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

Hyunju Kang () and Hyunduk Suh

International Review of Economics & Finance, 2017, vol. 49, issue C, 386-421

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 (search for similar items in EconPapers)
JEL-codes: C5 E3 E5 F4 G1 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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Working Paper: Macroeconomic Dynamics in Korea during and after the Global Financial Crisis: A Bayesian DSGE Approach (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:49:y:2017:i:c:p:386-421

DOI: 10.1016/j.iref.2017.02.008

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