A Structural Change in the Trend and Cycle in Korea
37 Pages Posted: 14 Nov 2019
Date Written: November 13, 2019
We develop a new identification approach based on the regression of consumption on output to identify a structural break in business cycles. Using this method, we find that a structural change in the trend and cycle in Korea occurred in 1993. To explain these, we estimate the parameters of the productivity process in Korea, using data on Solow residuals. Our estimates show that the relative importance of trend growth shocks in the post-break period increased by a factor of 2.56 compared to that in the pre-break period.
Keywords: Structural change, Consumption volatility, Trend growth shocks
JEL Classification: E32, F44
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