Ensuring the stability of Korea’s financial system has been an important goal of the BoK. The competence for maintaining financial stability through the appropriate micro-prudential measures has, however, always rested with the government and thus the BoK was not able to implement a financial stability policy separately. In the wake of the 2008 global financial crisis, however, this situation has changed and led to the adoption and development of macro-prudential policies by the BoK. This chapter looks at how macro-prudential policy is implemented in Korea.

The BoK has developed three monetary policy tools, to wit, the lending facility, the required reserve system, and open market operations, which have led to changes in its assets and liabilities. The BoK uses these tools to influence intermediate targets, such as the money stock and interest rates, and to achieve price stability as its final goal. It has also added to its existing toolbox a standby facility, which has gained in importance under the current interest-rate-setting monetary policy framework. This chapter looks at the main components of the assets and liabilities of the BoK, and examines its credit and monetary policy tools.

Inflation targeting was a very important operational tool in stabilising the inflation rate in many countries when the inflation rate was running high. Korea was no exception to the deployment of this tool. In the past, Korea suffered from relatively high inflation rates and the introduction of inflation targeting contributed to stabilising inflation through the anchoring of the inflation expectations of private agents. The BoK set the target at 3 per cent and focused its operations on reducing inflation to below the target and thus the inflation targeting operations carried out by the BoK were asymmetric. This chapter conducts an assessment of the inflation targeting that Korea has experienced in the aftermath of the 1997 currency crisis.

As Korean growth slows down and interest rates fall close to zero per cent, the limits of the existing interest rate-based monetary policy become apparent and unconventional policy tools and instruments need to be newly developed. Against this backdrop, this chapter looks at the future challenges which will confront the BoK, and examines how the implementation of monetary policy can be improved by incorporating tools such as quantitative easing, forward guidance, and credit easing, in order to cope with the projected low growth and low inflation.

Chapter Five discusses two things. First, it looks at the aftermath of the Futian Rebellion and at Xiang Ying’s efforts to calm things down. Xiang’s efforts were soon reversed by the arrival of the “three person group,” which implemented the radical new line coming out of the Comintern. Zhou Enlai would later try to control the sufan movement, but new leadership (Bo Gu) and the pressing need for soldiers and money would reignite efforts to suppress so-called counterrevolutionaries. Second, the chapter looks briefly at the Eyuwan Revolutionary Base Area, north of the Yangzi river, to show that the same logic of sufan applied there as well.

Up to this point the book has followed the development of the Donggu Revolutionary Base Area on the one hand and Mao’s efforts to build a party-army on the other. In Chapter Four these two strands of the story come together violently. Mao is determined to purge the southwest Jiangxi party organizations of all landlords and rich peasants. Soon an “AB (anti-Bolshevik) Corps” is “discovered,” even though it is nonexistent. Hundreds of people (Communist Party members) are tortured and killed. The culmination of this campaign is the Futian Rebellion.

The Conclusion reviews the arguments made in the previous chapters and argues the importance of the Donggu Revolutionary Base Area for understanding the Chinese revolution. It is impossible to ignore the conflicts between the local interests of the Donggu revolutionaries and Mao’s efforts to create a national revolution. It is also impossible to ignore the conflict between the Communist movement’s need for soldiers and money and the unwillingness of local society to provide either in sufficient quantity.

Monetary policy in Korea is implemented by, and is the responsibility of, the Bank of Korea. More precisely, it is the Monetary Policy Board (MPB), an autonomous administrative agency modelled after the Board of Governors of the Federal Reserve System in the United States, which determines monetary policy through collective decisions. This monetary policy system was only established when the Bank of Korea became independent in 1998. This chapter looks at the history, organisation and decision-making structure of the BoK and its relationship with the Korean government.

This chapter examines the evolution of monetary standards in Korea, through which commodity money is replaced by paper money, and then paper money by electronic and digital payment instruments.

Chapter Two lays out the history of the Donggu Revolutionary Base Area. It emphasizes some of the unique characteristics of this place – its relative isolation nestled in the mountainous countryside of eastern Ji’an county, the close ties among a number of classmates, and the ties of kinship that made their alliance with local bandits possible. This core leadership group was able to stay together even after their original leader, Lai Jingbang, was killed. Lai was replaced by Li Wenlin, a graduate of Whampoa Military Academy, who led the Donggu Revolutionary Base area to expand to cover some 24 townships in the area.