Mapping Korea's International Linkages using Generalised Connectedness Measures

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.