Trade Linkages and International Business Cycle Comovement: Evidence from Korean Industry Data

Dongyeol Lee

No 2019/116, IMF Working Papers from International Monetary Fund

Abstract: Through the 2000s, Korea’s export and import linkages to advanced and emerging markets increased significantly. At the same time, the correlation of output growth between Korea and these economies rose. This paper investigates the nature of the link between trade linkages and the comovement of international business cycles (BC) using Korean industry-level domestic and international input-output data. The results suggest that, at the industry-level, higher export linkages lead to a larger positive GDP growth comovement, while higher import linkages lead to higher negative employment growth comovement. Furthermore, the decomposition of aggregate BC comovement shows that the increase in trade with China has contributed the most to aggregate BC comovement, while the impact of trade linkages on BC comovement is propagated domestically via vertical linkages. These findings suggest that the Korean economy can be significantly affected by a few countries that are highly linked through trade to Korea and/or a few industries that are highly interconnected to other industries.

Keywords: WP; trade linkage; Business Cycle; Comovement; Vertical Linkage; input-output linkage; BC comovement; import linkage; industry sector; input-output data; Imports; Exports; Employment; Manufacturing; Business cycles; Global (search for similar items in EconPapers)
Pages: 25
Date: 2019-05-24
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=46915 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2019/116

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().