Adjustment Cost on Investment and Under-Utilization of Maximum Installed Capacity in South Korean Business Cycle - A Bayesian New Keynensian Model

Abstract

This study examines the effects of adjustment costs on investment and the under-utilization of maximum installed capacity within the South Korea using a New Keynesian business cycle with Bayesian approach. The New Keynesian business cycle model that incorporates both investment frictions as well as capital under-utilization. The model has been calibrated specifically for South Korea economy. The model estimation uses Markov Chain Monte Carlo (MCMC) methods along with the Metropolis-Hastings algorithm to draw samples from the posterior distributions parameters of the model.

Keywords

• bayesian estimation
• korean business cycles
• adjustment costs
• underutilization of capital
• new keynesian economics
• ricardian estimation
• non-ricardian estimation
• maximum installed capacity
• metropolis-hastings algorithm
• e32
• e52
• e61
• e22
• c11