Labor Market Slack and the Output Gap: The Case of Korea

By Niels-Jakob H Hansen, Joannes Mongardini, Fan Zhang

August 2, 2019

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Niels-Jakob H Hansen, Joannes Mongardini, and Fan Zhang. Labor Market Slack and the Output Gap: The Case of Korea, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Output gap estimates are widely used to inform macroeconomic policy decisions, including in Korea. The main determinant of these estimates is the measure of labor market slack. The traditional measure of unemployment in Korea yields an incomplete estimate of labor market slack, given that many workers prefer involuntary part-time jobs or leaving the labor force rather than registering as unemployed. This paper discusses a way in which the measure of unemployment can be broadened to yield a more accurate measure of labor market slack. This broader measure is then used to estimate the output gap using a multivariate filter, yielding a more meaningful measure of the output gap.

Subject: Capacity utilization, Labor, Labor markets, Output gap, Potential output, Production, Unemployment

Keywords: Capacity utilization, Discouraged worker, Global, Labor force, Labor market condition, Labor market resource, Labor market slack, Labor markets, Output gap, Output gap estimate, Output gap from the MVF, Persistent output gap, Potential output, Unemployment, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/167
Stock No:

WPIEA2019167
ISBN:

9781513508344
ISSN:

1018-5941

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