Structural Change in the Trend and Cycle in Korea
Seoul Journal of Economics, Vol. 33, No. 1, 2020
24 Pages Posted: 25 Mar 2020
Date Written: February 28, 2020
Abstract
On the basis of regression of consumption on output, we develop a new approach to identify a structural break in business cycles. Using this approach, we find that a structural change in the trend and cycle in Korea occurred in 1993 and that the business cycles in Korea started to show the regularities of emerging market business cycles beginning in 1993. To explain these, we estimate the parameters of the productivity process in Korea, using data on Solow residuals. Our estimates show that the relative importance of trend growth shocks in the post-break period increased by a factor of 2.56 from that in the pre-break period.
Keywords: Structural Change, Consumption Volatility, Trend Growth Shocks
JEL Classification: E32, F44
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