Financial Factors in the Business Cycle of a Small Open Economy: The Case of Korea

Junhee Lee () and Wooheon Rhee ()

Open Economies Review, 2013, vol. 24, issue 5, 900 pages

Abstract: Financial factors influencing the business cycle have received considerable attention in recent years in the aftermath of the global financial crisis in 2008. This paper examines the role of financial factors in the business cycle by considering Korea, a small open economy, that experienced a severe financial crisis in 1997 as well as the recent global financial crisis. We estimate small open economy Bayesian DSGE (dynamic stochastic general equilibrium) models with financial factors and analyze the role of these financial factors in the business cycle in the context of Korea. The results indicate that the model based on an endogenous financial accelerator and a modified monetary policy rule provides a better explanation to the data than that without the financial factors and justify the recent attention to financial factors influencing the business cycle. Copyright Springer Science+Business Media New York 2013

Keywords: Financial accelerator; International comovement; Net worth shock; DSGE model; Bayesian estimation; E32; E44 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11079-013-9272-x (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:24:y:2013:i:5:p:881-900

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-013-9272-x

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().