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Modelling the economic impacts of Korean unification

Warwick McKibbin (), Jong-Wha Lee (), Weifeng Liu and Cheol Jong Song

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper explores the economic impacts of Korean unification on North and South Korea. It presents a new consistent database on macroeconomic, sectoral and trade data, and an input output table for the North Korean economy, and then incorporates it in a global intertemporal multi-sector general equilibrium model. Assuming three hypothetical scenarios such as North Korea’s reform and gradual convergence, its sudden collapse and immediate unification, and chaos and crises in both Koreas, we quantify the consequences of Korean unification on economic activity, trade and capital flows in the two Koreas. The results highlight the importance of the unification processes and of alternative policy responses in both Koreas to the economic impacts of unification.

Keywords: Korean unification; North Korea; economic integration; dynamic general equilibrium; economic growth; convergence (search for similar items in EconPapers)
JEL-codes: F15 H77 O19 O23 O53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-tra
Date: 2017-04
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Journal Article: Modeling the Economic Impacts of Korean Unification (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2017-30

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