A MACROECONOMETRIC MODEL OF KOREA: SIMULATION EXPERIMENTS WITH A LARGE-SCALE MODEL FOR A DEVELOPING COUNTRY

The main purpose of this dissertation is an empirical study of the economic structure and of the impact of economic policies and external influences on the Republic of Korea during the last two decades, building a large-scale econometric model for the Korean economy. There are several distinctive features of the model developed here. Our model is larger and more disaggregate than any of the existing models of Korea. It incorporates supply, demand, balance of payments, prices and wages, labor market, government sector and monetary sector. The model is also disaggregated into nine-sector level to reflect sectoral heterogeneities. More attention has been given to the long-run properties and some emphasis has been placed on the transmission channels for the monetary sector to the real sector and the role which foreign trade and payments play in the economic system, particularly its influences on the money supply. This study discusses partial equilibrium estimates of structural relations on the sectoral level for the Korean economy during the last two decades, and integrates these partial equilibrium relationships into a complete system model. Finally, the comprehensive simulation experiments using the complete model make it possible to analyze the impacts of the Korean economy of fiscal, monetary and foreign sector policies as well as of external influences including world trade, import prices, foreign interest rates and overseas construction activities. Based on the findings for these simulations, some conclusions are drawn: some confirming the conventional wisdom and some disagreeing with it