A Reexamination of Korea’s Trade Flows: What Has Changed and What Explains These Changes?

August 1, 2004

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Format: Chicago

Kevin C Cheng. A Reexamination of Korea’s Trade Flows: What Has Changed and What Explains These Changes?, (USA: International Monetary Fund, 2004) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reexamines Korea's trade flows. Using the standard demand-based models, the paper finds that owing to the increasing share of electrical and electronic products (EEPs) in total exports, the income elasticity of the Korean export demand has fallen sharply while its price elasticity has risen dramatically. This is a curious result, which begs the question of why. Accordingly, an alternative supply-based model shows that the sharp increase in exports of EEPs is mainly due to Korea's remarkable ability to make technological improvements in their production. After reestimating the standard import equation, the paper finds estimates similar to those from previous studies. Since most of these imports are industrial inputs, they are jointly determined by consumption, fixed investment, and exports.

Subject: Export prices, Exports, Imports, Personal income, Price elasticity

Keywords: Increasing returns to scale, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/145
Stock No:

WPIEA1452004
ISBN:

9781451856576
ISSN:

1018-5941

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