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Business Cycles in Korea: Insights from a TANK Model

Author

Listed:
  • Yongseung Jung

    (Kyung Hee University)

  • Doo Yong Yang

    (Kyung Hee University)

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.

Suggested Citation

  • Yongseung Jung & Doo Yong Yang, 2025. "Business Cycles in Korea: Insights from a TANK Model," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 29(3), pages 337-369, September.
    • Handle: RePEc:ris:eaerev:021637
    DOI: 10.11644/KIEP.EAER.2025.29.3.452
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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