Business Cycles and Limited Participation in Financial Markets: The Case of Korea
- 한국계량경제학회
- JOURNAL OF ECONOMIC THEORY AND ECONOMETRICS
- Vol.31 No.3
-
2020.0944 - 70 (27 pages)
- 7
This paper investigates sources of business cycles in Korea to shedsome lights on the role of limited participation in financial market along the lineof Christiano and Eichenbaum (1992) and King and Watson (1996). For thispurpose, the paper sets up a small open economy model with two agents subjectto limited participation in financial markets. Applying Watson (1993)’s measureof fit to evaluate the role of limited participation over Korean business cycles, itfinds that the household’s limited participation has played an important role inthe business cycle in Korea after the Asian financial crisis.
1. INTRODUCTION
2. FEATURES OF BUSINESS CYCLES IN KOREA
3. SMALL OPEN ECONOMY MODEL WITH LIMITED PARTICIPATION FRICTIONS
4. EQUILIBRIUM
5. QUANTITATIVE EVALUATION OF THE MODEL
6. CONCLUSION
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