TITLE : [Economic Papers 5-1] Durables Consumption under Time-Varying Income Uncertainty: Evidence from Korea AUTHOR : Joon-Ho Hahm CONTACT : Institute for Monetary & Economic Research (tel: 82-2-759-5407, fax: 82-2-759-5410) ATTACH : EP5-1-4.pdf Summary: Using an intertemporal optimization model of durables consumption under precautionary savings motive, this paper establishes and empirically investigates a channel through which fluctuations in permanent income uncertainty affect optimal durables consumption. Empirical results indicate that the frictionless intertemporal optimization model which assumes an instantaneous adjustment in consumer durables stock is not consistent with the Korean data. However, the evidence on more general time-series models indicates that an increase in permanent income uncertainty has a strong negative effect on consumer durables expenditure, as predicted by the precautionary savings theory. The negative uncertainty effect tends to last for approximately 3 to 4 quarters, and relative to asset return uncertainties, real income uncertainty has a more significant and persistent effect. The overall evidence suggests that time-varying income uncertainty constitutes an important source of consumption fluctuation over the business cycle. TITLE : [Economic Papers 5-1] Long-Term Determinants and Projection of Consumption in Korea AUTHOR : Byung Hwa Kim and Hyun Joon Lim CONTACT : Institute for Monetary & Economic Research (tel: 82-2-759-5407, fax: 82-2-759-5410) ATTACH : EP5-1-5(1).pdf EP5-1-5(2).pdf Summary: It is estimated that the private consumption rate of Korea is, in the long term, influenced by demographic structure, growth rate of income, liquidity constraints and public pensions, the last of which has only had a statistically significant effect on the private consumption rate since its introduction in the late 80s. Meanwhile, as a result of testing the impact of each determinant on the private consumption rate by income group, the higher the income earned, the greater spending is increased with the easing of liquidity constraints, while the public pension fund has affected private consumption by a similar degree across all income groups. In addition, the results of projecting the future private consumption rate by employing the regression equation estimated herein show that the private consumption rate of Korea, which stood at 78.5% on average for the period 1996∼99, is anticipated to rise to approximately 85∼87% in 2020 due to a slowing of the downward trends of the dependency ratio, a decrease in income growth rate, easier access to consumer credit and the expansion of public pension system. Meanwhile, it is expected that the consumption rate will rise more from after 2020, when the dependency ratio begins to rebound. TITLE : [Economic Papers 5-1] Nature and Cause of the Korean Economy´s Growth Slowdown in the 1990´s: Focusing on the Role of the Changes in Intersectoral Shifts of Labor AUTHOR : Du Yong Kang CONTACT : Institute for Monetary & Economic Research (tel: 82-2-759-5407, fax: 82-2-759-5410) ATTACH : EP5-1-6(1).pdf EP5-1-6(2).pdf Summary: This paper investigates the background of the Korean economy´s growth slowdown in the 1990´s. It particularly focuses upon the role of change in intersectoral shifts of labor following the work of Kindleberger (1967) and Yoshikawa(1992), who argue that changes in labor supply played a core role in the end of the high growth of Germany and Japan. This paper examines the marked change in intersectoral shifts of labor in the 1990´s in Korea resulting from the exhaustion of the rural labor supply pool, and estimates the contribution of this change to the