Sources of Economic Growth in South Korea: An Application of the ARDL Analysis in the Presence of Structural Breaks - 1980-2005
The primary objective of this paper is to examine the major determinants of GDP growth in South Korea emphasizing the importance of investment, trade and human capital, using quarterly time series data covering the period 1980Q1 to 2005Q3. The time series properties of the data are, first, analyzed using the Zivot-Andrews (1992) model. The empirical results derived indicate that there is insufficient evidence against the null hypothesis of unit roots for all of the variables under investigation. Second, the Gregory-Hansen (1996) cointegration technique, allowing for the presence of potential structural breaks in the data, is applied, and is found to reject the null hypothesis of no cointegration relationship in favour of the existence of at least one cointegration relation in the presence of single structural breaks in the system. By applying these methodologies we find that most of the endogenously determined structural breaks coincide with the gradual effects of the Asian crisis on the Korean economy. Taking into account the resulting endogenously determined structural breaks the error correction version of the ARDL procedure is then employed, to specify the short- and long-term determinants of economic growth in the presence of structural breaks. Based on the preliminary empirical findings obtained we conclude that, in the long-term, policies aimed at promoting various types of physical and human capital, and trade openness, have improved Korea’s economic growth. More specifically, the empirical results show that while the effects of physical and human capital as well as exports are highly significant, as expected, total imports were found to be non significant, and this could be due to compositional changes away from the importation of capital goods to consumer goods as Korean standards of living have improved. It was also found that the speed of adjustment in the estimated models is relatively high and had the expected significant and negative sign.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pahlavani, M., 2005. "Cointegration and Structural Change in the Exports-Gdp Nexus: The Case of Iran, 1960-2003," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(4), pages 37-56.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998.
"What Caused the Asian Currency and Financial Crisis?,"
Temi di discussione (Economic working papers)
343, Bank of Italy, Economic Research and International Relations Area.
- Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
- Corsetti, G. & Pesenti, P. & Roubini, N., 1998. "What Caused the Asian Currency and Financial Crisis?," Papers 343, Banca Italia - Servizio di Studi.
- Naoto Kunitomo, 1996. "Tests Of Unit Roots And Cointegration Hypotheses In Econometric Models," The Japanese Economic Review, Japanese Economic Association, vol. 47(1), pages 79-109, 03.
- Gregory, Allan W. & Hansen, Bruce E., 1996.
"Residual-based tests for cointegration in models with regime shifts,"
Journal of Econometrics,
Elsevier, vol. 70(1), pages 99-126, January.
- Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
- Tom Doan, . "RATS programs to replicate results from Gregory and Hansen(1996) JOE article," Statistical Software Components RTZ00081, Boston College Department of Economics.
- Tom Doan, . "GREGORYHANSEN: RATS procedure to implement Gregory-Hansen test for Cointegration with breaks," Statistical Software Components RTS00082, Boston College Department of Economics.
- Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Chan Huh & Sun Bae Kim, 1994. "Financial regulation and banking sector performance: a comparison of bad loan problems in Japan and Korea," Economic Review, Federal Reserve Bank of San Francisco, pages 18-29.
- Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
- Perron, P, 1988.
"The Great Crash, The Oil Price Shock And The Unit Root Hypothesis,"
338, Princeton, Department of Economics - Econometric Research Program.
- Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
- Pahlavani, M., 2005. "Sources Of Economic Growth In Iran: A Cointegration Analysis In The Presence Of Structural Breaks, 1960-2003," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4).
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
When requesting a correction, please mention this item's handle: RePEc:uow:depec1:wp06-17. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Siminski)
If references are entirely missing, you can add them using this form.