Business Cycles in Korea: Insights from a TANK Model

Yongseung Jung and Doo Yong Yang
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Yongseung Jung: Kyung Hee University
Doo Yong Yang: Kyung Hee University

East Asian Economic Review, 2025, vol. 29, issue 3, 337-369

Abstract: This paper sets up a medium-scale small open economy TANK model with incomplete markets to address business cycles in Korea extensively. The estimated model via Bayesian estimation methodology shows that the fraction of households who lack access to financial markets increased from 30 percent to 40 percent after the Asian Financial Crisis. This feature appears to be associated with structural changes in employment practices, including life-time employment and seniority-based salaries, as well as an increase in part-time jobs after the crisis. Since the mid-1970s, domestic markup, government spending, and risk premium shocks have been key factors influencing business cycles in Korea.

Keywords: Bayesian Estimation; Business Cycles; Constrained Households; TANK Model (search for similar items in EconPapers)
JEL-codes: E32 F31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:021637

DOI: 10.11644/KIEP.EAER.2025.29.3.452

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