Anatomy of the Trade Collapse, Recovery, and Slowdown: Evidence from Korea

51 Pages Posted: 11 Jul 2017

See all articles by Sooyoung Lee

Sooyoung Lee

Korea Institute for International Economic Policy

Date Written: June 15, 2017

Abstract

The last decade of the world trade has been marked by an unprecedented collapse, quick recovery, slowdown, another drop, and recovery. To study cyclical and structural aspects of the recent trend of trade, I use both aggregate and disaggregated trade statistics of a small open economy, South Korea, whose economic success and growth have been heavily dependent on exports. The aggregate trend of the country is surprisingly similar to that of the world, which is why the trend of Korea's export is called a proxy for the world. I show that while the last drop of trade after 2015 has cyclical aspects, there is evidence that the continued slowdown from 2012 is structural: (1) the so-called 'China factor' is found in the analysis of trade-income elasticity of the world and China for imports from Korea. (2) The bilateral trade barriers between Korea and its important trading partners are universally tightening. I also show that the firm sizes, destination countries, and the mode of transactions affect disaggregated trade flows during the slowdown periods. It is advisable to diversify main export products to lower the effect of oil prices on export prices and to strengthen the cooperation with ASEAN countries, whose trade barriers have exceptionally diminished throughout the last decade.

Keywords: The Great Trade Collapse, Trade Slowdown, Trade Elasticity, Trade Barriers, Korea

JEL Classification: F14, O24

Suggested Citation

Lee, Sooyoung, Anatomy of the Trade Collapse, Recovery, and Slowdown: Evidence from Korea (June 15, 2017). KIEP Research Paper. Working paper 17-03, Available at SSRN: https://ssrn.com/abstract=2998353 or http://dx.doi.org/10.2139/ssrn.2998353

Sooyoung Lee (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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