Macroeconomic Dynamics in Korea During and after Global Financial Crisis: A Bayesian DSGE Approach

66 Pages Posted: 15 Jul 2016 Last revised: 24 Feb 2017

See all articles by Hyunju Kang

Hyunju Kang

Korea Capital Market Institute

Hyunduk Suh

Inha University - Department of Economics; INHA University

Date Written: February 24, 2017

Abstract

We estimate a medium-scale DSGE model, including a financial accelerator and the search and matching framework in labor markets, for the Korean economy, using the Bayesian technique. The estimated model shows that the recent sluggishness in GDP growth can be explained by slow technology growth, and the decline in CPI inflation is affected by a falling markup in domestic homogeneous goods production and a negative intertemporal consumption preference. Although wages, unemployment, and total labor hours are influenced by various factors, households' weak bargaining power causes a slow recovery in wages, while pushing the unemployment rate down. There was also a spillover from non-big-5 to big-5 firms during the global financial crisis, while monetary and fiscal policy has been mostly conservative in the post-crisis period

Keywords: DSGE model, Financial Frictions, Employment Frictions, Korean Economy

JEL Classification: C5, E3, E5, F4, G1

Suggested Citation

Kang, Hyunju and Suh, Hyunduk and Suh, Hyunduk, Macroeconomic Dynamics in Korea During and after Global Financial Crisis: A Bayesian DSGE Approach (February 24, 2017). Available at SSRN: https://ssrn.com/abstract=2699943 or http://dx.doi.org/10.2139/ssrn.2699943

Hyunju Kang (Contact Author)

Korea Capital Market Institute ( email )

143 Uisadang-daero
Yeongdeungpo-gu
Seoul, 07332
Korea, Republic of (South Korea)
+82 2 3771 0850 (Phone)

HOME PAGE: http://https://sites.google.com/site/hjkang326

Hyunduk Suh

INHA University ( email )

253 Yonghyun-dong
Nam-gu Incheon 402-751

Inha University - Department of Economics ( email )

100 Inharo
Nam-gu Incheon 402-751

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