Do Korean Exports Have Different Patterns Over Different Regimes?: New Evidence from STAR-VECM

39 Pages Posted: 12 Oct 2018

See all articles by SeiWan Kim

SeiWan Kim

Ewha Womans University

Moon Jung Choi

The Bank of Korea; Bank of Korea - Economic Research Institute

Date Written: October 5, 2018

Abstract

In this work we examine whether the relationships of Korean exports to global GDP and to the exchange rate change depending on whether exports are in their expansionary or their contractionary regimes. To this empirical end we incorporate the two distinct dynamic features of regime change and co-integration into a multi-variable smooth transition autoregressive vector error correction model (STAR-VECM). Our estimation results reveal asymmetries in the short-run relationships of Korea’s exports to global GDP and to the exchange rate, between the contractionary and the expansionary export regimes, although their long-run relationships remain stable. Specifically, the positive effect of real global GDP on Korea’s real exports is inelastic during contractionary regimes but changes to become elastic in expansionary regimes. The effect of the real effective exchange rate on Korea’s real exports is positive and inelastic under contractionary regimes, but becomes negative and elastic under expansionary regimes. Our results suggest that the asymmetric properties of the relationship of Korea’s exports to global GDP and the exchange rates across the different regimes should be taken into account in order to better understand the behavior of Korea’s exports.

Keywords: Exports, Global GDP, Exchange rate, Regime change, Smooth

JEL Classification: F14, C40, C51

Suggested Citation

Kim, SeiWan and Choi, Moon Jung, Do Korean Exports Have Different Patterns Over Different Regimes?: New Evidence from STAR-VECM (October 5, 2018). Bank of Korea WP 2018-30. Available at SSRN: https://ssrn.com/abstract=3260933 or http://dx.doi.org/10.2139/ssrn.3260933

SeiWan Kim (Contact Author)

Ewha Womans University ( email )

11-1 Daehyun-dong
Seodaemun-gu
Seoul 120-750, Seoul Seoul 120
Korea, Republic of (South Korea)

Moon Jung Choi

The Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Bank of Korea - Economic Research Institute ( email )

110, 3-Ga, Namdaemunno, Jung-Gu
Seoul 100-794
Korea, Republic of (South Korea)

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