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  • 중국의 통상환경 변화와 국가별 상품 간 수출 대체가능성 연구
    Multidimensional Substitutability Measurement and Analysis: with an Application to Trade between China and South Korea

       Recent changes in the trade environment surrounding China are developing dynamically. These changes are expected to directly or indirectly affect the Korea-China trade structure. Therefore, in this study, focusing on ..

    Wonho Yeon et al. Date 2021.05.28

    Economic relations, Trade structure China

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       Recent changes in the trade environment surrounding China are developing dynamically. These changes are expected to directly or indirectly affect the Korea-China trade structure. Therefore, in this study, focusing on the possibility that Korea’s exports to China could be replaced by Chinese or foreign products in the future, we establish a new quantitative analysis methodology to analyze the level of substitutability of Korean exports.
       One of the most important external changes in China’s trade environment is the U.S.-China trade conflict. In particular, in countries such as Korea that export final products to the U.S. while forming a division of labor with China in the global value chain (GVC), the conflict between the U.S. and China is acting as a greater destabilizing factor. In terms of the substitutability of Korean exports to China, the U.S.-China conflict can have an effect through various channels, and one of the important events is the U.S.-China Phase 1 trade agreement.
       For internal changes, it is important to study China’s industrial upgrading strategy. China, which has been called the “world’s factory,” has been pursuing a strategy to improve the localization rate and upgrade its industrial structure through technological development and innovation. Accordingly, China has been adjusting its role and position within the GVC, in which China used to be in charge of the simple processing trade. As the U.S.-China trade dispute escalated since 2018, the U.S. containment policies have intensified as well, particularly against China’s advanced industry and technology sector. As a reaction to this, China has dealt with its industrial policies not only in the context of economic growth but also in national security. The strategy to indigenize core technologies and parts has been strengthened and pursued under the goal of establishing a fully independent supply chain within the nation. Due to China’s industrial advancement and import substitution strategy, concerns are growing about the replacement of Korean-made exports to China by Chinese products.
       In Chapter 2, the internal and external factors of the recent development of China’s trade environment are briefed. As an external factor, the US-China Phase 1 trade agreement was reviewed, and as an internal factor, the import substitution strategy of China was examined. Chapter 2 provides the background of the case analysis in Chapter 4, while emphasizing the necessity for developing the new multidimensional methodology that was newly modeled in Chapter 3.
       In Chapter 3, we explained the multidimensional import substitution index model, which is the core contribution of this study. First, we examined the Alkire-Foster (AF) model that provides the basic structure for the Yang-Yeon (YY) model that derives the multidimensional substitutability index (MSI). Second, we explained our model, the Yang-Yeon (YY) model, which is a newly built methodology based on the AF model to analyze the probability of substitution between the imported products. 
       In Chapter 4, applying the YY model derived in Chapter 3, we conducted case studies to see how Korea’s exports to China are actually affected by related events and policies. First, we analyzed the effect of the U.S.-China Phase 1 trade agreement on Korea’s exports to China. Second, we investigated the influence of China's import substitution policies on Korea’s exports to China. 
       In the last chapter, we reemphasized the necessity of the YY model to fully understand the substitutability between the exporting goods and the trade partner’s home-produced goods or the third party’s exporting goods. Also summarizing the analysis results of the case studies based on the YY model, we presented the policy implications and suggestions. The YY model predicted that the US-China Phase 1 trade agreement would not have a significant impact on Korea’s exports to China. This suggests that it is necessary to prepare more objective and comprehensive responses using quantitative methods such as the Multidimensional Substitutability Index (MSI) rather than engaging in qualitative conjecture or groundless concerns. However, the YY model predicted that China’s industrial upgrading policy would act as a major threat to Korea’s exports to China in the long term. In particular, the possibility of Chinese goods replacing Korean products is high in general goods, suggesting that Korean-made products with low technological levels will eventually be replaced by the Chinese as Chinese manufacturing technologies advance. What is more worrisome is that Chinese industries and products positioned as strategic emerging industries or targets of scientific and technological innovation, such as products related to renewable energy, batteries, semiconductors, and electric vehicles, are highly expected to replace Korean products not only in the mid- to long-term but also in the short term. 
       Korea’s best response to China’s industrial upgrading strategy will be to maintain its comparative advantages over China. However, the realities in Korea make it difficult to maintain competitiveness in all industries and technologies, meaning it will be necessary to choose and focus on areas that will develop as major industries in the era of the 4th industrial revolution. Therefore, we hope the newly constructed YY model that provides the Multidimensional Substitution Index (MSI) will help policymakers to identify areas where competition with China is likely to intensify, and to determine the target and priority of policy support.
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  • 한ㆍ중ㆍ일 소재ㆍ부품ㆍ장비 산업의 GVC 연계성 연구
    A study on GVC linkage of materials, parts, and equipment industries in China, Japan and Korea

       China, Japan and Korea (CJK) have been competing and cooperating in many fields in the material, parts and equipment industries due to their geographical proximity and similarity in industrial structure. However, non-..

    Hyung-Gon Jeong et al. Date 2021.06.30

    Trade structure, Industrial policy China Japan

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       China, Japan and Korea (CJK) have been competing and cooperating in many fields in the material, parts and equipment industries due to their geographical proximity and similarity in industrial structure. However, non-economic factors such as COVID-19 and sanctions against Korea by Japan and China pose obstacles to economic cooperation among CJK. Therefore, this study derives policy implications for the efficient management of global value chains (GVCs) in the materials, parts and equipment industries by comparing the supply chain structure of Korea’s materials, parts and equipment industries with Japan and China. The main contents of this study consist of four parts. 

       First, this study analyzes changes in the trade structure and mutual connections between Korea, China and Japan in the materials, parts and equipment industries, from 2000 to 2018.
       Over the past 20 years, Korea’s materials, parts and equipment industries have grown significantly. During this period, the top industries for Korean exports/imports in the materials, parts and equipment  sectors have been electronic components (1st), chemicals and chemical products (2nd), and primary metal products (3rd) ‒ areas of high competition with Japan and China in the global market. 
       The biggest change in Korea’s materials, parts and equipment industries came in 2018, when the import and export rankings of textile products and non-metallic mineral products sharply declined, and the transportation machinery parts and semiconductor display equipment industries rose in their ranking. These changes reflect the fall in production of general-purpose technology industries in Korea, accompanied by an increase in the proportion of industries requiring advanced technology and specialization in related industries. General purpose technology products have changed to a trend of importing from China or third countries.
       Trade in China’s materials, parts and equipment industries also grew rapidly during the same period, and imports and exports of general-purpose technology products increased significantly. The top trade items of China’s materials, parts and equipment industries are electronic products, electrical equipment parts, chemicals and chemical products. China shows very high competitiveness in textile products, but when compared to other industries in terms of export and import data for 2018, these were found to have declined significantly in terms of size and competitiveness against 2001 levels.
       Japan’s materials, parts and equipment industries are still highly competitive. However, the share of industries related to general-purpose technology has been reduced, and only industries specializing in advanced technology fields remain visibly competitive. The remarkable changes in the Japanese materials, parts and equipment industries over the past 20 years have led to a decline in the stature of the textile industry, and the status of the semiconductor display equipment industry has risen far higher than in the past.
       Meanwhile, the characteristics of imports and exports between Korea and China, Korea and Japan, and Japan and China were identified by classifying the materials, parts, and equipment industries into 231 fields. Trade between Korea and China in the materials, parts and equipment industries is concentrated in 20 items, each accounting for more than 1% of the import and export items. As for Japan’s exports in materials, parts and equipment industries to China, there was no detectable phenomenon of specific items dominating exports. The characteristics of Japanese imports from China are similar to those of Korea, but differed in that no items account for more than 1% of imports from China in the equipment industries.

       Second, the study examined the competitiveness of materials, parts and equipment industries of CJK by comparing the share of imports and exports of materials, parts, and equipment industries, and calculating Revealed Symmetric Comparative Advantage Index (RSCA), Export Similarity Index (ESI), and Trade Specialization Index (TSI) for each country.
       When looking at the share of imports and exports of the materials, parts and equipment industries by CJK in the global market, the rise of China (3.2% in 2001 → 14.4% in 2018) is prominent. On the other hand, Japan’s share of exports declined, while Korea’s increased. A field in which Japan occupies an overwhelming position in the export market of the global materials, parts and equipment industries is the semiconductor display equipment industry. The Korean semiconductor display equipment industry relies on overseas sources for over 90% of its procurement, indicating the need for caution of dependence on Japan in the field.
       When analyzing RSCA, Japan had the highest competitiveness, but the gap with Korea has been narrowing since 2016 after peaking in 2011. China continues to show a large gap with Korea and Japan.
    Korea-China, Korea-Japan, and Japan-China ESI has steadily increased over the past 20 years. During the same period, ESI between Korea and China (56.4 → 66.9) increased the most. ESI between Korea and Japan (57.5 → 61.3) and ESI between Japan and China (55.0 → 60.2) also increased.
       When examining TSI data, Korea’s competitiveness in textile products, rubber and plastic products, and semiconductor display equipment has weakened compared to the beginning of 2000. All other 13 fields show improved competitiveness. China has improved its competitiveness in all 16 fields. On the other hand, Japan’s competitiveness in the primary metal products, semiconductor display equipment, and measurement equipment industries has improved, while its competitiveness in the other 13 fields has weakened.

      Third, the study analyzed the changes and characteristics of GVCs in the materials, parts and equipment industries of CJK using the World Input-Output Table.
       Taking into account the structural characteristics of production and trade taking place from 2010 to 2018 in the materials, parts and equipment industries of China, Japan and Korea, the production-induced effects (feedback effects, spillover effects, domestic induced effects, etc.) generated under global value chains in the three nations were calculated. It was also analyzed how each country’s production and trade induce other countries’ production and trade. The analysis results are as follows.

       1) The backward linkage effect of materials, parts and equipment industries in CJK was significantly different in 2018 compared to the year 2000, leading to a significant change in GVC from the perspective of production technology.
       2) It was observed that the level of production-induced effects to partner countries in the materials, parts and equipment industries of CJK has also changed significantly.
       3) The globalization of the economy among CJK is having a significant impact on the GVCs change in the materials, parts and equipment industries. In addition, Korea’s import-dependent GVCs linkage with China and Japan is becoming relatively deeper than that of China and Japan.
       4) All three nations show deeper GVCs linkage of production technology, focusing on key export products such as electrical equipment and electronic parts, primary metals and metal processing products, textile products, general machinery parts and equipment, and transportation machinery parts. Through this, it was confirmed that a horizontal division of labor and competition systems are being established not only in the global market but in partner markets as well.
       5) Measuring the inducement structure of production and trade in the materials, parts and equipment industries of CJK shows that the spillover effects of all three countries increased in each other, indicating the formation of interdependent GVC linkage.
       6) The direction of CJK spillover effect changed from “China → Japan, Japan → China, Korea → Japan” in 2000 to “China → Korea, Japan → China, Korea → China” in 2000, signifying a rise in China’s influence.
       7) When examining the results of direct and indirect decomposition of the spillover effects among the three countries, indirect spillover effects were found to be quite small.
       8) Overall, Japan’s materials, parts and equipment industries are highly concentrated in domestic production and show a relatively low level of production-induced effects for other countries.

       Fourth, GVC linkage was verified through a survey of materials, parts and equipment companies. The survey was conducted on 3,260 materials, parts and equipment companies during January 2021, and 502 valid samples were obtained.
       The importance of China and Japan was once again confirmed as a result of a survey on the need to reorganize the supply chain of the materials, parts and equipment industries in Japan and China caused by COVID-19 and diplomatic issues. The results indicate it will be difficult for a new form of GVCs to replace Japan and China for the time being.
       The importance of Japan and China as trading partners is still high, and there is low possibility of changing sources of procurement from Japan or China. In the end, despite many restrictions due to non-economic issues, Japan and China remain important partners for Korean’s materials, parts and equipment companies. Therefore, the government needs to take this situation into account and actively engage in diplomatic efforts for a win-win approach with China and Japan.
       However, CJK represent one of the most sensitive regions to non-economic shocks such as natural disasters and disputes between the United States and China. Therefore, it is necessary to shift from the existing cost- and efficiency-based global value chains (GVC) management to a rational GVC management based on supply chain stabilization.
       As the trend of strategic weaponization is expected to continue gaining strength in the core materials, parts and equipment industries, it is necessary to move away from monopolistic supply chains and pursue a strategy for multi-polarization of the supply chain, and reasonable decoupling from countries where potential risks exist.
       In addition, domestic self-reliance should be promoted in fields with high foreign dependence, such as the semiconductor display equipment industry. Also, most companies in the materials, parts and equipment industries are small and medium-sized enterprises (SMEs) greatly lacking in terms of  technology development and market dominance, meaning that measures are urgently needed to address this concern.

       Finally, considering the pace of development in China’s materials, parts and equipment industries over the past 20 years, the gap in competitiveness of the materials, parts and equipment industries in CJK will be greatly reduced, and the GVCs of China-centered materials, parts and equipment industries are expected to show significant advances. It will be necessary to prepare countermeasures by the government and companies accordingly.
       The materials, parts and equipment industries in Korea should transition from general-purpose technology to more specialized and advanced technology. Towards this, the policy proposals in this report, based on an analysis of competitiveness and corporate satisfaction with government policies, merit careful consideration.


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  • Consumer Responses to Price Shocks of Wine Imports in Korea
    Consumer Responses to Price Shocks of Wine Imports in Korea

    The main purpose of the study is to develop a methodology that divides consumers' responses to FTAs or commodity taxes into quantitative and qualitative margins, which cause exogenous price changes for some specific goods. The use..

    Chul Chung et al. Date 2021.07.30

    Trade policy, Free trade

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    Executive Summary

    1. Introduction

    2. Literature Review
    2-1. Research on the Effects of FTAs and Consumption in Korea
    2-2. Research on Demand Analysis

    3. Methodology

    4. Empirical Analysis
    4-1. Data
    4-2. Empirical Results

    5. Conclusion

    References
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    The main purpose of the study is to develop a methodology that divides consumers' responses to FTAs or commodity taxes into quantitative and qualitative margins, which cause exogenous price changes for some specific goods. The use of unit values as a dependent variable for consumers' qualitative choice, unlike the usual method of utilization of unit values as a proxy variable for market prices, showed that qualitative response to price changes exists and its size is significant. The methodology of separating and estimating qualitative responses to income changes as in economic crises is also presented, and the empirical analysis using this methodology showed that much of the existing income effects were qualitative responses. As a key result, the price elasticity of -1.178 estimated by the usual demand model based on a single commodity assumption is reduced to -0.712 for the quantitative margin only, and the qualitative margin is the remaining -0.466, accounting for more than a third of the overall response. The significant degree of qualitative response estimates suggests that policy makers and researchers should consider qualitative response as an important factor when analyzing the effectiveness of FTAs, especially on consumption.
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  • 동아시아 금융협력의 비전과 과제: CMIM 20년의 평가와 새로운 협력 방향
    East Asian Regional Financial Cooperation: Visions and Challenges

       After the East Asian financial crisis in 1998, the need to strengthen financial cooperation, including liquidity support at the regional level, emerged. Accordingly, the Chiang Mai Initiative (CMI) was signed at the A..

    Deok Ryong Yoon et al. Date 2020.12.30

    Economic cooperation, Financial integration

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       After the East Asian financial crisis in 1998, the need to strengthen financial cooperation, including liquidity support at the regional level, emerged. Accordingly, the Chiang Mai Initiative (CMI) was signed at the ASEAN+3 Finance Ministers’ Meeting in 2000, and institutional efforts to strengthen regional financial cooperation have been continued for 20 years. The outcomes of this effort include the Chiang Mai Initiative Multilateralization (CMIM) and the Asian Bond Market Initiative (ABMI). However, it is difficult to find countries actively utilizing them. For example, even though the blockade caused by the spread of COVID-19 in 2020 led to a decline in economic activity and suffered instability in the foreign exchange market, none of the ASEAN+3 countries attempted to resolve market instability by using regional financial cooperation mechanisms. Under this circumstance, we try to find the reason for the poor use of CMIM. First of all, CMIM is linked to the International Monetary Fund, so it cannot be free from the sigma effect. The size of support is also small, as well as using the holding amount. Chapter 2 pointed out the lack of leadership and vision as the cause of the failure to improve even though there was the awareness of such institutional weakness in the region. Therefore, a plan to increase the effectiveness of CMIM was suggested as follows. First, we suggest establishing a “CMIM Fund” and the future vision of regional financial cooperation by introducing regional currency cooperation and regional settlement systems in connection with financial cooperation. Second, It will also helpful to bring Australia and New Zealand as new member states. This is to take advantage of the developed financial industries of those countries while coming out of the sluggish financial cooperation caused by political conflicts between the existing member states. ABMI, which has been performing the most within the ASEAN+3 framework, has taken the strategy of presenting a new roadmap every certain period of time, thereby facilitating the introduction of financial infrastructure and institutions in the ASEAN region as well as the development of the local currency denominated bond market. However, due to the gap in the level of economic development among member countries, there are limits such as the continuing difference in the degree of development of the bond market between ASEAN+3 countries and the still large regional infrastructure investment gap. Chapter 3 proposes a multilateral and bilateral approach to improving the financial settlement infrastructure and expansion of regions including Australia and New Zealand to address these problems. In Chapter 2, the participation of Australia and New Zealand to improve the governance structure of CMIM was considered. In terms of the local currency bond market, it is interesting to discuss with Australia. As of the second quarter of 2020, the size of the bond market in Australia is $2.19 trillion, similar to the size of the Korean bond market. The peculiar thing is that the share of financial institution bonds is 53.9%, which is considerably higher than that of the US, UK, and Japan. In addition, as the share of raw materials in Australia’s export composition is close to 60%, the Australian dollar shows a high positive correlation with raw material prices. In other words, unlike most advanced countries’ currencies, it has the property as a risky asset that reacts sensitively to fluctuations in commodity prices. This can be interpreted as, for example, that there are many cases of moving in the opposite direction to Japanese yen assets, and it can be seen that it helps to organize an optimal portfolio. Therefore, attempts to expand ABMI’s regional reach, including Australia and New Zealand, which are pursuing policy strengthening of cooperation with ASEAN will be meaningful. Chapter 4 looks at monetary cooperation between East Asian countries and explores the possibility of new cooperation through the use of Central Bank Digital Currency (CBDC) in this region in the future. The fundamental reason why East Asian monetary cooperation has not been successful is that it has set a low-realistic goal of stabilizing exchange rates in the region. Therefore, we would like to consider setting a more specific goal of “cooperation in issuance and common use of CBDC” and think about ways to achieve more visible results. Still, the cross-border payment and settlement process involves problems due to high costs, risks, and uncertainty in transactions. If CBDC is introduced and can be used for international payment and settlement, this problem can be solved in terms of improving the efficiency of payment settlement and promoting the internationalization of the local currency. However, in order to realize this, cooperation between central banks of regional countries is essential for the holding and using the CBDC. Cooperation through the CBDC may lead to a change in the international monetary order centered on the US dollar, and in the process of cooperation, international capital movements may be promoted, leading to further fluctuation of exchange rates. However, rather than reducing options due to excessive concern about this, we suggest that the time has come when efforts to realize the potential of cooperation through CBDC are needed. The effect of promoting the international use of Korean won could also be achieved. More specifically, it is possible to consider raising the “cooperation through CBDC” as a new agenda at the ASEAN+3 Finance Ministers and Central Bank Governors Meeting or Regional Comprehensive Economic Partnership (RCEP). In Chapter 5, we present new options that can be considered in order to escape the inactivity of financial cooperation in East Asia and cultivste the cooperation. In other words, from the perspective of change the existing cooperation structure centered on ASEAN+3 into a new one, it is transforming into regional development cooperation and expanding and moving its center country to Northeast Asia. The Northeast Asian region has great growth potential and enormous demand for investment, as it is called “the last major economic resort of the Asian continent”. However, since funds are insufficient to satisfy this, the establishment of a development financial institution in Northeast Asia is proposed as an additional method like Northeast Asia Development Bank, Northeast Asia Infrastructure Fund, and Northeast Asia Development Corporation. As a result of comparing and analyzing these three alternatives from various angles, the Northeast Asia Development Corporation seems to be the most suitable. The reason is that it does not require membership qualifications in international financial institutions when supporting funds first, allowing efficient allocation of funds. In addition, development-related banks in each country can avoid the form of international organizations, and local governments instead of central governments can participate, making it easy to establish. In addition, there are many other advantages, such as encouraging private participation and, from the standpoint of Korea, fostering the asset industry and enabling efficient use of long-term capital. However, in consideration of the fact that it cannot be free from political issues, some cautions are needed regarding the implementation system of the Northeast Asia Development corporation. First, rather than the government’s direct initiative, development banks, such as development banks and export-import banks, should lead the establishment, while encouraging the participation of private financial institutions in the region by emphasizing its commerciality to attract public-private cooperation. Second, it is not necessary to exclude China’s participation itself, but it is desirable to avoid letting China play a key role. This is because China’s pursuit of a one-on-one route and already high in its own fundraising capacity cannot rule out the possibility that this participation will be part of an external strategy rather than a regional development and cooperation level. Third, the Northeast Asian Development Corporation should also actively promote cooperation with existing multilateral development banks, such as Asian Development Bank (ADB) and European Bank for Reconstruction an Development (EBRD). Fourth, in order to focus on the aspect of financing necessary for the development of the Northeast Asian region, it can have a practical effect to establish the Northeast Asian region as the scope of activities of the Northeast Asian Development Corporation rather than encompassing all countries subject to economic cooperation with the New Northern Policy. In Chapter 6, we also propose a transition to the subject of financial cooperation, which is the transition from ASEAN countries to Central Asia, a relatively underdeveloped partner with high demand for development finance. These regional alternatives are Mongolia and Central Asia, which have been alienated from the target of financial cooperation so far in order to prepare Korea’s response strategy to Japan, led by the Asian Development Bank, and China, led by the Asian Infrastructure Investment Bank (AIIB). Cooperation is needed to encompass five countries (hereinafter, Mongolia and five Central Asian countries collectively referred to as Central Asia). Specifically, the “Korea-Central Asian Financial Cooperation and Training Center (tentative)” will be established as soon as possible for Central Asia to maintain the momentum of financial cooperation, and to expand the scope of cooperation to macro-financial fields including KRW settlement cooperation. This should be promoted in a direction that supports cooperation in the real sector, such as discovering new growth engines of the Korean economy in the long term, and finally, we need to build Korea-Europe-Central Asia’s trilateral financial cooperation system through cooperation with Europe, especially EBRD. As discussed above, this study proposes a new policy alternative to overcome the limitations of East Asian financial cooperation. Of course, more precise preparation is needed to implement these alternatives, and it is also acknowledged that the topics covered in this study are only a part of regional financial and monetary cooperation. However, in overcoming the limitations so far, it is hoped that it can be a contribution that provides at least a hint of thought, and it is expected to be more concrete in future studies.
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  • 디지털 전환 시대의 국경간 전자조달 논의 동향과 시사점
    Cross-border e-Procurement in the Digital Transformation: Discussions and Implications

       This report analyzes statistics on cross-border e-procurement, examines the use of e-procurement and e-procurement systems in the USA, the EU, and Korea, and comparatively analyzes e-procurement norms in international..

    Ji Hyun Park Date 2021.03.30

    Multilateral negotiations, Trade policy

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       This report analyzes statistics on cross-border e-procurement, examines the use of e-procurement and e-procurement systems in the USA, the EU, and Korea, and comparatively analyzes e-procurement norms in international trade agreements to identify implications. 
       The analysis of statistics on cross-border e-procurement included data on millions of procurement contracts per year downloaded from government websites to estimate the amounts of procurement, or that gained by processing publicly available data. The results showed that, while the public procurement is a gigantic market that accounts for 10‒15% of the GDP, cross-border e-procurement only represented an insignificant share. In the US procurement market, which is the largest single market in the world, cross-border e-procurement as defined by vendor nationality only accounted for 2‒3% (excluding the USA, in terms of value). This figure was 3% in the EU (direct cross-border procurement, in terms of value), and less than 1% in Korea (central government, foreign funds). However, it is notable that, as in the cases of the EU, Korea, and the USA, there is an upward trend in the size of cross-border e-procurement in countries that use electronic means in the procurement process.
       Country-specific e-procurement data from World Bank reports were analyzed to take stock of the use of e-procurement. The number of countries using electronic means decreased as the e-procurement process progressed. Also, while the US, the EU, and Korea have well-organized e-procurement systems and are showing an increase in their use of e-procurement, the share of cross-border e-procurement in these countries was shown to be very low, indicating a high entry barrier in the procurement market.
       Comparative analysis of e-procurement norms in different international trade agreements revealed incremental increases in bilateral and regional trade agreements that embrace e-procurement norms. Recent FTAs such as the Regional Comprehensive Economic Partnership (RCEP) have added or newly established provisions on e-procurement cooperation. In particular, the Digital Economy Partnership Agreement (DEPA), a digital trade agreement, includes provisions on cooperation (cooperation activities related to e-procurement) in government procurement. For the DEPA, it is notable that government procurement, which would otherwise have been addressed in individual chapters in other trade agreements, was included in the digital trade agreement. This represents a new trend in digital trade where government procurement proceeds from the perspective of cooperation. E-procurement cooperation provisions that have recently emerged one after another in trade agreements including FTAs are likely to be added or newly drafted into more concrete cooperation provisions within trade agreements to come.
       This report presents ways to vitalize cross-border e-procurement and develop norms for e-procurement. The overarching prerequisite to the vitalization of cross-border e-procurement is to build procurement statistics as the basis for developing procurement policies. Also important, particularly for countries actively utilizing electronic means in public procurement, is to modernize procurement systems and increase the use of e-procurement, as seen in the case of the EU, which experienced increases in cross-border transactions. However, even if a country has a well-developed e-procurement system, the country’s institutional regulations may serve as an entry barrier that prevents foreign companies from entering the procurement market. In this sense, efforts must be made to ease or improve institutional regulations that may hinder cross-border e-procurement. There is a need to strengthen international cooperation, especially in response to communicable diseases, and have an international council or organization overseeing e-procurement to coordinate and regulate the execution of procurement activities in emergency situations. Most of all, openness in government procurement will be limited as long as the policy stance to take advantage of government procurement as a policy tool remains, and this calls for countries’ willingness to open their procurement markets.
       This report suggests directions for the development of norms for cross-border e-procurement in preparation for an expansion in agreements related to e-procurement. In the short run, inter-governmental discussions over cooperation for e-procurement and international discussions should be expanded. In the medium term, we can expect discussions over including e-procurement in electronic commerce or digital trade chapters of international trade agreements, rather than government procurement chapters, as part of digital trade. The long- term orientation should be to establish norms to promote cross-border e-procurement, which will require discussions and considerations to regulate entry barriers in e-procurement markets and institutional regulations that hinder cross-border e-procurement. This highlights, in particular, the roles of the WTO in promoting cross-border e-procurement and developing norms for e-procurement. The e-procurement system is one of Korea’s strong points, and the country should be aggressive in exporting it. To expand exports of the Korean e-procurement system, considerations should be made for many other aspects including interconnected systems, operations, and training, rather than just aiming to export the procurement system itself. Particularly important is continued post-export follow-up, as well as constant monitoring and networking aimed at extending the scope of export from building e-procurement systems to include the advancement of these systems as well.
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  • KIEP가 함께 한 한국의 FTA 20년
    20 Years of FTAs in Korea with KIEP

    Korea Institute for International Economic Policy Date 2021.07.30

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  • 개혁·개방이후 중국의 제조업 분야 산업정책과 산업구조 변화 연구
    A Study on the Changes in China’s Industrial Policies and Industrial Structures in Manufacturing Sector after China’s Reform and Opening

       As China's recent industrial advancement has changed the trade structure between Korea and China from a complementary relationship to a more competitive one, the need for research on Chinese industrial policy has incr..

    Wonseok Choi et al. Date 2020.12.30

    Industrial structure, Industrial policy China

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    Summary
       As China's recent industrial advancement has changed the trade structure between Korea and China from a complementary relationship to a more competitive one, the need for research on Chinese industrial policy has increased. This report aims to analyze and evaluate changes in major industrial policies and industrial structures following China's reform and opening, thus enabling better understanding of China's industrial policies and forecasting the direction of China's industrial policies during its 14th Five-Year Plan period. In particular, unlike previous studies, this report classified China's major manufacturing policies into four types after China's reform and opening, and proposed Korea-China industrial cooperation through policy analysis and comprehensive evaluation.
       Chapter 2 divides China’s industrial policies into four stages after the initiation of reform and opening-up, and described the trend of major industrial policies by period. The first stage is the market economy exploration stage (1978-1991), when industrial policies first began to be introduced in China, focusing on adjusting proportional relations such as imbalances between the agricultural and industrial sectors, and light and heavy industries. The second stage is the initial construction stage of the market economy (1992-2001), during this period, policies to foster key industries were implemented, direct intervention by the government in promoting industrial policies was reduced and the transition to guide-type intervention began. The third stage is the stage of full-scale and in-depth reform (2002-2012), when the government began to foster high-tech industries after declaring the path to “new industrialization” in November 2002. Since the global financial crisis of 2008, the government has also promoted strategic emerging industries as a new growth engine, while implementing 10 major industrial promotion and coordination policies in response to the issue of oversupply. From 2013 to the present, various strategies to strengthen manufacturing power, such as the China Manufacturing 2025 and Internet+ initiatives, are being pursued to further promote full-scale reform within the country. However, as competition for trade and technology hegemony between the U.S. and China intensified, new industrial policies were needed to cope with this, and the 14th Five-Year Plan presented the direction of industrial policies focused on securing core technologies through innovation.
       Chapter 3 summarizes and evaluates China's industrial development policy, industrial restructuring policy, industrial organization policy, industrial technology policy and the timing characteristics and direction of policy measures. The industrial development policy was carried out by selecting industries that did not meet market demand at each period to supply resources first, and to intensively foster industries that will lead the national economy now or in the future. In this process, the size of the industry grew and the industrial structure advanced, but indiscriminate overlapping investments in industries designated by the government resulted in oversupply or quantitative growth without yielding core technologies. To solve the problem of oversupply, the Chinese government implemented various industrial restructuring policies for each period.
       China's industrial restructuring policy changed from a uniform control of production and construction of various industries to an approach where specific targets were set for the liquidation of redundant businesses or management and support measures to make each local government and company more active in removing underdeveloped facilities. In addition, instead of determining targets based on size, comprehensive indicators such as technology and environmental pollution began to be considered as well. However, the concrete achievements of these policies still remain limited due to the sheer scale of long-term policies conducted and the protection of local governments.
       Through industrial organization policy the government engages market structures and market activities to maximize market performance. Implemented since the reform and opening of the market, the policy has focused on establishing a modern corporate system and the order of market competition. The recent rapid growth of the digital economy is expected to have a significant impact on China's industrial ecosystem and business activities, leading to the revision of the anti-trust law in 2020 for the first time in 11 years in response to the possibility of a small number of Internet (platform) conglomerates exploiting a monopoly in the market.
       Industrial technology policies are a series of policies enacted by the Chinese government to promote industrial development, enhance industrial technology innovation capabilities, and advance industrial technology. For about 40 years since the reform and opening of its market, China's industrial technology policy has evolved through the stages of simple technology introduction, to absorption and assimilation of these technologies, and then to autonomous innovation. Technology development is increasingly being led by the corporate sector, instead of directly planned and controlled by the government. Recently, policies to promote and support industrial-academic cooperation in China are expected to be implemented to drive the independent development of key technologies in response to U.S.-China technology conflicts.
       In the 1980s, China mainly used government intervention measures such as government investment, state-owned bank loans, tax revenues and plans, but after the reform to introduce a socialist market economy, direct intervention by the government has gradually been reduced and replaced with market-based means applied in the form of state guidance and economic or legal measures. The government is expected to focus more on identifying efficient industrial policies through means that utilize the market rather than direct means such as government subsidies, which run the risk of trade disputes.
       The major milestones of China's industrial policy can be summed up as its rise as the world's largest manufacturer, securing stability in industrial development through long-term policy implementation, upgrading industrial structure, and technological development. However, increasing problems with overlapping investments and oversupply, increasing dependence on state-owned companies and improving inefficiency, and international disputes over industrial policies are major policy tasks to be resolved.
       Chapter 4 analyzes changes in China's industry, trade, and Korea-China trade structure due to the effects of industrial policies after reforms and opening, as presented in Chapter 2 and 3. First, the core of China's industry has shifted from light industries to heavy industries in accordance with policies to upgrade the industrial structure. Second, due to policies to foster high-tech industries since the early 1990s, the proportion of high-tech industries has increased and the technology level of manufacturing has increased. Third, localization and domestic industrialization are proceeding in line with policies to foster domestic companies. According to these changes in China's industrial structure, Korea's exports to China have gradually advanced from labor-intensive to technology-intensive industries, while Korea's import and export dependence on China has increased. However, as Korea's coefficient of correlation between exports and investment to China is gradually increasing, the coefficient of inducement of imports and exports to China per unit of investment in China has continued to decline.
       Based on this analysis, the results of a panel regression analysis of Korea-China industrial data from 1997 to 2017 showed that Korea's exports to China increased as China's exports to the world increased. In addition, there was a trend in which Korea's exports to China increased since 1997, but this rise tapered off between 2012 and 2017, indicating that the synchronization of Korean and Chinese exports decreased. This result indicates that Korea has driven export growth to China in the past by supplying intermediate goods needed for China's heavy industry development policy and export-led growth method, but has failed to respond to changes in demand caused by the advances in China’s industrial structure and technological innovation policies centered on high-tech industries.
       Chapter 5 presented trade risks and Korea's strategies due to the impact of friction between the U.S. and China, and changes in the direction of China's industrial policy. First of all, we propose ways to cope with U.S.-China friction by diversifying export markets, analyzing changes in the Korea-China industrial cooperation environment, preparing industrial technology protection policy in Korea, diversifying global supply chains and participating in China’s value chain to target its domestic market.
       We also emphasize the need for research on industrial policies and the process of creating related industrial ecosystems as China's industrial policies gradually change from simple to comprehensive policies. In response to the expansion of China's industrial influence in state-of-the-art technology, there is a need to redefine long-term industrial policies in new industries. This was followed by a proposal of promising areas to focus cooperation efforts, identified by comparing China's industrial policies and related strategies in Korea.
       As our analysis indicates that Korea's supply capacity for China's new growth industry will become increasingly important in choosing opportunities and strategies for Korea-China economic cooperation, our study divides products in the areas of materials, parts, and equipment according to three classifications based on China's growth and Korea's trade competitiveness.
       Finally, efforts to maximize the performance of the Korea-China FTA in China's growth industry, urge China to comply with international rules and rules in promoting new industries, respond to China's independent standardization, and strengthen Korea-China cooperation in digital economy and environment.
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  • 동아프리카 스타트업 시장분석 및 한국기업의 진출방안
    The Analysis of East African Startups Ecosystem and Korean Corporation’s Participation Plan

       Startups are an adventurous business platform with a high likelihood of failure. Statistics show that in 2019 only one out of every 12 startups survived worldwide. Despite such risks, investment in startups is increas..

    Yongkyu Chang et al. Date 2021.06.21

    Economic cooperation, Overseas Direct Investment Africa Middle East

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       Startups are an adventurous business platform with a high likelihood of failure. Statistics show that in 2019 only one out of every 12 startups survived worldwide. Despite such risks, investment in startups is increasing tremendously globally. For instance, Cruch base, one of top global startup investment research institutes, has shown that the total amount of venture capital invested in startups over the past decade (2010-2019) amounted up to KRW 1,700 trillion (15$ trillion)internationally. Furthermore, KRW 400 trillion ($249.8billion) that was invested in a single year in 2019.
       Behind the rapid growth in startups is the global economic crisis. Since the 2008 global financial crisis, the global youth unemployment rate has rocketed. Many countries have taken serious measures to tackle this impending and escalating youth unemployment rate. Promoting startups was one of decisive measures that aim to tackle the global youth unemployment issues.
       Currently, Europe and North America are at the forefront of global startup ecosystems. These two regions account for about 80% of startups in the world. On the contrary, Africa shares only a tiny portion of the global startup market. However, a good sign is that the African startup ecosystem is growing fast and that has caught the attention of international venture investors. For example, Africa's Tech Hub grew to nearly 50% alone in 2019 and major global startup investors, mostly based in Europe and the United States, are actively investing in the continent. The potential of the African startup ecosystem has been demonstrated and should not be taken for granted. With this in mind, we would suggest that the Korean startup ecosystem should also take steps towards entering the African startups ecosystem. The purpose of this study is to provide relevant information and analyse the African startups ecosystem. Based on this information and analysis, we advise the Korean startup ecosystem to take measures to pursue the possibility of cooperation with the African startup ecosystem.
       East Africa, known as the entry point of the African continent, has developed a cordial relationship with Korea. For Korea, East Africa is geopolitically a vantage point for various reasons. Korea and East Africa have maintained an active exchange of human and material resources, and East Africa is also a region where the large part of Korea’s ODA is implemented. East Africa is also a politically and socially stable region compared to other parts of African continent. Therefore, this study takes East Africa as its research area. For this purpose, the study takes and analyses East Africa’s five major industrial sectors (logistics, transportation, energy, health care, agriculture and education) in four East African Community (EAC) members (Kenya, Tanzania, Uganda and Rwanda). These five major industries are business areas that meet the needs of East Africa's high demand for and Korea's expertise in excellent ICT technology. We understand that this cooperation would be a starting point for cooperation between Korean and East African startups. In addition, East Africa is one of the major target areas for Sustainable Development Goals (SDGs) and we expect that a cooperation with the East African startup ecosystem would contribute to successful implementation of SDGs.
       This study employs a qualitative and quantitative methodology to analyse the East African startup ecosystem in order to provide ways for Korean startups to efficiently approach the market. The qualitative methodology consists of literature analysis and in-depth interviews. Unfortunately, academic literature on startups is rare. Therefore, it was not easy to attempt academic analysis. Also, another qualitative methodology, field work, is almost impossible as Covid-19 has spread world wide and prevented us from travelling to East Africa. So, we have had to rely heavily on Web-meetings with our interviewees. Interviews were conducted with Korean and Kenyan startup-related informants. Throughout this qualitative study, we could identify some trends and characteristics of global, Korean and East African startup ecosystems. The major results of the qualitative investigation are as follows:
       A significant feature of the most successful countries that have well-maintained startup ecosystems is that there are a number of excellent startup hubs. In these countries, governments provide proper policies to support startups and various initiatives. In addition, those startups operating in high-level startup ecosystems receive a good amount of venture capital investment. For example, in2019, international venture capital investment received by German and French startups, in their respective countries, amounted to $6.65 billion and $4.39billion, respectively. The volume of the venture capital invested in Africa (asa total in 55 countries) in the same year was merely $3.9 billion. The total volume of venture investment in the African continent was smaller than that of within France. However, a positive signal is that a growing number of venture capital transactions in Africa between 2014 and 2019 suggest that the African startup ecosystem is likely to grow in the future.
       The leading startup sectors in East Africa specialise in software, data, and fintech, which follow global startup trends. East Africa is Africa's second largest venture capital destination after Southern Africa. In particular, East African countries are trying their best to develop startup ecosystems by introducing startup bills and other actions. For example, the Kenyan Parliament announced the Startup Bill (2020) in 2020, which aims not only to protect startups in Kenya, but also to motivate the local youth to innovate and create startups.
       Whereas, in general, the Korean startup ecosystem is passive in the sense that Koreans are reluctant togo off overseas and invest in foreign startup environments. There are various reasons, but the lack of information on foreign startup ecosystems is considered as the most critical one. Technically, most Korean startups are optimised for the Korean market and that makes it extremely difficult for Korean startups to expand to local markets beyond their boundaries. However, during this study, we were able to contact some Korean startup operators in East Africa (Jerry Baek, Tella, Zakyraders, etc.). The number is insignificant; however, the results were sufficient in obtaining an overview of the nature of Korean startups operating in East Africa. These startups collectively demonstrate a movement to solve the various levels of social problems faced by East African societies. Also, we had interviews with four Kenyan startup initiators (Uhai 365, Mali Agricultural Industry Solutions, Young Stripe, Zeit Africa) that share similar characteristics to Korean startup operators in East Africa. In other words, startups operating in East Africa are partially pursuing social values ​​in their early stages. Based on this qualitative study, we define these type of startups as “social startups”.
       In this study, we adopted data mining methodology to anlayse five major industrial sectors in East Africa. The process of the analysis involves three steps: correlation analysis of topics related to startups in East Africa. By doing this, we hope to suggest the possibility of Korean startups entering into East Africa and cooperating with the East African startup ecosystem. For data mining, we collected news articles related to five industrial sectors in major East African daily newspapers over the past five years (2015-2019). Then we put them into a data mining programme. The programme classfied, patterned and selected some significant key words, called pain points, to illustrate the needs of the local business consumers. The five industrial sectors analysed in this study show some significant features. For example, there are Pain Points that show the overall needs in terms of the development of agricultural sectors in the region, such as improving agricultural production technology, ensuring market access (Kenya) and supporting and investing in improving the agricultural sector (Uganda). In the energy sector, more detailed pain points were revealed: the need for further support for the solar industry, strengthening access to power supplies (Uganda) and supplying power using solar technology (Rwanda).One commonality that can be found in all these five sectors is that there exist some pain points related to startups that are successful in securing investment. However, we found that there are far too many startups not properly receiving adequate government or venture capital investments. Despite their needs (pain points), they still lack investment. The results show that there exists a market where Korean startups could invest in and, in doing so, cooperate with the East African startups. In addition, the cooperation would lead to a meaningful contribution to social development in East Africa as five of the industrial sectors are closely related to the indicators of SDGs.
       In this study, we have reached the conclusion that we propose a converging point between Korean and East African startup ecosystems. We need to approach East African startup ecosystems in achieving two discrete, but connected goals: achieving financial returns and taking social responsibility. Startups in Less Developed Countries, such as many East African countries, cannot be solely assessed from an economic point of view. Measuring startup social responsibility is another cardinal indicator. As we have shown in this study, a number of Korean startups are already operating their businesses and taking social responsibility in East Africa. Fortunately, we have a government-led startup programme that is closely linked to development cooperation programmes in Africa. The effective use of these programmes will be an effective solution for the moment. The problem is that the number of social startups and programmes has not reached a critical momentum as yet. In order to overcome this unfavourable situation, the study reasons as follows:
       This study encourages governments to design a standardised startup programme to promote Korean startups accessing East Africa. As the study has shown, social startups are an alternative option for entering the East African startup ecosystem. The government's startup programme should be diversified, while at the same time one clear direction must be taken to link development cooperation programmes to facilitate their cooperation. Inter-cooperation among different governmental organisations is mandatory in this sense.
       Recently, facing an international aid fatigue, in the cycle of international development cooperation, international organisations have introduced ESG and impact investments that give more responsible positions within business corporations. Within this initiative, every single business corporation or government wishing to invest capital should provide reliable social and environmental indicators for sustainable development and social startups may play a role as major agents for ESG investment. Government organisations may operate a joint ESG investment fund with local and international companies. In addition, the joint ESG investment can lead to support for Korean and East African startups, nurturing a greater worldwide startup network system.
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  • 일본의 ‘사회적 과제 해결형’ 4차 산업혁명에 관한 연구
    Japan’s 4th Industrial Revolution Efforts in Response to Social Challenges

       This research aims to present policy implications to the Korean government and private companies by providing an in-depth analysis on how the Japanese government and companies deal with the country’s so-called “soci..

    Gyupan Kim et al. Date 2020.12.30

    ICT economy, Economic cooperation Japan

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       This research aims to present policy implications to the Korean government and private companies by providing an in-depth analysis on how the Japanese government and companies deal with the country’s so-called “social challenges” using the technologies of the 4th Industrial Revolution. In order to do this, this study chose 1) health, medical care and nursing, 2) manufacturing, logistics and mobility, and 3) regional revitalization as its fields of focus, and examined how the Japanese government and private companies utilize the 4th Industrial Revolution technologies—namely, Artificial Intelligence (AI), Internet of Things (IoT), Big Data, etc.—in addressing the country’s social issues.
       In chapter 2, “Japan’s ‘Social Challenges’ and the 4th Industrial Revolution,” this research analyzes the social cost of Japan’s low birthrate and aging population in terms of its fiscal sustainability, medical costs and regional imbalance. Then it looks into the Japanese government’s 4th Industrial Revolution policy and the digital transformation (DX) movement further stimulated by the spread of COVID-19.      
       Chapter 3, “Health, Medical Care and Nursing Sector,” examines the Japanese government’s efforts to utilize health data including regulatory reforms and its “Data Health Reform” policy. It also introduces some model cases of corporate-level utilization of health and medical big data. It was noted that remote medical treatment is rapidly spreading in Japan, after the country temporarily eased restrictions on remote medical care in April, 2020, following a spike in the coronavirus cases.
       In chapter 4, “Manufacturing, Logistics and Mobility,” this research firstly analyzes the Japanese government’s efforts to connect different manufacturing companies’ digital platforms, and presents some case studies of Japanese manufacturing companies’ utilization of 4th Industrial Revolution technologies, such as AI, IoT, 5G, etc. Next, in the mobility sector, this research examines the Japanese government’s movements in the area of Mobility as a Service (MaaS), including its roadmap, pilot operations, policy supports and commercialization efforts. Finally, the Japanese government’s policy supports for DX in the logistics field were analyzed. 
       Chapter 5, ”Regional Revitalization,” introduces Japan’s efforts at dealing with the growing regional imbalance by using the technologies stemming from the 4th Industrial Revolution. This chapter focuses on the three topics of creating a regional IoT Platform, implementing 5G networks and smart city construction as distinctive examples of Japanese (central and regional) governmental efforts at regional revitalization.  
       Finally, chapter 6 suggests policy implications for the Korean government. First, for the health, medical care and nursing sector, this research presents three proposals for the government: institutional reforms and data standardization in healthcare, broader collection and utilization of nursing data, and engaging in an active discussion on how to expand telemedicine. In the manufacturing, mobility and logistics sector, this research suggests supply chain optimization across the entire chain, as opposed to merely implementing smart technologies in a manufacturing plant, and introduction of MaaS and DX in the mobility and logistics fields. Regarding regional revitalization, this research draws policy implications from Japan’s regulatory reforms, which helped shift the focus of its regional DX policy from “technology” to “problem- solving,” and from a supply (provider)–driven approach to a demand-driven approach. 


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  • 신용공급 변동이 경제성장 및 금융위기에 미치는 영향
    A Study on Credit Supply, Economic Growth and Financial Crisis

       This study investigates the impacts of credit supply on economic growth and financial crisis. While credit supply helps boost economic growth through resource reallocation, excess credit supply can make the economy an..

    Hyosang Kim et al. Date 2020.12.30

    Financial crisis, Financial policy

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       This study investigates the impacts of credit supply on economic growth and financial crisis. While credit supply helps boost economic growth through resource reallocation, excess credit supply can make the economy and financial market more vulnerable. In the event of a negative shock to the financial or real sector in a situation where credit is excessively supplied, asset prices sharply fall as the deleveraging proceeds. Moreover, economic activity can be sharply shrunk, thereby expanding the width and duration of the recession. The rapid credit crunch and stock price plunge that appeared in the early stages of the COVID-19 pandemic highlight the phenomenon in March 2020.
       Chapter 2 presents qualitative analysis and event studies to describe the relationship between credit supply, economic growth, and financial crisis. In the qualitative analysis, we visualize the long-term relationship by comparing the household, corporate, and government credit with macroeconomic variables in each country. In the cross-country comparison, the correlation of household credit and consumption is negative, while that of corporate credit and investment is positive, suggesting that the impact on economic growth is different for each type of credit. Moreover, to examine the relationship between private credit and GDP growth, we find that GDP generally grows faster in the group where private credit expands rapidly. This relationship, however, blurs in the highest-income group. In the event study, we consider the relationship between credit expansion and the financial crisis. We observe that private credit increased significantly before the banking crisis, including the global financial crisis. This phenomenon is particularly noticeable in advanced economies.
       Chapter 3 examines a dynamic relationship between private and government credit and various macro variables by estimating the panel VAR model. Household credit shocks tend to increase real GDP in the short-run, mainly by boosting consumption. However, in the long-run, real GDP tends to be decreased by appreciating the real exchange rate, increasing non-tradable goods production, and decreasing productivity and current accounts surplus. On the other hand, the corporate credit shock is opposite to the household credit shock. Its impacts on real GDP are relatively small, leading to the real exchange rate decreasing and the production of trade goods. The macro variable responses to the government credit shocks are clearly distinguished from private credit shocks, but overall significance remains statistically low.
       In Chapter 4, we analyze the effect of credit supply on the possibility of a financial crisis using the panel probit model. We find that the household credit expansion significantly increases the probability of a banking crisis, while it does not affect the probability of a currency crisis. On the other hand, corporate credit expansion increases the probability of all types of crises. Government credit expansion tends to increase the probability of a government debt crisis. However, it is statistically insignificant for the period before the other type of crisis, suggesting that the rapid government credit expansion in response to a financial crisis rather than the level of government credit increases the likelihood of a government debt crisis. Moreover, government credit expansion has the effect of lowering the probability of a banking crisis and a currency crisis, supporting the counter-cyclicality of government credit.
       In 2020, in the responses to the economic shock of the COVID-19 pandemic, the level of both private and government credits are sharply increased due to the massive fiscal stimulus programs and expansionary monetary policy. The impacts of household, business, and government credit on the macroeconomics can differ, so policymakers should pay attention to the level of total credit and the change in the composition of credit. In particular, it should be aware that the economic stimulus through short-term boosting of aggregate demand can lead to a deeper downturn by deteriorating in long-run productivity.
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