Korea Institute of Finance

Financial Research Brief

25-25 Jan 10, 2026

Structural Drivers of Interest Rate Movements: A Flow of Funds-Based Analysis

Amid heightened uncertainty and rising interest rate volatility, there is a growing need to assess the structural trajectory of interest rates based on macroeconomic fundamentals, such as demographic trends, rather than solely relying on short-term cyclical dynamics. Flow of Funds data indicate that households have expanded their role as net suppliers of funds, driven by rising life expectancy and growth in the working-age population. However, households’ capacity to further increase their role...

Financial Review Seok Ki Kim

The Impact of Revenue Diversification on Securities Firms' Business Performance

Policy Issue in Focus JiEun Lee

Trends in Low-Price Exports and the Outlook for Structural Reforms for Chinese Firms

Policy Issue in Focus Mansoo Jee

The Shifting AI Landscape: Impacts on the Financial Sector and Policy Implications

Policy Issue in Focus Christopher Byungho Suh

FSC Outlines Three-Pillar Strategy to Expand Inclusive Finance, Jan 2026 (FSC)

News Briefs KIF

Special Resolution Regime and Policy Implications in Korea

This study examines financial policy considerations in response to the legal institutionalization of the special resolution regime and proposes policy alternatives that can be implemented prior to legislation through improvements in supervisory practices. Whereas the existing Prompt Corrective Action framework focuses on business normalization, the special resolution regime is distinguished by its use of resolution powers when the likelihood of recovery is limited and the stability of the finan...

20260112 Bon-Sung Gu

Challenges in Responsibility Sharing Between Financial Institutions and Users by Retail Payment Types

In response to the growing spread of financial fraud, discussions are underway to strengthen the responsibility of financial institutions within payment systems. Accordingly, this report compares and analyzes the liability frameworks for payment fraud in major foreign jurisdictions by retail payment types and, based on the findings, presents implications for future discussions in Korea. In particular, it emphasizes the need to approach the issue from the perspective of payment types rather than ...

20260109 KyooBok Lee

Monetary policy responses to demand- and supply-driven inflation in Korea

The analysis in this report indicates that, unlike major economies, Korea‘s monetary policy has responded without making a clear distinction between demand-shock and supply-shock inflation. Given the characteristics of Korea's economic structure and the need to comprehensively consider factors beyond price stability, responding to overall inflation trends rather than targeting specific inflation drivers may be a rational choice. However, this approach ultimately led to a lukewarm inflation resp...

20260108 Min Chang

Policy Options for Broadening Banks' Business Scope to Strengthen Economic Sustainability in Korea: Lessons from Japan

Korea faces serious sustainability challenges such as low fertility, rapid aging, population decline, and the climate crisis. Addressing them requires stronger private-sector involvement, especially from the banking industry, which controls a large share of national financial assets. This study therefore explores expanding banks’ permissible ancillary activities and the scope of their subsidiaries. Since 1998, Japan has revised its Banking Act to permit non-financial subsidiaries in areas incl...

20260108 Byungyoon Lee, Heung Jin Kwon

Comparing Issuance Methods for Bank Digital Currencies,

This paper examines the main characteristics and pros & cons of potential issuance methods for bank digital currencies, categorizing them into: (1) stablecoins versus deposit tokens, (2) individual bank issuance versus joint issuance among banks, and (3) retail deferred net settlement systems versus wholesale CBDC-based settlement systems. Deposit tokens and stablecoins ? two representative issuance types ? share similar fundamental properties, except that stablecoins can be used repeatedly. B...

20260107 Myong-Hwal Lee

Early Identification and Forecasting of Business Cycle Turning Points

This report develops a model that identifies Korea’s monthly business cycle expansion and contraction phases using Learning Vector Quantization (LVQ), a machine learning technique, and evaluates its out-of-sample forecasting performance. To assess the current state of business cycle turning points, a “current business cycle phase identification model” is constructed based on the component variables of the coincident index. In addition, to assess the likelihood of near-term business cycle turn...

20260107 Hyuntae Kim