The peace effects of inter-Korean trade and the political-economic separation: Analysis of the reciprocal effects of inter-Korean relations and inter-Korean trade

Kyoochul Kim

KDI Journal of Economic Policy, 2023, vol. 45, issue 3, 1-24

Abstract: This paper empirically examines the relationship between inter-Korean trade and inter-Korean relations over the past three decades. It asks two questions: (1) Does inter-Korean trade contribute to improved interKorean relations and peace on the Korean Peninsula? (2) Does improved inter-Korean relations lead to increased inter-Korean trade? The study employs a time-series causal relationship analysis methodology to answer these questions. The findings show that during the progressive government's reign, inter-Korean trade was not impacted by inter-Korean relations. This is due to the implementation of a political-economic separation policy towards North Korea. Moreover, the increase in general trade and processing on commission did enhance inter-Korean relations, reflecting the "inclusive policy" aimed at achieving peace on the Korean Peninsula through interKorean trade. In contrast, during the conservative government's reign, inter-Korean relations had a direct impact on inter-Korean trade, with deteriorating relations leading to a significant decrease in trade. This was due to the implementation of North Korea policies that were linked to politics and the economy.

Keywords: Inter-Korean Trade; Inter-Korean Relations; GDELT; Peace Effect; Political-Economic Separation (search for similar items in EconPapers)
JEL-codes: F51 P33 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kdijep:278794

DOI: 10.23895/kdijep.2023.45.3.1

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