The World Trade Organization (WTO), launched in 1995 as a successor of the GATT system, has ambitiously begun its first multilateral trade negotiation round, Doha Development Agenda (DDA) in 2001. Since then, notwithstanding with its great ambition, the DDA has failed to draw visible results for more than 17 years, and hence confidence in the WTO-centered multilateral trading system has been declining accordingly. Nevertheless, there are some of the accomplishments of the WTO. The liberalization of the commodity markets has expanded and deepened through the conclusions of plurilateral negotiations under the WTO such as the Information Technology Agreement (ITA) and the Government Procurement Agreement (GPA), and rules in service and intellectual property rights have been set-out and established. As a result of these achievements, the volume of global commodity trade has increased by more than three times, and the market share of developing countries has also increased from 28% in 1995 to 43% in 2017. The expansion of the number of member states is another achievement of the WTO. Although such expansion may have increased the difficulties and complexity of decision making in the WTO, it is clear that the expansion of new business opportunities by successfully incorporating developing countries into the global economy and applying unified WTO rules and standards is an achievement of the WTO. Along with the strengthening of the dispute settlement system, the Agreement on Trade Facilitation (TFA) and its implementation are the greatest achievements of the WTO system. The Trade Facilitation Agreement is the first multilateral trade agreement concluded after the establishment of the WTO and the launch of the DDA negotiations, while the Information Technology Agreement and the Government Procurement Agreement are plurilateral agreements. Economically, it is expected of the increase in exports by more than $ 1 trillion, the creation of 20 million export-related jobs, and the increase in the world's GDP by about $ 960 billion due to the reduction of trade costs and the improvement of trade environment.
   The limitations and problems of the WTO system are as clear as these achievements. In particular, governance issues that have long been pointed out are such typical examples. Decisions in the WTO system are in fact made by consensus, and enlarging the number of Member States has become a decisive factor in hindering efficient decision-making in the WTO. Although The ‘Single Undertaking’ principle of concluding the agreement contributed to maintaining the consistency and stability of the multilateral trade system, it caused the problem of the rigidity of the WTO system at the same time. The dispute settlement procedure is also increasingly problematic. Recently, the dispute settlement implementation process is increasingly followed by the retaliation process. In such processes, the situation in which the complainant must observe the implementation failure of the defendant until the retaliation is approved is undermining the fairness of the WTO system. Not only that, the lack of safeguard measures in service trade and the limitations and problems of special and differential treatment for developing countries have been pointed out as major challenges related to the current WTO system. In addition to the challenges of the WTO system itself, the fact that the WTO does not adequately respond to the rapidly changing global trade environment is also a major problem of the current WTO system. The reason why the FTAs around the world in the 2000’s have rapidly expanded is the WTO multilateral system has failed to respond effectively to the new trading environment. Since the early 2000s, the Global Production Networks have rapidly spread out and the 'made in world' has become common due to such international division of production, and hence the set-out of new trading rules and further tariff concessions in accordance with such development has long been awaited. However, the progress of DDA has fallen far short of expectation due to the confrontation between developed and developing countries. As the global economic slowdown has been prolonged since the global financial crisis in 2008, countries around the world have strengthened their protectionist policies for their industries and jobs. Notwithstanding, the WTO failed to issue a proper prescription for them. WTO members have constantly bashed protectionism and stated the importance of strengthening multilateral trade system whenever there is opportunity, but this is only an empty declaration; non-tariff measures have steadily increased since the financial crisis and have not returned to pre-2008 levels.
   Furthermore, the trade liberalization that has been pursued so far has mainly focused on trade barriers, especially tariff concession. However, in terms of market access, behind-the-border or non-tariff measures and regulations such as customs procedures and domestic regulations has persistently remained. In this situation, the abolition of tariff barriers has rather created a favorable environment for large companies. Large companies have more human and physical capital than small and medium enterprises to deal with customs procedures and domestic regulations. As a result, SMEs have failed to enter the foreign markets due to complex customs procedures and regulations behind the border, while large companies have succeeded in entering those markets. Such imbalance results in the concentration of benefits from trade liberalization into large corporations. The same stark reality applies between capital and labor; since the share of labor income after trade liberalization is gradually decreasing, the issue of unequal distribution of benefits from trade liberalization between labor and capital has been pointed out in multilateral trade negotiations. Therefore, inclusiveness and sustainability of international trade have become main topics. The need for discussions about reform of the WTO system are invigorated among developed and developing economies alike.
   Nevertheless, the current WTO reform discussion is to be characterized as the multilateralization of the U.S-China bilateral trade conflict. According to the proposals submitted by developed countries regarding WTO reform, transparency and notification enhancements are on the table. A set of regulations is to be strengthened in order for the WTO member states to comply with the notification duty. In spite of how the reform of the WTO Appellate Body will be done is controversial, that reform will move in the direction of mitigating the complaints of the United States. In that regard, a certain extent of differentiation among developing states will be inevitable. It is obvious that such a discussion will face strong opposition from developing countries. However, as the economic heterogeneity across developing countries is widening up, it is difficult for developing economies to ignore the disparity in their levels of development and to assert the same obligation among all developing countries. In addition, plurilateral negotiations will also be actively pursued in parallel with the existing DDA. Since some issues that developing countries argue to keep on the DDA negotiation table will be there as they are now, the 'flexible multilateralism' referred to by the EU will also be at the center of the debate. Considering the current conflicts between developed and developing economies, it cannot be ruled out the possibility that the multilateral system could be divided into alliance among developed economies and a group of developing countries if the WTO reform initiative led by developed countries such as the United States is not reaching to their desired level due to the opposition of developing economies. In this case, the current WTO regime may demise indeed.
   Therefore, Korea needs to be strategically prepared for the reform of the WTO system. With regard to transparency enhancement and notification enhancement, obtaining information on industrial subsidies across member states is intended and according to them more stringent classification and international review of subsidies is expected to be set-out. Therefore, Korea should review whether the current supplementary policies are strictly in accordance with the WTO regulations and minimize the possibilities of countervailing duties from other WTO members in advance. Maintaining the status of developing countries has been the principal premise of the DDA agriculture negotiations of Korea. However, given that recent development of the discussion with regard to the differentiation of developing countries, keeping Korea as a developing country will not be an option any longer. Since the obligations between developing and developed countries is considerably different in the agricultural sector, the implementation of Korea's obligations as a developed country will not show a favorable impact on the agricultural sector for a while. Therefore, there is a need for thorough preparation of the agricultural sector for such changes. Since the discussions on reform of the WTO system will go through every detailed issues, it is necessary for Korea to actively participate in the discussions on the agenda of our interests, especially transparency and notification and differentiation of developing countries, and reflect our interests in those discussions as much as possible.
   Moreover, the direction of Korea's multilateral trade policy, taking into consideration of the WTO system reform and the changes in the global trade environment, should include strengthening the status of Korea in the WTO, promoting inclusive trade within the WTO system, multilateralization of bilateral and regional trade agreements, and embracing the sustainability issues in the multilateral trade agenda. In order to strengthen Korea's status within the WTO system, it is necessary to cultivate multinational trade experts and expand the dispatch to the WTO Secretariat. In addition, it is necessary to increase the contribution of Korea by actively participating in various projects managed by the WTO. It is also a good idea for Korea to lead the WTO ministerial meeting. At the same time, it is an effective way to substantially promote Korea's position in the multilateral trade stage with new proposals supported by developed and developing countries that can break through the deadlocked DDA.
   To pursue and lead inclusive trade, it is necessary for Korea to contribute to promoting the implementation of the trade facilitation agreement first. In particular, it is effective to provide customized consulting services to developing countries focusing on the e-Customs clearance system or ‘single window’ system that Korea has strengths with and developing countries are in need of. It is also important to develop a Korean GSP program for developing countries. For example, Korea opens up commodity markets developing countries desire and provide technical and financial support contents in those sectors so that encourage them to experience the benefits of trade liberalization. Along with these efforts, a customized bilateral solution system for SMEs as well as large companies to resolve the difficulties with regard to access to those markets should be pursued together.
   In order to multilateralize bilateral or regional trade agreements, a unified framework is needed to connect the FTAs together ​​that Korea has been promoting so far. In the case of tariffs, for instance, the tariff concession for all products in all FTAs could be uniformly set at the most liberalized schedule Korea has offered to any WTO members. In the case of services, a unified liberalization framework can be created as well with applying the MFN principle.
   Last but not least, in order to strengthen the sustainability of trade, we have to consider the resumption of Environmental Goods Agreement (EGA) negotiations, the harmonization of trade and environment, and the promotion of new rules for permitting environmental subsidies. Furthermore, we must now consider sustainability issues i.e. the implementation of the Paris Climate Accord in the multilateral trading system.

   Recently, the global trade system is deteriorating and the basis for world free trade is being threatened by a rise in trade protectionism. The multilateral trade system represented by the WTO has shown its limitations in efficiently reflecting the rapidly changing global trade environment. In the meantime, free trade agreements have continued to increase up to recently, not only in terms of their numbers but also the scope they cover. While free trade agrements in the past focused on tariff reduction, more recent free trade agrements include complex provisions on issues such as non-tariff barriers, services, investment, digital trade, and intellectual property rights. This study reviews the contents of free trade agreements and investigates their effects on trade using data from Worldbank (2017). First, more recent free trade agreements appear to contain more contents or provisions. We also find that Korea tends to sign more comprehensive free trade agreements, containing an average of 26 provisions, which is higher than the world average of 18. Second, we find that establishing such comprehensive free trade agreements has greater positive effects on trade. In particular, free trade agreements including more WTO-X provisions promote trade flows more effectively. Third, we also investigate the effect of each type of provision on trade. Empirical results are as follow. Market access provisions increased trade significantly. However, service provisions appear to have a negative effect on trade. Investment provisions also have a negative effect on trade, mainly negative for export from advanced countries to both advanced and developing countries. We also find that intellectual property rights provisions play a restrictive role on trade between developing countries while public procurement provisions have a positive effect on export to developing countries. Finally, while standard provisions have a negative effect on exports from developing countries to advanced countries, they appear to promote trade between developing countries. As mentioned above, the effects of provisions on trade are heterogeneous by the level of a country’s economy. Moreover, these might vary depending on how they are implemented, so further research is needed for an accurate interpretation of the results. 

   The adoption of the Sustainable Development Goals (SDGs) and Paris Agreement in 2015 accelerated the transition to a low-carbon climate-resilient economy which requires significant investment for both new and existing infrastructure. This study aims to provide policy implications for supporting Korean companies participating in overseas climate-related infrastructure projects.
   Chapter 2 provides a literature review of low-carbon climate-resilient infrastructure and the importance of investment in climate-resilient infrastructure. For the purposes of this study, climate-resilient infrastructure refers to low-carbon climate-resilient infrastructure that contributes to the mitigation of greenhouse gas emissions and adaptation efforts to climate change. Investment for low-carbon climate-resilient infrastructure provides new business opportunities and promotes capacity building in developing countries vulnerable to the adverse impacts of climate change. It has been shown that the amount of investment in climate-related infrastructure is steadily increasing, particularly in developing markets. Based on forecasts for infrastructure needs that factor in climate change, this study focuses on three sectors – energy (power), transportation and water – to perform our analyses and case studies.
   In Chapter 3, the current trends of investment for climate-resilient infrastructure provided by multilateral, bilateral and private actors are analyzed. Multilateral development banks and climate funds can bridge recipient countries and private investors. The six major multilateral development banks mobilized an average of $22.05 billion in investment annually in climate-resilient infrastructure projects for the last six years(2012~17), with the energy sector (renewable and energy efficiency) receiving the majority of these funds. Meanwhile, from bilateral perspectives, Korea allocates only 9.3% of its ODA budget into climate-related projects while members of the OECD Development Assistance Committee (DAC) provide 19.1% of their ODA support for climate projects.
   Since infrastructure projects require significant amounts of funds and inevitably entail risks to be shared among investors, most of the projects are conducted as public-private partnership (PPP) projects. According to the World Bank, private participation in infrastructure increased from $88 billion in 2008 to $150 billion in 2012. Energy and transportation projects received the majority of investment from private and public partnerships in 2017 and the share of energy projects has consistently increased after 2015. In addition, private climate finance and institutional investors are expected to increase their contribution to expanding investment for climate-related infrastructure. With the aim of understanding the impact of climate change and aligning this with investment decisions, the private sector has introduced numerous initiatives and efforts such as the Equator Principles, recommendations from the Task Force on Climate-related Financial Disclosures(TCFD), ESG principles and the Green Bond.
   Chapter 4 examines the key features of international climate infrastructure investment and the risk factors associated with various cases, going on to analyze the conditions in Korea and obstacles to overseas investment by Korean companies. First, in light of various previous studies, renewable energy generation, energy storage systems, electric vehicles, BRT, water resource facility and water efficiency programs are suggested as promising fields of international climate infrastructure. However, prior cases of major climate infrastructure investments promoted by multilateral development banks often revealed complexities stemming from how each sector is linked and integrated. Our case analysis of major climate infrastructure projects indicates how various strategies and means for mitigating project risks have been utilized, including support from various multilateral climate funds, financial safety measures such as exchange rate indexation, participation of experts in the international community, and the adoption of comprehensive capacity building programs.
   In Korea, on the other hand, various overseas investment support systems are in operation for general and climate infrastructures, but problems such as insufficient mainstreaming of climate change agendas throughout the support system, lack of a dedicated platform for climate infrastructure, biased support for renewable energy, and lack of experts outside of the EPC areas. Over the past decade, Korean companies have been expanding overseas, mainly in the field of renewable energy. However, as a result of the interviews and informal surveys conducted on participants in climate infrastructure projects, a lack of clear understanding of climate infrastructure, difficulties in financing, lack of domestic and overseas business performance, lack of business development and management capacity were pointed out as the major obstacles that Korean companies face.
   In Chapter 5, based on the results of the previous analysis, the following implications can be derived for government and private initiatives to promote participation in overseas climate infrastructure projects.
   First, it is necessary to establish a comprehensive support system for the whole project including the planning, construction, operation and financing of overseas climate infrastructure projects. To this end, the support system needs to perform various support functions necessary at the initial stages of the project, such as providing a wide range of business information, conducting feasibility studies for the project, and promoting participation in the project by multilateral development finance partners. In addition, the support system can serve as a window for developing projects with domestic GCF implementing organizations and for using various domestic funds. It can also provide a pool of labor that the private sector cannot secure on its own, and support training by experts in related fields.
   Second, the government should improve relevant policy measures to effectively support private sector expansion overseas in climate infrastructure. First of all, the government must provide opportunities for the private sector to participate in projects by utilizing existing infrastructure funds or expanding the contribution of climate infrastructure in policy finance, and should support domestic companies to participate in the process of developing international climate infrastructure projects led by multilateral development banks. The government should also encourage institutional investors such as pension funds and private financial companies to participate in investment projects, and induce these participants to utilize specialized financial instruments such as green bonds. In addition, the government should cooperate with the private sector to develop and propose various business models, and support expert training. Finally, in order to accumulate experience and promote the performance of domestic projects related to climate infrastructure, deregulation and promotion strategies should be prepared beforehand.
   Third, selection and concentration strategies based on promising areas are necessary for efficient utilization of limited investment resources. Based on this analysis of the characteristics of the international market and precedents provided by climate infrastructure project cases, our study identified notable fields such as smart eco-city development, off-grid photovoltaic power generation, disaster response and recovery projects, climate-resilient agriculture and water resource projects.
   Fourth, to encourage companies to participate in investment and promote the development of government policies and regulations, it is necessary to first disclose relevant information based on a common understanding of climate change and to mainstream climate change in corporate and government decision making. First of all, the private sector should strive to transparently disclose information on risk factors, opportunities, and financial impacts associated with climate change, and develop strategies and action plans to mainstream climate change in corporate management and decision-making processes. In addition, the government also needs to redesign the system and policies for overseas infrastructure investment considering the domestic and foreign climate change issues. 

   In July 2017, the Moon Jae-In administration announced its New Northern Policy, aimed to create a new northern economic space and strengthen connectivity between Korea and the Eurasian continent. Vitalizing Korea–Russia economic cooperation is an important factor in realizing the policy. In this regard, Korea needs to come up with new economic cooperation measures which correspond to Russia’s socio-economic conditions, industrial policy and regional development plans. This study focuses on Russia’s Far East development policies and Korea’s measures to cooperate in the region. The Russian Far East has abundant natural resources and is situated relatively close to Korea. However, high living costs and poor housing and transport infrastructure conditions deteriorate the quality of life in the Far East, resulting in chronic depopulation. Moreover, the commodity-dependent industrial structure has to be improved and diversified for sustainable economic growth. Considering all these factors, this study suggests to seek cooperation in the Far East’s key and growing industries such as the mining, transport, fishery sectors. In addition, Korea can foster new cooperation projects in the high technology and services sectors.
  The Far East development policy carried out in Putin’s third term was targeted mainly at regional development and investment promotion. The major achievements of the policy can be summarized as the establishment of an institutional base, such as with the advanced development zones, Vladivostok free ports and the Far East Hectares. The challenges in the coming years will be to specify development plans and investment projects, improve the business climate, and raise the quality of life, among others. The policy will continue in a similar manner during Putin’s fourth term as well, but with more focus on increasing the quality of life. Whether the ultimate goal of the policy will be successfully achieved is now up to whether the authorities can find appropriate ways to distribute benefits from development while efficiently managing the institutions that have been adopted.  
   China’s strategy towards the Far East has expansionary features, focusing on transport connectivity. China and Russia relations became stronger after the imposition of Western sanctions on Russia. The two nations formed a foundation for more detailed and practical economic cooperation by establishing funds for investment projects in various fields. The two sides are seeking new projects in the high-tech, manufacturing, agriculture and tourism sectors.
   Japan’s strategy towards the Far East is to expand a business model that has been domestically successful and applying this to the Far East. Japan has traditionally concentrated its investment in the energy sector, especially in Sakhalin Oblast. Recently, however, the country is trying to employ its comparative advantage and know-how in the region, based on an 8-point cooperation plan.
   Korea established a joint investment platform with Russia in 2013. Based on this, various projects such as the Vladivostok cold storage project, Zarubino port development, Nakhodka fertilizer plant, and Sovcomflot’s oil-tanker support services projects have been discussed. However, these projects were blocked from progress due to the West’s sanctions, lagging investment climate, and lack of experience in the Far East. Responding to this, Korea proposed the “9 bridge” strategy at the 3rd Eastern Economic Forum in September 2017. The strategy is under discussion between Korea and Russia.
   Korea’s key cooperation directions towards the Far East are “9-bridge + α and trilateral cooperation between Russia, North and South Korea. The former is in the making for tangible results. The latter holds strategic importance toward forming the base for vitalizing Korea and Russia cooperation and joint prosperity in North East Asia. In fact, the trilateral cooperation is closely related with the ”9 bridge” strategy because the two already overlap in some sectors, namely in the areas of gas, railroad, electricity, etc.
   Our policy suggestions are to: 1) prepare economic cooperation action plans by sectors and by stage (short-term, mid-term, long-term) under the umbrella of the “9-Bridge+α” strategy, 2) design Korea’s cooperation strategy towards the Far East, 3) formulate comprehensive strategy for the rapidly changing international environment in the NEA, 4) seek new forms of trilateral projects, 5) enhance cooperation between regional governments, and 6) construct channels for sustainable cooperation. 

   Satoshi Nakamoto announced the white paper of bitcoin, “Bitcoin: A Peer-to-Peer Electronic Cash System,” which embodies ideas of the distributed ledger in October 2008 and based on the ideas, the first bitcoin was mined in March 2009. Since then, there have been vast on-going discussions whether bitcoin can be used as a means of exchange like fiat money. Meanwhile, the price of bitcoin skyrocketed in 2017, so bitcoin and other crypto-assets made a splash on public interest with a lack of legal regulations. Governments worried the overheated market that could become a bubble and tried to impose regulations for market soundness. With the recent development of fintech and the emergence of the fourth industrial revolution, it is difficult to separate the impact of the blockchain technology as financial innovation in the current discussions. This research report summarizes the economic effects of financial innovations in retrospect and examines the blockchain technology considered as a part of financial innovation.
   In Chapter 2, we summarize the history of financial innovations and its implications on the economy. Financial innovations can affect the economy through the reduction of intermediation costs, the opening of a risk trading market, the diversification of risks, and the complement of market imperfection. The reduction of intermediation costs is achieved through the emergence of new payment instruments and the innovation on interest payment systems for savings funds. The risk trading market has broadened with new financial products such as insurance and derivatives, which help to diversify risks.
   Financial innovation can affect the economy regarding both the economic growth and the business cycle. In literature, it is still debatable on the relationship between economic growth and financial innovation. On the one hand, financial innovation can mitigate the asymmetry of information, which can lead to economic growth by increasing the efficiency of resource allocation. Some studies, on the other hand, show that economic growth leads to financial innovation. The financial market develops with increased financial demand as a consequence of economic development. Also, there is a view that financial innovation and economic growth interact with each other. There are also opposite views on the relationship between financial innovation and the business cycle. Some studies argue that in the rapid development of the financial market, financial innovation can amplify the volatility of the economy, the so-called boom-bust cycle. In the meanwhile, some studies interpret the Great Moderation, which is a period when macroeconomic volatility has been steadily declining since the mid-1980s, as a result of financial innovation. Thus, financial innovation moderates business cycles.
   In Chapter 3, we extend a small open economy model that financial innovation can have an economic impact through the trade finance and analyze this mechanism through the empirical analysis. We primarily focus on the reduction of intermediary costs as financial innovation. In the model, credit accessibility of firms plays a crucial role in their trade decisions. Aggregate trade increases if credit access cost or transition cost drops. The empirical results of the model are as follows; If the cost of credit access cost, households participate more in the credit market, and has less demand for holding real money. Firms decide to export more so that aggregate exports increase and external debt decrease. As a result, the output of the economy increases while the domestic interest rate falls. That partially happens because of a reduction in the domestic interest rate premium due to a decrease in domestic debt.
   In Chapter 4, we discuss the technical aspect of the blockchain in detail. Participants in the public blockchain, such as Bitcoin and Etherium, ultimately pursue that maintain databases among unspecified network participants without a guarantee by a specific group. While the Internet is copying or modifying databases that are stored in a specific place, it revises databases simultaneously with the agreement of the participants in the distributed ledger which is widely distributed on the Internet via the blockchain. It requires the development of new protocols different from existing Internet protocols such as TCP / IP, SMTP, and HTTP. Vitalik Buterin, a founder of Etherium, suggest Trilemma that it is impossible for a particular blockchain to achieve both security, scalability, and decentralization. Bitcoin takes security and decentralization and abandons scalability. Many private blockchains abandon decentralization.
   Recently, the development of blockchain technology to resolve the stagnant situation is proceeding in the following two directions. First, they use the consortium blockchain to integrate the concepts of blockchain with the existing systems. Second, they try to develop a stable public blockchain by solving the scalability problem, but the progress is expected to be slow.
   In Chapter 5, we investigate the crypto-assets as an application of the blockchain technology. We also analyze the similarity and difference between the crypto-assets and the conventional financial markets. Most crypto-assets are traded in centralized exchange markets, which is deviated from the aim of the blockchain technology, the decentralization. It causes many problems and requires legal and institutional regulations. Moreover, it is relatively easy that capital can cross the border anonymously via the crypto-assets without going through the existing foreign exchange system. Thus, it should be guided by the AML/CTF act and regulation.
   Based on these findings, Chapter 6 presents the following implications. First of all, it is necessary to carefully aware unknown risks through financial innovation and strengthens monitoring system. Secondly, it is necessary to understand the direction of development of the blockchain technology and to support for future development. The crypto-assets have been used as a tool to fund the blockchain technology, but it can also generate a form of speculative bubbles. The government requires both to support for the infrastructure technology development and to impose adequate regulations. Lastly, as the crypto-assets can easily cross the border, international cooperation would be essential to regulate. 

   An estimated total of 5-7 trillion USD will be needed annually for developing countries to achieve the Sustainable Development Goals (SDGs) by 2030. However, financial flows to developing countries currently account for only 400 billion USD per year, thus highlighting the need to expand financial resources. Although public development finance should be increased in order to achieve the SDGs and the 0.7% ODA/GNI target set by DAC member countries, the prospect of increasing the total volume of ODA looks dim when considering the mounting constraints placed on the donor government’s budget. Therefore, the role of private finance will likely become more important to support the economic growth and sustainable development of developing countries.
   This research aims to derive policy implications to increase financial flows to developing countries by examining current international debates on financing for development, conducting a statistical analysis of official development finance including ODA and other official flows (OOF), and analyzing case studies which cover the development finance landscape from the perspective of partner countries. Firstly, the study examines the major issues regarding development finance based on a study of international dialogue on financing for development. Secondly, the study derives the characteristics of official development resources and determinants of resource allocation by type based on statistical analysis of official development finance. This is followed by a study of cases in the Philippines and Senegal to understand the issues on development finance from the perspective of partner countries.
   This research captures the characteristics of major donors, sectors, and income level of partner countries by type of development resources, and derives the determinants of resource allocation by analyzing ODA (grants, concessional loans, equity investment) and OOF statistics for the past five years. The study specifically focuses on identifying aspects of OOF that set it apart from ODA, as a category of flows that do not satisfy the concessionality criteria and grant elements of ODA or are used for commercial purposes. OOF tends to represent a larger share than ODA in the case of middle-income countries. While ODA accounts for 31% of funds provided to lower income countries, OOF accounts for only 2%. ODA and OOF also differ in the sectors they are focused on, with more than one-third of ODA concentrated in social infrastructure and services while OOF is mainly focused in economic infrastructure (one-third of OOF) and production sectors (39 %). In order to analyze the determinants of ODA and OOF allocation, the study establishes a model that includes the size of the country, income level, FDI, openness, business environment as explanatory variables and conducts empirical analysis. The results show that the coefficients and statistical significance are different according to the estimation method. While the objective of the empirical analysis is to derive differences in the allocation determinants for two different official resources by their distinctive characteristics, the estimates of the OOF model were not statistically significant. It indicates that allocation of OOF is determined not by the characteristics of the partner country but by the commercial aspects of the projects.
   One of the main distinguishing features of the research is how it handles development finance issues from the perspective of the partner country. We selected the Philippines and Senegal for our case study, where we analyzed the financial needs and recent trends of inflows in the area of development finance. Our study also identifies differences in the perspectives and responses of partner countries regarding private funding, based on a review of available literature and field surveys. The focus of the study was to derive challenges to mobilize private finance and understand the role that official development finance plays toward attracting private finance to support its growth, and finally to clarify the role of ODA throughout changes in the development finance landscape.
   The results of the case study show a general decrease in ODA and increase in private finance in Senegal and the Philippines, taking into account some differences in the composition of development finance and trends in inflows of diverse development finance resources. The research confirms that both countries have expectations on TOSSD as a statistical methodology to track, adjust and manage the diversified external financial inflows. Furthermore, both countries shared a lack of sufficient data on the participation of private finance in infrastructure projects through public-private partnership mechanisms, as well as a lack of capacity to monitor and manage the projects. One perspective to be highlighted was that the financial inflows from emerging donors such as China and Islamic financial institutions should be included in TOSSD. As the role of non-traditional development actors has been expanded, ODA could play a significant role in the newly emerging challenges such as coordination between development objective and commercial objective, the capacity building of the partner country's government and local private sector, debt management, transparency and results management, and risk management.
   The Korean government plans to expand the size of its ODA to 0.2% of its GNI by 2020 and, in particular, has announced the policy direction of expanding the size of financial resources by mobilizing private finance through development finance instruments. While the legal instruments necessary to utilize development finance instruments have been established by the revision of the Economic Development Cooperation Fund Act and its enforcement decree in 2016, this has not led to the active identification of development projects that utilize diverse financial instruments to leverage private finance other than ODA. However, as the international society is yet to reach an agreement on the principles of these development finance instruments, it would be a practical approach for the Korean government to actively participate in the international dialogue and ongoing process of establishing standards and implementing principles, after which they can be introduced into national policies.
   First, the capacity to utilize blended finance schemes must be strengthened. Blended finance incorporates a diverse range of stakeholders such as donor countries, donor agencies, partner countries, and private sector participants meaning that Korea must have the capacity to coordinate the diverse needs of these stakeholders. In addition, the Korean government must acquire technical and legal expertise, knowhow learned in the long-term as well as networks and partnerships established in the field if it is to take advantage of diversified financial instruments properly. Also required will be the capacity to evaluate whether these financial instruments are being properly utilized. To this end, Korea should improve its capacities and visibility in the international society, as well as strengthen partnerships through participation in large-scale blended finance facilities. Ultimately, Korea should provide sustained support for sectors which could establish business environments at partner countries that can attract private finance, rather than merely conducting one-time technical assistance projects.
   Second, Korea should diversify its strategy and approach to support partner countries by their income level. In order to implement SDGs in developing countries, Korea should maximize development results by combining ODA, OOF and private finance. To this end, however, Korea should establish and operate development finance strategies that take into consideration the diverse and distinct environments at each partner country, such as their level of economic development, income level, capacity of the government and private sector, political, economic and social environments, policy on private investment, and institutional framework. Many middle-income countries show a high dependence on domestic funding or remittances for its development. Therefore, in these cases it is more important to expand assistance on tax policy, institutional reform on tax, and tax administration while supporting these partners to construct a mechanism that can fully take advantage of domestic financial resources or remittances as development finance. However, in the case of lower-income countries, lack of capacity is the main challenge and thus it becomes more important to assist them to strengthen the capacity of their human resources and institutions to utilize private finance.
   Third, Korea should revise and update its Country Partnership Strategy (CPS) to incorporate the results of international dialogue on finance for sustainable development and the necessity to diversify the utilization of development finance according to each country's capacity level and environment. Based on a thorough analysis of the changes in development needs and trends in inflows of external development financial resources, Korea should establish directions to combine ODA with diverse financial resources such as non-concessional loans and private funds. The 3rd CPS, which will be introduced in 2020, should function as a partnership strategy to link and combine private finance and various public development resources beyond ODA, which will be included in TOSSD.
   Lastly, when considering the potential risks that the utilization of private funds may accompany, it will be necessary to establish an ex-ante and ex-post risk management framework. Even in cases where the private sector engages in development projects, it is important to ensure development objectives are met and development effectiveness remains a priority. Another essential consideration is to apply existing principles of aid effectiveness, such as alignment with partner countries’ systems and participation by the local community. In particular, Korea should establish a participation mechanism which incorporates demands and opinions from the local government and community, together with a system to weigh local stakeholders’ interests and priorities. Furthermore, a results management framework to monitor and evaluate ongoing processes should be constructed to review the effectiveness of development projects. 

   Following the global financial crisis in 2008, various forms of financial instability have continued to emerge due to the European fiscal crisis, US taper tantrum, plunge in resource prices, and worries about a hard landing in the Chinese economy. This financial stress is likely to continue on the domestic and international fronts when considering the deepening US-China trade war, sustained US interest rate hikes, and economic unrest in China and emerging economies. Upon this backdrop, this study develops a financial stress index which can measure financial instability, and analyzes changes in determinants of financial instability in Korea and emerging economies, as well as the influence of various external shocks on Korean financial stress.
   In Chapter 2, we introduce the KIEP Financial Stress Index, an instrument we have developed to measure the level of financial instability in a systematic and continuous manner, and evaluate recent levels of financial stress in Korea and emerging economies. We have developed two types of our Financial Stress Index (FSI) for the Korean economy, one based on financial indicators and the other on big data. The FSI based on financial indicators is calculated in a way that can measure financial stress properly but is not complicated in its measuring method, thus allowing for high usability. The index is compiled from a variety of data sources including stocks, foreign exchange, and the money market. Next, we construct an FSI using the machine learning method based on the data of daily search word frequency provided by Google Trends. Although big data has a short time series of available data, it can be utilized as a supplementary index of the FSI based on financial indicators because of the rapidity and timeliness of big data information. Recently, Korea’s FSI has fallen below the long-term average, which is the threshold of financial instability. However, the FSI rose slightly from 2.9 in December 2017 to 8.0 in October 2018 due to the recent US interest rate hikes, deepening US-China trade disputes, and China’s economic unrest. By sector, the foreign exchange market and the stock market are more unstable than the money market. Among emerging economies, the FSIs of Turkey, China, Mexico, and Russia have recently risen sharply, largely due to unease in the foreign exchange market.
   In Chapter 3, panel analysis and time series analysis are conducted to investigate changes in determinants of financial stress before and after the global financial crisis. First, we examine the changes in determinants of financial instability in emerging countries after the global financial crisis, using the FSI of individual emerging economies calculated in Chapter 2, through a fixed effect panel analysis. Our results show that the effects of foreign portfolio investment on the FSI after the global financial crisis increased compared to the pre-crisis period, while the effects of other investment (e.g. loans) decreased. In the case of foreign portfolio investment, the effect of equity securities on financial stress is greater than that of debt securities. This can be because global funds flowed from other investment to portfolio investment after the global financial crisis. In the case of other variables, the effects of the current account balance, the fiscal balance, and the global commodity price index on the FSI after the financial crisis expanded compared to the pre-crisis period. The results of an analysis of dynamic changes in determinants of financial stress in Korea using the recursive least squares method indicate that the effect of foreign portfolio investment and other investment on financial instability generally expanded after the financial crisis. The impacts of these factors greatly increased right after the global financial crisis, and after then high levels of impact have continued. Among foreign investments, the influence of foreign debt securities of portfolio investment on financial stress has expanded the most. In addition, the effects of unrest in the Chinese stock market on the Korean FSI changed from negative (-) to positive (+) immediately after the financial crisis, and a positive relationship has continued until recently. This shows that the China factor emerged as one of the major determinants of financial instability in Korea since the global financial crisis.
   In Chapter 4, we use a structural VAR model to analyze the impact of various external shocks such as US interest rate hikes, China’s financial market instability, and global trade uncertainty on Korea’s FSI. Empirical results show that the impact of the US interest rate rise changes from before and after the global financial crisis. Before the financial crisis a hike in the US interest rate has the effect of lowering domestic financial instability, but following the financial crisis a hike in US interest rates raises domestic financial stress. This is because the response to the rate hikes before and after the financial crisis was different. Prior to the global financial crisis, US interest rate hikes did not provoke capital outflow concerns in emerging economies and Korea due to  strong economic growth in these countries. On the other hand, since the financial crisis, US interest rate hikes have tended to lead to concerns over capital outflows as emerging economies and the Korean economy remain sluggish. China’s financial instability has been shown to have a rapid and significant impact on Korea’s financial stress, confirming that the Chinese financial market is one of the major determinants of domestic financial instability. Finally, global trade uncertainty does not have a significant impact on Korean financial anxiety, and Korea’s FSI does not respond to global trade uncertainty shocks. This could be explained by the fact that global trade uncertainty became visible after the launch of the US Trump administration in 2016, which was not fully included in the data used in the empirical analysis.
   In Chapter 5, based on the results of our research, we suggest policy implications to strengthen financial stress management. First, the KIEP FSI developed in this study can be used as a tool for Korean policy authorities to monitor and respond to domestic and external financial instability. The KIEP FSI is divided into stages of financial instability (e.g. stable, unstable, and crisis) and can be used in connection with the authorities’ manual for financial stability at each stage.
   Next, the variables to be considered when monitoring the risk of financial instability in Korea and emerging economies are foreign portfolio investment, other investment, current account and fiscal balance, and world commodity price index. In particular, monitoring of foreign portfolio investment should be strengthened. Another suggestion is for Korean policy authorities to work toward stabilizing excessive foreign capital flows and maintaining the current account surplus and fiscal soundness in order to stabilize the financial market.
   Finally, the current financial stability system should be reviewed from a larger perspective. This is because global capital flows have changed after the financial crisis, from other investment to portfolio investment, and the influence of portfolio investment on financial stress has become larger than that of other investment among the factors causing financial instability. However the existing financial stability system, which involves measures such as imposing limits on forward position, bank levy and foreign currency liquidity coverage ratio, focuses on other investment (i.e. financial institutions such as banks). Therefore, it will be necessary to strengthen the financial stabilization measures for the capital market by closely monitoring the capital flows of foreign portfolio investors and strengthening exchanges with foreign central banks and sovereign wealth funds. 

   The aim of this study is to examine the development and present condition of the African Growth and Opportunity Act (AGOA), to review cases of beneficiary countries that are utilizing AGOA and to analyze the effects of AGOA on African exports to the US. It also seeks to draw implications for Korea’s trade policies on Africa by prospecting US’s trade policies towards Africa in the Post-AGOA era.
   AGOA is a preferential trade agreement of the US that seeks to foster economic growth of and eradicate poverty in Africa by providing duty-free access to US markets for goods made in Africa. It is an agreement specific to Sub-Saharan Africa in addition to the Generalized System of Preferences (GSP) that is applied to developing countries in general. AGOA can be utilized by any African country as long as it satisfies certain criteria on governance, legal issues, human rights, and labor rights. The purpose of such conditions is to expand the principles of a free market economy and democracy as well as to foster economic growth. 
   AGOA was first implemented in 2000 and is expected to expire in 2025. Exports of crude oil in particular increased rapidly in the early years of AGOA but later declined after oil prices fell in 2008. Other items excluding crude oil and gas show a gradual increase in export, especially items from the light manufacturing sector such as textiles and apparel. This is because AGOA exclusively enables lesser developed countries in Africa to export textiles and apparel, which is unprecedented. In some countries, certain areas of the manufacturing sector such as textiles and apparel, or auto assembly are developing at a fast speed because AGOA has widened access to US markets.
   Chapter 2 examines the current status of AGOA, the utilization strategies of key beneficiaries, and also summarizes the outcomes and limitations of AGOA. AGOA is unique in that it is not a mutual trade agreement but is rather implemented in the form of a US trade law. Its beneficiaries are also determined based on a yearly evaluation by the executive branch. In 2018, 40 countries were determined as eligible beneficiary countries. US trade with Sub-Saharan Africa was measured at around $ 39 billion in 2017, which is 1% of the US’s total trade. Approximately 25~65% of imports from Africa receive preferential treatment through AGOA and GSP. Items include crude oil, gas, mineral resources, agricultural products, textiles and apparel, and automobiles. Trade and investment between the US and AGOA beneficiary countries have increased in general, but is limited mostly to the energy sector, mainly crude oil and gas.
   It is important from the African perspective to diversify export items that traditionally were centered on minerals and agricultural goods. The latter part of Chapter 2 outlines the national strategies of Kenya and Botswana, major countries exporting apparel and minerals respectively, in utilizing AGOA to diversify their trading items. The case of Ethiopia, who is trying to foster its manufacturing industry with a special focus on the textiles and apparel sector through AGOA, is also reviewed.
   Meanwhile, there are also many limitations to and criticisms of AGOA. First, there are institutional limitations arising from the fact that AGOA is a domestic legislation of the US and thus, the dispute resolution process is different from that of general trade agreements. The annual review of eligible countries also increases the uncertainty of the policy. Furthermore, the impact of lowering tariffs can only be limited if Africa's export capacity is not strengthened. Infrastructural development and widening the scope and size of Africa's exports need to be supported simultaneously. The latest revision of AGOA requires beneficiary countries to hold routine discussions with the US and includes measures to strengthen Africa's trade competence to overcome these challenges. African countries are diverging in their efforts to utilize AGOA as some countries take active measures to maximize opportunities arising from AGOA by providing implementation strategies and evaluation, while others are disqualified due to their lack of conformity with the AGOA regulations. This chapter also examines challenges to the development of long-term investment or trade because of the uncertainty of AGOA’s continuity and because its impact on the development of the manufacturing and agricultural sectors remain limited, unlike the case of crude oil.
   Chapter 3 analyzes the impact of AGOA on the variation of trade between the US and Sub-Saharan African countries. Based on a time series analysis only, trade in the early years of AGOA did in fact increase but also rapidly decreased after 2008. To identify the trade effects of AGOA one needs to control certain external conditions such as changes in the global economic structure and changes in Africa’s trade conditions during the same period as the operation of AGOA. Identifying the impacts of policy changes arising from the key revisions of AGOA is also important in assessing the effects of AGOA. This research utilizes the analytical methodology used by Frazer and Van Biesebroeck (2010), a representative study on the effects of AGOA, in examining the trade effects of AGOA over 16 years until 2017. The HS Code, which classifies trade data, modifies its upper 6-digit universal code through international consent every 5 years. The 10-digit code, the standard code used for tariffs and customs, can also be adjusted throughout the year reflecting changes in the US trade regulations. As a result, codes within trade data show discontinuity when using them for mid to long term time series analyses. To correct the errors arising from this problem, the analytical method of Pierce and Schott (2012) is used for the reclassification of goods over the entire time series in the trade impact analysis in Chapter 3. Results of the analysis show an overall increase of trade through AGOA but its effects vary according to the time and industry significantly. In particular, because a group of countries can export apparel duty-free as a result of AGOA’s uniqueness, certain differences were noted between different groups of countries in addition to the items of goods.
   Lastly, chapter 4 provides prospects on possible changes in the US trade policy towards Africa and draws implications for the Korean government’s trade policies towards Africa based on the review of the status of AGOA, cases of application, and its trade effects in the previous chapters. It is difficult to directly apply the policies of the US towards Africa not only because it is one of the leading countries in the international development and cooperation area, but also because the US provides preferential treatment to African countries through AGOA in addition to the GSP treatment. However, it is necessary to review AGOA in establishing Korea’s trade strategy for Africa because it is the representative trade policy on Africa.
   Since 2000, Africa is showing rapid economic growth with Ethiopia, Ghana and other eastern and western countries at its core. In March 2018, the African Continental Free Trade Area (AfCFTA), the largest trade bloc worldwide was established and is changing the trade environment of Africa at a fast pace. Consequently, emerging countries such as China, India, and Turkey, as well as traditional partners of Africa such as the US, Europe and Japan are reexamining their partnership strategies with Africa through which they are seeking to expand trade and investment networks. Korea also needs to draw out a plan on how to design its trade partnership with Africa, the next consumer market of this era, in addition to its development cooperation policies.
   An economic cooperation strategy that can be agreed by both Korea and its African partners is one that blends and balances trade issues with development agendas. In this sense, AGOA provides meaningful implications to Korea despite the differences in size and quality between the economic cooperation policies of Korea and the US towards Africa. It is not easy for Korea to adopt trade strategies such as the GSP or AGOA that can be applied to an entire group of developing countries or the entire African continent, considering Korea’s capability. The results of this research that show the varying degrees of AGOA’s impact based on the country, region, and industry provide several important implications. One suggestion would be to begin by selecting certain strategic trade partner countries or regions as a base for expanding Korea’s trade partnership with Africa, which would be in line with Korea’s capacity restraint. As can be noted in the Post-AGOA discussions, the US is also developing its agendas and strategies towards selecting priority countries with higher probabilities of business cooperation, such as middle-income countries or those who have an industrial base. Such an approach can be of consideration in designing Korea’s strategy.
   Developing a model of a reciprocal bilateral trade agreement with African countries is as important as selecting partners for trade cooperation. Reciprocal bilateral or multilateral free trade agreements pursued by Korea so far have been relatively symmetric is opening markets and also covers the whole range of economic cooperation such as bilateral trade, investment, intellectual property rights, and e-commerce. A symmetrical agreement that requires all parties to open its markets on the same level would be burdensome for African countries, especially as Korea’s consumer market is not as large as that of the US. Like that of the EU, a reciprocal bilateral trade agreement with African countries should open up markets on a medium to long-term time frame by considering the demand and conditions of developing countries. It should also reflect the mutual cooperation between Korea and African countries that is centered on the key areas where Korea can provide support for Africa’s economic development. The legal and institutional issues currently under discussion by the US government and assembly to support US investment in Africa and investment by African companies in the US, to maximize the effects of AGOA can also be adjusted to Korea’s situation.
   It is necessary to expand the framework where the agendas of economic cooperation can be discussed between Korea and the African Union (AU), with regional economic communities (RECs), especially as the importance of Africa is increasing with the launch of the AfCFTA. The AGOA Forum is held every year to strengthen the economic connection between beneficiary countries. Countries share the trade enhancement effects of AGOA, discuss barriers to trade and investment, and seek improvement measures at the forum. It would be meaningful to combine and promote the Korea-Africa Economic Cooperation (KOAFEC) supervised by the Ministry of Strategy and Finance, the Korea-Africa Industrial Cooperation (KOAFIC) supervised by the Ministry of Trade, Industry and Energy, the Korea-Africa Forum held between the Ministry of Foreign Affairs and the AU, and other policy consultative groups into one regular summit-level consultative body like that of Japan’s Tokyo International Conference of Africa’s Development (TICAD) or China’s Forum on China-Africa Cooperation (FOCAC).
   Last of all, the Post-AGOA discussion that was initiated at the 2018 AGOA Forum in consideration of 2025, when AGOA expires, should be noted. The US has made clear that it is shifting its policy direction towards signing reciprocal bilateral trade agreements with African countries. It will take some time for the bilateral free trade agreement mentioned at the AGOA Forum to materialize, but some African countries may competitively engage in negotiation with the US because it is of national interest to maintain preferential access to the US market. The Korean government needs to strengthen the monitoring of future trade agreements between the US and Africa because it is expected to be a higher level of reciprocal bilateral trade agreement that includes investment, service, transparency to actively expand support for US companies willing to invest in production facilities such as infrastructure in Africa, in addition to mutual tariff concessions to expand trade. 

   This report aims at providing a reference for the Korean government’s policies for an income-led growth. Among the policies discussed or implemented for the goal of an income-led growth, it focuses on housing-cost reduction (Chapter 2), employment expansion in the public and social services (Chapter 3) and minimum-wage increase (Chapter 4). Housing cost and employment in the public and social services have been chosen, because the level of awareness and interest on these topics is too low despite their importance. On these topics, the Korean government can learn from Europe, where welfare in general is known be highly developed, as well as from the U.S., where many policies in these areas have been employed to counter economic crises. In particular, this report compares the current state of Korea in these areas to those of Europe and the U.S., and delves into the cases that stand out in that comparison. Regarding minimum wage, which has already been widely discussed, this report does not add more cross-country comparison or case study. Instead, considering the ongoing debates on the impact of minimum-wage increase in Korea, it aims at providing scientific evidence on the impact of minimum-wage increase. For this, it empirically analyzes the impact of minimum-wage increase at the country level using a panel of the OECD countries.
   The main findings of this report are as following. First, for the share of housing rents in disposable income, Korea ranks mid-low compared to European countries and the U.S. At the same time, Korea’s housing subsidies as a proportion to the GDP are also low when compared to the same countries. The U.K. and France have significantly higher subsidies, for significantly more households than Korea. The U.K. has a finer-tuned design of housing policy. The focus of housing policy in the U.S. has shifted from housing development to rent subsidies.
   Secondly, Korea performs badly in terms of the public and social services employment per population, in comparison not only with richer countries than Korea, but also with the eastern European countries with income levels significantly lower than in Korea. Compared to Sweden, Korea has significantly less healthcare practitioners per population, and they are significantly more concentrated in big cities. This implies a wider regional gap in the access to medical services in Korea. In the U.K., the public sector employment has been on a secular decline since the Thatcher government, but the public and social services employment, particularly in healthcare and social works, has been increasing in most of the time. The U.S. expanded the public and social services employment during the 1970s to counter economic crisis. Noticeably, the federal government delegated the operation of such expansion to local governments, while offering the necessary budget and guidelines. The Obama administration also expanded the public and social services employment as an economic stimulus during the Great Recession.
   Regarding minimum wage, this report estimates its impact on employment rates by age group and by industry, profit by industry and income inequality. An unbalanced panel of the OECD countries with mandatory minimum wage is used, and each estimation has a different set of countries and years depending on data availability. Because the proportion of workers directly hit by a minimum-wage increase is likely to depend on the distance between the minimum wage and the median wage, the proportion of the minimum wage to the median wage is taken as the main explanatory variable. A linear model and a quadratic model are estimated.
   The results show, that the impact of minimum-wage increase depends on the relative size of the minimum wage compared to the median wage; that is, the quadratic term is both statistically and economically significant. However, minimum-wage is estimated to reduce income inequality in general.