Working Paper 99-1
Figures, Equations, and Tables

Rigorous Speculation:
The Collapse and Revival of the North Korean Economy

Return to Working Paper 99-1

Price Equations

1. Import prices

2. Export prices

3. Composite good prices net of cons. taxes

4. Average producer prices

5. Value added prices net of indirect taxes

6. Consumption prices of composite good

7. Numeraire consumer price index Quantity Equations

8. Cobb-Douglas Production function

9. Demand function for primary factors (First order condition for profit maximization)

10. Total intermediate uses

11. Exports transformation frontier

12. Export supply

13. Imports substitution frontier

14. Import demand Income and Expenditure Equations

15. Factor income

16. Expenditure aggregates as a function of factor income

17. Private consumption by sector

18. Government consumption by sector

19. Investment demand by sector of origin Market Clearing Conditions

20. Goods markets equilibrium

21. Factor markets equilibrium

22. External balance

NOTATION

Endogenous variables

PM_i = domestic price of imports

PE_i = domestic price of exports

PC_i = composite good price to consumers

PQ_i = composite good price net of consumption taxes

PD_i = price of domestically produced good for domestic market

PX_i = average producer price

PV_i = value added (net of indirect taxes) price

EXR = foreign exchange rate

X_i = gross domestic output

FDSC_if = factor demand by sector

WF_f = nominal average factor wages

M_i = imports

E_i = exports

Q_i = demand for composite good

D_i = domestic demand for domestically produced good

YFCTR_f = factor income

CONSUM = total private consumption

INVEST = total investment demand

GDTOT = total government current expenditure excluding military spending

INT_i = intermediate demand

CD_i = private consumption by sector

GD_narmy = government consumption by nonmilitary sector

ID_i = investment demand by sector of origin

Exogenous variables

PINDEX = numeraire consumer price index

REMIT = foreign remittances to households

FBOR = net foreign borrowing

FSAV = current account balance (or foreign savings)

FS_f = aggregate factor supply

Parameters

pwm_i = world prices of imports

pwe_i = world prices of exports

pwcs_i = weights in composite price index

a_i,f = production function share parameters

a_ji = input-output coefficients

ratex_i = export rationing ratios by sector

ratm_i = import rationing ratios by sector

wfdist_i,f = factor price proportionality constant

tm_i = import tariff rates

te_i = export tax rates

tx_i = indirect tax rates

tc_i = consumption tax rates

cles_i = household expenditure shares

gles_narmy = government expenditure shares

Functions

CobbD = Cobb-Douglas production function

CET = Constant elasticity of transformation function

CET* = Relation derived from revenue maximization in a CET

CES = Constant elasticity of substitution function

CES* = Relation derived from cost minimization in a CES

F = Mapping from factor income to expenditure aggregates

g_i = Derivation of investment demand by sector of origin

Indexes

I, j = production sectors (rice; maize; other agricultural goods, forestry, and fisheries; mining; light manufacturing; intermediate products; capital goods; construction; public administration; military; services)

narmy = production sectors excluding military sector

f = factors (three types of land; rural labor, urban high-skill labor, urban low- skilled labor, capital)

Table 1: Composition of Output, 1992-96 (millions of US dollars at US$1 = won 2.15)

Source: North Korean submission to the IMF.

Table 2 Government budget balance, 1994-96 (billions of won)

Source: North Korean submission to the IMF.

Table 3: General Government Revenues, 1996 (millions of won)

Source: North Korean submission to the IMF.

Table 4: Actual and "Natural" North Korean Trade Shares

Note: Intra-Korean trade counted as international trade; GDP in current dollars from Bank of Korea.