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  • 유럽 주요국 녹색당의 성공 및 실패 요인 분석
    Determinants of Success and Failure of Green Parties in Europe

    The Green Transformation that has begun before the COVID-19 pandemic is expected to continue to be a major economic policy of governments around the globe. Major European countries, especially the United Kingdom and Germany, along..

    Dong-Hee Joe et al. Date 2021.12.30

    Energy industry, Environmental policy Europe

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    The Green Transformation that has begun before the COVID-19 pandemic is expected to continue to be a major economic policy of governments around the globe. Major European countries, especially the United Kingdom and Germany, along with the European Union, are at the forefront of this transformation. However, electoral outcomes of political parties focused on climate change (i.e., Green Parties) differ significantly among these cases. Analyzing the reasons of their electoral success or failure can help understanding their role in climate-change policy. This, in turn, can teach how to make climate policy sustainable in Korea where political support for Green Parties is extremely low. We review the history of Green Parties in the UK, Germany and the EU and analyze the reasons for their success or failure. The related literature considers three major reasons for the extremely low electoral outcomes of Green Parties in Korea, namely the public’s attitude, electoral system and major traditional parties’ reactions. Following this, we focus on those three factors.
    To the concerned readers in Korea, the UK’s case shows, above all, that a substantial presence of Green Parties in the legislature is not a necessary condition for an active climate policy by the government. Instead, it emphasizes the importance of concrete commitments through legislation and institutionalization and wide consensus, including that of businesses, that the additional costs in the short run will result in net economic gains in the long run. The EU’s case shows that creating a platform on which interested parties of various types can actively participate in the discussion and formation of climate policy and putting more focus on “just transition” can be good starting points for achieving this consensus. For Korean Green Parties' electoral prospect per se, the German case hints at the needs to extend the scope and improve the competence of themselves.

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  • 미국과 EU의 농업보조 변화와 정책 시사점
    Trade–Distorting Subsidies of the U.S. and the EU: What Can We Learn?

       The Uruguay Round’s Agreement on Agriculture (AoA) categorized “domestic support” according to its presumed effect on trade. Subsidies that were deemed to be “trade distorting” were subject to limits specified in..

    Jin Kyo Suh Date 2021.12.30

    Multilateral negotiations, Trade policy United States of America Europe

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       The Uruguay Round’s Agreement on Agriculture (AoA) categorized “domestic support” according to its presumed effect on trade. Subsidies that were deemed to be “trade distorting” were subject to limits specified in member schedules. Domestic agricultural policies have been radically reformed in a number of countries, including the U.S. and the EU (European Union). This reform has been in the direction of reducing reliance on price supports in favor of direct payments. 
       Both the U.S. and the EU have found ways to adjust policy instruments to appear to show trade-distorting support reduction even when incentives to producers are maintained. In fact, both countries had significantly reduced their trade-distorting supports (TDS) from the initial stage of agricultural subsidies reduction. For example, the TDS of EU decreased to 10.4 billion Euro in 2012 from 73.4 billion Euro in 1995, which is almost 86 percent reduction. Similarly, the TDS of the U.S. shows the continuous declining trend during the period of 1999~2008, $ 24.3 billion in 1999 to $8.5 billion in 2007.
       However, there was a sharp reversal in this decreasing trends of the trade-distorting agricultural subsidies during the period of 2010~2019. Both economies started to increase, at least maintain their TDS level from around 2008~2010. As a result, EU’s TDS increased in recent years from 11.0 billion Euro in 2010 to 11.8 billion Euro in 2018. Particularly, the TDS of the U.S. significantly was increased by 2.2 times, from $ 15.6 billion 2008 to $ 34.6 billion in 2019. What happened in both economies during the last decade?
       A close look to 25 years-historical data of agricultural subsidies in both countries shows very interesting aspects in terms of the reduction behavior of agricultural subsidies for the United States and the EU. Both countries would not reduce their TDS on certain agricultural products, which are regarded as ‘very sensitive’ goods in the viewpoint of their domestic politics: wheat, cotton, bananas, and grapes for wine in the EU and soybean, corns, cotton in the United States. 
       It is also interesting that those sensitive products generally have a wide and huge harvested area in both economies. Wheat accounts for 45 percent of total grain production in the EU. Similarly, corn also account for 40 percent of total harvested area of grains in the United States. Thus, we can think about the possibility of connections between those sensitive products and rural society or rural communities that wheat or corn is mainly produced. In other words, the TDS for such sensitive products could be related to the non-trade concerns or non-economic role of agricultural production, which the AoA has already admitted the importance of it. For example, agricultural production can be a necessary condition in the rural development policy. Even if farm household income is guaranteed, if a certain amount of agricultural production is not achieved, living conditions in rural society will deteriorate unless the area is fully urbanized. It can be, therefore, said that it is necessary to maintain a certain agricultural production in the relevant area due to the introduction of sustainable rural and environmental policies along with agricultural subsidy policy.
       If this is true, then this finding has very meaningful implications on the reform of world agriculture as well as WTO agricultural negotiations, including future directions for agricultural subsidy policies of Korea. First, until now, prevailing view has been that the TDS such as price supports or deficiency payments should be reduced because they distort agricultural trade. However, from the subsidy policy experience of both the U.S. and the EU during the last two decades, we can infer that the certain TDS for sensitive products such as wheat in the EU or corn in the U.S., may be deeply related to the maintenance and development of rural communities from. This conjecture raises the question of whether certain flexibility should be allowed in some cases, rather than viewed as a bad subsidy that must be reduced unconditionally. That is, it is necessary to take a flexible view that some degree of flexibility can be granted in some subsides, even though they are related to agricultural production. At the same time, we need to have a question that the various non-economic roles of agricultural production have not been adequately addressed. In this respects, it is necessary to change the existing perspective on the TDS related to agricultural production, especially the TDS related to maintenance and sustainable development of rural area.
       Second, if there is a change in the existing uniform view of production-related subsidies, this may affect the current WTO agricultural subsidy discussion. It can be a step-stone to discuss how such TDS can be subject to the green box that is exempt to reduction commitments.   
       Third, we can utilize our finding as a good leverage in the bilateral negotiations with the EU or the U.S. For example, we easily expect that the U.S. is primarily interested in exports of soybeans and corn, and also will have a deep interest on protecting cotton and sugar. Therefore, we can think of a strategy to protect our sensitive products by appropriately satisfying the U.S.‘ request for the item of interest or by requesting ambitious market opening for cotton or sugar.
       Finally, Korea's agricultural subsidy policy is expected to change from the TDS to a permissible green box subsidy policy. It is true that such a policy centered on green box subsidies is desirable in that it is market-friendly and has high transparency. However, as we saw at the subsidy reduction of the US and EU, it is necessary to properly utilize subsidy policies directly linked to agricultural production or prices, if necessary in the transition to green box subsidies from the TDS. The view that production-related subsidies are a problem is from the point of view of economic efficiency, and some TDS may be positive enough from the perspective of a non-trade concerns of agriculture. 
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  • 코로나19가 무역에 미치는 영향
    Analysis of Economic Effects of the COVID-19 Pandemic on Global Trade

       Although many studies have documented that financial and political crises are associated with severe recessions, little attention has been paid to pandemic crises. Furthermore, they focus on estimating the effect of t..

    Soon Chan Park Date 2021.12.30

    Trade structure, Trade policy

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       Although many studies have documented that financial and political crises are associated with severe recessions, little attention has been paid to pandemic crises. Furthermore, they focus on estimating the effect of the crises on economic growth and unemployment, but not on trade. With deepening global value chains, the growth of trade exceeds that of GDP, and countries are increasingly exposed to foreign risks or shocks. International trade therefore is no more derived transactions but a crucial factor driving economic growth. This paper makes progress understanding the economic effects of the Covid-19 by investigating the impact of the previous 21-century pandemics and the Covid-19 on trade.  
       To study how long the negative effects of the pandemics persist, we also estimate the effect of these health crises on trade, both in the onset year of the crisis as well as the dynamic effects over time. An another important question on the economic effects of the pandemics is whether pandemics are demand shocks or supply shocks. This is a fundamental question for both economists and policymakers, because it helps design effective policy responses to future health crises. Yet there were few evidence-based arguments based on similar events in the past. 
       Our findings are as follows:
       First, we find a larger negative impact of the severity of the Covid-19 on bilateral exports, implying that effective prevention and control measures for pandemics do matter not only for human life, but also for economic performance. The severity of the Covid-19 is measured by the mortality rate, death cases per 1000 population and confirm cases per 1000 population. It reveals that each of them serves as a good proxy variable for the severity of the Covid-19. 
       Second, we find that ICT development contributes to mitigate negative effects of the Covid-19 on exports. The Covid-19 and resulting public health measures necessitated many workplaces to permit workers to work from home. We test the hypothesis that the productivity of remote working depends on the ICT development, and this leads to better export performance. 
       Third, we find that the previous 21-century pandemics including SARS, H1N1, MERS and Ebola are a supply shock resulting in the reduction in exports of final goods, but leaving exports of intermediates inputs largely unchanged. These results imply that consumers in importing countries substitutes the final goods from non-affected countries for those from affected countries, but the inputs souring decisions of firms are not affected by the pandemics. 
       Fourth, we find that it takes at least 4 years for the negative effects of the pandemics on trade to disappear, identifying the dynamic effects of the pandemics. 
       Based on our empirical findings, finally, we discuss some policy implications for mitigation of economic damage, protection of business from destruction and facilitating recovery. 
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  • 탄소국경조정제도(CBAM)에 대한 중소기업 대응방안 연구
    A Study on Korean SMEs Policies for the Carbon Border Adjustment Mechanism (CBAM)

       In July 2021, the EU announced the Carbon Border Adjustment Mechanism (CBAM), which obligates importers to purchase certificates corresponding to the emissions embedded in imported products. Implementation of the CBAM..

    Hyeri Park and Ji Hyun Park Date 2021.12.30

    Economic development, Trade policy

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       In July 2021, the EU announced the Carbon Border Adjustment Mechanism (CBAM), which obligates importers to purchase certificates corresponding to the emissions embedded in imported products. Implementation of the CBAM will have a negative effect on the Korean economy, which is highly dependent on trade and carbon-intensive industries. Another point of particular concern lies in that domestic SMEs will also be affected by the CBAM directly or indirectly. Therefore, this study examines the impact of the CBAM on SMEs in Korea, and evaluates different industries for their vulnerability to the CBAM. Implications for government policies and strategies for SMEs to effectively respond to CBAM are drawn.
       This study differs from previous studies in that it analyzes the impact of the CBAM from the perspective of SMEs. Few domestic studies have analyzed the impact of the CBAM on SMEs. This study examines various aspects of the CBAM, including statistical analysis of vulnerabilities to the CBAM in the area of SMEs, and case studies of carbon neutrality support policies for SMEs in major countries. Various analysis methods are attempted, such as measuring the export status of SMEs’ CBAM target items and domestic SMEs' distribution of CBAM target industries, evaluating the SMEs’ vulnerability to the CBAM by sectors, and measuring carbon emissions embedded in SMEs’ exports. Moreover, overseas carbon neutrality support policies for SMEs are investigated to identify recent policy trends in major countries and learn from benchmarking cases.
       Chapter 2 discusses the major issues of the CBAM. As the CBAM is expected to expand in the future, response strategies for the CBAM are needed not only in the steel industry but also in other industries. Moreover, if composite materials and indirect emissions are included in the scope of the CBAM, SMEs are also directly subject to CBAM regulation. Therefore, SMEs should prepare an adaptation strategy for the CBAM through active communication with the government while paying attention to the implementation progress. The government should carefully establish its position on the CBAM, while monitoring responses in other countries to the CBAM and cooperating with major countries. The Korean government should also make preparations on issues for bilateral CBAM consultations with the EU.
       According to the analysis results in Chapter 3, while direct exports to the EU by Korean SMEs do not account for a large proportion of items falling under the scope of the CBAM, it is confirmed that the impact on domestic SMEs increases when indirect exports are taken into account. When considering indirect exports, the sectoral vulnerability to the CBAM appears in different patterns from when indirect exports are not considered, and it is also found that vulnerability to the CBAM differs by sector.
       Chapter 4 investigates carbon-neutral policy cases for SMEs in Korea and major countries. In Korea, it appears that SME support policies related to carbon neutrality are mainly composed of short-term projects, and there is no long-term support policy. In addition, it is found that domestic SMEs lack the ability to respond to the CBAM and carbon neutrality, and SMEs have more demand for policy financing than strengthening their capabilities for carbon neutrality.
       The results of this study yield the following important implications.
       First of all, a phased response strategy is needed according to the timing of CBAM implementation. The role of the government is important during the CBAM transition period (2023-25). In order for SMEs to adapt to the CBAM, the government should provide information about the CBAM, prepare education programs, and design support systems for SMEs. If the CBAM is implemented after 2026, substantial response actions by the government and companies should be prepared. An integrated carbon-neutral data management system and advisory agency for SMEs should be established, while forming cooperational networks between large companies and SMEs. In the long run, SMEs should prepare export strategies to cope with the era of carbon neutrality. At the same time, they should de-carbonize their production processes and develop low-carbon, high-value-added products, and the government should participate in international discussions and negotiate the conditions of CBAM implementation.
       The detailed response strategies by the government and SMEs to the CBAM are recommended as follows. First, the government should come up with a long-term carbon-neutral support policy that focuses on SMEs. Second, when it comes to response strategies to the CBAM, indirect export as well as direct export must be considered. If the CBAM is expanded in the future and all supply chains are included in the scope of CBAM regulations, SMEs will also be subject to CBAM regulations. Therefore, the CBAM affects domestic SMEs through direct or indirect channels, as exporters are expected to force suppliers to comply with environmental standards and demand the supply of eco-friendly intermediate goods. Third, it is necessary to develop various types of carbon reduction programs that can promote SMEs' participation in carbon neutrality. Export support systems for environmental products and technologies, carbon reduction support through ICT, local government carbon neutral support policies, and cooperation between SMEs and large companies can be benchmarked from overseas cases. Fourth, the policy direction for carbon neutrality support for SMEs should prioritize implementation of support for eco-friendly process transition, followed by the provision of incentives based on carbon neutrality performance. Fifth, support policies for SMEs should be designed considering conformity with WTO agreements. Finally, a control tower that supervises SME carbon neutrality policies should be established. We propose the launching of an "SMEs Carbon Neutral Response Team" or “CBAM TF” dedicated to SME policies.
       SMEs must accurately inform themselves on the scope of the CBAM and international discussion on the CBAM, because the impact of the CBAM on domestic SMEs depends on how far its scope extends. Second, SMEs should actively participate in the carbon neutral policy design from the initial stage so that the specificity and difficulties of SMEs can be reflected. Third, the ability to respond to the CBAM should be strengthened. SMEs should secure professional manpower with CBAM-related administrative capabilities, reporting capabilities, and verification systems by making the most of government support during the CBAM transitional period. Fourth, it would be more effective to formulate response strategies by industry. Carbon emissions, reduction efficiency, and reduction technologies all vary by industry. Therefore, an effective approach would be for each company to participate in the development of benchmarks for their respective industries, develop standards for reporting emissions by industry, and share best practices. In addition, since the vulnerability factors by the CBAM are very different from industry to industry, government support should be established along the path of vulnerability. Finally, carbon neutrality is a challenge for SMEs in the short term, but it can be an opportunity if successfully overcome. SMEs should establish response measures to the CBAM from a long-term perspective.
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  • The New Southern Policy Plus Progress and Way Forward
    The New Southern Policy Plus Progress and Way Forward

       Over the past three decades, the Republic of Korea (hereinafter, Korea) has shown a great commitment to cooperating with ASEAN member states and India. Starting with the establishment of a sectoral dialogue partnershi..

    Kwon Hyung Lee and Yoon Jae Ro Date 2021.12.30

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    Foreword

    Contributors

    I. Overview
    1. The New Southern Policy Plus and ASEAN-Korea Relations
    2. The New Southern Policy Plus and India-Korea Relations 
    3. Advancing the ASEAN-Korea Partnership: From Sectoral Dialogue Relations to the New Southern Policy Plus 
    4. The New Southern Policy Plus and India: Progress and Way Forward 

    II. ASEAN 
    5. Strengthening Trade and Investment between ASEAN and Korea
    6. FinTech and Financial Inclusion: A Vital Space for ASEAN-Republic of Korea Cooperation
    7. The ASEAN-Korea Cooperation and Connectivity: Beyond the New Southern Policy Plus 
    8. Missing Pillars of Strategic Autonomy? Security Cooperation Between Korea and ASEAN 
    9. Advancing ASEAN-Korean Cooperation on Non-Traditional Security Challenges in East Asia 
    10. Education and Human Resource Development of Korea’s New Southern Policy: Taking a Step Forward 
    11. Building a Sustainable Mekong-Korea Partnership for the People, Prosperity, and Peace 

    III. India 
    12. Role of Korea–India Bilateral Economic Ties in India’s Trade and Investment Strategy 
    13. Strengthening Economic Relations with ASEAN: Role that India and Korea Can Play 
    14. The Role of a Korea-India Strategic Partnership in the Indo-Pacific 
    15. Promoting Korea-India Mutual Understanding: Social and Cultural Aspects

     IV. Concluding Remarks 
    16. The New Southern Policy and Afterwards: Forging New Dimensions of ASEAN-Korea Partnership 
    17. The Prosperity of the New Southern Policy: Achievements and Remaining Challenges
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       Over the past three decades, the Republic of Korea (hereinafter, Korea) has shown a great commitment to cooperating with ASEAN member states and India. Starting with the establishment of a sectoral dialogue partnership in 1989, Korea has developed a comprehensive partnership with ASEAN over the years. The ASEAN-KOREA FTA was completed in 2009 and the elevation of bilateral relations to a ‘strategic partnership’ in 2010 served as a momentum to strengthen our economic and security partnership. By sharing cultural proximity rooted in Asian values, ASEAN and Korea have also enjoyed robust socio-cultural exchanges. Meanwhile, regarding to India and Korea relations, both countries established a long-term cooperative partnership for peace and prosperity in October 2004 as a channel to enhance mutual interests between the two countries. Korea has further deepened its relations with India by concluding the CEPA in 2009 and upgrading its relations into a ‘special strategic partnership’ in 2015. 
       The New Southern Policy (hereinafter NSP), announced in November 2017 in Indonesia, has further deepened Korea’s strategic partnership with ASEAN and India under the vision of achieving a ‘People-centered Community of Peace and Prosperity.’ ASEAN-Korea relations were developed to a level of Korea’s diplomatic ties with the United States, China, Japan, and Russia. The India-Korea Summit of 2018 adopted the Shared Vision for People, Prosperity, Peace, and the Future to strengthen mid-to-long term bilateral relations. President Moon Jae-in visited all ASEAN member states and had two summit meetings with India. Moreover, the Korean government hosted the ASEAN-ROK Commemorative Summit, launching the first Mekong-ROK Summit in 2019.
       The NSP pursues the three pillars of People, Peace, and Prosperity as a common foundation to realize its vision. ‘People’ aims to make safer, better lives and greater interaction in the NSP region, that is, ASEAN member states and India. ‘Peace’ seeks a community where all are free from fear or threat. The goal of ‘Prosperity’ aims to create mutually beneficial and future-oriented economic cooperation. The number of visitors, trade volume, and investment between Korea and the NSP region has unprecedently increased with the help of NSP partners’ policies. 
       The NSP has since evolved into the NSP Plus amid the Covid-19 pandemic and the US-China rivalry. Korea and NSP partners together have to overcome the global health crisis and reconstruct global value chains to ensure the safety of the people and free trade in the region. To achieve these goals, the Korean government presented an upgraded version of the NSP in November 2020, reflecting changes in the current environment for cooperation. The NSP Plus promotes seven Initiatives as follows: 1) comprehensive healthcare cooperation, 2) sharing Korea’s education model for human resource development, 3) promotion of mutual cultural exchanges, 4) formation of mutually beneficial and sustainable trade and investment, 5) support for rural villages and urban infrastructure development, 6) cooperation in future industries for common prosperity, and 7) cooperation for safe and peaceful communities. 
       In this context, this publication aims at examining the progress of the NSP Plus and discussing a way forward for sustainable cooperation between Korea and NSP partners. It comprises four sections and eighteen chapters. Section 1 provides overviews of the NSP Plus from the perspectives of Korea, ASEAN, and India to evaluate the NSP in a more comprehensive manner. Sections 2 and 3 deal with a sectoral analysis of the NSP Plus including trade, investment, infrastructure, human resource development, and security in the divisions of ASEAN and India. Section 4 summarizes the progress of NSP Plus in the region, suggesting prospects and future tasks to further expand cooperative relations between Korea and NSP partners.
       I would like to express my deepest gratitude to the distinguished scholars from Korea and NSP partners who have gladly contributed to this publication. Special appreciation goes to honorable ambassadors for their insightful overviews of the NSP Plus: Ambassador Kim Young-sun, Ambassador Shin Bongkil, Ambassador Ong Keng Yong, and Ambassador Mohan Kumar. I am also grateful to our research fellows and senior researchers in the New Southern Policy Department at the Korea Institute for International Economic Policy (KIEP), who managed the whole publication process and contributed two chapters in Section 4.
       I hope that this publication can promote active discussions on new visions and policy proposals for the New Southern Policy Plus, as we work to advance together in the fast-changing global environments. 
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  • 만화로 보는 세계경제 2021
    만화로 보는 세계경제 2021

    KIEP Date 2021.12.23

    United States of America Latin America China Japan Europe Russia Eurasia Southeast Asia Ocean India and South Asia Africa Middle East

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  • The Effects of Climate Change on Income Inequality: Evidence from APEC Member Ec..
    The Effects of Climate Change on Income Inequality: Evidence from APEC Member Economies

    This study empirically investigates the dynamic effects of climate change on within-country income inequality. Using panel data of 17 APEC member economies, I estimate impulse responses via the local projection method. Temperature..

    Wongi Kim Date 2021.11.15

    APEC, Environmental policy

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    Executive Summary

    I. Introduction

    II. Related Literature

    III. Econometrics and Data
    1. Local Projections
    2. Identification Strategy
    3. Data

    IV. Empirical Results
    1. Results in the Linear Model
    2. Results in the Non-linear Model
    3. The Role of Redistribution Policy

    V. Discussion and Policy Implications
    VI. Concluding Remarks

    References

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    This study empirically investigates the dynamic effects of climate change on within-country income inequality. Using panel data of 17 APEC member economies, I estimate impulse responses via the local projection method. Temperature and precipitation shocks, defined as deviations of temperature and precipitation from their historical norms, are also exploited to measure country-specific climate change. The empirical results reveal the following. First, temperature and precipitation shocks deteriorate income inequality measured by the Gini index; these effects are long-lasting. Moreover, asymmetric effects exist: heatwaves and droughts more significantly increase income inequality than coldwaves and floods. Lastly, current redistribution policies do not seem to effectively mitigate those adverse effects. I also discuss implications of carbon pricing/tax and environmental taxes related to income inequality.

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  • 미국의 스위스 환율조작국 지정 원인 분석 및 평가
    On the U.S. 2020 Designation of Switzerland a Currency Manipulator

       In December 2020, the U.S. Treasury designated Switzerland, together with Vietnam, currency manipulators in its biannual report Macroeconomic Foreign Exchange Policies of Major Trading Partners of the United States to..

    Dong-Hee Joe et al. Date 2021.11.12

    Economic relations, Exchange Rate United States of America Europe

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       In December 2020, the U.S. Treasury designated Switzerland, together with Vietnam, currency manipulators in its biannual report Macroeconomic Foreign Exchange Policies of Major Trading Partners of the United States to the congress. The report conducts an enhanced analysis on each country exceeding certain thresholds in three criteria: trade surplus with the U.S., current account surplus and foreign exchange market intervention. Based on this analysis, the Treasury can designate the country a currency manipulator. Switzerland met the three criterion during the period of the analysis of the December 2020 report, from the third quarter of 2019 to the second quarter of 2020, and the Treasury’s decision was the result of an enhanced analysis.
       During the period of the analysis, Switzerland had negative interest rates and deflation; and the Swiss Franc (CHF), considered to be a safe asset in the international financial market, severely appreciated following the outbreak of COVID-19. The report acknowledged the need for foreign exchange market intervention in such a situation to counter the pressure on CHF. However, it claimed that the magnitude of the intervention was excessive; that is, at least some of it was to improve the competitiveness of Swiss products.
    This study aims at evaluating the U.S. Treasury’s decision to designate Switzerland a currency manipulator, by surveying related empirical evidences. To evaluate the claim that Swiss intervention in the foreign exchange market was to improve the country’s price competitiveness, we survey the empirical evidences on the sensitivity of Swiss exports to the exchange rate of CHF. To evaluate the legitimacy of Swiss intervention in the foreign exchange market, we survey the empirical evidences on the impact of sudden exogenous appreciation of CHF on the country’s domestic economy.
       Swiss export is characterized by high technological intensity and value-added. At the HS 4-digit level, for instance, exports are highly concentrated in high value-added and technology-intensive products such as medicine, medical products, chemicals and luxury watches. This concentration is known to be a result of the country’s strategic choice during the first era globalization, from the late nineteenth century to the early twentieth century. Thanks to this export structure, the CHF exchange rate has little impact on Swiss exports, especially of medicine, medical products and luxury watches, which take up more than forty percentage of the country’s total exports.
       Sudden appreciation of CHF due to exogenous causes leads to a reduction in import prices, which in turn puts a downward pressure on domestically produced goods, resulting in deflation and distortion in the economic agents’ decision between imported goods and domestically produced goods in Switzerland. Intervention by the Swiss National Bank (SNB), the country’s central bank, is known to be effective in reducing exogenous appreciation pressure on CHF.
       Considering the characteristics of the Swiss economy, the SNB’s intervention in the foreign exchange market appears to be for countering the effect of CHF’s sudden appreciations on the country’s domestic economy, rather than for improving the country’s price competitiveness. Deflation had been happening for some time in Switzerland, to which the SNB’s mandate of price stability urged it to react; and as it kept its policy rate negative since late 2014, reducing it further would have been ineffective and inefficient.
       When the Treasury published its December 2020 report, the SNB immediately reacted by announcing its expectation that it could persuade the then-forthcoming Biden administration that its foreign exchange market intervention is solely a reaction to the exogenous appreciation pressure on CHF, not an effort to improve the country’s price competitiveness. Indeed, the April 2021 report, the first one in the Biden administration, did not designate Switzerland a currency manipulator, even though it conducted an enhanced analysis on Switzerland, as well as on Taiwan and Vietnam. This observation supports the suspicion that the conclusion of the December 2020 report was politically motivated. The Biden administration, which was about to take office at the time of the publication of the December 2020 report, was largely expected to change the Trump administration’s policies towards foreign countries, including the designation of currency manipulators. It appears plausible that the outgoing administration tried to constrain the incoming administration’s policies.
       This observation suggests that the Biden administration is unlikely to designate Switzerland a currency manipulator in the future. There is a high chance that Switzerland, due to the characteristics of its economy, will again meet the three criterion for an enhanced analysis. However, the Swiss government and central bank have consistently reacted to such criticisms, and the April 2021 report’s evaluation agrees with their reactions. Therefore, the conclusions of the enhanced analyses conducted in the Biden administration are likely to be in line with that of the April 2021 report.
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  • Does digitalization help employment stability during the COVID-19 pandemic?: Evi..
    Does digitalization help employment stability during the COVID-19 pandemic?: Evidence from Korean survey data

    This paper investigates if workers’ ICT use intensity helps to improve their labor market outcomes in the early stage of the COVID-19 pandemic using real-time survey data produced in Korea. We first find that the impacts of the p..

    Seongman Moon Date 2021.10.20

    APEC, ICT economy

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    Executive Summary

    I. Introduction

    Ⅱ. Related Literature

    Ⅲ. Real-Time Survey Data
    3.1. Survey Design
    3.2. Summary Statistics

    Ⅳ. Empirical Models
    4.1. A Model for Different Impacts of COVID-19
    4.2. Models for the Role of Digitalization

    V. Heterogeneous Impacts of COVID-19

    VI. Workers’ ICT Use and Impacts of COVID-19
    6.1. ICT Use Intensity
    6.2. ICT Skills
    6.3. Internet Activities

    VII. Policy Implications and Concluding Remarks

    References

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    This paper investigates if workers’ ICT use intensity helps to improve their labor market outcomes in the early stage of the COVID-19 pandemic using real-time survey data produced in Korea. We first find that the impacts of the pandemic on labor market outcomes are different across workers’ socio-economic characteristics and industries where they are employed: workers in service or construction industries, temporary workers, and workers who had experienced unemployment before the pandemic are more likely to be unemployed, be furloughed, work less hours, and have earnings reduced in the early stage of the pandemic. We measure workers’ ICT use intensity by weekly computer, mobile, and internet usage hours and find that workers who belong to a group with high ICT use intensity tend to mitigate the adverse effects of the pandemic on their labor market outcomes, while controlling for skill-fixed, industry-fixed, and region-fixed effects as well as for individual characteristics.
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