Trade Linkages and International Business Cycle Comovement: Evidence from Korean Industry Data

May 24, 2019

Preview Citation

Format: Chicago

Dongyeol Lee. Trade Linkages and International Business Cycle Comovement: Evidence from Korean Industry Data, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Through the 2000s, Korea’s export and import linkages to advanced and emerging markets increased significantly. At the same time, the correlation of output growth between Korea and these economies rose. This paper investigates the nature of the link between trade linkages and the comovement of international business cycles (BC) using Korean industry-level domestic and international input-output data. The results suggest that, at the industry-level, higher export linkages lead to a larger positive GDP growth comovement, while higher import linkages lead to higher negative employment growth comovement. Furthermore, the decomposition of aggregate BC comovement shows that the increase in trade with China has contributed the most to aggregate BC comovement, while the impact of trade linkages on BC comovement is propagated domestically via vertical linkages. These findings suggest that the Korean economy can be significantly affected by a few countries that are highly linked through trade to Korea and/or a few industries that are highly interconnected to other industries.

Subject: Business cycles, Economic growth, Economic sectors, Employment, Exports, Imports, International trade, Labor, Manufacturing

Keywords: BC comovement, Business Cycle, Business cycles, Comovement, Employment, Exports, Global, Import linkage, Imports, Industry sector, Input-output data, Input-output linkage, Manufacturing, Trade linkage, Vertical Linkage, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/116
Stock No:

WPIEA2019116
ISBN:

9781498315845
ISSN:

1018-5941

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