• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.741-750
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• 2021

The budget deficit is closely related to expansionary fiscal policy as a fiscal instrument to encourage economic growth. This study aims to apply optimal control theory in the Keynesian macroeconomic model for the economy, so that optimal growth can be found. Macroeconomic variables include GDP, consumption, investment, exports, imports, and budget deficit as control variables. This study uses secondary data in the form of time series, the time period 1990 to 2018. Performing optimal control will result in optimal fiscal policy. The optimal determination is done through simulation, for the period 2019-2023. The discrete optimal control problem is to minimize the objective function in the form of a quadratic function against the deviation of the state variable and control variable from the target value and the optimal value. Meanwhile, the constraint is Keynes' macroeconomic model. The results showed that the optimal value of macroeconomic variables has a deviation from the target values consisting of: consumption, investment, exports, imports, GDP, and budget deficit. The largest deviation from the average during the simulation occurs in GDP, followed by investment, exports, and the budget deficit. Meanwhile, the lowest average deviation is found in imports.

• Journal of Korea Trade
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• v.23 no.2
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• pp.34-45
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• 2019

Purpose - This study investigates the lead-lag relations between the prices of major commodities imported into Korea and corresponding shipping freight rates. This paper aims to provide implications for cross-market causal relations between related economic segments. Design/Methodology - For economic long-run equilibrium between commodity prices and freights, a Johansen (1988) cointegration test is employed first. Then, Granger (1987) causality tests are performed under the vector error correction model (VECM) framework. Findings - The results indicate that the direction of causality varies by raw materials, which is attributable to different economic mechanisms in the corresponding shipping transportation sectors. In addition, the significance of causality becomes blurred during the post-2008 period. Practical Implication - Corporate managers in commodity trading, steelmaking, power generation, and oil refinery sectors can take advantage of the findings in this study as identifying leading economic indicators can be helpful for decision making in both short- and long-term strategies. Originality/value - This study is the first attempt to analyze the inter-relations between commodity prices and corresponding freight rates focusing on raw material imports of Korea.

• KDI Journal of Economic Policy
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• v.12 no.4
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• pp.47-69
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• 1990

Using an aggregator model, we look into the possibilities for substitution between Korea's exports, imports, domestic sales and domestic inputs (particularly labor), and substitution between disaggregated export and import components. Our approach heavily draws on an economy-wide GNP function that is similar to Samuelson's, modeling trade functions as derived from an integrated production system. Under the condition of homotheticity and weak separability, the GNP function would facilitate consistent aggregation that retains certain properties of the production structure. It would also be useful for a two-stage optimization process that enables us to obtain not only the net output price elasticities of the first-level aggregator functions, but also those of the second-level individual components of exports and imports. For the implementation of the model, we apply the Symmetric Generalized McFadden (SGM) function developed by Diewert and Wales to both stages of estimation. The first stage of the estimation procedure is to estimate the unit quantity equations of the second-level exports and imports that comprise four components each. The parameter estimates obtained in the first stage are utilized in the derivation of instrumental variables for the aggregate export and import prices being employed in the upper model. In the second stage, the net output supply equations derived from the GNP function are used in the estimation of the price elasticities of the first-level variables: exports, imports, domestic sales and labor. With these estimates in hand, we can come up with various elasticities of both the net output supply functions and the individual components of exports and imports. At the aggregate level (first-level), exports appear to be substitutable with domestic sales, while labor is complementary with imports. An increase in the price of exports would reduce the amount of the domestic sales supply, and a decrease in the wage rate would boost the demand for imports. On the other hand, labor and imports are complementary with exports and domestic sales in the input-output structure. At the disaggregate level (second-level), the price elasticities of the export and import components obtained indicate that both substitution and complement possibilities exist between them. Although these elasticities are interesting in their own right, they would be more usefully applied as inputs to the computational general equilibrium model.

• Korea Trade Review
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• v.42 no.6
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• pp.111-129
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• 2017

According to the World Bank statistics, China's contribution to global economic growth during the year of 2013-2016 was estimated at 31.6 percent. This figure is even larger than 29.0 percent, the contribution by summing each contribution of the United States, EU and Japan. The Chinese commodity trade accounts for up to 11.5 percent of world trade volume. Thus, we can consider that the Chinese economy has a strong influence on the global economy. The primary purpose of this study is to analyze the contribution level of Chinese seaborne trade volume on world economy. First, this study conducted a time-lag analysis using Moran test, so we can find that China's level of contribution to global economic growth varies from time to time. The contribution of the first phase (1999-2007) was nearly three times higher than the contributions from the second phase (2008-2016), suggesting that the overall contraction of the global trade volume starting from the subprime mortgage crisis in 2008 has continued until recently and recovery has not even occurred. Second, using the econometrics model, this study conducted an regression analysis of the impact of Chinese imports and exports in chemicals, grain, steel, crude oil, and container on global economic growth. Fixed effects model with time series data has been applied to examine the effect of Chinese seaborne trade volume on global economic growth. According to the empirical analysis of this study, China's exports of steel products, exports of container, imports of containers, imports of crude oil and imports of grain have significant contributions to global economic growth. Estimates of China's exports of steel products, exports of container, imports of containers, imports of crude oil and imports of grain are 1.023, 1.020, 1.019, 1.007 and 1.006, respectively. For example, the estimated value 1.023 of China's exports of steel products means that the growth rate can be 1.023 times higher than the current world GDP growth rate if Chinese seaborne trade volume of exports of steel products increased by one unit (one million tons). This study concludes that the expansion of China's imports and exports should be realized first to increase the global GDP growth rate. The expansion of Chinese trade can lead to a simultaneous stimulus of production and consumption in China, which can even lead to global economic growth ultimately. Thus, depending on how much China's trade will be broaden in the future, the width of global economic growth can be determined.

• International Area Studies Review
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• v.13 no.3
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• pp.361-383
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• 2009

This study extends theoretically the expected utility model of trade-conflict developed by Polacheck if a third country is involved, and analyses empirically how trade between North Korea and China affects to the political conflict between South and North Korea. The results of empirical analysis show that North Korea's exports to South Korea and China do not affect the conflict or cooperative relations between South and North Korea. But North Korea's imports from South Korea and China affect to the conflict between South and North Korea: increasing of North Korea's imports to South Korea reduce conflict between South and North Korea, but increasing of North Korea's imports to China increase conflict between South and North Korea.

• KDI Journal of Economic Policy
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• v.37 no.3
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• pp.75-106
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• 2015

The primary goal of this paper is to explore the microeconomic foundation of Korean firms' adoption of foreign technologies. The paper also reviews the overall trend of international technology transfers to Korea. The period covered in this paper is Korea's high growth era, from the 1960s to the 1990s. The works of this paper center on the two questions of what characterizes foreign technologies which had been imported through licensing contracts, and which driving forces expedite technology adoption by firms. The Korean experience provides the context of success in the catch-up growth. The co-movement of technology imports with capital goods imports manifests Korea's effort to improve the technical efficiency toward the world frontier. Underlying this trend are firms' decisions to adopt new technologies. The paper shows that firms respond proactively to wage increases by adopting newer technologies and thus, in turn, increasing employment, which implies the existence of a virtuous interactive mechanism among these factors.

• International Commerce and Information Review
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• v.12 no.4
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• pp.49-65
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• 2010

We have analyzed the trade effect of Korea-EU FTA on the Korean fishery sector, after reviewing the trade pattern and the tariff barriers of fishery sector between Korea-EU. For the trade effects, we have categorized into three cases: 1) the complete tariff elimination of all items, 2) the half tariff reduction on top ten valued items, with complete tariff elimination of other items, and 3) the complete tariff elimination, except unbinding top three valued items. The effect of the complete tariff elimination of all items implies the effect of the full achievement of FTA. For other two cases, these effects imply the effects of the transitional phenomenon of FTA since the complete tariff elimination happens gradually over more than ten years. For the complete elimination of tariff, we found that imports are increased by 1.1 billion dollars which is 12.9% increase in average imports during years 2006-2009. Also, exports are increased by 1.3 billion dollars which is 14.5% increase in average exports during same years.

• Journal of Korea Trade
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• v.26 no.3
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• pp.45-62
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• 2022

Purpose - Using unexpected changes in geopolitical tensions on the Korean peninsula as a quasi-natural experimental setting, we examine whether and how geopolitical risks travel across borders through firm-level imports and exports linkages. We also test whether the effects are driven by either imports or exports and assess whether firms can effectively hedge themselves against geopolitical risks. Design/methodology - We focus on a series of unanticipated geopolitical events taken place in Korea in 2018. Making use of the shocks to geopolitical climate, we identify five milestone events toward peace talks. We employ the event studies methodology. We examine heterogenous firm-level stock price reactions around key event dates depending on firms' exposure to geopolitical risks. As a measure of firms' exposure to geopolitical risks in Korea, we utilize a text-based measure of firm-level trade links. When a firm announces and discusses its purchase of inputs from Korea or sales of outputs to Korea in their annual disclosure filings, we define a firm to have a trade relationship with Korea and have exposure to Korean geopolitical risks. Similarly, we use a measure of a firm's hedging policies based on a firm's textual mention of the use of foreign exchange derivatives in their annual disclosure. Findings - We find that U.S. firms that have direct trade links to Korea gained significantly more value when the intensity of geopolitical risks drops compared to firms without such trade links to Korea. The effects are pronounced for firms purchasing inputs from or selling outputs to Korea. We find that the effectiveness of foreign exchange hedging against geopolitical risks is limited. Originality/value - We document the international transmission of geopolitical uncertainty through trade linkages. Export links as well as import links serve as important nexus of transmission of geopolitical risks across borders. Hedging strategies involving foreign-exchanges derivatives do not seem to insulate firms again geopolitical risks. With the recent movements of localization and reshuffling of the global value chain, our results suggest a significant impact of geopolitical risks in Korea on the construction of the global value chain.

• International Journal of Human Ecology
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• v.15 no.2
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• pp.1-12
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• 2014

This study focuses on apparel production and consumption trends in major Asian economies in order to understand a paradigm change in the Asian fashion industry. A comparison of trade among ASEAN, NICs, and developed countries shows the changes that have occurred in terms of production and consumption of fashion products before and after 2000 in Korea, Hong Kong, and China. The flow of imports and exports in the apparel industry was analyzed using UN trade statistics data. The results found a change of industry structures in Asian NICs and ASEAN countries. Garment production bases have moved to lower cost regions like China and ASEAN; in addition, NICs sent a part of their export business in the fashion industry to ASEAN countries. The Asian fashion industry has transformed from a production base for developed countries into a consumption market with the emergence of newly industrializing economies.

• Journal of the Korean Society for Aviation and Aeronautics
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• v.27 no.4
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• pp.44-51
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• 2019

This study analyzes the trade patterns that occur between Korea and ASEAN countries through air transport, one of Korea's trade transport methods. In order to understand the detailed characteristics of the air transport sector, the dependent variables were analyzed by dividing them into amount and weight. As a result, the amount of exports, imports, and trade was proportional to GDP per capita representing income level, and inversely proportional to GDP representing national economic power. In terms of air transport weight, exports, imports and trade were all proportional to GDP representing economic power and inversely proportional to GDP per capita representing income levels. In addition, the national area acted as a factor to reduce the trade volume, and the number of airports and inland countries did not show any significant results.