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Mapping Korea's International Linkages using Generalised Connectedness Measures

Author

Listed:
  • Hail Park

    () (Economic Research Institute, The Bank of Korea)

  • Yongcheol Shin

    () (Department of Economics and Related Studies, University of York, Heslington)

Abstract

Korea is a textbook example of a small open economy which is susceptible to conditions overseas but cannot affect them itself. Policymakers in Korea would therefore naturally beneï¬ t from an enriched understanding of the connections that exist between the Korean and global economies. We provide a detailed summary of these linkages using the generalised connectedness methodology introduced by Greenwood-Nimmo, Nguyen and Shin (2013b). Among our principal ï¬ ndings is the observation that domestic conditions are only generally important in the short to medium term, with overseas conditions exerting a dominant influence on Korea's economic prospects in the long run. The economies which exert the strongest effect on Korea are the US, Europe, China and the ASEAN group, with a considerable role also played by global energy markets. Furthermore, we ï¬ nd that the ongoing global ï¬ nancial crisis is associated with greater connectedness of the Korean economy with advanced economies and its reduced connectedness with emerging economies.

Suggested Citation

  • Hail Park & Yongcheol Shin, 2014. "Mapping Korea's International Linkages using Generalised Connectedness Measures," Working Papers 2014-16, Economic Research Institute, Bank of Korea.
  • Handle: RePEc:bok:wpaper:1416
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    References listed on IDEAS

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    More about this item

    Keywords

    Small Open Economy of Korea; Global VAR; Forecast Error Variance Decomposition; Generalised Connectedness Measures;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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