Does Trade Elasticity Vary Across Regimes? New Evidence from Korean Exports, Incorporating Regime Changes*

Sei Wan Kim; Moon Jung Choi

doi:10.1111/asej.12223

Does Trade Elasticity Vary Across Regimes? New Evidence from Korean Exports, Incorporating Regime Changes*

Sei Wan Kim, Moon Jung Choi

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We examined whether the elasticities of Korean exports with respect to global GDP and to the exchange rate vary depending on exports’ expansionary or contractionary regimes. Our empirical analysis incorporated regime changes and cointegration into a multivariable smooth transition autoregressive vector error correction model. Our estimation results revealed asymmetries in the short-run elasticities of Korea's exports between the two regimes, although their long-run elasticities remain stable. The positive effect of global GDP on Korea's exports is inelastic during contractionary regimes but elastic in expansionary regimes. The effect of home currency appreciation is negative and elastic under expansionary regimes but positive and inelastic under contractionary regimes.

Original language	English
Pages (from-to)	379-403
Number of pages	25
Journal	Asian Economic Journal
Volume	34
Issue number	4
DOIs	https://doi.org/10.1111/asej.12223
State	Published - Dec 2020

Bibliographical note

Funding Information:
Kim: Department of Economics, Ewha Womans University, 52, Ewhayeodae‐gil, Seodaemun‐gu, Seoul 03760, Republic of Korea. Email: swan@ewha.ac.kr . Choi (corresponding author): Economic Research Institute, Bank of Korea, 55, Namdaemun‐ro, Jung‐gu, Seoul 04532, Republic of Korea. Email: mjchoi@bok.or.kr . The authors are grateful to Wook Sohn, Jaerang Lee, Hyunjoo Ryou, Bok Keun Yu, SaangJoon Baak, Ji Hyun Eum, anonymous referees and seminar participants at the Bank of Korea for their helpful comments. The first author is also grateful for financial support from the Bank of Korea. The views expressed herein are those of the authors and do not necessarily reflect those of the Bank of Korea. The first author acknowledges that this work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF‐2019S1A5A2A01041891).

Publisher Copyright:
© 2021 East Asian Economic Association and John Wiley & Sons Australia, Ltd

Keywords

elasticities
exchange rate
exports
global GDP
regime change
smooth transition autoregressive model

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10.1111/asej.12223

Cite this

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title = "Does Trade Elasticity Vary Across Regimes? New Evidence from Korean Exports, Incorporating Regime Changes*",

abstract = "We examined whether the elasticities of Korean exports with respect to global GDP and to the exchange rate vary depending on exports{\textquoteright} expansionary or contractionary regimes. Our empirical analysis incorporated regime changes and cointegration into a multivariable smooth transition autoregressive vector error correction model. Our estimation results revealed asymmetries in the short-run elasticities of Korea's exports between the two regimes, although their long-run elasticities remain stable. The positive effect of global GDP on Korea's exports is inelastic during contractionary regimes but elastic in expansionary regimes. The effect of home currency appreciation is negative and elastic under expansionary regimes but positive and inelastic under contractionary regimes.",

keywords = "elasticities, exchange rate, exports, global GDP, regime change, smooth transition autoregressive model",

author = "Kim, {Sei Wan} and Choi, {Moon Jung}",

note = "Funding Information: Kim: Department of Economics, Ewha Womans University, 52, Ewhayeodae‐gil, Seodaemun‐gu, Seoul 03760, Republic of Korea. Email: swan@ewha.ac.kr . Choi (corresponding author): Economic Research Institute, Bank of Korea, 55, Namdaemun‐ro, Jung‐gu, Seoul 04532, Republic of Korea. Email: mjchoi@bok.or.kr . The authors are grateful to Wook Sohn, Jaerang Lee, Hyunjoo Ryou, Bok Keun Yu, SaangJoon Baak, Ji Hyun Eum, anonymous referees and seminar participants at the Bank of Korea for their helpful comments. The first author is also grateful for financial support from the Bank of Korea. The views expressed herein are those of the authors and do not necessarily reflect those of the Bank of Korea. The first author acknowledges that this work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF‐2019S1A5A2A01041891). Publisher Copyright: {\textcopyright} 2021 East Asian Economic Association and John Wiley & Sons Australia, Ltd",

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N2 - We examined whether the elasticities of Korean exports with respect to global GDP and to the exchange rate vary depending on exports’ expansionary or contractionary regimes. Our empirical analysis incorporated regime changes and cointegration into a multivariable smooth transition autoregressive vector error correction model. Our estimation results revealed asymmetries in the short-run elasticities of Korea's exports between the two regimes, although their long-run elasticities remain stable. The positive effect of global GDP on Korea's exports is inelastic during contractionary regimes but elastic in expansionary regimes. The effect of home currency appreciation is negative and elastic under expansionary regimes but positive and inelastic under contractionary regimes.

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Does Trade Elasticity Vary Across Regimes? New Evidence from Korean Exports, Incorporating Regime Changes*

Abstract

Bibliographical note

Keywords

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