This study provides a dynamic analysis of the inflation that has been occurring in Korea ever since the Korean economy began to grow.
Stability is crucial for sustained economic development. Korea has achieved remarkable economic growth over the last decade, with its economy growing at more than 10 percent annually from 1976 to 1978, but inflation has been a chronic feature of this development process, and is now causing increasing concern. Inflation can hurt household finance and may even compromise the long-term prospects of economic growth in general. As such, policymakers in Korea have begun to take steps to slow the pace of economic growth so as to restore a greater measure of stability.
Our model of analysis assumes that the consumer price and real output are decided at the supply-demand equilibrium on the money market, and also by the price-deciding and supplying behavior of producers of real goods on the real goods market. The analysis reveals that the supply of money is largely subject to the influence of the rate at which the size of the reserve base increases. In the current term, only partial adjustments are being made. The analysis of the price level, which controls the equilibrium on the money market, reveals that the interest rate exerts little impact on the demand for money, and that the increases in imports made a considerable contribution to stabilizing prices from 1966 to 1977, but failed to help between 1972 and 1975, amid the oil shocks. Regarding wages, the factors that exert upward pressure on wages are the level of living activities and the rate of wage increase of the previous term.
This model may be narrow in scope, but is significant in that it assists researchers in taking into account both the growth and stability of the Korean economy simultaneously. So long as the current structure of the Korean economy persists without abrupt changes, the model will help policymakers analyze and develop various economic policy measures. However, as the model produces slightly different results depending on which variables are included and which perspective is adopted in the assessment, researchers will need to control for various exogenous variables and find an effective structural equation.
한국인플레이션의 동태적 분석 (Dynamic analysis of inflation in Korea)
적정안정·성장 정책조합을 위한 시뮬레이션 모델 (a simulation of the appropriate stabilization-development policy choice sets)
|Journal Title; Vol./Issue||한국개발연구:vol. 1(issue 1)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics|
|Holding||KDI; KDI School|