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Macroeconomic shocks and dynamics of labor markets in Korea

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Frame of Image rking at the BOK Research Institute as an economist. The authors are grateful to Woon Gyu Choi, Myung Soo Lee, Jung Goo Ji and seminar participants for helpful comments.
Contents
Ⅰ. Introduction ···················· 1 · ·· ·· ·· ·· ·· ·· · ·· ·· ·· · · ·· ·· ·· ·· ·· ·· ·· · ·· · ·· ·· ·· · ·· ·· ·· ·· ·· ·· · Ⅱ. Related Literature ················· 3 ················· ················· ·················
················· ················· ················· Ⅲ. Theoretical Model ················· 5
3.1. Household ··························6 ························· ························· ························· 3.2. Firms ····························10 ··························· ··························· ··························· 3.3 Monetary authority ····················· 15 ····················· ···················· ···················· 3.4 Labor market statistics ··················· 16 ··················· ··················· ··················· 3.5 Macroeconomic shocks ··················· 18 ··················· ··················· ···················
Ⅳ. Empirical Analysis ················· 19 · · · · · · · · ·· · · · · · · · ················ · · · · · · · ·· · · · · · · ·
4.1 Data ···························· 19 ···························· ···························· ··························· 4.2 Calibration ························· 21 ························· ························· ························ 4.3 Estimation ························· 23 ··


Full Text
Title Macroeconomic shocks and dynamics of labor markets in Korea
Similar Titles
Material Type Articles
Author(English)

Kim, Tae Bong; Lee, Hangyu

Publisher

Seoul:The Bank of Korea

Date 2015-10
Journal Title; Vol./Issue BOK Working Paper:no. (.2015-26)
Pages 46
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Macroeconomics
Social Development < Employment
Holding The Bank of Korea; KDI국제정책대학원

Abstract

A New Keynesian model with a labor market friction, where involuntary unemployment can be endogenized, is estimated with the Korean macroeconomic data using a Bayesian estimation approach. In order to characterize the Korean labor market more realistically, the model is extended by specifying a small open economy with tradable and nontradable goods sectors.The results of empirical analyses based on the estimated model can be summarized as follows. First, it is confirmed that the sectoral reallocation of labors plays an important role in the adjustments of Korean labor market responding to some macroeconomic shocks, particularly foreign shocks. Second, the historical decomposition analysis demonstrates that the cyclical fluctuations of unemployment in Korea are mostly explained by key domestic shocks such as domestic productivity shocks and preference shocks. A relatively small contribution of foreign shocks onto aggregate labor market variables is in part due to the sectoral shift of employment rather than changes in aggregate employment and labor force at extensive margins.