BOKDSGE: A DSGE Model for the Korean Economy

Transcription

1 BOKDSGE: A DSGE Model for he Korean Economy June 4, 2008 Joong Shik Lee, Head Macroeconomeric Model Secion Research Deparmen The Bank of Korea

2 Ouline 1. Background 2. Model srucure & parameer values 3. Model experimen 4. Curren saus

3 1. Background main macro forecasing model : BOK04 Keynesian ype simulaneous equaion model (81 endogenous variables; 26 exogenous variables) develop a DSGE model, suiable for forecass/projecions and policy analysis risk and uncerainy assessmen communicaion

4 ypical SOE srucure 2. Model srucure

5 2. Model srucure A. Household 1+ ν Nh Mh 1 () () + U= E0 β ln C() h b C() h 1 χ1 + χ2ln = 0 1+ ν P 1 max ( ) * bh ( ) sbh ( ) Ch ( ) + Ih ( ) mh ( ) * R Rφ () s B 2 φ wh ( ) / wh ( ) π = wh w 1 ( ) 1 1 N ( h ) 2 wh ( ) 1/ wh ( ) 2 π 1 * () () K bh sb h mh () + R K () h + T () h () h (1 + g ) π + (1 + g ) π + (1 + g ) π +Π y y y feauring habi formaion; money-in-uiliy funcion; and CES ype of composie goods and price index

6 2. Model srucure B. Firms (monopolisic compeiion) producion echnology Y( j) = exp( z) N( j)(1 + gy) K( j) α 1 α profi maximizaion : ψ p 2 D0, P j φp P j P 1 j 0 () 1 1 = 0 P P 2 P 1 P 2 max () () () E P j Y P () j = 0 ψ p P ( j) Pmc ( ) j Y P { } where α K 1 r α 1 w mc () j = z e α 1 α

7 2. Model srucure law of moion on capial : 2 φ (1 ) ( ) (1 ) () 1 (1 ) () zi I + g Ih + g K h K h e 1 Y + = δ + 1 I () h 2 Ih ( ) 1 Y where γ 1 Ih γ I h I h * ( ) = θ ( ) + (1 θ) ( ) γ γ 1 γ 1 γ feauring labor augmening g echnological progress; rigidiies on wage and prices (Roemberg, 1982); and quadraic adjusmen coss on capial accumulaion

8 2. Model srucure C. Cenral Bank : moneary reacion funcion ρ ρ ρy 1 ˆ Rˆ π R R π Y = 1 exp( ( R ) R R π Y D. Exernal Secor ineres rae pariy condiion i : R s 1 φ B () + = E * R 1 s φ B ( ) + where + φb() = exp φ B py * sb + 1

9 2. Model srucure E. Equilibrium marke clearing: goods marke, labor marke, capial marke, money marke, bond marke, and exernal (sock-flow) balance balanced growh equilibrium pah symmeric equilibrium, consising of Korea and is Trading Parners

10 2. and parameer values pragmaic approach in seing parameer values goal: mimic Korean macro dynamics sraegy: incorporae various evidence including Grea raios, VAR impulse responses, and inflaion arge ools: hisorical daa, IV esimaion, mehod of momens, MLE wih Kalman Filer MATLAB wih DYNARE (v3.0)

11 2. and parameer values classify parameers ino 5 groups: {Ω 1, Ω 2, Ω 3, Ω 4, Ω 5 } group Ω 1 (8) coverage (examples) daa driven depreciaion rae discoun rae inflaion arge poenial growh rae ools hisorical dae (SNA) meric Ω 2 (3) moneary ypolicy reacion funcion parameers IV esimaion

12 2. and parameer values group coverage (examples) ools meric Ω 3 (8) long-run seady sae grea raios adjusmen coss preferences calibraion (mehod of momens) (Ω 3 ) of 8 relevan variables Ω 4 (8) shor-run dynamics habi formaion elasiciies pseudocalibraion (MM) [ (Ω 4 ) I (Ω 4 ) ] of 10 horizon GDP & Cons. dynamics Ω 5 (14) exogenous shock parameers MLE wih Kalman filer likelihood of 7 ime series 1. (Ω) = daa driven saisics Model(Ω) 2. : sequenial ieraion of Ω 5 Ω 4 Ω 3 (convergence criical values: Ω 3 < d 1 and Ω 4 < d 2 )

13 2. and parameer values dynamic properies compared wih he daa counerpar (in percen) Consumpion o GDP Governmen Expendiure o GDP Fixed Capial Formaion o GDP Expor o GDP Daa Model Ne Expor o GDP Inflaion Rae Nominal Ineres Rae Money/GDP Daa Model Correlaion Coefficien wih GDP GDP C I Exp. Imp. Inflaion Ex. Rae In. Rae Daa Model Firs-order Daa Auocorrelaion Coefficien Model

14 2. and parameer values impulse responses: comparison wih VAR counerpar impulse responses o moneary policy shock 0.10 (%) < GDP > (%) < Consumpion > VAR BOKDSGE VAR BOKDSGE

15 3. Model experimen back-ou realizaions of he economic shocks < Produciviy Shock > < Expor and Capial Adjusmen Cos Shocks > Capial Adjusmen Cos Shock Expor Shock < Fiscal Policy Shock > < Moneary Policy Shock >

16 3. Model experimen < Foreign Price Shock > < Foreign Ineres Rae Shock > and execue medium-erm baseline forecass 7 (%) 6 Obser v ed GDP 2005 ~ ~ Mean Revering o Poenial GDP Gr owh 2006 ~ 2010 Rae

17 4. Curren saus compleed : analyical model srucure sysemaic esimaion and updae of he parameer values analyzing conjuncural issues: sagflaion, expecaion shocks in line wih he algorihm of Fujiwara & Kang (2008) in progress : inegraion wih he curren forecasing sysem opimal moneary policy: ineres rae pah fuure asks : Bayesian esimaion of he parameer values uncerainy and risk assessmen model exension: global model, sochasic growh