Title : Mapping Korea's International Linkages using Generalised Connectedness Measures
Author : Hail Park(BOK), Yongcheol Shin(University of York)
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 benefit 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 findings 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 find that the ongoing global financial crisis is associated with greater connectedness of the Korean economy with advanced economies and its reduced connectedness with emerging economies.