; t g'R3g;:'tI' ˘) ll ~~~~~~~~~~R E S T R ! C Tr E D Ii ~~~~~~~~~~~~~Pr Pir' J@e4l Report No. FE- 55a , MT 34 This report was prepared for use within the Bank and its affiliated organizations. Thev do not acceot responsibilitv for its; accuracy or completeness. The report may not be published nor may it be quoted as representing their views. TMTrPlATITCNhAT. BANK FOR RECONSTRUCTION AND DEVELOPMENT IMTETN AT TCNAT DFV.ELOPMENT ASSOCIATION THE ECONOMY OF KOREA (in eight volurnes) VOLUME VI PRICES, MONEY AN:D CREDIT June 1.7, 1966 F'ar East Department M:%-j CIJRRENCY EQUIVALENTS U.S. $1.00 Won 270 Won 1, 000 U. S. $3. 70 Won 1, (000, 000 U.S. $3, 703. 70 This Report is based on the findings of a Mission which visited Korea in November and December, of 1965. The Mission was composed of the following menbers: Ravi I. Gulhati Chief Cornelis J. A. Jansen General Economist Oktay Yenal. Money & Public Finance Alexander Nowicki Industry Ivi. Shafi Niaz (FAO) Agriculture W. F. Doucet (FAO) Fisheries Robert Ward. (Arthur D. Little) Industry Remedios Crofoot Secretary The present, Annex was prepared by Oktay Yenal. TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ............... i - ii V. Prices, Money. Credit 1.. . A. Tntroduction . . B. Pric~~--s. - - - - ---1. ..... ..... . D. Mendl Its 7)ner.m,.nnV& 7 E. Stabilization Progr--s - - 12 F. Laking ar.d Credit .. . . G. =.eT Rates 1 LIST OF TAELES Page No. Table 1. Prices and Money, 1960 - 1965.......... 2 2. Components of Wholesale Price Index, 1960-1965 .. ....... .... . 3. Velocity of Money......... .............3 4i. Money Supply 1956-1965................. 7 5. Determinants of Money Supply 1956-1965. 8 6. BOK Monetary Liabilities, Money and Total Liquidity 1956-196....................... 10 7. Determinants of BOK Monetary Liabilities 1956-1964 .................. 11 8. Loans and Discounts of Banking Institutions 1960-1965 ................. 13 9. Loans and Discounts Outstanding by Industry 1958-1964 ..... .. ... 14 1C). Sources of Funds For Commercial & Specialized Banks 1958-196h ............ 15 11- Price indices 19--19965 ............... . 18 12'. lMoney Supply and Principal Factors Affecting It ........ 19 SUIi4MLY AND CONCLUSIONS 1. The financial system of Korea centered around the Bank of Korea, the specialized banks and the commercial banks has played an important role in recent economic developments. On the one hand, through their impact on moneyr supply, these institutions have been the focus of atten- tion during the period which was marked by severe inflation. On the other hand, in their capacity of financial intermediaries, the banks have played an important part in the allocation of investible funds. 2. The economy has experienced inflation since the Korean lJar with the exceo)tion of two years only - 1958 and 1959. During the 13 years from L952 to 1965 prices multiplied by more than 8-fold. Although the rate of inflation since 1960 was, on the average, lower than the rate before 1957, it nevertheless was considerable, particularly in 1963 and 1964 when price increases were 21 pnere-nt and 35 nprcent resDpctively. Since the second half of 1964 inflation has s'lowed down very considerabl;y to less than 10 percent per annuim. 3.* The price increases in recent years are not clearly correlated with the trend in money supply and growth in real income. The velocity of m..oney waSa very nAst.able. T,.uerea- 'hle rap-j- mon*a. r ef, ransion f-lo-M ing the May Revolution in 1961 was absorbed by a fall in velocity, having little impact on prices, the rapid price increases in 1963 and 1 when monetary expansion was modest implied a rising velocity. The fall in velociUy i11n LU.61 auld ħL19U2 car, LIe explained parLy Ib the laJng response in spending behavior after two years of relative stability, and partly b;y the strict control measures adopted by the revolutionary government. The excess liquidity accumulated during these years started affecting prices at the beginning of 1963. inflationary expectations were probably res- ponsible for elevating velocity to the high level it reached in 1964. It was due to this characteristic of the income velocity that the stabili- zation programs which were successful in controlling the increase in liquidity in 1963 and 19604 failed to achieve price stability. 4. Although there is still some control on prices, it seems that whatever excess demand there may exist is not significant. Even some downward revision of price expectations might have occurred as the slight fall in velocity in 1965 indicates. Nevertheless, an atmosphere of stability has not yet been established. Even official policy is geared to a price rise of 8-10 percent. The Mission considers this degree of inflation too high and would counsel an increase in the money supply which is not more than 5 percent higher than the expected growth in real income. 5. Throughout the post war period, the interest rate structure of the banking system was artificially low. In many years the price rise was so high, that interest rates were really negative. On the one hand, this l-ed to less than optimal funds allocation by the banking system and on the other hand it was responsible for a large unofficial or "curb" money market where interest rates were 60-80 percent per annum. At the (ii) beginning of October, 1965, the Government raised the ceiling on interest rates on deposits, :Loans and discounts of the banking institutions suo- stantially. Rates on savings deposits were raised to 30 percent from their previous level of 9-15 percent, and the rates for ordinary com- mercial loans and d:Lscounts to 26 percent from 16-18.5 percent. At the same time, :Lending rates of specialized banks were also increased in varying degrees. Following the reform, the increase in time and savings deposits gained momentum. The value of these deposits has almost doubled in the five months from the end of September 1965, to the end of February 1966. Some of these funds may have been transferred from the curb market. However, it is also possible that higher real returns on such deposits - not only due to the interest reform, but also due to relative price sta- bilitv - have encouraged savings. With price increases of 6-7 percent, the r(eal interest rate on ordinary loans comes to about 20 percent. Thi, looks like a high cost of capital under normal conditions. However, so far, these high rates have not altogether eliminated excess demand for loA ns. For the- tjmim b-ing; it may be wise to watch developments care- fully rather than introduce new changes. V. PRICES, MONEY, CREDIT A. Introduction 1., The banking system of Korea is made up of the Bank of Korea (130K) which is the central bank of the country, the spe- cialized banks ior financing industry and agriculture. and the commercial bank's. The Government owns the Bank of Korea and the Korean Reconstrimtion Bank (KR]3) and has ncntrolling interests in all other bariks. 2. The financial system centered around these institutions has played a key role in the recent histo y of the Korean economy. On the one hand, through their effect on monetary developments these! ins.ti+utions have been the focu --- --te o -uig h period marked by serious monetary instability and price inflation. the other hand, in their capay--4- as financial inter4mediaries, the banks have played an important role in the allocation of funds an.d perha,ps aals-o on t-he 4tot4al of__ 4avgs These4. -wapct 1wl be discussed separately. 3. The Korean economy has experienced inflation since the Korean War with the exception oI two years only - 1958 and 1959. During the 13 years from 1952 to 1965, wholesale prices multiplied by more than 8-fold. During 1960-65 the rate of price increase wals about 17% per annum. The analysis below will focus on develop- ments since 1960. 4. Various indicators of price level changes during the period since 1960 are shown in the following table (Table 1) to- gether with the money supply figures for corresponding years. The price iindices shown have moved in a slightly different fashion. The CGP implicit deflator rose faster, and the consumer price index slower than the wholesale price index. However, the general picture conveyed by these indicators is the same: since 1960, prices have more than doubled. The price increase was fastest during 1963 and 1964. According to the wholesale price index, the price level in- creased by an armual average of 11 percent from 1960 to 1962, by an arnual average of 27 percent from 1962 to 1964 and by about 10 per- cent from 1964 to 1965. KOREA MAONEY AND PRICES. 1960-1965 6FWAGE -S I-N MANUFACTURING 5(THOUSANDS OF WON PER MONTH)11 WHOLESALE~ PRICES. I 200!- _ _I-7'7 \4* ALL COMDTE 150[ - 1 ~~~~~~~~~~........L "'~~ALL COMMODITIES (Excluding an,i'ns)1 luu~ ~ ~ ~~~~I .... I 9 0k.I _ _ _ _ _ 80 i--__ __ - I____ 15TURNOE OFDEMAND DEPOSITSA j (IMES PRn MONITH) - IA _ _ _ A _ _ _ _ _ _ 7tr-m KZZrv _ _ I 11 A______I MONEY SUPPLYI______ 50k(BILLIONS OF WON)__ 40- _ ___ _______I I I ~ ~~~~~~~~~I______ NOTE CONCERNING LOGARITHMIC SCALE OF THE GRAPH 4 b4 ~~~~~ince the vertical scale ot the graph is logarithmic, the rate of in- ___ crease in the variables can be compored visually by looking at the . pesof the lines.I 1960 1961 1962 1963 1964 1965 I i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~BRD - 999 j - 2 - Table 1: PRICES AND MONEY 1960 - 1965 GNP Seoul Wholesale Implicit Consumer Price Index Deflator Price Index Money Supply /l T1960=100T (1960=100) (1960=100 billion won 1960=100 1960 100.0 100.0 100.0 21.0 100.0 1961 113.2 115.6 108.1 25.5 121.4 1962 123.8 128.3 115.2 35.0 166.6 1963 1L9.3 168.4 139.0 37.2 177.1 1964 201.1 211.9 180.0 40.9 194.7 1965 221.2 229.6 20b.4 49.9 237.6 {l Annual averages Source: BOK Economic Statistics Yearbook 5. The aggregate price indices do not reveal the sharp var- ia.tions that occurred between the prices of different commodity categories. Various components of the wholesale price index are given in Table 2. They are also sho-n in the chart Money and Prices which follows p . 'agraph 6. Due to speculation in grains folflowing bad harvests, grain prices rose much faster than prices of other comr,odit;ies in '.962 and especially in 1963 and 196. After favor- able crops in 1964, this trend was reversed. There was even an absolutet fall in grain prices when other prices kept ri.sing. The prices of food items other than grains followed closely the rise in grain prices. It is in.teresting to observe, however, tha whereas there wals a fall, in grain prices in 1965, other food prices kept rising1. Ad of year indices for 1965 indicate that prices of cate- gories shown above which diverged significantly in 1963 and 1964 have again convErged to their earlier re1ative po sitios. In other words, the food and grain prices which had a lead in 1963 and 1964 haive eItlher slowed down or everL fallen in 1965, and the non-food prices have caught up with them. - 3 - Table 2: COMPONENTS OF IWHOLESALE PRICE INDEX 1960-1965 Al:l All commodities Fccd Commodities Excl. Grain Grains Excl. Griains 1960 100.o 100.0 100.0 100.0 1961 1132 111.3 123.9 11]. L 1962 123.8 122.5 131.4 123.3 1963 149.3 139.1 208.3 153.6 1964 201.1 190.4 263.1 239.0 1965 221.2 216.8 246.5 2IL7.2 )XII) 1965 223.6 222.9 227.5 242.6 C. Velocity 6. Uilen price chnges are com.. pared1 L. - - i1n-u and growth in incoimie for the period under consideration, the follow- .Lng piC ,u-are eiLerges: Table 3: VELOCITY OF MONEY GNP Income Velocity Current Money 0otal /1 Velocity of Total Prices Supply /l Liquidity /2 of Money LiqiLidity 0-i4iP GNP (M) (L) M ,bil.won)(bil.won) (bil.won) 1958 211 16.4 18.3 12.9 11.5 1959 228 20.7 24.7 11.0 9.2 1960 243 21.0 27.0 11.6 9.0 1961 293 25.5 32.4 11.5 9.0 1962 339 35.0 49.7 9.7 6.8 1963 472 37.2 56.2 12.7 8.4 1.964 667 40.9 60.0 16.3 11.1 1965 779 49.9 76.5 15.6 10.2 /1 Armual averages /2 Money supply plus time and savings deposits. 4 _ Table 3 also shows the income velocity of money which is a measure of the general wi'illingness in the economy to hold cash balances rather than obtain goods or services for them. A fall in velocity indicates increased willingness to hold cash balances. After a fall in 1959, the velocity of money remains stable until 1961 when another sharp fall occurs. Looking at the monthly data, it can be said that the velocity started to fall in mid-1961. This observa- tion is also supported by the monthly trend of demand deposit turn- over 1/ (see chart). After 1962, the trend of velocity is reversed. It rises steeply in 1963 and 1964. In 1965 there is a slight fall. 7. These observations hold both for the income velocity of money supply and the income velocity of total liauidity which in- cludes the outstanding time and saving deposits as well. In other words, the raDid monetarv exoansion of 1961 and 1962 was absorbed by the fall in velocity, having little impact on prices. On the other hand. the ranid price increases of 1963 and 196h when monetary expansion was modest were due to the rise in velocity. 8. It is hard to trace fully the reasons for these changes in vanlitny+. which harl cilih gretn+s inifircnce- fonr +.he npricn le avel -The *- - ___ -_ _ _,- l *-.. --- -_ _.. -- -- -- v -_ money supply which had been absolutely stable during 1960 started rising inmm.ei atelr following the I1- Revolution in 1961. In spie+- of this expansion the prices remained quite stable during the year. One -1 -4anatnon f thls,-- Aol be- 4the 4t,me Ia tha 4 ho-4- be -Al,ec'- between monetary expansion and prices after more than two years of t aL.bL L'y HowUeVe r, iLU -L Vi tr.y pJroblablj.e tLhat s tLL%ict L, con tLro.U Vls,UAJILD and severe punishment of businessmen accused of profiteering con- tributed to hesitacy on the part of businessmuen. GovernHment m,ea- sures leading to reduced liquidity culminated in the "monetary reform" of 1962 during which bank accounts were temporarLly blocked. 9. Towards the end of 1962, with more settled conditions in the private sector and substantial expansion of the government's own investlmientri acbivities, mounting excess liquidity started exerting its weight and price controls became weaker. The excess liquidity which was successfully suppressed in 1961 and 1962 showed its first impact on grain prices at the beginning of 1963. Following poor crops, grain prices doubied within a few months and this set off a chain reaction in other prices which started rising, defying controls under the "Special Law Concerning Price Regulations". Even prices of basic goods such as fertilizer, coal briquets and cotton cloth could only be maintained until July and after that they all exceeded legal ceilings. 1/ Turnover of demand deposits is measured by the total withdrawals during the period divided by the average balance. 10. The financial stabilization program established early in 1963 could not help because the demand pressure was emanating from excess liquidity accumulated in previous years. Therefore, efforts to maintain the money supply at a stable level could not keep prices from rising by about 30 percent in 1963. 1:L. The price rise continued into the first half of 1964 with- out any increase in the money supply. If turnover of demand deposits c_n be taken as a DroxV for velocity of the total money stock, then excess liquidity seems to have spent itself in the second half of 196J, Tn 1965; there is even a drop in velocity. 12. LTooking at the secular relationship between money, real income and prices, the notable fact is the high level of present velocity of money compared to the levels in late 1950's. This is contrary to expectations. Abstracting from cyclical fluctuations, velocity -normally falls with the growth of real income. There are two reasons for this. First, evidence from other countries suggests that the elasticitiy Or demand for money with respect to real income is above unity. In other words, individuals increase their cash bala.ces at a slightly faster rate than the growth in tuheir real income. Secondly, in a developing country like Korea, industriali- zation an-d urbarization increase the use of m.oney - the process of monetization. 13. Two hypotheses can be suggested for explaining the high level of present velo-ity- of rmioney in Korea. In the first place, this may1 be the result of the money definition used. If tii'e and saving deposits, which are not included in the money definition, are close substitutes for money, then the faster increase in such assets (quasi--money) may have satisfied parti of the liquidity dem.and. It is likely that this has been the case in Korea because the interest paid on time and savings deposits was until recently too low to makE these deposit accounts attractive as savings instruments. Taking into account the large price rise of the past decade, the rea' re- turns on time and savings deposits have been negative. It is there- fore reasonable to assume that time and savings deposits were orly made for their near-money aspect. This hypothesis is supported by the fact that a calculation of velocity using to-tal liquidity (mone plus time and saving deposits) gives a less unusual trend - the present income velocity of total liquidity is not higher tharn the .Level in the 1950's. 1L. The second hypothesis is that the present level of velocity is still influenced by inflationary expectations. Demand for money is a fanction not only of existing prices, but also of expectations about future prices. If scepticism about stability is wridespread, then this can Iceep velocity high and may compensate for the secular diecline that would come about as a result of economic development. A corollary of this is that once confidence in stability is established -velocity will decline. - 6 - 1 '. The future relationship between money and prices will be d:Lfferent depending on the validity of the two hypotheses. If quasi- money is a substitute for money proper, then the monetary plan shouldl aim at regulating the total liquidity rather than money supply alone. To the extent that quasi-money will increase faster than money -- as has been the case in the past - money supply should rise slower than the planned increase in nominal GNP. On the other hand, to the exteint that the present demand for money is the result of inflationar-y expectations, with continuing stability, the velocity may fall. Thi, means that money supply can be expanded faster than the planned in- crease in nominal GNP. 16. Until more is known about the "moneyness" of quasi-money arnd about the determinants of demand for liquidity in Korea, it would not be safe to base monetarv targets on the prenise that velocity wi:Ll fall. It is, with existing knowledge, by no means certain that velo- city wfill decline in the immediate future. although in the longer run it probably will. Furthermore, faster expansion in quasi-money may comnensate this increase in demand for liauiditv. 17. Although the scOpe of priGe znntnrol was greatly reduced in 1965, direct and indirect Government pressure on many commodities still ^onntinued. Offici ln ornl -tr c1-r.n t-nrnrnrvrHies had nri e n ei I rr - wheat flour and coal briquet. But on a less formal basis, the prices of many cnmmodities classified under daily necessities and basic pro- duction materials designated as important commodities under the Price Contro l T.- -n D ecree wer e IMpt de.r. vvery los srvey.c o rn t'h Government. The Mission had the impression that the measures taken 1<,Sho. h :- +te_ au1I 111- - --4 ad 4ol the Pom oP ----- 4 i; VLJ C.U..JVU . U G O L-IUJUILV JC1 J JAILL aV11 l'J4X" UILA .L IlL V-L ' 4 IL - sanctions, such as denial of credits to businesses which did not con- fo. . tLo Goverrz0.Jent 0loUILLd. s 1-. udgtUU reVeIlUe jJ1UJeU.Lons11Z IUL7UJ - Ud~U ULI ci aejJ bL;e otu price rise of 8 percent. The Mission views this attitude with some _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~J Ls u D t > 1 4- -1- -ec 'a' _ apprJJ.he.nJJ S4Ur for 1-Wo r easoris . ħ VI -rs, U.L4 ex..L , UOAjJ OU Ld,z to this target, there is grave danger that the actual increase may be highe.* .OUcUL.Ly, tWUe U.0istoUJ.LU11 0caUsedU Uby tILħs riAte of .fLat.Luo in resource allocation, and the setback to the development of sound savirig habits may retard tuhe steady growt1h OI the economy although it is true that, if the present system of flexible exchange rates is mnaintained, tnere will be somewhat less danger than in the past that distortions will be introduced by unrealistic exchange rates. For these reasons, Korea should aim at not aliowing prices to rise at more than, say, 5 percent per annum. Assuming 6 or 7 percent growth in real GN-P, this means that the money supply should be increased by not more than 11 or 12 percent per annum unless a strong case can be made that velocity will decline. -7- D. Money and Its Determinants 19. The distinction betwieen wihat is normally defined as money and the other liquid assets is one of degree rather than of kind. There exists in an economy a spectrum of financial assets with dif- ferent degrees of' "moneyness', i.e., ability to satisfy the liquidity demands of the individuals even if they do not serve as mediums of exchange. As pointed out above, the time and savings deposits in Korea may be close substitutes for currency and demand deposits and hence be important in the analysis of prices. Nevertheless there is merit in analyzing the trend and the determinants of the money supply, as conventionally defined, for two reasons. First, what is defined as money proper is most likely the main component of the general liquidity and has the greatest impact on price developments. Secondly, this component of liquidity can be maniPulated with a certain degree of precision bv monetarv policv. 20. In line with the conventional definition. monev supnlv in Korea is calcuLated as total currency in circulation plus monetary dernosits (demand deposits?. iirrency in circu1lation is equal to thp banknotes and coins issued by Bank of Korea plus monetary deposits at BOK imnUs the reServYe of' t.he other hnnks kpnt eithpr in the fnrm of vault cash or as deposits at BOX. Average annual totals of the main components of money supply sin-ce 196 are given below: Table 4: MONEY SUPPLY 1956-1965 (billion won) (1o (2) (3_)) k (5) (6) \ Bank Total BOK Total BuanIotes Re.;er-ves Monetary Reserves CUirrency Jin MonetU-ry Mon,ey & Coidns at; BOK Liabilities of Banks Circulation Deposits Supply (1 + 2) (3 - 4) (5+6) A.), I6 . 7.8 1.6 6.2 4. 10.3 1957 8.3 1.3 9.6 1.6 8.0 5.3 13.3 1958 9 0r 1.6 10.6 1.9 8 7 7.7 16.4 1959 10.8 2.4 13.2 2.8 10.4 10.3 20.7 160 12 7 2.1 1. R o 1 2. 8 . R 2 1. 1961 14.6 2.8 17.4 3.4 14.0 11.5 25.5 Io96 17 6.5 24. 7 .4 16u9 A 35.0 1963 19.5 4.2 23.7 6.4 17.3 19.9 137.2 1OA). 225 4.1 26-. 51. 19.5 ,.n 1965 27.6 /1 5.1 /1 32.7 /1 6.1 Ll 26.9 22.9 49.9 Columns 1, 6 and 7 1956, 19i57: Annual averages computed as averages of end of year figures. 1958, 1959: AnrLual averages computed as averages of quarterly figures. 1O60- 1965: Annual averages computed as averages of monthly figures. ColurrLs 2 and 4 Armual averages computed from daily flgures. Source: BOK, Economic Statistics Yearbook. - 8 - 21. From 1L956 to 1965 the money supply in Korea increased almost five-fold. The immediate determinanbs of this increase can be analyzed in terms of the following identity: D (+ D Mq = B - R + D = B.R DC where R C M: Money supplv B: Central Bank monetary liabilities R: Rank Reserves D: Monetary deposits C- GClrrency in Circulation = B - R According to this equation, mr..r sunply is determined by t.he actions ~~~ ~ Ol e -r…I-- - __ ___- - or the behavior of three parties: (1) Bank of Korea, which determines the supply of' central bank monetary liabilities (B); (2) indivjidu1s; who determine what proportion of money balances to keep in their bank accounts rather than in their pockets ( + t - Currency Ratio: D ) and (3) the commercial banks, which determine what proportion of C clrrency deposits to hold as reserves (DPnosit - Reserve Ratio: D E The trends of these three determinants of the money supply in Klorea are sho.wn in rth-1e fo--llo-WTng table. Table 5: DETERMINANTS OF MONEY SUPPLY 1956 - 1965 BOR fleposit Denosit Monetary Currency Reserve Linhilities BRntlo Ratio Money Supply Moneyj Multiplier (B) D D (M) (M/B) (billion won) ^ (billion won) 1956 7.8 .66 2.6 10.3 1.3 1957 9.6 .66 3.3 13.3 1.A 1958 10.6 .89 4.1 16.4 1.5 1 ncn 1 .70 00 3.7 207 1.6 1.960 14.8 .72 3.4 21.0 1.4 1961 17.4 I 7 3.. 2. 1.5 U4 . . . 2 )3L4.C.J) 1962 24.3 1.07 2.4 35.0 1.4 1963 23.7 1.15 3.1 37.2 1.6 1964 26.6 .91 3.6 40.9 1.5 -L.5 32.- .-8 -.7 4.7 17 M - 9 - 22. No secular trend can be discerned in the behavior of the D/C ratio and the D/R ratio. In 1962 there occurred a sudden jump in the D/C and a sharp fall in the D/R. This may be related to the currency reform that took place in that year. For some time deposits were blocked. Although the effect of the reform on the size of de- posits may have lingered on after the restrictions on the use of deposits were removed,this would not fully explain the high D/C ratio in 1963. 23. From 1953 to 1965, legal reserve requirements on time and savings deposits remained at 10 percent, but the reserve requirementa for denand deposits altered frequently. They varied between 10 and 20 percent since 1957. 2h. In sDite of some variations in the D/C and the D/R ratios. the money multiplier (i.e., the relation between money supply and the BOK monetary liabilities) remained nuite stable around 1.5. But sharp increases in legal reserve requirements have taken place since tnpe beginning o:f 1966. Tn Jnuary, legnl resPrves n riOpmnnd pnnsits, were raised from 16 percent to 20 percent, and on short term deposits f-rnm 10 ton 12 erent. Rffecti+.vT Fehruiannr 1, +.hD rq+.ir: nro .q e+. tt 35 percent on demand deposits and 15 and 20 percent for long and sho-r+-id. +Thes T ii< ncrae a -binrl +.rd t ffret the mo_,neyrT multiplier. 25. A rough calculation shows that D/R may fall down to 2.0 as a resl't of ch-ages 4n reserve re-uTrem en4s. T t i change in D/C, money multiplier will as a result decline to 1.4. A.Vs a roughl 4prxi,ao lt can be sai J.a - v- bL- o wo i, ħiQ . ħ .JLJ51~dJj)UJ~JI1d LVLAU LdL I l ue OU.4uU LIcILU dL_ L)UIJI ..-LII wVuiiJ-1 crease in BO3K monetary liabilities during 1966 would increase the moLoney supply by ll - l3' , while a 10 billion won iiivease wo-uld raise the money supply 23 - 27 percent over the end of December 1965 leevel. According to this calculation, the lIF standby agree- ment which projects a won 5 billion increase in the net domestic assets of DU0 woulu mean an increase of about 11-3% in the mLoneyr supply during 1966. 26. It is also interesting to see the relationship between the monetary liabilities of BOuK and the total liquidity (money plus time and savings deposits). The behavioral link between time and savings deposits and monetary liabilities of tne BOK is weaker than in the case of demand deposit-currency ratio. This is in line wi-th expectations since time deposits are not functionally related to currency, but perhaps more to incomes and the rate of interest. Nevertheless,the rising trend of the liquidity multiplier (quasi- money rose from 15 percent to 55 percent of the money supply) is of significance for future monetary policy. - 10 - rable 6: BOK MONETARY LIABILITIES, MIONEY AND TOTAL LIQUIDITY 1956 - 1965 Quasi- /1 Total Total Liabilities Money Money - Liquidity_ Liquidity (billion won) (billion won) (billion won) (billion won) Multiplier 1 2 3 =2 + 3 4 5= 1956 7.8 10.3 1.5 11.8 1.5 1957 9.6 10.3 1.7 15.0 1.6 1958 10.6 16.4 1.9 18.3 1.7 1959 13.2 20.7 4.0 24.7 1.9 1960 14.8 21.0 6.0 27.0 1.8 1961 17.4 25.5 6.9 32.5 1.9 1962 24.3 35.0 14.7 49.7 2.0 1963 23.7 37.2 19.0 56.2 2.b 1964 26.6 40.9 19.1 60.0 2.3 1965 32.7 49.9 27.1 76.5 2.3 All figures annual averages /1 Time and savings deposits 27. Since! the money multiplier did not change much during the period under consideration, the main factor responsible for the rapid increase in the money supply was the expansion that took place in the monetary liabil.ities of the Bank of Korea. The shares of the public sector, the private sector, and the foreign sector in this expansion. wrere as shown in Table 7. 28. Following a period of stabilization in 1959 and 1960, the Expansion of monetary liabilities of BOK in 1961 and 1962 was pri- marily due to public sector borrowing. With the accession to power cf the military Government in May 1961, the public sector started borrowing heavily from BOK. This borrowing took the form of over- drafts and selling bonds to BOK. There was also minor borrowing by Government agencies. 259. In 15963, a significant expansion of BOK credit to the private sector took place, together with some additional lending to public sector. The expansionary effect of this credit was more than compensated by the drastic reduction in foreign exchange reserves. In this way, an expansionary credit policy was combined with a stable money supply, at the expense of significant worsening in the exchange reserve situation. - 1l - Table 7: DETEFRIN2'ANTS OF BOK MONETARY LIABILITIES 1956 - 1964 (Annual changes in billion won) Public Foreign Private TotnlI Monetary Sector Sector Sector Liabilities of BOK ___~~~~~~~~~~~~~~~h 1957 - 0.7 0.5 1.5 1.3 1958 1.3 1.5 - 0.4 2.4 1959 3.1 0.3 - 1.3 2.1 1960 - 3.h 1.0 3.8 1.6 1961 6.6 7.2 -6.2 7.6 1962 10.2 - 4.3 - 1.5 4.4 1963 3.2 -13.1 7.1 - 1.8 1964 - 3.0 4.2 3.6 4.8 Notes: Column (1): Net Government overdrafts from BOK + Government bonds held by BOK plus loans to Government agencies by BOK-Government deposits with BOK. Column (2): Foreign curency assets minus foreign currency liabilities (including deposits of foreign orgarn zations) Column (3): Column (4) - Columns (1+ 2). Column (4): Banknotes and coins and deposits of banks at BOK. 30- The maior exnansion of the BOK monetary liabilities in 1964 occurred as a result of devaluation in May. Although there was no significant change in the dollar value of foreign exchange reserves during the year, the foreign sector, as shown in the table above, contrihuted 4.2 billion to the expansion. Most of this was due to payment of compensation. for the exchange rate difference which is reflected as a decrease in the foreign exchange evaluation adjustment fund. There was also continued expansion of BOK credits to the private sector. It is only b y-a reduction of about 3 billion in the BOK net credits to the public sector that primary expansion was kept from reaching dangerous levels. ITn the eleven months of 1965 un to the end of November_ monetary liabilities of BOK increased by about 9 billion wion. This was due m,aily to increase in fertilizer credits, although increase in exchange reserves and rise in export credits also contributed to this expansion. The increase in fertilzer credit arose because, from early 1965, NACF was required to pay for fertilizer at the time of imp-ort In ri'I 'e pastu, NACFki hiadu to pay flor fertili-zer onl-y alfter" i+t was sold to farmers. Thus, the cost of inventory accumulation was financed t'-lrough BOK credits. - 12 - E. Stabilization Programs 32. The stabilization program which had been successful in restraining inf:Lation during 1958 and :1959 was sum-endect after the May 16 revolution. With inflation gaini-g rmo.en-ir. at the end of 1962 and beginning of 1963, the stabilization proVrarm was reintro- duced in coordination with the U.S. mission in 1963. The prorgram aimed at restraining the increase in money supply and sct a target increase of 5 ptercent during the year. To this end, cei'Lings were set on bank loans and these were controlled on a quarterly basis. During the year, additional measures were taken to counter loopholes in the >nntrol systvm. The nrograqm was a success in terms of res- training the increase in money supply. In fact, the end of year f'igpii was 3 nerprnt ehlow the target. Howeverr ans A.caincni ahove; (paragraph 7 - 'LO) the success of the program in controlling money Slinn1l r't-rn notl rq ir. v'n f nil nan 33 The fiLnancial stabilization program for 196h was adopted on March 14 and set a target growth of money supply of 7 percent nt,+;-I the end o f I (A). Aga4- 4thls -;-- i,peretdtruhqatr V II VJ. .L -/L,7W4 * L JI U " Y6 L.1.FA UIIW r ceilings on banic lending. In *the first half of the year, increase in money supptyj wa very ,,,odest. HoUwtVee, f'winLgi Uthe VdeLvau-LuIL iL May, a series of measures were taken to promote exports and to help 1-_3t- 1. t_.: __ --I-. _1_ _!____ __ ~ D_A__ _ : _ l - A: DD __ _ mu _ _! 1_ 9 4AA. -3 4t o ijnustries WhichU1 weLCe In Linarnial dUiffiultJy. Tieiis ctrUilStbutedU tu expansion and money supply reached 46.7 billion - as compared to the Uħu-ge(U of 40 UbLlLIon - in November. T-he end of year level o 43 bil- lion coluld be achieved only at the cost of postponing public expendi- tures and putting a heavy squeeze on oank iending. 31. In 1965, the system of setting money supply and credit ceilings continued on a quarterly basis. After the second quarter, the targets were changed to a net credit concept, meaning increase in loans minus increase in savings deposits, and several measures were taken to simplify the monetary control procedures. On Sep- tember 30, the current "Regulations for Handling Banking Sector Funds," was revised and greater emphasis was put on indirect controls and overall credit ceilings. 35. The Korean Government signed a standby agreement with the International Monetary Fund in March 1965 for a period of one year in an amount of $9.3 million. Under this standby, the Government under- took to observe specific limits on credit expansion. According to this agreement, the credit level at the end of the last quarter would be 79.3 billion won. By August it was clear that the credit expansion could not be limited to the targets of the standby agreement and the Korean Government requested a revision. The new targets were 85.5 billion won for end of November and 85 billion won for the end of Februiary, 1966. The end of November credit level could be kept within the target with great difficulty. After November, credits kept ex- panding and reached 88.9 billion at the end of December and 93.7 b:illion at the end of January 1966. as compared to a ceiling of 85 billion for the quarter ending February 1966. The excess over the ceiling on total domestic bank credit was mainly due to expansion of bank credit to the private sector in the months following the interest rate reform of October, 1965. 36. In March, 1966, a new standby agreement in the amount of $12.0 million was signed. This agreement sets targets on net domestic loans. The increase in the net domestic assets of BOI' is projected at w-on 5 billion durin-, 1966, over the amount of 33.5 billion outstand- inrz at the end of 1965. According to the money multiplier estimiaated above (para-i,xaph 25), such an expansion may lead to an 11-13 percent increase in the money supply. 37. The stabilization program agreed by the Goverrment with the U.S. Aid Mission allows an increase of won 8.4 billion, or 14.8 per- cent in the money supply during 1966. F. Ranki-ng and Credit 38. The loans outstanding of the five commercial banks and the f-onrn spne-i -I i 7%H hbnks in Korea nre shown in the following table: Table 8: LOANS AND DISCOUNTS OF BAN1ING INSTITUTIOINIS 196CI - 1965 th41 1 ml ..^--AA ^f, tA"; ^,4 1960 1961 1962 1963 1964 1965 Commercial Banks 11.5 12.8 20.9 22.8 23J1 37.5 Korean Reconstruction 15.9 20.3 24.3 27.6 31.7 36.8 Bank Medium Industry Bank -- 2.8 4.5 5.9 6.5 8.4 National Agricultural 12.8 17.1 18.6 19.7 23.1 25.4 /1 Cooperatives Federation Citizens National Bank 0.9 0.9 1.0 1.4 40.2 53.o 69.2 76.9 85.4 96.5 ou rEd of Koven-be Source: BO'K - 14 - 39. The commercial banks with 4 ubranchiies 4ihrughout U country carry on mainly conventional commercial banking activities. Since 1962, these banks have aiso extended longer-term credlts, called equipmen-t loans, as part of a drive to channel funds into ildustry. But at the end of 19614 these equipment loans aLounted to only about 6 percent of their total credits. The main source of finds for commercial banks are deposits. 440. Secondly, there are the four specia.lized banks. Korean Reconstruction B3ank (KRB) is more in the nature of an intermediary for channelling Government funds, counterpart funds and foreign loans to industry. A-t the end of 1965, out of a total loans outstanding of 36.8 billion, 113.4 billion was supplied by counterpart funds and 4.4 billion from budigetary funds. KRB accepts deposits onLy from enter- prises it has financed. These amount to a mere 700 million won. The loans extended by KRB are heavily concentrated in manufacturing and electricity sec-bors and are mostly medium or long-term loans. 1L4. National Agricultural Cooperatives Federation (NACF) is an agricultural bansk in addition to its marketing and other activities. Its finances are mainly from the budget (52.2%), from deposits (21.2-), from BOK credits (17.3%), and from agriculture debentures (6.5%). More than 90 percent of its loans are for agriculture. 42. The Meditum Industry Bank (M]IB) and the Citizens National B;mnk (CNR) are much smaaller institutions compared to KRB and NACF. The purpose of -the MIB is to finance the small and medium industries. Its rnvin sources of funds are counterpart funds and deposits: its loans are almos-t completely for manufacturing. CINB specializes in irte+nding small loans and accepting mutual installment deposits and ordiniary deposi-ts. 43. Outstanding loans, classified by industry, are shown in the follow ng table: Table 9: LOANS ANND DTSCO-UNTS OTTSTANDTMG BY TIDUSTRY /2 1958 - 1964 Agriculture Commerce, Manufacturing Fishery Estate / Electricity Other Total Equ- Eq-4 Equn p- Eq n-.i- Total ment Total ment Total Total ment Total ment Total ment L d of 1958 11.5 5.9 8.3 3.4 1.1 1.6 1.3 3.8 1.5 26.4 12.1 1959 - 14.6 7.7 Q. .1 -IA '. 1. 5.6A 2.7 32.4 16.1 -L 7) -.L4. % f *I U.U L4. ) _L.U .L.v. .L.C-L ._ -. I .)4~S . .LJ*. 1960 16.9 8.2 :L2.3 5.7 2.7 1.6 1.2 6.7 3.1 40.2 18.2 1961 20 . 0 17.3 IC 0 . 0 52 . 0 8 3 5 22.8 L~~~~~~~~~~Uħ ~~~~~~~~~~~~~~~~~~~ U.) L(.) U.U ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.U ).~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 14.U U.U )..L )).U ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.) -4 . 1962 27.2 10.0 18.7 8.3 5.7 7.6 7.1 10.1 5.2 69.2 30.6 190`3 29..4 13.6 1L9.7 ° 5 7.i 9.4 9. 11. 2. 76. ` ^ .1 1964 32.6 10.6 22.3 8.8 7.4 11.1 10.9 12.2 6.4 85.6 36.7 /1 The share of rea:L estate is very minor. Th 1964, total loans to real estate amoulnted to a mere 16A9 million won- /2 Comnmercial & Specialized Banks Sournew 30K e EcoDonomlc Statistirs Yearbook- 19(65 - 15 - 41.. As mentioned in relation to individual banks, the sources of finance for the bank loans in Korea came from deposits, government fumds (including counterpart funds), borrowing from the Bank of Korea and some other minor sources, such as capital contributions. TabLe 10: SOURCES OF FUNDS FOR COI$ERCIAL & SPECIALIZED BANKS 1958 - 1964 (billion won) Gov't Borrowing Total D e pos i t s Funds From BOK Total /1 Loans /1 Demand 'Pi mP Total 1958 9.9 1.8 11.7 14.4 2.7 28.8 26.4 1''59 9.5 5.1 14.6 18.7 1.9 '5 22.4 19?60 12.1 5.4 17.5 21.5 5.5 44.5 40.2 19A61 :16.8 8.6 25.4 29.2 2.9 57.5 53.0 1962 23.2 :L6.o 39.2 29.4 1.4 70.0 69.2 1963 21.1 16.9 38.0 3-.9 4.2 77.1 76.9 1964 21.6 :L9.9 41.5 39.4 7.7 88.6 85.4 u1 Lvue to Ute existence of oLlier accou.nts in the aset and lia- bilities of the banks, the sources of funds cannot, of course, be identified with the loans, hence the difference. Source: BOK, Economic Statistics Yearbook, 1965. 45. Export loans which constitute about 7 percent of the tDtal loans by the banks deserve special attention because of the subsidy involved in the very low rates charged for such loans. Exporters may obtain loans from commercial banks up to 200 won per US dollar upon receipt from abroad of an export letter of credit. In February, 1965, the interest rate on these loans was lowered from 8% to 6.5, a year. This rate has remained unchanged after the interest rate reform of September, 1965. (see paragraph 48 ff) The duration of the credit has a maximum of 90 days. Normally, however, the credit ends when payment has been received from abroad. Since the export letters of credit can be rediscounted with the BOK at 3.5% a year the commercial banks are quite willing to extend export credits. In addition to this, exporters can also obtain credit at the preferential rate of 6% a year for the import of raw materials to be used in export production. Contractors for deliveries to UN forces in Korea enjoy almost equally advantageous credit facilities. They can obtain credit for a maximum duration of six months at 6.5% up to an amount of 150 won per US dollar. - 16 - 46. The total amount outstanding of export credits and import usance credits for exports, including rediscounts of these credits with the BOK, amounted to somewhat over 6 billion won at the end of 1965. This is equivalent to about $23 million. Since the monthly level of exports is about $15 million and since export credits are given up to around 75" of the export value (200 won per US dollar), this suggests an average duration of all export credit of about 2 months. The amount outstanding on loans to contractors with UN forces in Korea amounted to only about 0.6 billion won. L7. The availabilitv of credit at such low rates creates, of course, powerful incentives for diversion to domestic activities. It is certainly hard to tell how much diversion does occur. The average duration of 2 months seems fairly long and this may be partl;y due to d1vPrsion_ However, the authorities annear to be screening applications carefully. Moreover, failure to effect exports even- +uii1, l ea1ds to ayn-I iio-i nn from consniderartion for fnrther p-xmort credits. (In the case of contractors with UN forces, failure to spnpnly r w.oillri ean +to 1 ocInc, +the iml -u f-fi rat+.i on +.o hid r in the fii+.itnre G. Interest Rates L4'J. At thU11~ LJtMLIUJe J4r,_L LU. '.J1 . LAJLJg%, UV October,U V I CZ Ui r r o. deposits, loans and discounts of the banking institutions were raised substantially. Rates on saving's UeUPobUO were raisdu tU 3) percent from their previous level of 9-15 percent, and rates for ordinary- cornrL[ercial loans and discounbs to 26 percent from 16-18.5 percent. At the same time, lending rates of specialized banks were also raised in varying degrees. Rates of NACF loans filanced from agriculture and forestry funds, went up from 16 percent to 20 per- cent for production loans and 23 percent for marketing ioans. KRan equipment loans were raised from 7-8 percent to 10-12 percent. Slmilar increases took piace in the rates oI special loans by MIB and CNB. 49. The objectives of this drastic operation were: (a) to increase savings; (b) to transfer funds from the curb market into the banks, and (c) to effect better allocation of loans. Following the reform, the increase in time and savings deposits, which had already started since May, 1965, gained momentum. The value of these deposits has almost doubled in the five months from end of September 1965, to end of February, 1966. Some of these funds have probably been transferred from the curb market. However, it is also possible that higher real returns on such deposits - not only due to rate of interest reform, but also due to relative price stability - have encouraged savings. It is not possible to see the relative contribution of each of these effects. 50. With price increases of 6-7 percent, the real interest rate on ordinary loans comes to about 20 percent. This looks like a high cost of capital under normal conditions. However, for the time being, these high rates have not altogether eliminated excess - 17 - demand for loans. Some surveys have indicated that the increase in lending rates of the banks have not raised the cost of capital to the firms siznificantly. This is explained by the high dependence of these firms on loans from the curb market at interest rates of h-5 percent per month. This extraordinary structure of interest rates is the result of contirnuing inflationary expectations. 51. In Korea, a sizable unorganized credit market exists out- side the banking system. There are varyinrg estimates of the s ze of this market. Estimates of outstanding loans by the curb market range from onp-third to onnp-hnlf of the r-^rprli1- hv the nnkirncw qvqt-m_ Tn any case, it is of considerable size. The curb market comprises vnrioii. jnst.ituii-.-ons and ma'rltsj- 1lnn individual brokers, finnnc-e companies, Kye which are the rotating credit cooperatives for consumer loans ar.d Ke.hCl ,yln-4ch provide sh,ort-ter. wor ca princ- pally in the fishing industry. 1/ 52. "It appears that the curb market scores high according to som,e les's of effici-ency. It does less well on others. Cos4ts ofl transactions seem to be high; information is limited; there is market .L ragmentati.oLU1. The, nLdL r..eI_th r o LIUa tw divertgLUVt, L)LO LAJCULL U-LVt1 L-J savings into inventory investment with scant attention to finance of flixed -ivestmlenlt. Loanw are oUr'-t-term,U, fruiri a uay- o perhaps a month. The market has allocative bias towards enterprises with the mVIt and best colLateral and not clearly toward enterprises wlth the most productive investment opportunities." 2/ 1/ J. G. Gurley, H. T. Patrick and E. S. Shaw, The Financial Structure of Korea, Reprinted by Research Department of Bank of Korea,l1965. 2/ J. G. Gurley, H. T. Patrick and E. S. Shaw, op. cit. pp. 82-83 - 18 - Table 11: PRICE IiJDICES 1953 - 1965 W h o 1 e s a 1 e P r i c e I n d e x Seoul All All Commodities Producer Consumer Consumer Commodities Grains Excl. Grains Goods Goods Price Index 1953 26.5 33.0 23,5 19.4 30.9 195), 3)h 0 26=5 J=4 '_I J5 5 1955 61.5 63.2 60.D9 52.0 66.8 61.3 1956 81.0 101.3 7h.5 72.0 86.o 75.T 1957 9)h.l 116.3 87.0 81.3 101.2 92.9 1958 88.2 95.3 85,9 81.2 90.8 89.6 IoQC~o Qn_i 09 -4 on~ 1~ on~ 09 C~ 1960 ħ00.0 100.0 100.0 100.0 100.0 100.0 1961 113.2 123.9 111.3 114.0 112.7 108.1 1962~ 123. R iTi ) 1~22.5 125.3 122.8 P iicf. 1963 149.3 208.3 139.1 138.9 156.8 139.0 1964 '20I1 A2631 '90.4 - 1.7 2. 1 80.0 -L'.~JLI .J... CA. J~).-.L -L7U. 4. .L~U4. I r-L.LL. .7 ħ0V . J 1965 221.2 246.5 216.8 217.4 223.9 204.4 1964 ħ-J. 0.8 (U 7.0 1J.L 4 L164.)3 03).0 178.1 VI 211.1 306.0 194.7 183.5 231.0 181.5 IX 210.9 248.44 204.5 202.9 216.7 i8.5 XII 209.8 235.0 205.4 205.9 212.6 186.8 1965 III 213.9 233.0 210.6 211.2 215.8 198.4 VT 224.5 256.6 219.0 218.1 229.2 206.8 IX 226.6 264.4 220.1 222.2 229.7 210.4 XII 223.6 227.5 222.9 223.8 223.4 206.0 Source: BOK Economic Statistics Yearbooks and Monthly Statistical Review, January, 1966. - 19 - Table 12: MONEY8 SUPPLY AND PRINCIPAL FACTORS AFFECTING I07 12/ ~~~~~Maon e t a ry De .p osits a' I B an C0r e d it to. P ub 1i c Re ctor BaneCredit to PrivateRotrFore.ign~Sector 2 Cor roses C~~hecking Other Other Chenk, and71t 1erdr~PtW ot-.n:t Bnlsa,o ,:,,s-r, o L-n__ - Or-v' 7F W TT 9Storks fle q, 9 TNet Deonaits a End of in Private Deposits Private Demaand Bills In Total Mny from POK Hold by tonal Gooots Oovt - - Total Tt1 .ritehof Withl Oter Ci-ola- Cheukdeg of La..al Dee-d De olsof Poon o f IKpl inuc Gov't All Ranking of Bainklng Ag.Sfoies.. 0 . RaningBev fen-Saings of Foreign Foreign tion Deposits Goaeta Deposits Local OGvcts CoLec.tion O epositol oAth P5K Inst. i-st. by BOK Toot Panda Fonda tures Deposits Eanhangs Clrganiz- TL-' . n a L.) ~~~~~~~ations ~~~A) (ninus) ~~~~~~~~~~~~~~~~~~~~~(nirus) I ianking Root.) 1 (minus) t......2inun) .___ 1950 223 11 - 33 iS 2 601 283 ! 210 3 -- 11 -2014 77 -- -6 71 1 1 6 -5j -7 1991 5o~~~~~ 8o -- 99 52 143 1911 7301 4~~~~~~~~~~~~~131 9 25 56 20 oo 027 -I -13 l1b 7 9 -2) -2 1952 9714 2 20 20 297 27 LOS 1459J 1,-3 596 14 108 138 56- 27 37 2 84t -S 1953 2233 3149 S3 5147 53 20h 798 3 037 1,'L49 77 286 185 -- 1,6971 ,601 1 - -- 239 1,362 126 38 8: -I 19514 3,998 926 77 1,1.21 102 1415 1,810! .O 3,109 834 141 Si 23 14,0181 ,206 oil 1 386 i,8142 153 139 114 -66 199 5878 1,578 118 218 156014 3,1475 9.352 2,3821538 01o ,2II63 lo14o -181 i955 lh8 2,158 195 5 ?38 2,157 83 70 7~~~~~~~~~~~~~~~~~~~,148) 3,21 39 1 699 3,075 7 ,3 - i956 7,3314 2,106 179 3,7-,69 227 1,522 14,75911 093 2;,453 h,392 153 -- 53 6,qL5t io018 281 21 1, L22 9,675 1,390 1,1425 -35 -1492 157 8,6o5 L, 789 130 5,0514 256 1,319 5,913b- ~ ~ -807,2314 18 11,7 586198 6 5 1'9249 ,9 ,0 42 -,5 198 11,105 2, 528 216 7,0148 1451 2,093 8,1 5 2,2,03 7,1400 212 -- 6,393 3,622 7L,112 b,560 I 256 i,91i6 114,0172 3,915 1,927 1,988 -367 i I5 12,359 2?,014 175 6,14 14 75 207 8,631 7o 5,470 7,332 082 -7 7,768 51316j11 Tho 6,8146 332 5,1491 12,8271 3,697 l,1412 0,255 592 1960 13,932 2310 58 769 790 14078 7,7'0.0 2,069 7,670 3146 -- 907 , 12 ,712 8,292 339 5,700 1.8,6143 14,1429 1,089 3,3140 -1,087 1961 i6,660 5,356 9141 10,3914 14707 3,01 1454312 14 5,367 10,820 816 200 11,550 5,651,112322 , 10,1911 149 9,820849 312 ,852 1-0,979 -5,881 1960 18,002 6,915 957 16,101 1,860 6,728 18,705 136.7R7 11,761 17,931 14714 500 16,079 9,9 02811 I 094 3 686 2,1 113 1,2 ,3 ,3 1963 18,250 16,169 700 11,08 2,5145 14,385 19,057 737 11,3314 131,679 588 2,6142 17, 0110 11,2003 314, 886 1 11,681 1,A92 17~,270 33,789 814 6:7145 4,:661, -824 961, 21,,896 2,6bg 6, M 18,161 tot:~ ~ ~ ~ ~ ~ ~~~13491,61 3,29 6i5 810 1963 3 15,153 -5,739 907 12,076 2,865 1,167 20,141o 35 593 10,609 13,059q 517 500 16,214b6 9,279:33,079 17 2261 857 18,073 09,089 6,787 5,367 1h2,0 -14,155 6 15,830 5~,383 983 12, '2o14 2,5141 1,1456 19,16708 3t63l 1 i' 50 13,816 9514 o,145 17,60)6 1o,312!33,e8A7 !15:215 ! 11 20,14413 29,770 3,691 5,262 -1,371 -3, 203 9 18,739 7,199 1,0149 10,738 2,714 1,961 21,773 t5t3 1 3 09 12,A70 583 7,9142 17,757 12,777135,142 1 6,626 1,0146 20,4,15 32,879 0,100 4,777 -2,677 I-2,4~67 12 18,050 6,169 720 i14,oo8 2,9149 14,385 19,057 I 11; 334 17,670) 585 7,63,2 17,2140 :11, 0031 34~,8862I 114,681 1,192 17,070 33,789 814 6,74S -6,660 -8214 19614 3 18,157 7,093 1408 15,201 3,907 6,665 20,00613M.6] 10,909i,59 571,(1 ,1 3,8 h991L3 1,8 4,C 2 ,2 398 lO' 6 20'110 -1'h8 378 16 30 3,063 7:21 19 707 3 17 9,1966 13,657 508 3,lb9 a'. 8,885137,1466 16,53211,598 19,161 36,399 -.85 14,609 -14,6914 -769 9 2736 -7,0223 931. 18,2014 1 8,737 19,97812.7114 9,0 350 S0 316 , ,3 h8166 17,037 1,5614 00,303 36,7614 14, 86 7,556 -3,07C 1519 02 214,896 65,667 1472 15,1419 0,6149 6,o146 8,M6t307 8331,11 ,14 ,0 904 ,0391o 15,1140 1,5614 20,317 35,793 6,159 8,100 -1,9141 i, 681 1965 3 23,301 6,5148 562 18,3814 3,6614 7,706 21,1452 b45,727 10,322 17-,561 903 6,6oo 19,563 II,8143 1o,o34 15,360 1561 01,016 37,7140 -6, 590 5,5i6 -10,106 7,0914 6 25, 328 .7,319 1430 21,2155 2,833 9,1410 22,90027 2,5 10,4R7 13,5146 1,11 6 10,300 19,8i97 15,552 145251 16,8141 1,5614 214,996 38,660 2,3914 8,015 -9,801 _-136 9 27,650 13,S568 9143 214,9o58 3,786 12,514N 5,1 9027969 n1,816 13i,378 1,143 9,915 19,6145 18,077 146,53 16,658 i1,509 07,718 37,3C2 8,3~29 9,1412 -1,117 -1, 306 12 31,,617 9,396 9514 08,14314 3,200 16,591 25,013 5bh3 7,391 13,1429 1,306 12,300 18,7148 15,698 S7,770j15,70 71,1447 39:7bo 35,2214 12,367 5,950 6,1437 -729 1/Exelude,s the cash holdings by banking institutions and the Kore,an Rccnstruc:iJn Rank,. 2/The sow of che-kiog deposits, pa.sobesh deposits, eatra deposits, credlit control depnoito Ind public de-soito aith all1 bunking institutions and the Korean 7.ec-otruntion Bank. Eanldads treasury checks stone Dlecaber 19,62. G oavrn,ent deposits include gonve-r,os checking deposits i6th the Bank of Kor-ea and natotatndiog balance of treasu,ry agency ancoants of banking ins'oitutiono. Includes industrial finance drb-nture issued by the Korean Reconstruotion Bank. /Inolud,, le...i g-n.-oet. bonEs held by bankin,g institutions. 7/ loans to the Agricultural Caoperativea for financing pronaro,sest of fertiltier ston 19514. 6]Exclud,s. the usurious debt settlement fand of the Agrioultural Cooperatives. 2/The .., ef sa.n-gs deposit., ratios deposits, time de-osits, specil tisoc den-nito, :-ntklnent -avin- deposits and mutual installment saings de-naito with all banking icutitutiono ndAthe (,arsnRoconot-ati-n Babe. if/Won equivalent (at the current official rate) to the net puoha.es of f-ric,, emohunge by toe Book of Kore and uceoo-ciul 'vaola .oo -o.ot,Inding reSe-es of forntgn cuotonge revaluationpoofito. 11 Includes sales praceeds of sur-plas egfinalturti products imported under US Poiblic La- 1480 and MSAk Section 3,o2. 12i/ Consists mainly of assets and ia.bilities not separately prenented in this table non), an donoitss the Korean Rec mntr,ctio- Bomb with the Bank of Kore, int-rbrannh a-nonts, profit and lo-a accou.nts end unsettled accounts. Source o R.an of Korea