# Macroeconomic Effects of COVID-19 Pandemic: Fresh Evidence from Korea

^{1}

^{2}

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review

## 3. Model

#### 3.1. Household

_{t}C

_{t}+ P

_{t}I

_{t}+ B

_{t}+ M

_{t}+ T

_{t}= W

_{t}N

_{t}+ R

_{t}

^{1}K

_{t}+ (1 + R

_{t}

^{2})B

_{t−1}+ D

_{t},

_{t}denotes investment; B

_{t}denotes bonds; T

_{t}denotes tax; W

_{t}denotes wage; Rt

^{1}denotes interest rate for capital; K

_{t}denotes capital; R

_{t}

^{2}denotes interest rate for bonds; D

_{t}denotes dividends. Suppose that there is an adjustment cost of investment. The law of capital motion is given as follows:

#### 3.2. Firm

#### 3.2.1. Final Goods Production Firm

#### 3.2.2. Intermediate Goods Production Firm

#### 3.2.3. Calvo Pricing

#### 3.3. Government

#### 3.4. Central Bank

#### 3.5. Market Clearing

## 4. Results and Discussion

#### 4.1. Parameters

#### 4.1.1. Bayesian Estimation

#### 4.1.2. Parameter Calibration

#### 4.2. Impulse Response Function Analysis

#### 4.2.1. COVID-19 Pandemic Shock

#### 4.2.2. Government Investment Expenditure and Monetary Policy Shocks

## 5. Conclusions

## Author Contributions

## Funding

## Institutional Review Board Statement

## Informed Consent Statement

## Data Availability Statement

## Conflicts of Interest

## References

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Parameter | Definition | Prior Mean | Posterior Mean | 95% HPD Interval | Prior Distribution | Posterior Deviation | |
---|---|---|---|---|---|---|---|

$\mathsf{\xi}$ | Government investment expenditure smoothing | 0.886 | 0.869 | 0.868 | 0.882 | Beta | 0.010 |

$\mathsf{\rho}$ | output gap | 0.500 | 0.498 | 0.482 | 0.516 | Gamma | 0.010 |

${\mathsf{\rho}}_{\mathrm{r}}$ | Degree of interest-rate smoothing | 0.750 | 0.750 | 0.746 | 0.753 | Beta | 0.010 |

${\mathsf{\theta}}_{\mathsf{\pi}}$ | Weights the central bank places on inflation | 1.700 | 2.514 | 2.248 | 2.774 | Gamma | 0.010 |

${\mathsf{\theta}}_{\mathrm{y}}$ | Weights the central bank places on output growth | 0.500 | 0.498 | 0.497 | 0.504 | Gamma | 0.010 |

$\mathsf{\delta}$ | Capital depreciation rate | 0.025 | 0.006 | 0.002 | 0.011 | beta | 0.010 |

${\mathrm{e}}_{1}$ | Government investment expenditure shock | 0.500 | 0.502 | 0.564 | 0.644 | inverse gamma | 0.200 |

${\mathrm{e}}_{1}$ | Benchmark interest shock | 0.700 | 0.846 | 0.790 | 0.886 | inverse gamma | 0.200 |

${\mathrm{e}}_{1}$ | COVID-19 shock | 0.500 | 0.740 | 0.598 | 0.894 | inverse gamma | 0.200 |

Parameter | Value | Definition | Source |
---|---|---|---|

$\mathsf{\theta}$ | 1.250 | Inverse of real balance substitution elasticity | Yoo [36] |

$\mathsf{\vartheta}$ | 1.093 | Inverse of labor elasticity | Jeong [34] |

$\mathsf{\chi}$ | 0.971 | Sensitivity parameter for investment adjustment | Yie and Yoo [33] |

${\mathsf{\epsilon}}_{\mathrm{p}}$ | 6.000 | Elasticity of substitution between differentiated goods | Rhee [37]; Yie and Yoo [33] |

$\mathsf{\gamma}$ | 0.450 | Elasticity of the level of production with regard to capital | Kim et al. [38] |

$\mathsf{\upsilon}$ | 0.200 | Elasticity of the level of participation of capital with regard to government spending | Takyi and Leon-Gonzalez [31] |

$\mathsf{\varpi}$ | 0.750 | Proportion of intermediate goods production firms who can adjust their price | Rhee [37]; Yie and Yoo [33] |

$\mathsf{\beta}$ | 0.990 | Subjective discount factor | Kim et al. [38]; Yie and Yoo [33] |

${\mathsf{\delta}}_{2}$ | 0.020 | Public capital depreciation rate | Takyi and Leon-Gonzalez [31] |

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He, Y.; Wang, Y.
Macroeconomic Effects of COVID-19 Pandemic: Fresh Evidence from Korea. *Sustainability* **2022**, *14*, 5100.
https://doi.org/10.3390/su14095100

**AMA Style**

He Y, Wang Y.
Macroeconomic Effects of COVID-19 Pandemic: Fresh Evidence from Korea. *Sustainability*. 2022; 14(9):5100.
https://doi.org/10.3390/su14095100

**Chicago/Turabian Style**

He, Yugang, and Yinhui Wang.
2022. "Macroeconomic Effects of COVID-19 Pandemic: Fresh Evidence from Korea" *Sustainability* 14, no. 9: 5100.
https://doi.org/10.3390/su14095100