Missing growth and economic fluctuations: Empirical evidence from Korea

Sangmin Aum

Journal of Economic Dynamics and Control, 2024, vol. 164, issue C

Abstract: We compute missing growth due to imputation practices in Korea by applying the market share approach of Aghion et al. (2019) and investigate its contribution to the trend and the cyclicality of measurement errors in official inflation and GDP. We find that missing growth is strongly procyclical and that it correlates significantly to an oil shock and a monetary policy shock. The procyclical missing growth, together with the significant correlation with a monetary policy shock, provides additional difficulties in identifying the slope of the Phillips curve from officially measured statistics. Furthermore, missing growth complicates the policy tradeoff between inflation and output stabilization in the face of cost-push shocks, calling for a greater emphasis on inflation stabilization.

Keywords: Creative destruction; Missing growth; Market share approach; The Phillips curve; Monetary policy trade-offs (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:164:y:2024:i:c:s0165188924000642

DOI: 10.1016/j.jedc.2024.104872

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