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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Aug 20 2014

Bank of Korea Rate Cut May Boost Consumer Debt More Than GDP

ECRI has just updated its Korean Long Leading Index (KOLLI). The value of this index lies in its ability to anticipate cyclical turns in the economy before conventional leading indexes.

With GDP growth slowing to just 0.6% in the second quarter, the Bank of Korea (BoK) cut its benchmark interest rate last week in an effort to encourage growth by lowering borrowing costs. This comes just a month after the Korean government announced a $40 billion stimulus package aimed at lifting the housing market. Still, in a nation where household debt has more than doubled in the past decade, many are concerned that these fiscal and monetary policy actions will serve to worsen indebtedness, potentially limiting the actions’ effectiveness.

ECRI’s latest update to the KOLLI provides insight into the trajectory of Korean economic growth, indicating whether the fiscal and monetary stimuli can provide lift for the sputtering economy.

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