer prices increased slightly by 1.0% YoY due to reasons such as lower agricultural and livestock prices, while the Korean won-to-Dollar ratio continued to decline for four consecutive months, recording a monthly average of 1,067 won against the dollar, 19 won lower than the previous month. The treasury bond interest rate, which was 9bp higher than the previous month at 2.19%, exhibited an increasing trend affected by reasons such as the interest rate rise in the government bonds of advanced economies as well as the economic recovery in Korea and abroad.
Ⅱ. The Impact of US Monetary Policy on Investment by Foreign Capital in Korean Securities
US monetary policy affects investment by foreign capital in Korean securities in terms of the interest rate gap between Korean and US as well as changes by the US to the liquidity injection method. The influence of the interest rate gap between the two countries has become more significant, especially since the advent of the global financial crisis. As the US is pursuing more aggressive monetary tightening measures, there is an increased risk of a foreign capital flight. Therefore, the interest rate gap should be closely monitored so that it does not widen excessively. Also, given that the US is also pursuing quantitative tightening, the size of the tightening measures should be carefully monitored along with US government bond trends.
Ⅲ. A Global Analysis of the Impact of Introducing Measures against Climate Change
Many countries are pursuing financial support schemes and regulations to address climate change, and the idea of decoupling income increases from environmental impact is recognized as a crucial source of motivation. Recently, leaders of the G20 agreed on some policy recommendations for a low carbon economy, and Korea ranks second in terms of diverse financial support schemes and regulations out of the 34 OECD member countries. In this respect, this report compared the decoupling trend among OECD countries, and conducted an impact analysis of country-specific financial support schemes and regulations. As a result, Korea was found to be at an early stage of decoupling, while the introduction of measures to address climate change was expected to have a positive impact on economic growth and environmental improvement. According to the analysis, in order to achieve a low carbon economy, it is important to consider the synergy effect between measures as well as introduce and implement measures to address fossil fuel usage when introducing and implementing climate change measures.