Executive Summary

I. Introduction

II. Data

1. Investment
2. (Global) Megatrends
3. Uncertainty

III. Empirical Model: Augmented Demand Accelerator Model

IV. Results and Policy Implication

1. Closed Economy
2. Open Economy

V. Conclusion

Appendix

References
 

Even at near-zero interest rates for a prolonged period since the financial crisis, why has business investment in advanced economies remained persistently below its pre-crisis level? This paper investigates empirically the roots of this investment puzzle from the global megatrend perspective. The empirical model of this study augmented the uncertainty-finance accelerator investment model with megatrend variables of a transition to service industry, ageing population and a rise in income inequality. The main estimation results show that they have affected negatively the business investment over the period 1980-2014. The shift-to-service driven investment fall is the price-dominant effect during the transition, which is not necessarily pessimistic news, while the suppressing effects from ageing and a rise in income inequality require adequate policy reactions. In addition, the analysis finds significant negative spillover effects of trade partners' ageing and income inequality on a country's own private investment. Based on the empirical results, I expect that the G20’s efforts in inclusiveness with structural reforms will stimulate global business investment.

Keywords: investment, megatrends, aggregate demand, uncertainty, G20, inclusiveness
JEL classification: E20, F41, F42 

Executive Summary

1. Introduction

2. Theoretical Framework and Literature Review

3. The Revision of the Companies Act in India in 2013

4. Data and Identification Strategy
4-1. Data
4-2. Empirical Specifications and Methodology

5. Results

6. Discussion and Conclusion

References 

India is the first country to introduce mandatory CSR spending for eligible firms, based on the revision of the Companies Act in 2013. In this paper, I explore the effects of the revision of the Companies Act in India on the likelihood of a firm's CSR participation and its profit. It is the first work to investigate the effects of the provision of mandatory CSR. The results show that the revision increased the eligible firms' CSR incurrence by 2.3 percentage points, compared to ineligible firms. The findings also indicate that the revision is effective to increase the eligible firms' profits by 3.5 percent, compared to the ineligible firms. Therefore, I suggest that profit-maximizing CSR and private provision of public goods through mandatory CSR are valid in India. 

  Keywords: Corporate Social Responsibility (CSR), The Companies Act of 2013, Mandatory CSR

  JEL classification: D04, D22, H42, O10, O53 

This report investigates the reduction of regulatory restrictiveness in services sectors in Korea using recent free trade agreements in effect and studies its impact on FDI inflows. The research outcomes provide three main findings as follows.
First, FDI inflows of Korea closely follow the trend of global FDI flows. FDI inflows to Korea from developed economies have appeared dominant; FDI inflows from the U.S., Japan and European economies account for the major share. The increase of FDI inflows from China is significant. Moreover, the FDI inflow shares of capital-intensive industries such as electronic, chemical, and machinery in manufacturing and financial, distribution, and business in services are also large. The fact that FDI inflows in services have become two times larger than those in manufacturing since early 2000’s is noteworthy. In the meantime, while FDI flows in forms of M&A in most developed economies, M&As as a form of FDI are still less prevalent in Korea.
Second, Korea’s services trade restrictiveness indices provided by the OECD are updated and recalculated reflecting the FTAs recently put in force. Further liberalization through recent FTAs in force is identified in legal, accounting and telecommunications services.
Third, this report analyzes the impact of services liberalization on FDI inflows in Korea. As suggested in theoretical predictions, further services liberalization through FTAs plays a positive role in FDI inflows in Korea. Such outcomes are derived not only in services sectors but in manufacturing sectors as well. 

Introduction

I. How Realistic are the Initial Re-unification Assumptions in this Exercise?

II. Real World Starting Conditions in Post-unification Northern Korea: Potential Complications

III. Estimating and Explaining DPRK Economic Performance to Date: Rationale and Design for a Simple Model Utilizing International Panel Data

1. Theoretical Background
2. Model Specification: Variables, Indicators and Data Sources
3. Initial Model Results
4. Methodological Issues
5. Modeling Contemporary North Korean Trade and Investment Performance through Our Simple Approach
6. Sensitivity Analysis for North Korean Results from Our Simple Model

IV. Illustrative Indications of Northern Korean Economic Performance in Year U Plus 10

V. Illustrative Trade and Investment Profile for Northern Korea in Year U+10, and the Implications for US Commercial Interests in the Territory

VI. What US Role in Strategic and Economic Cooperation for Such a Northern Korea in Year U+10?

VII. Concluding Observations

References

Appendix 

  Our assignment in this paper is to consider the question of “management under temporary separation and international cooperation after Korean unification”: more specifically, to examine “U.S. strategy for economic cooperation with unified Korea, particularly with a focus on investment in North Korea” (and, to the extent feasible, the) “prospects of changes in East Asian value chain after Korean unification: from the U.S.’s perspective”.
  The basic assumptions about the nature of the hypothetical future re-unification for this exercise are laid out as follows:
  Of the many scenarios of Korea’s unification, this research project will focus on the “compromising scenario” which is a scenario that has achieved political unification through governmental negotiations but have not yet begun full-fledged economic integration. Economic integration in this case will be a gradual process.
  This scenario involves one political and economic system (market capitalism), but will have two separate economic units (North and South) which eventually is expected to reach full integration. Initially there will be integration of the commodities market and capital market (1ststage) then there will be labor market integration (2nd stage), then adaptation of a common currency (3rd stage), which will gradually reach full integration into a single market.
  This project will focus on the 1st stage of this process, where we assume an integration of the commodities and capital market, but not yet labor market integration or a unified currency.
  In this paper we will propose an alternative method for attempting to quantify economic performance for the DPRK?and by extension, for a future northern Korea in a re-unified peninsula. This is based upon an approach of modeling economic performance on the basis of international datafiles which do include estimates of North Korean socioeconomic conditions. This approach seems to produce generally robust results, and affords a novel method for estimating possible macroeconomic performance and international trade and financial performance for a northern Korea in a re-unified peninsula. Developing this model and presenting its results is the main contribution of this paper.
  Many different future re-unification scenarios for North Korea can be envisioned, and indeed have been in some detail by researchers and policymakers: these include the possibility of a regime collapse, an internal upheaval and “implosion”, or an end to regime resulting from an attack against the South (“explosion”). Reviewing the framing stipulations for the nature of the re-unification for this exercise, one is tempted to observe these conditions look to be the very most convenient from the standpoint of South Korean policymakers. At the same time, however, they all look to be exceedingly unlikely to concord with reality in the event of an actual re-unification of the peninsula. Yet even under our putative “best of all possible worlds” scenario, there would be serious “transition risks” bearing on economic performance in post-unification northern Korea. It is notable that virtually all these uncertainties would make for poorer performance than we might otherwise expect against our baseline.
  In this monograph we model “the economic growth of nations”?postwar economic performance, including international economic performance, for a large sample of countries?solely on the basis of human resource inputs and the quality of policy/institutions. This approach to estimating and predicting macroeconomic and international economic performance is new. Models attempting to explain and predict economic performance at the national level on the basis of human resource qualities and human societal/organizational arrangements alone are as yet not part of the economic literature.
  To date the main approach to estimating the North Korean economy’s quantitative performance has been with physical indicators, drawing on physical indicator-to-value added relationships from a limited number of other countries (or sometimes just a single country, South Korea, from earlier decades). Our approach offers a very different theoretical narrative?one explaining economic output entirely in terms of human resources and social arrangements, rather than inanimate inputs?and a truly global international context.
  The results from our simple approach to modeling are striking: on the whole, they are powerful, robust, and stable. We appear to have uncovered deep and statistically meaningful relationships from these panel data for postwar relationships between human resources and the quality of institution and polices on the one hand and economic performance?in terms of per capita output levels, trade volume, and levels of foreign domestic investment stock?on the other. We use lagged independent variables to estimate dependent variables 10 years later. By this same process we can estimate notional economic performance for northern Korea ten years after a notional Korean re-unification (U+10). For our purpose in this paper we illustrate estimates for U=10 based on the assumption that unification took place in 2015?using alternative assumptions for initial “business climate” in northern Korea.
  Will the United States be willing to commit to the sorts of strategic and economic efforts that would promote the chance for a successful Korean re-unification?especially to the sorts of measures that would be most helpful in the early stages of such a re-unification? At this writing, there may be more uncertainty about the answer to this question than at any time since the world awaited President Truman’s response to the North Korean invasion of the South in June 1950. The immediate reason for this uncertainty is the inauguration of President Donald J. Trump?a very new type of American President, with seemingly very different ideas about America’s role in the world from any of his postwar predecessors, Democrat or Republican.
  This is not to say that the new Trump Administration might not embrace “liberal internationalist” style policy choices concerning Korean re-unification at the moment of truth. The plain fact, however, is that the new Administration’s potential approach to this question is much less clear and much less predictable than for any American President in the living memory of most readers.
  This new uncertainty about America’s commitment to liberal internationalism?to the international architecture, in other words, that the United States itself was instrumental in designing after World War II?did not entirely commence with the Trump Presidency. It is a classic case of “domestic bases of foreign policy”?and as such it has been gathering slowly, and for some time.
  Just how the American approach to a prospective Korean re-unification will play out under the influence of these new and unfamiliar populist tides remains to be seen. Winston Churchill famously remarked that Americans could be relied upon to do the right thing?after they had exhausted all other alternatives. Perhaps?but for now, convincing America to do “the right thing” with respect to Korean re-unification in its early stages looks to be a considerably harder sell than would have been the case just a few years ago.  

Ⅰ. Introduction

1. Summary of Approach
2. Korea’s North African Economic Relations
3. Current Korean Economic Conditions
4. Overview of the Report

Ⅱ. SENTURION Methodology

1. Horizon Scan Approach
2. SENTURION Data Collection Process
3. SENTURION Agent Based Computational Economics Modeling
A. Defining the Political Landscape
B. Overview of SENTURION Algorithm
C. Votes & Forecast
D. Power
E. Risk
F. Stakeholder Game Tree
G. Mapping of Perceptions
H. Network of Proposals
I. Learning and Discounting

Ⅲ. Algeria: Political and Economic Development and Forecasts

1. Recent Algerian Macroeconomic Activities,  Facts and Figures
A. Korea’s Political and Economic Relations with Algeria
B. Summary of Algeria Three Year Baseline Forecast
C. Algeria Data Collection
D. Base Case Projection
E. Robustness Testing of Algeria Political Stability
F. Removal of the Executive Leader Due to Unforeseen Circumstances

Ⅳ. Morocco: Political and Economic Development and Forecasts

1. Recent Moroccan Macroeconomic Activities, Facts and Figures
2. Korea’s Political and Economic Relations, Trade and Investment Activities in Morocco
A. Summary of Three Year Morocco Baseline Forecast
B. Morocco Data Collection
C. Base Case Projection
D. Robustness Testing of Morocco Political Stability

Ⅴ. Tunisia: Political and Economic Development and Forecasts

1. Recent Macroeconomic Activities, Fact and Figures
2. Korea’s Political and Economic Relations, Trade and Investment Activities in Tunisia
A. Summary of SENTURION Three Year Baseline Forecast
B. Tunisia Data Collection
C. Base Case Projection
D. Robustness Testing of Tunisia Political Stability
E. Scenario Analysis
F. Removal of the Executive Leader Due to Unforeseen Circumstances
G. Monte Carlo Simulations

Ⅵ. Policy Implications and Conclusions

References

Executive Summary

국문요약 

  Political unrest, emerging Islamic State terrorism and uncertain macroeconomic growth across Algeria, Morocco and Tunisia could threaten Korea’s trade, business investment activities and higher-level diplomatic policy development in the region. Although Korea’s aggregated goods and services trade is currently estimated to be merely US$3.7 billion in export and about US$1.2 billion in imports, it is North Africa’s potential as a future market, rather than the trade amount today, that makes the region a strategic location for Korea. The importance of these countries also resides in their economic growth potential and maintaining market entry based in light of peer competition from China or Japan.
  This study performs a deep horizon scan of Algeria, Morocco and Tunisia’s domestic political stability over the next three years.  Within each country, we map and track the anticipated evolution of government support from domestic, regional and international stakeholders. We employ an agent based computational economics model called SENTURION to forecast likely political stability outcomes given current conditions, irregular regime change scenarios, macroeconomic shocks and varying political opposition scenarios. As strong linkages between political stability, economic growth and foreign direct investment have been found by both economists and political scientists, we then infer the subsequent potential impact on Korean trade and investment activities in each country and offer policy implications. Table  below summarizes our horizon scan results and substantive policy implications for Korean investment, trade and business relations.
  Algeria continues to strengthen its economy by further developing hydrocarbon resources, increased private sector development, and launching massive infrastructure improvement campaigns with economic diversification. As we expect a relatively stable political climate given our SENTURION horizon scans, this presents a strategic opportunity for Korea. We anticipate an increased demand for construction and manufacturing equipment, almost certainly to be accommodated by international trade partners, presenting Korea with lucrative opportunities. In this context, Korean trade, investment and business activities should continue current activities or even start a slow, yet steady and measured increase in infrastructure and plant export activities due to Algeria’s anticipated continued climate of stability. Even after Bouteflika’s government, Algerian political transition should be stable and this presents Korea a potential opportunity to outperform other peer competitors such as Japan and China in these sectors. Depending on Korean policy makers risk appetite, the investment could be direct, commensurately matched or secured with significant government subsidies or hedged through other bilateral and multilateral investment schemes.
  Morocco’s medium-term economic outlook is favorable and structural risks are decreasing, particularly because of Morocco’s strong ties to the euro zone. Korea’s current export and investment portfolio in automotive and manufacturing sectors should continue to produce desired returns as our horizon scans indicate a robust and stable political climate under most anticipated scenarios.  Korea can partner with other domestic industries and take advantage of Morocco’s long standing EFTA trade status. This can include Korean investment in further automotive and electronics manufacturing activities as well as labor intensive industries, such as textiles or machine assembly, or other intermediate good finishing industries in Morocco which can then subsequently be exported to Europe or other markets where Morocco enjoys a preferred trade status or existing export lines. In this context, Korean trade, investment and business activities should continue or can increase into different sectors given Morocco’s anticipated continued climate of stability. King Mohammed’s eventual departure will result in a smooth political transition and like Algeria, could also present Korea a potential opportunity to outperform peer competitors. The investment should be commensurately matched, secured with significant government subsidies or hedged through other bilateral and multilateral investment schemes depending on Korean policy makers risk appetite.
  Since the overthrow of dictator Zine El Abidine Ben Ali, Tunisia has proven a relatively rare success story in the post-Arab Spring Middle East and North Africa. However, given prevailing underlying structural macroeconomic risks that include a dispersed population and sporadic GDP growth coupled with high unemployment, Tunisia remains at high risk for domestic political instability and conflict based on our assessments. We caution against increasing investment flows outside of apparels and textiles without strong guarantees due to the expected deteriorating political environment and poor macroeconomic performance. In the event of an irregular leadership change, we anticipate a fierce competition for governance with no clear winner as the heir apparent today. Moreover, we find that Tunisia is fragile and not resilient to domestic political or economic shocks. Any sustained or continued investment in Tunisia should be highly hedged through other bilateral and multilateral pooled investment schemes to reduce direct risk to Korean investment. 

  When it comes to the unification and integration of North and South Korea, discussions have been mainly focused on either radical integration or gradual integration. Coming into recent years, another direction of research is being  explored as well, suggesting that even if political integration is achieved, economic integration should proceed over time. This approach to the unification issue, which is referred to as special administrative region (SAR) type integration or temporary separate operation, is based on awareness of the problems that will result from radical economic integration should political unification be carried out irrespective of our will, such as production and employment unstability in North Korea, the burden on South Korea, pressure on the foreign exchange and capital market, and difficulties in operating the fiscal system.
  Even should political integration take place, it will be possible to reduce pressure to the social security and tensions in the labor market if the North Korean region can temporarily remain in a state of separate operation. Such an approach would enable the North to implement its own monetary policy, exchange rate scheme, fiscal policy, foreign exchange system and financial system to support rapid growth within the North Korean region. In this case, South Korea's support could be utilized more efficiently by concentrating on the goals of economic development rather than social security.
  This report examines the implications of integration and temporary separation, the necessity of temporary separation in the monetary, financial, and fiscal sectors and suggests temporary separate operation by each sector. We also illustrate the interconnected relationship between each sector and propose a process that leads to integration from a state of temporary separation. However, the economic advantage and legal validity of temporary separation are not included in the scope of this study, as they are discussed in a separate study within this series. While the separation period cannot be explicitly set in advance, it could be set as a period sufficient for economic policies of its own in the North Korean region to fully take effect but not so long that the state of segregation comes to be perceived as a permanent one. Overall, the period from separation to integration for each sector may vary.
  The integration of the monetary sector means that a single currency is used and unitary monetary policy is implemented by a single central bank. Integration of the financial sector signifies the overall integration of the financial system, which includes financial institutions, the financial market (e.g. credit, capital markets), financial infrastructure (e.g. payment infrastructure), financial supervision and deposit insurance). The integration of the fiscal sector means applying the same taxation system and principles of government expenditure to both the North and South Korean regions and sharing responsibility to maintain the sustainability of the government finance through the sound fiscal policies. Therefore, the separation of monetary, financial, and fiscal sectors refers to the stages until such integration is achieved. Based on this premise, we examine the temporary separate operation of the monetary, financial, and fiscal sectors.
  From the perspective of the monetary sector, we examine new currency, monetary policies and the foreign exchange system. It seems reasonable to introduce a new currency in the North Korean region (SAR) in order to restore confidence in the North Korean currency and implement monetary policies through its own currency. In terms of monetary policy, academic theories and the experiences of the South Korea and initial financial system of the North suggest it would be reasonable to begin by regulating the supply ceiling for money followed by monetary targeting and leading on to inflation targeting for South Korea in advance of the integration. As for the exchange rate, the official exchange rate and the market exchange rate should be unified and reflect the real values first. If the fixed exchange rate system is adopted for the stabilization of the initial price and the securing of confidence in the currency, measures should be prepared to maintain the exchange rate level. The setting of the initial exchange rate level should take into account competitiveness in exports and income levels. Should the transition be made to a floating exchange rate system, sequential development into a single floating exchange rate system, multi-currency basket system and market average exchange rate system can be considered, while the range of fluctuation can be expanded gradually. At the final stage, a monetary system similar to the ERM of the EU or a currency board system could be implemented up to the point of integration. For a market exchange rate that reflects real values well, proper formation of the foreign exchange market will be necessary. The foreign exchange system should be gradually liberalized beginning from the current account, but regulated at a pace where the liberalization of capital transactions does not lead to instability in the North Korean economy.
  In the financial sector, we propose a temporary separate operation system for the areas of financial institutions, financial markets, and financial infrastructures, while considering the current financial system of North Korea, expansion of the private finance and dollarization. The Central Bank of the North Korean region should initially establish itself as a central bank with its own monetary policy authority and gradually integrate with the Bank of Korea. The refinancing measures to the commercial financial institutions should gradually transit from rediscount system to open market operations. The commercial financial institutions should be established by separating commercial banking from the Central Bank of DPRK and utilizing the Foreign Trade Bank of the DPRK and other settlement banks, savings banks, cooperative farm credit departments, etc. At the same time, South Korean and foreign-owned banks should be actively attracted. It will be important to pay close attention to nurturing self-reliant, local-based financial institutions and consider how to absorb private money-lenders (the “donju”), and other money merchants who currently serve as the main axis of private financial system, into the system.
  In the money and credit markets, it is important that the supply of funds from South Korean and foreign-owned banks be maintained at an appropriate level. The capital market is likely to be formed from the issuance of government bonds, but we consider using the South Korean market rather than opening a separate market. The foreign exchange market is important for the transition to the floating exchange rate system and the proper formation of the North Korean currency value, so foreign exchange banks should be activated.
  The payment system of the financial infrastructure should be integrated into the South Korean system as soon as possible. In the beginning, the financial supervisory system can apply a somewhat relaxed form of regulation in consideration of various conditions in the North Korean region, such as the lack of an accounting system and its inexperience dealing with such regulations. The deposit insurance system must be designed while keeping in mind the eventual integration into the South Korean system, but can apply different policies in terms of the insurance mechanism and protection limit during the transition period.
  For temporary separate operation in the fiscal sector, we consider strengthening autonomy in the North Korean region and discuss the principles of fiscal policy and the structure of the tax system to be applied after integration. The principles of fiscal policy are as follows: fiscal soundness must be maintained; it would be economically efficient for the central government to monitor budget performances and intervene if necessary to prevent a default; the central government or the South Korean government should be cautious about joint guarantees for government’s liabilities; and the fiscal transfer to the government in the North Korean region must be planned in advance. The application of ‘Local Finance Equalization System“ to the SAR shall be postponed.
  Under these principles, the SAR government will be granted autonomy for taxation and government expenditure. In addition to fiscal support from the central government, the government in the North Korean region can set its own tax rate and establish government expenditure plans. Currently in South Korea the share of national tax is much greater than local taxes, and the central government provides fiscal transfer to the local authorities. As for the SAR, the proportion of national tax could be lowered and that of local tax increased, thereby improving the autonomy of the region. By reducing the tax burden, an environment for growth-friendly tax and fiscal policies could be provided. The government uses grants from the central government for the welfare of its residents, and taxes collected from within the SAR are used for investment promotion.
  The tax system of the SAR should be based on the South Korean tax system while keeping in mind the future integration, but it could reduce tax burdens on its own discretion if this is deemed necessary for growth. If the government adopts an economic growth strategy that fosters competitive enterprises through government-led industrial policies and wage restraints, a tax system should be established to support this. The tax burden imposed on individuals should also be kept low too. Therefore, the major tax sources will inevitably become the business sectors growing within the support of government policies. In order to prevent the tax burden of these enterprises from becoming too heavy, the government of the SAR should maintain a small government at the beginning and make efficient use of funds received from the central government. Meanwhile, indirect taxation will be important not only as a stable tax source but also to create conditions for lowering the tax burden on enterprises. To ensure smooth integration in the future, we should also consider applying the same value-added tax rate as South Korea to the SAR from the outset.
  In the last section, we describe the interconnected relationship between the monetary, financial, and fiscal sectors, and summarize the process of integrating these sectors in the later stages following initial separate operations. In the early stages, a new currency should be introduced into the SAR, while monetary targeting is adopted under an independent monetary policy system, and the interest rate level is set differently from that of South Korea. If a fixed exchange rate regime is adopted, capital transactions are restricted in the foreign exchange system. Together with a switch to a two-tier banking system, the central bank of the SAR should be granted its own authority for monetary policies. The issuance of government bonds will raise the need for capital markets and the initial shape of the foreign exchange market will be established. The payment system of the South Korean system should be transplanted quickly, while the financial supervision system can be introduced in a somewhat relaxed form. The deposit insurance scheme takes into account the lack of fund accumulation and considers measures to provide deposit incentives by the government. As for fiscal policy, the government should actively support funds for economic development, and consider special tax exemptions in the SAR to attract investment.
  In the intermediate stages of integration, together with a transition toward a floating exchange rate system, the government will gradually liberalize the foreign exchange control along with the gradual liberalization of interest rates. The number of financial institutions may increase and listed stocks may emerge. The Stock Exchange of South Korea can be used as a capital market platform. The financial infrastructure, such as the financial supervision system and the deposit insurance fund, should gradually converge into the South Korean system. As for fiscal policies, it will be important to maintain the fiscal soundness of the government in the North Korean region, and assist it to gradually expand its own tax sources.
  The final stage will be to prepare for integration. Preparations should be made for the conversion of the SAR’s currency to the Korean Won, while monetary policies converge to the inflation targeting regime of the Bank of Korea, and the liberalization of interest rates is expanded. The SAR exchange rate should be based on the exchange rate formed in the market, and follow a strict fixed exchange rate regime pegged to the South Korean won before eventually being integrated. In addition to the task of integrating the central bank of the SAR into the Bank of Korea, refinancing through the open market operation should be generalized. The capital markets should increase the existing degree of integration and the deposit insurance scheme should be launched as a single system while integrating funds of both South and North Korea. In the fiscal sector, the tax system should converge into the existing South Korean system by incorporating national taxes, local taxes, and local grants.  

  Tariff rates have become lower under the GATT/WTO regime while the use of non-tariff measures has increased acquiring growing importance. Despite the significance, less work has been done to assess the effect of non-tariff measures on various economic variables compared to the effects of tariffs. This was mainly due to limited data on non-tariff measures.
  The purpose of this report is to introduce and illustrate the newly collected data on Korea’s NTM which will be included in the UNCTAD NTM database. Based on the classification of the Multiple Agency Support Team (MAST), UNCTAD has collaborated with countries around the world to collect non-tariff measures data. Currently the data cover 57 countries and more than 80% of world trade. However, the data has yet to include information on Korea's NTMs.
  First, this report illustrates the legal structure and sources of Korea and show how the Korea NTM data is collected from the sources. We collect NTMs from regulations of all types at national level, which come into effect in 2016. The primary source of the Korean NTM data is the National Law Information Center website, which is a centralized source for regulations of all types at all levels across government bodies. Based on the information from this website, we compile and organize the data following the MAST classification.
  Out of 44 fields, we identify 25 fields that are potentially related to international trade. In this report, we selectively choose 15 priority fields and illustrate NTMs and regulations of Korea. We identified around 1,400 NTMs for the 15 fields. Of the 1,400 NTMs, 40% of the NTMs are classified as technical measures, either TBT (Technical Barriers to Trade) or SPS(Sanitary and Phytosanitary) measures. Many of the NTMs were concentrated in the agriculture and fisheries industry, which is consistent with the stylized fact. On the other hand, no NTMs were found in fields such as military, labor or marine transportation. We also found that many government ministries or agencies other than the Ministry of trade, industry and energy are involved in NTMs. This implies that many of the NTMs of Korea have non-economic objectives such as food safety or environmental protection.  
  Although it is not covered in this report, the information on products that are potentially affected by each NTMs classified by HS codes at 10-digit level will be added to the data. The new NTM database once finished collecting, will allow us to implement further empirical study including evaluation on various NTMs on trade and welfare.  

  Korea is aging at a rapid pace, causing concern about the resulting socio-economic impacts. This study analyzes the expected changes in the financial markets resulting from aging and seeks possible policy measures to mitigate the negative impacts of aging stemming from these changes.
  Chapter 2 reviews the current status of Korea’s aging process. Even though the country remains yet at the stage of an aging society, it is expected to become an aged society in 2017 and then a super-aged society in 2026, a mere nine years later. The aging of the Korean population is proceeding at an unprecedented pace. The fundamental reason for this fast pace of aging is the rapid drop in birth rate and growing life expectancy. However, Korea’s socio-economic systems are not well prepared to absorb the shocks for aged people. More and more aged people are facing poverty and the rate of suicide is highest among the elderly. Rent beneficiaries occupy just a part of the old population. The social security system does not guarantee a stable livelihood for old people. This problem will become more serious in the near future because the baby boom generation has started to retire recently. The aging problem will lead to low growth, low inflation and low investment throughout the whole Korean economy, making structural changes inevitable in the financial market.
  Chapter 3 undertakes empirical analysis to examine whether monetary policies can maintain their effectiveness even after aging has proceeded further. We performed a panel-VAR analysis using the OECD data for 25 member countries for 20 years, from 1995 to 2014. The empirical analysis showed that monetary policies lose their effectiveness considerably in an aged society. This result implies a possible change in the effectiveness of Korea’s monetary policies, especially if the aging of Korea’s population proceeds further. As of yet aging has not progressed significantly in Korea. However, the Bank of Korea should restructure its monetary policies in the long term, considering the change of policy effectiveness according to the progress of aging. The government may utilize fiscal policies to a more intensive extent to respond to cyclical depression while it sets monetary policies to manage the financial market and inflation pressure. For instance, if the government employs monetary policies to control cyclical changes, they would have to apply greater and faster interest rate changes than before to achieve the same effect. Research on the relation between aging and monetary policy has only begun to be discussed recently. However, it may become one of the main research topics in the near future due to its importance. Further and more detailed studies will be needed to allow adjustment of monetary policies in an aged society.
  Chapter 4 reviews the theories regarding the relation between aging and the financial market and undertakes case studies with Japan, Germany and the U.S. In addition to a theoretical review, the countries’ money flow charts and international investment position tables were analyzed to discover the impacts of aging on the financial market. Japan has shown macroeconomic and financial changes very close to theoretical predictions. However, Germany is not showing considerable changes in its financial market due to active labor market reforms. The U.S. as well does not reveal the characteristics of an aged society because aging in the U.S. is still at an initial stage and the financial market functions as a global market rather than a domestic market. Even though the countries show different levels of change, they all have introduced some policy measures focused on aging. Examples of successful policies include the Japanese current account policies and NISA, German labor market reform and competition policies, and the U.S.’ introduction of annuities such as its 401(k) plan.
  Chapter 5 draws policy implications based on the analyses above. The recommended policy directions are as follows: explore new roles for monetary policies, use labor market approaches and financial market approaches to respond to aging, and employ strategies using the income account to maintain current account balance, etc.
  Finally, this study emphasizes the need for fast and comprehensive countermeasures against the negative macroeconomic and financial impacts of ageing. 

  Slovakia is a dynamic EU member state and a successful case of economic transition and development, currently attracting numerous global companies into her market. This study aims to analyse a selection of promising industries in Slovakia with the objective to strengthen industrial cooperation between Korea and Slovakia and to recommend measures for Korean companies that are planning to gain access to the EU market, which has contracted after the Eurozone crisis, by entering into the Slovak market. This study covers the overall conditions, Slovak government’s policy, detailed industry trends, growth potentials and prospects of the automobile and infrastructure industry in Slovakia. These industries were selected based on the criteria of: importance in the Slovak economy, recent growth rate, future growth potentials, and possibility of market entrance for the Korean companies. The results are supplemented by the findings of a survey on Korean companies already present in Slovakia. The automobile industry is divided into the complete vehicle sector and parts/components sector, while the infrastructure industry is divided into the energy/environmental sector, ICT sector, and transport sector, etc. Within the infrastructure industry, this study focuses on the energy/environmental sector and the ICT sector, an area in which a few Korean companies have already entered in Poland and other Visegrad countries. In this study we carried out a survey on 37 onsite Korean companies about the business environment in Slovakia. The results indicate that, unfortunately, while the companies have sufficient internal capabilities, many are frustrated in seizing the opportunities and minimizing the risks to thrive in the Slovak market. Therefore, this study suggests strategies for such Korean companies to cope with the circumstances by considering both external and internal factors.