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Macroeconomic effects of monetary policy in Korea: A time-varying coefficient VAR approach

Jong-Suk Han and Joonyoung Hur

Economic Modelling, 2020, vol. 89, issue C, 142-152

Abstract: Using a time-varying coefficient vector autoregressive (TVC-VAR) model, we assess how the efficacy of monetary policy innovations in stimulating real activity has evolved over time in Korea, as an example of emerging market countries, since 2000. We show that the responsiveness of output toward monetary policy innovations has decreased gradually since the early to mid-2000s, but monetary policy remains effective in boosting output even for the most recent sample. In addition, we find that the volatility of exogenous disturbances has decreased dramatically in the post-2000 period, and that this is the main driver of the recent volatility reductions of both output and inflation.

Keywords: Time-varying coefficient VAR; Stochastic volatility; Monetary policy (search for similar items in EconPapers)
JEL-codes: C11 C15 C22 E32 E52 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.econmod.2019.10.002

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