Country Spread, Foreign Interest Rates, and Macroeconomic Fluctuations in Korea
- Resource Type
- Academic Journal
- Authors
- Taly I; David Kim
- Source
- formerly The Jounal of the Korea EconomyKorea and the World Economy. 2013-12 14(3):517-553
- Subject
- country spread
structural vector autoregression (SVAR)
small open economy
foreign interest rates
Korea
- Language
- Korean
- ISSN
- 2234-2346
2765-6136
This paper examines the dynamic relations between the country spread and macroeconomic fluctuations in Korea using a structural vector autoregressive (SVAR) model as well as a calibrated equilibrium model due to Uribe and Yue (2006). Our empirical analysis shows that the country spread has a small but significant influence on the short-run macroeconomic activities of the Korean economy. We also find that the U.S. and Japanese interest rate shocks have quite different effects on the real activities in Korea. Finally, the calibrated model produces results that are largely consistent with the results from the SVAR model, although there are some gaps to be explained.