This paper investigates an international real business cycle model of a small open economy such as Korea. Our model is parameterized, calibrated and incorporates the neoclassical framework with investment-specific technology shock Our result supports that shocks to the marginal efficiency of investment are important for business fluctuations. Our model is able to duplicate many of the stylized facts of business cycles in Korea. Our analyses suggest that capacity utilization and investment-specific technology shock, together with productivity and world real interest rate shocks, provide a meaningful explanation to Korea economic fluctuations. The shock has positive effects on macroeconomic variables except .for trade balance.