The Economic Costs of Diplomatic Conflict

61 Pages Posted: 3 Dec 2020

See all articles by Hyejin Kim

Hyejin Kim

Bank of Korea - Economic Research Institute

Jungmin Lee

Seoul National University

Date Written: November 26, 2020

Abstract

English Abstract: We examine the economic impact of the diplomatic conflict using the THAAD crisis between South Korea and China as a case study. Using the synthetic control method, we estimate the conflict’s impacts on Chinese tourists to Korea and stock prices of China-related Korean firms. We find that a negative effect on the inflow of tourists appeared with a lag of 3 months after the announcement of the decision and persisted for about 18 months. On the other hand, the impacts on the stock market appeared immediately, but insignificant and short-lived.

Keywords: Economic Sanction, Geopolitical Events, Tourism, Stock Market, South Korea, China, Synthetic Control Method

JEL Classification: F51, P16, Z30

Suggested Citation

Kim, Hyejin and Lee, Jungmin, The Economic Costs of Diplomatic Conflict (November 26, 2020). Bank of Korea WP 2020-25, Available at SSRN: https://ssrn.com/abstract=3737949 or http://dx.doi.org/10.2139/ssrn.3737949

Hyejin Kim (Contact Author)

Bank of Korea - Economic Research Institute ( email )

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

Jungmin Lee

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
25
Abstract Views
243
PlumX Metrics