Economic Trend Changes for Low Interest Rate and High Interest Rate in South Korea
Interest rates are the most crucial factor in the global financial and capital markets, and they greatly impact the entire economy, including the product and service markets. Various economic indicators are affected by changes in the interest rate, and the direction of capital flow changes according to the low or the high interest rate. The interest rate has been continuously increased or frozen to stabilise inflation and recover the liquidity spread caused by the COVID-19 pandemic. Accordingly, this study aims to analyse the impact of interest rate changes on the economy. Among the economic indicators, we focused on the base interest rate, the home sale price, the household debt, and the bond transaction performance.
This study used the analysis of covariance (ANCOVA). The research utilized this tool to see the effect of the treatment level on the value of the dependent variable, where the exogenous variable must be controlled by the experimental design. We analysed the economic trend for the low interest rate and the high interest rate for South Korea’s low interest rate low interest rate period (2013–2021) and the high interest rate period (2003-2012, 2022).
Copyright© 2025 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.
Article’s history: Received 17th of October, 2025; Received in revised form 16th of November, 2025; Accepted 15th of December, 2025; Available online: 30th of December, 2025. Published as article in the Volume XX, Winter, Issue 4(90), December, 2025.
Yoon, D. (2025). Economic Trend Changes for Low Interest Rate and High Interest Rate in South Korea. Journal of Applied Economic Sciences, Volume XX, Winter, 4(90), 835 – 846. https://doi.org/10.57017/jaes.v20.4(90).12
Funding: This work was supported by Kyonggi University Research Grant 2023.
Conflict of Interest Statement: The author declares no conflicts of interest.
Data Availability Statement: Data included in article/supp. material/referenced in article.
Abel, I. & Lehmann, K. (2019). Real and monetary theories of the interest rate. International Journal of Political Economy, 48(4), 353-363. https://doi.org/10.1080/08911916.2019.1693159
Arestis, P. & Chortareas, G. E. (2007). Natural equilibrium real interest rate estimates and monetary policy design. Journal of Post Keynesian Economics, 29(4), 621-643. https://doi/abs/10.2753/PKE0160-3477290405
Audi, M., Ali, A., & Hamadeh, H. F. (2022). Nexus among innovations, financial development and economic growth in developing countries. Journal of Applied Economic Sciences, 3(5), 79-84. https://doi.org/10.57017/jaes.v17.4(78).09
Buchholz, A., Cupertino, C., Meurer, R., Santos, A. P. & Costa, N. D. J. (2012). The market reaction to changes in the Brazilian official interest rate. Applied Economics Letters, 19(14). 1359-1364. https://doi.org/10.1080/13504851.2011.629975
Butter, F. A. G. D. & Jansen, P. W. (2004). An empirical analysis of the German long-term interest rate. Applied Financial Economics, 14(10), 731-741. https://doi.org/10.1080/0960310042000243565
Chaney, A. & Hoesli, M. (2010). The interest rate sensitivity of real estate. Journal of Property Research, 27(1), 61-85. https://doi.org/10.1080/09599916.2010.500815
Cook, S. (2008). Econometric analysis of interest rate pass-through. Applied Financial Economics Letters, 4(4), 249-251. https://doi.org/10.1080/17446540701704372
Craig, B. R. & Dinger, V. (2014). The duration of bank retail interest rates. International Journal of the Economics of Business, 21(2), 191-207. https://doi.org/10.1080/13571516.2014.909173
Dias, J. C. & Shackleton, M. B. (2009). Durable vs. disposable equipment choice under interest rate uncertainty. The European Journal of Finance, 15(2), 157-167. https://doi.org/10.1080/13518470802560790
Eschenbach, T. & Cohen, R. (2006). Which interest rate for evaluating projects? Engineering Management Journal, 18(3), 11-19. https://doi.org/10.1080/10429247.2006.11431699
Harashima, T. (2022). Numerical simulations of reaching a steady state: no need to generate any rational expectations. Journal of Applied Economic Sciences, 4(78), 321-339. https://doi.org/10.57017/jaes.v17.4(78).04
Kawaller, I. G. (2007). Interest rate swaps: accounting vs. economics, Financial Analysts Journal, 63(2), 15-18. https://doi.org/10.2469/faj.v63.n2.4524
Leuvensteijn, M. V., Sørensen, C. K., Bikker, J. A., & Rixtel, A. A. R. J. M. V. (2013). Impact of bank competition on the interest rate pass-through in the Euro area. Applied Economics, 45(11). 1359-1380. https://doi.org/10.1080/00036846.2011.617697
Levy, M., Levy, H., & Edry, A. (2003). A negative equilibrium interest rate. Financial Analysts Journal, 59(2), 97-109. https://doi.org/10.2469/faj.v59.n2.2518
Lima, G. L. R., Ely, R. A., & Cajueiro, D. O. (2024). Interactions between monetary and macroprudential policies. Quantitative Finance, 24(3-4), 481-498. https://doi.org/10.1080/14697688.2024.2327065
Lu, X. & In, F. (2006). Monetary policy, open market operations and New Zealand interest-rate and exchange-rate markets. Journal of the Asia Pacific Economy, 11(4), 462-481. https://doi.org/10.1080/13547860600924021
Makysh, S. B., Bulakbay, Z. M., Kenesbayeva, D. Z., Iskakov, B. M., Zhagyparova, A. O., & Munhatay, G. S. (2017). The effect of the European Сentral Bank’s unсоnvеntiоnal mоnetary pоliсiеs to the financial stability of the Eurozone. Journal of Applied Economic Sciences, 5(51), 1495-1507. https://doi.org/10.57017/jaes.v12.5(51)
Panda, A. K., Nanda, S., & Sahoo, S. (2022). Transmission of monetary policy impulses to a firm’s profitability: an empirical analysis of manufacturing firms. Global Economic Review, 51(3), 265-285. https://doi.org/10.1080/1226508X.2022.2102055
Rainer, M. (2009). Calibration of stochastic models for interest rate derivatives. Optimization, 58(3), 373-388. https://doi.org/10.1080/02331930902741796
Ratti, R. A. & Vespignani, J. L. (2019). What drives the global official/policy interest rate? Applied Economics, 51(47). 5185-5190. https://doi.org/10.1080/00036846.2019.1610716
Sengupta, N. (2014). Interest rate pass-through in India. Macroeconomics and Finance in Emerging Market Economies, 7(1), 36-50. https://doi.org/10.1080/17520843.2013.771692
Simionescu, M., Schneider, N., & Gavurova, B. (2024). Transmission channels from monetary shocks might be identified by studying the features of the production network. Journal of Applied Economics, 27(1), Article: 2395114. https://doi.org/10.1080/15140326.2024.2395114
Sorwar, G. (2011). Estimating single factor jump diffusion interest rate models. Applied Financial Economics, 21(22). 1679-1689. https://doi.org/10.1080/09603107.2011.591729
Staehr, K. & Tkacevs, O. (2025). The Euro at 25: how demand, supply and policy shocks contributed to inflation in the euro area countries. Journal of Applied Economics, 28(1), 2469880. https://doi.org/10.1080/15140326.2025.2469880
Stijepic, D. (2018). On the system-theoretical foundations of non-economic parameter constancy assumptions in economic growth modelling. Journal of Applied Economic Sciences, 1(55), 9-23. https://doi.org/10.57017/jaes.v13.1(55)
Vasudevan, R. (2025). The nexus of public debt and private finance: forging the international monetary order. Review of Political Economy, 37(2), 637-656. https://doi.org/10.1080/09538259.2024.2321452
Vianna, M. T. (2024). Monetary policy and income distribution in a multisectoral AB-SFC model. Review of Political Economy, 36(3), 1019-1041. https://doi.org/10.1080/09538259.2024.2339005
Yoshino, J. A. & Santos, E. B. E (2009). Revisiting the interest rate puzzle. Applied Economics Letters, 16(13), 1333-1340. https://doi.org/10.1080/17446540802403643