In this paper, we construct a nominal rigidities DSGE (dynamic stochasticgeneral equilibrium) model with financial frictions in which borrowings arelimited by collateral constraints and analyze the importance of monetary andfinancial factors in Korean business cycles. After Bayesian estimation of themodel, we find the explanatory power of the model with the collateralconstraints is enhanced compared to a pure sticky price DSGE model withoutfinancial frictions and the importance of monetary and financial factors inKorean business cycles is well supported. With the introduction of thecollateral constraints, the propagation of technology shocks is weakenedwhereas monetary shocks is more amplified due to the financial acceleratoreffects. Comparing housing collateral constraints and capital collateralconstraints, we find that the capital collateral constraints are much moreimportant as a financial accelerator mechanism than housing collateralconstraints and the role of housing collateral constraints as a financialaccelerator mechanism is limited.