This study concerns the development and discussion of a semi-annual economic simulation model for Korea that is intended to help policymakers to analyze the costs and benefit of different policy options.
Economic policymakers are required to understand and predict how the policy choices they make will affect the economy. However, as Korea’s economy is growing increasingly complex it is nearly impossible for any policymaker to fully understand the exact relationships between policy choices and outcomes. One should not attempt to analyze the possible costs and benefits of economic policy options without the use of a valid scientific model. The model proposed in this study involves a minimal possible scope so as to enable policymakers to keep track of the logical flows as easily as possible. Despite narrowness of scope, this model also involves the major economic variables, including growth, price, and the international trade balance.
This study then applies its semi-annual economic simulation model to conduct simulations on certain policy choices and their effects. Because the formula used in the model has been designed with the goal of simulating future policy choices, the model may not be accurate on past policy choices, but it is nonetheless a useful tool for analyzing possible policy choices for the future.
The semi-annual model avoids the constraints that annual models for dynamic analysis often face, and is also free of the seasonal problems often associated with quarterly models. The semi-annual model can be used alone for short-term predictions and also alongside other tools for intermediate- to long-term analyses. The relatively limited and narrow focus of the model also enables determination of the theoretical and logical grounds for the predicted policy results.
Of course, the model still has some room for structural improvement. It explains economic growth with a single equation applying to the added value of non-primary sectors. Moreover, the model tracks the state of employment and the state of the economically active population separately, which can be destabilizing. We therefore may need to divide and analyze added value by industry or source of demand, and apply a single equation to employment rate estimates as well.
한국경제의 반기시뮬레이션모형(Semi-annual simulation model for the Korean economy)
|Journal Title; Vol./Issue||한국개발연구:vol. 3(issue 1)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < General|
|Holding||KDI; KDI School|