Search

Begin New Search Topic Economic Policy Publishing Institution Korea Institute for International Economic Policy (KIEP)

1. The Economic Effects of Multinational Corporation Withdrawal and Policy Implications

Author:
Minsoo Han, Hyuk-Hwang Kim, Hyelin Choi, Danbee Park, and Jisu Kim
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The shutdown of the GM Koreas Gunsan plant in May 2018 heightened social interest in the withdrawal of mutlinational corporations (MNCs). Against this backdrop, the forthcoming research The economic effects of multinational corporation withdrawal and policy responses studies the previous cases of MNC withdrawal, estimates the effects on labor market., and provides policy directions to address to the withdrawal. This note summarizes some of its important results.
Topic:
International Trade and Finance, Economy, Multinational Corporations, and Economic Policy
Political Geography:
Asia and Korea

2. An Analysis of Service Trade Regulation in ASEAN and Its Implications

Author:
Meeryung La
Publication Date:
02-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The Korean government has been pursuing a New Southern Policy (NSP) focusing on the “3P” areas of cooperation ‒ People, Prosperity, and Peace. The NSP puts people at a center of policy, and emphasizes the enhancement of cultural conversation and people-to-people exchange between Korea and ASEAN. The majority of services trade, an area with a low level of cooperation between Korea and ASEAN, is inherently based on the exchange of people. Promoting services trade flows between Korea and ASEAN could contribute to achieving the vision of a People-centered community in the region. Also, when taking into account the fact that services are integral to the working of GVC, the government should pursue policies to promote services trade and to enhance cooperation with ASEAN in the services sector. To this end, we aim to identify the current status of service trade and service trade barriers between ASEAN and Korea. This report briefly covers ASEAN’s trade in services and the restrictiveness of service trade regulations in ASEAN, and then suggests policy recommendations based on the results.
Topic:
International Cooperation, Regulation, Economy, Economic Policy, and Trade
Political Geography:
Asia and South Korea

3. Data-and AI-driven Economic Growth in a General Equilibrium Model

Author:
Kyu yub Lee and Hyun Park
Publication Date:
02-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
We attempt to characterize a data- and AI-driven economy and establish a general equilibrium growth model in order to describe the data economy and examine how data and AI can affect the economy in the long run. To sum up, this article provides three policy implications. First, the authority should have a balanced view between privacy protection and data usage in economy-wide technology in terms of long-run growth. Privacy should not be considered only as utility loss, but must be considered as a contributor to loss in growth rates. Second, economic growth can be achieved by using higher amounts of data as well as continuous development in AI technology. A caveat is that AI-technology can boost economic growth only when it applies to all industries as general purpose technology. Lastly, the authorities should keep considering how to deal with new issues that include data ownership, outlaw data sharing, data market, AI bias, and so forth. Our model can be used as a starting point to such examinations.
Topic:
Science and Technology, Privacy, Economic growth, Economic Policy, and Artificial Intelligence
Political Geography:
Asia and South Korea

4. Analysis of Economic Cooperation between Kazakhstan and South Korea

Author:
Yessengali Oskenbayev
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This article investigates the potential direction of the Kazakh-Korean economic relationship. The two countries have become major partners in their economic relationship. It is important for Kazakhstan to establish economic relations with South Korea, to diversify its economy. Kazakhstan’s economy is strongly dominated by mineral resources extractive sectors, and the country’s rapid economic growth during the period from 2000 to 2007, and afterward due to oil price increases, was not well translated into substantial growth of non-extractive sectors. Kazakhstan could employ strategies applied by Korean policymakers to sustain business and entrepreneurship development.
Topic:
Development, Bilateral Relations, Economic growth, Economic Policy, Diversification, Trade, and Economic Cooperation
Political Geography:
Central Asia, Kazakhstan, Asia, and South Korea

5. The Impact of Monetary Policy on Exchange Rate and Its Policy Implication

Author:
Deok Ryong Yoon, Soyoung Kim, and Jinhee Lee
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In this study we aim to clarify the different extents to which monetary policy influences foreign exchange rate determination between the monetary policies of small open economies with international currency and those without international currency, and use empirical research to explain why. Based on the analysis above, we make some policy suggestions.
Topic:
Foreign Exchange, Monetary Policy, Economic Policy, and Currency
Political Geography:
South Korea and Global Focus

6. The Effects of US Sectoral Shocks through the World Input-Output Network

Author:
Minsoo Han
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In this paper, I estimate the global effects of hypothetical 1% changes in US sectoral productivity. To do that, I formulate a multi-sector Armington trade model with import tariffs, trade in intermediate goods, sectoral heterogeneity, and input-output linkages. Because a closed form for changes in welfare is not available in the model, as opposed to Ossa (2015), I solve for equilibrium to conduct the counterfactual exercises. In particular, knowing that the gravity equations in this model are identical to Caliendo and Parro (2015) once we calibrate the trade elasticity and industry level productivity to the corresponding data, I modify their computation approach to estimate the counterfactual productivity changes. The model predicts that the primary channel through which the sectoral shocks affect welfare is terms of trade. I also find that both US productivity’s direct effect and effects through export prices are substantial for countries such as the US, Canada, Chile, and Mexico. On the other hand, changes in volume of trade are small and their directions of changes are also mixed across countries.
Topic:
International Trade and Finance, Economic Policy, and Trade
Political Geography:
North America and United States of America

7. The Effects of Technological Similarity and Diversity on Merger and Innovation

Author:
Gu Sang Kang
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper examines drivers of merger partner selection and impacts of those factors on post-merger innovation outcomes analyzing 1,432 merger transactions in U.S. ICT industries. Throughout the paper, technological similarity between merging firms and technological diversity of an individual firm are important factors affecting firms' merger partner choice. In order to show their impacts on merger partner selection, we use a two-sided matching model as a theoretical framework and employ a maximum score estimation as an empirical methodology. With these empirical strategies, our findings are summarized as follows. First, technological similarity between merging firms has positive effects on merger value creation. This implies that similar technologies between merging firms plays an important role in choosing their merger partners. Second, technological diversity of an individual firm increases expected merger values. This means that firms tend to choose their deal partners with diverse technologies for the purpose of maximizing their expected merger values. Lastly, we estimate post-merger innovation impacts for actual merger transactions. As a result, estimated merger values created by technological similarity and diversity increase the number of merged firms' patents after merger. This implies that expected merger values are realized through the channel of post-merger innovation outputs.
Topic:
Science and Technology, Business, Economic Policy, and Diversification
Political Geography:
South Korea, North America, and United States of America

8. Stakeholders’ Interest Relations in Korea’s Services Trade Liberalization: A Political Economy Analysis

Author:
June Dong Kim
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper seeks to analyze the major factors behind why each stakeholders in the legal, health, educational and audio-visual service sectors in Korea op-pose liberalization in a qualitative political economy context as well as to pro-vide alternative strategies for further liberalization in these four service sectors. In legal services, the foreign equity ceiling of 49 per cent for joint venture law firms may be lifted as long as the present regulation against the number of FLCs in a joint venture law firm exceeding the number of Korean lawyers is maintained. In health services, as a step-by-step approach, we can first con-sider a system where incorporated hospitals can be established and liquidated more freely by deregulating current limitations placed on the disposal of re-maining properties, while an overly distribution of dividends is restrained. In educational services, in order to deregulate limitations regarding the disposal of remaining properties, it will be necessary to enhance the transparency of management and operation of private schools. In this regard, allowing school foundations to take the form of a limited liability company could be considered, since they would then become subject to external financial audit. In audio-visual services, it will be necessary to improve monitoring and im-plementation of intellectual property rights as well as competition policy when considering further liberalization. The major factors compelling each stakeholder in the legal, health, educational and audio-visual services to oppose further liberalization can be summarized as a general mindset towards uniform equity and control, cultural factors pre-venting discussion on rational alternatives, insufficient government budget for universal services, lack of administrative capacity in policy implementation and monitoring, absence of a proper system to evaluate the quality of ser-vices, asymmetry of information, and persistence of acquired rents. In order to correctly identify and understand the nature of problems, the highest priority should be placed on reducing the mistrust among the con-stituents. This is because mistrust among the constituents acts as the most important impediment when attempting value-creating negotiation strategies among each of the stakeholders. Meanwhile, to build trust among all constit-uents, free flow of information works as an important factor. Therefore, the problems of mistrust and lack of free flow of information are the most important impediments to improve those constraints that were analyzed in the selected service sectors. In addition, they are interlinked with each other, so that dealing with these problems simultaneously is a rational solution. In order to accomplish this, it is utmost important to develop the capability of each constituent to allow them to interpret specific pieces of information without distortion. In this regard, upgrading research and educa-tion of economics also becomes imperative.
Topic:
Political Economy, Law, Economic Policy, and Trade Liberalization
Political Geography:
Asia and South Korea

9. Institutional Quality, Trade Costs and Comparative Advantage

Author:
Sangkyom Kim and Soon Chan Park
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Earlier works derive empirical implications that institutional quality is very influential as a source of comparative advantage in industries requiring relationship-specific investment from the supplier. However, as earlier studies focus on investigating the impact of institution on the efficiency of the producer, only the exporter’s institution is considered. In contrast, we attempt to identify the impacts of the quality of institution, of both exporters and importers, on trade costs, that are different across country-pairs. To check the problem of measuring trade costs, we use two alternative measures of trade costs, i.e. CIF/FOB ratio and the relative measure of trade costs proposed by Novy (2013). Using the Eora global supply chain database covering 187 countries for 11 primary and manufacturing industries and four years, 2000, 2005, 2010 and 2015, we calculate a CIF/FOB ratio and the relative trade costs suggested by Novy (2013) which are used as a proxy variable for trade costs. At the country level, we find that the institutional quality of exporter and importer is negatively associated with trade costs and trade costs increase as disparity between two countries’ institutional quality increases. At the country-industry level, we find that a country-pair with better legal institution has lower trade costs in industries for which a hold-up problem is important. This result is robust to the alternative measure of trade costs suggested by Novy (2013). However, an analysis on the impact of institutional differences on trade costs yields mixed results. Therefore we do not conclude that the similarity of institutional quality between two countries is associated with lower bilateral trade costs.
Topic:
Economic Policy, Trade, and Industry
Political Geography:
Global Focus

10. The Effect of Export Insurance and Guarantees on Export Performance: An Empirical Analysis for Korea

Author:
Kyunghun Kim and Hyelin Choi
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
There is a series of empirical papers (Kim and Lee 2004; Egger and Url, 2006; Moser, Nestmann, and Wedow, 2008; Baltensperger and Herger, 2009; Auboin and Engemann, 2014; Van der Veer. 2015) which show that trade finance is positively associated with export. Despite its positive impact on export, trade finance has been a contentious issue in international organizations such as the WTO and OECD in terms of implementing related policy measures. This is based on the argument that trade finance hurts fair international trade because it ultimately plays a role just like a subsidy. Regarding this contentious issue, in this paper we examine whether there is evidence supporting that trade finance is associated with an increase in export. We also investigate the channel through which the effect of the trade finance on export is working. To this end, we focus on a specific part of trade finance: short-term export insurance and export credit guarantee. This is because noble and ample data on these types of trade insurance are available. This confidential data is provided by the Korea Insurance Trade Corporation (henceforth K-SURE) exclusively. We conduct a panel regression using Korean sector-level export data covering from 2010Q1 to 2017Q4. This dataset enables us to control for destination country-, sector-, and time-fixed effects. Our empirical results show that the short-term export insurance and export credit guarantee have a positive impact on exports, and the main channel behind this is related to mitigating financial constraints of exporting firms. The trade finance effectively eliminates the risk of importers' payment, which helps export firms reduce the financial frictions. This ultimately leads to an increase in export. Since the main mechanism in which the trade insurance affects export is related to alleviating financial frictions, it becomes more definite that the way how trade insurance contributes to an increase in export is somewhat different from that of a subsidy. When we consider the fact that financial friction is an important factor for restraining international trade, which can partly explain the great collapse in international trade during the global financial crisis, the trade insurance policies would rather be a useful policy measure which can dampen negative impact on export during recession.
Topic:
Finance, Economic Policy, Exports, and Trade Policy
Political Geography:
Asia and South Korea