KDI Journal of Economic Policy

open access

Journal Archive

Home > Journal Archive

P-ISSN 1738-656X

Vol.27, No.1

Cite

한국개발연구. Vol. 27, No. 1, June 2005, pp. 157-183

https://doi.org/10.23895/kdijep.2005.27.1.157

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

Dynamics of Business Cycles in Korea: The Role of External Shocks

Sung hyun H. Kim; Hyung do Ahn

Author & Article History

Manuscript .

Abstract

Using a multi-sector dynamic stochastic general equilibrium model, we investigate the dynamic effects of a variety of shocks to a small open economy. In particular, we calibrate the model to match the main characteristics of business cycles in Korea and analyze the effects of external shocks: the terms of trade and world real interest rate shocks. Business cycles in Korea more closely follow those of the G7 countries rather than Asian countries. The simulation results suggest that an improvement in the terms of trade has positive impact on investment, output and consumption, while a decrease in the world interest rate has a significant and positive effect on investment. This paper concludes that external shocks significantly influence business cycle fluctuations in Korea.

Keywords

Business Cycles, MultiSector, External Shock, Korea

JEL Code

E3, F4

735Download
2701Viewed