Quantitative Easing

It has been pointed out that the Fed’s exit strategy will result in an inflow of more foreign funds into Korea and an increase in its exports. 

The Hyundai Research Institute published a report on September 22, titled the Exit Strategy of the US and Its Ripple Effect on the Korean Economy. It said in the report, “The Fed’s exit strategy, which will be in progress with the recovery of the US economy, is expected to take the three steps of the withdrawal of the quantitative easing, interest rate normalization and the disposal of mortgage-backed securities.” It added that the contractionary monetary policy would be going along gradually over an extended period of time, allowing for the pace of the economic recovery and its impact on the global market. 

The institute predicted that the change of the policy would have positive effects on the Korean economy. “Korea is enjoying more robust macroeconomic conditions these days than the other emerging economies, and thus more foreign funds are likely to flow into Korea, and its stock market will be able to benefit from them with individual investors’ sentiments being improved with time,” it said, continuing, “At the same time, Korea’s exports to advanced countries like the United States will record substantial growth and the exports of intermediate goods to emerging economies will enjoy the same trend as China and the ASEAN nations increase their exports.”

It also forecast that the slowdown in quantitative easing will signal the end of the current financial crisis and the beginning of a global economic rebound. “The exit strategy is not expected to be drastic with the G20 countries against it and, therefore, market instabilities are likely to be limited on the part of emerging countries,” it added.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution