Which Method Should the Central Bank Choose to Estimate the Model Economy? A Korean Monetary Policy Example
AbstractTo understand how the macro economy evolves, the central bank has two options in choosing how to estimate the economic model against actual data: one is to estimate each sector of the model piece-by-piece, and the other is to estimate the whole model altogether. This paper demonstrates the advantage for the central bank of estimating the whole model in terms of the estimation accuracy and the robustness of the resulting policy recommendations. For that aim, we construct a macro model for the monetary policy analysis of the Korean economy and estimate the model via the system approach and single-equation approach. We evaluate the data fits of the two estimation results and show that the fit of the system approach is far better than the other and comparable to other methods such as vector autoregressions. It is also shown that, if the two estimated models are equally likely, conducting the policy tailored for the model estimated by the system approach delivers better stabilization results for the Korean economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Global Economic Review.
Volume (Year): 37 (2008)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RGER20
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.