| What Caused the GDP Fluctuation Over Time? A Case Study of Korea |
Won Joong Kim, Wonmun Shin, Chunyan Piao |
| Konkuk University, Seoul, Republic of Korea |
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Corresponding Author:
Chunyan Piao ,Email: pcy5614@konkuk.ac.kr |
| Copyright ©2026 The Journal of Economic Integration |
| ABSTRACT |
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Using a time-varying parameter (TVP) structural vector autoregression, we estimate the GDP dynamics of Korea. The impulse response results show that world industrial production, Korea's investment, and export shocks generally have statistically significant and positive effects on GDP, while exchange rate shock generally has no statistically significant effect in the long run. The variance decomposition from the TVP-VAR shows that Korea's GDP is predominantly explained by investment shocks during the Korean financial crisis, and that the relative importance of investment shocks declines during the global financial crisis (GFC) and the COVID-19 periods. We also find that, on average, Korea's GDP is more affected by domestic shocks (such as investment and GDP) than by ex-ternal shocks (such as world industrial production, exports, and exchange rates). While this is also true in the TVP-VAR for the Korean financial crisis and the GFC periods, Korea's GDP is more affected by external shocks during the COVID-19 period.
JEL Classification
C11: Bayesian Analysis: General
C15: Statistical Simulation Methods: General
E32: Business Fluctuations; Cycles |
| Keywords:
Korea's GDP | TVP VAR | COVID-19 | GFC | Korean Financial Crisis
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