How Should the Fiscal-Monetary Policy Mix Be Implemented in Response to Exogenous Economic Shocks?: The Case of Korea Using the HANK Model

How Should the Fiscal-Monetary Policy Mix Be Implemented in Response to Exogenous Economic Shocks?: The Case of Korea Using the HANK Model | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article How Should the Fiscal-Monetary Policy Mix Be Implemented in Response to Exogenous Economic Shocks?: The Case of Korea Using the HANK Model Min Gyu Lee This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8147499/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This study analyzes fiscal-monetary policy mix in Korea under exogenous economic shocks using the heterogeneous agents new Keynesian (HANK) model. The shocks include positive and negative markup, TFP, and government debt shocks. Results show that fiscal and monetary policies respond differently, and the policy mix is decoupled—expansionary fiscal and monetary policies are not always applied simultaneously. The findings suggest that countercyclical tax and monetary policies, combined with procyclical fiscal spending, are more effective. In particular, during shocks, increasing capital income taxes and adopting an active monetary policy stance are recommended to stabilize the economy. Macroeconomics HANK DSGE Heterogeneous Agents Fiscal-Monetary Policy Mix Figures Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 Figure 10 Full Text Additional Declarations The authors declare potential competing interests as follows: Declaration of Competing Interests The author declares that there are no competing financial or personal interests that could have influenced the work reported in this paper. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8147499","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":547060623,"identity":"de04788e-9f70-4c06-94fc-fbbfa0f54774","order_by":0,"name":"Min Gyu 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Model\u003c/strong\u003e\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"Korea Economic Growth Institute","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"HANK, DSGE, Heterogeneous Agents, 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The shocks include positive and negative markup, TFP, and government debt shocks. Results show that fiscal and monetary policies respond differently, and the policy mix is decoupled\u0026mdash;expansionary fiscal and monetary policies are not always applied simultaneously. The findings suggest that countercyclical tax and monetary policies, combined with procyclical fiscal spending, are more effective. 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