The Bank of Korea has been engaged in the construction of several versions of demand-oriented Keynesian models of the Korean economy and analyzed the causal relations among economic variables of the monetary and real sectors. The Bank has contributed, thereby, to the formulation of stabilization policies in Korea for the past ten years. In view of the recent experiences of oil shocks, however, it came to recognition that disturbances on the supply side can exert a significant influence upon the rate of inflation and GNP. It was considered necessary, therefore, to revise the BOK models and incorporate more carefully the interaction between supply and demand factors that determine the levels and changes of important economic variables in the Korean economy.
KeywordsDemand Side Real Income Money Market Demand Factor Policy Simulation
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