FIMI doesn’t predict what a government will do. It classifies what it has done and points the analyst to the right transfer mechanism, positioning horizon and risk assessment.
The South Korean case was not a crisis. It was a transparent, testable example of a mechanism that’s becoming increasingly common as governments within the post-QE environment search for tools that produce monetary demand effects without requiring central bank motion. The same logic applied in three jurisdictions over a six-year period. The probability of reoccurrence is non-zero and precedent suggests that it will not be a hypothesis.
When the following case arises, practitioners who’ve a reputation for it and a checklist to confirm it can be placed ahead of those reaching for the closest available label.
The label determines the position. The fallacious label means the fallacious trade.
References
[1] Bank of Korea. Monetary policy decision, April 10, 2026.
https://www.bok.or.kr/eng/bbs/E0000634/view.do?nttId=10097454&menuNo=400069
[2] Ministry of Economy and Finance, Republic of Korea. Supplementary budget 2026 to deal with the Middle East war crisis. March 31, 2026.
https://www.khan.co.kr/en/article/202603311234007/
[3] Korea Herald. The government is proposing an extra budget of W26.2 trillion, including W4.8 trillion for money spending. March 31, 2026.
https://www.koreaherald.com/article/10706553
[4] Seoul Economic Daily. Korea passes 26.2 trillion won supplementary budget. April 10, 2026.
https://en.sedaily.com/politics/2026/04/10/korea-passes-262-trillion-won-supplementary-budget-payments
[5] FocusEconomics. Korean central bank meeting: Central bank stands still in April. April 11, 2026.
https://www.focus-economics.com/countries/korea/news/monetary-policy/korea-central-bank-meeting-11-04-2026-central-bank-stands-pat-in-april/
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https://www.brookings.edu/articles/fed-response-to-covid19/
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https://www.researchaffiliates.com/insights/publications/articles/802-too-soon-pandemic-policy-response-raises-risk-of-inflation
[8] Bank of England. The UK Treasury and the Bank of England announce a short lived extension of the Ways and Means Facility. April 2020.
https://www.bankofengland.co.uk/news/2020/april/hmt-and-boe-announce-temporary-extension-to-ways-and-means-facility
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https://www.brookings.edu/bpea-articles/abenomics-preliminary-analysis-and-outlook/
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https://www.frbsf.org/economic-research/publications/working-papers/2019/15/
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https://economics.td.com/us-assessing-the-feasibility-of-President-Trump-Tariff-dividend-checks
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[13] Leeper, EM equilibria under “active” and “passive” monetary and financial policies. Journal of Monetary Economics, 27(1), 1991.
https://uva.theopenscholar.com/eric-leeper/publications/equilibria-under-%E2%80%98active%E2%80%99and-%E2%80%98passive%E2%80%99monetary-and-fiscal-policies
[14] Bernanke, BS Deflation: Making Sure “It” Doesn’t Happen Here. Federal Reserve Board. November 21, 2002.
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[15] Turner, A. Between Debt and the Devil: Money, Credit and the Solution to Global Finance. Princeton University Press, 2015. ISBN 978-0691165856.
https://books.google.com/books/about/Between_Debt_and_the_Devil.html?id=D26YDwAAQBAJ
[16] Cochrane, JH The tax theory of the value level. Princeton University Press, 2023.
https://www.hoover.org/research/fiscal-theory-price-level
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https://www.imf.org/en/publications/wp/issues/2023/06/02/quasi-fiscal-implications-of-central-bank-crisis-interventions-534076
