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Asian Financial Crisis And Korean Trade Dynamics

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  • ARTATRANA RATHA
  • EUNGMIN KANG

Abstract

type="main" xml:lang="en"> Since the Asian financial crisis in 1997, Korean international trade has gone up substantially in both volume and trade balances. The improvement is largely due to an expansion of international markets through various bilateral trade agreements and the structural changes in Korean exchange rates. This article investigates the exchange rate–trade balance dynamics, popularly known as the J-Curve phenomenon. Employing the bounds-testing approach to cointegration and error-correction modeling on Korean bilateral trade for the pre- and post-Asian crisis periods, the study finds that support for the strict version of the J-Curves has been fading after the crisis. While the weaker version of J-Curve is generally supported in both pre- and post-crisis sample periods, we also notice patterns such as M, N, or W-Curves. There exists a long-run relationship among the Korean exchange rates, domestic income, foreign income, and Korean trading balances. (JEL F14, F32)

Suggested Citation

  • Artatrana Ratha & Eungmin Kang, 2014. "Asian Financial Crisis And Korean Trade Dynamics," Contemporary Economic Policy, Western Economic Association International, vol. 32(4), pages 862-877, October.
    • Handle: RePEc:bla:coecpo:v:32:y:2014:i:4:p:862-877
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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