What is the cause of the rapid recovery of the US after the financial crisis compared to other advanced countries, and how will the US’s medium- and long-term growth be followed? It is one of the most important questions about the recent US economy. The purpose of this study is to present the analysis of these problems and to examine the implications of US economic recovery and mid - to long - term growth on Korea. First, after the financial crisis, the US economy is recovering faster than other developed countries such as Japan and Europe. On the back of this recovery, the US is trying to normalize its monetary policy by moving away from zero interest rate. However, other developed countries such as Japan and Europe are still trying to stimulate the economy through easing monetary policies such as quantitative easing.
  As shown in various data, during the 2008-2009 financial crisis period, the real GDP of each country has recovered slowly after a sharp decline, but it is recovering differently in each country. In the case of the United States, it shows a rapid recovery compared to Japan and Europe. One thing to keep in mind is that the recovery rate from the financial crisis period until 2011 is not much different among US, Japan and Europe, but the recovery of Europe and Japan has stagnated since 2011. As a result, in the US, GDP in the first quarter of 2015 is about 10% higher than in the first quarter of 2007, but in Japan and Europe, GDP in the first quarter of 2015 is only about 1-2% higher than the first quarter of 2007.
  On the other hand, despite the rapid recovery compared to other developed countries, there are still many people who doubt the mid- to long-term growth path of the US economy. In the mid-to-long term, the growth potential of the US is limited to mid-1%, and economists such as Larry Summers and Paul Krugman are questioning the US’s long-term growth by insisting on the US’s structural stagnation. In particular, Gordon presented a very pessimistic analysis of the US mid- to long-term economic growth. His analysis suggests that the United States’ mid- to long-term growth prospects are not bright due to the US structural problem such as aging population and low productivity.
  The impact of the US mid- to long-term growth path on the future growth of the global economy is crucial in light of the US weighting in the global economy. Especially, in the case of Korea, export is still a large part of the economy, and the mid- to long-term growth of the global economy is a big part of Korea’s mid- to long-term growth. Aside from this, the United States is the second largest export destination of Korea after China, and it is highly likely that the US economic growth will directly affect Korea. In addition, the rapid recovery of the United States relative to other advanced countries after the financial crisis is highly suggestive of Korea’s growth and economic deregulation policies. In Korea, it has been experiencing a steady decline in growth rate since the financial crisis, and its potential growth rate has also been falling. In this situation, it is important to find a way to accelerate economic recovery through benchmarking of US growth policy, which is recovering faster than other advanced countries.
  The purpose of this study is that analyzes the possibility of mid-to-long term growth of the United States to provide a foundation for Korea’s mid-to-long term foreign strategy. Furthermore, we try to find the reasons behind the rapid recovery of the US after the financial crisis and to provide its implications on the growth strategy for the Korea economy. In Chapter 2, we analyze the US economic growth rate and examine whether the US economy has experienced in structural changes. As a result of the analysis, structural changes in the US economy, measured by the decline in trend growth, took place in early 2000, before the financial crisis, and the financial crisis accelerated the decline in this trend growth to some extent. In general economic theories, the impact on trend growth is known to be largely influenced by supply side factors such as technology progress and labor supply. Based on these facts, we analyzed the supply side factors such as total factor productivity and labor supply factors in Chapters 3 and 4.
  In Chapter 3, we use the growth accounting method to diagnose whether the US will grow in the medium to long term. Growth accounting is a method for analyzing the effects of supply side factors such as labor supply, total factor productivity, and labor quality on mid- and long-term growth, and is particularly appropriate for analyzing the impact of trend growth decline analyzed in Chapter 2. The results of the analysis are as follows. According to the labor supply factors such as the degree of population aging and the quality of education, and productivity, the US economic potential growth rate is found to range from 1.4% to 2.9% on average by 2060 unless the effects of the aging of the population are reduced or rapid increase in productivity due to the recent 4th industrial revolution. Especially, in case of population aging, the average annual growth rate is reduced by about 0.17%p.
  Chapter 4 tries to explain why the US is recovering faster than other developed countries after the financial crisis, despite the mid- to long-term growth is uncertain through dynamic stochastic general equilibrium model (DSGE model). In particular, we have constructed a model in which the growth and supply side factors have a great impact on the economic cycle. Based on this model, we examined the impact of the decline in trend growth on the economic recovery and searched for the reasons for the rapid recovery of the US. US productivity is recovering faster than other countries after the financial crisis. The results of the DSGE analysis show that the recovery of productivity reduces the decline of trend growth and the this better trend growth is positive for current consumption and investment through expectation of future income increase. This rapid US productivity recovery can be attributed to the large-scale national R&D initiated during and after the financial crisis, and the large-scale increase in aggregate demand through general fiscal spending has also contributed to productivity growth. In addition, continuous policy implementation is important in the case of attempting to increase the aggregate demand through the management of trend growth or fiscal policy through investment of national R&D. If these policies are suspended or canceled in the middle, in the worst case, it seems to have a negative impact on the economic recovery.
  Based on these discussions, Chapter 5 examined the policies of the Obama administration during the financial crisis period and until the recent years. In particular, the specific details of the policies that led to the recovery of productivity presented in Chapter 4 - National R&D policies and large scale fiscal stimulus package - were summarized to help establish the actual policies. Chapter 6 summarized the discussions and the policy implications for Korea are derived.
  The policy implications suggested in this paper can be divided into two major categories. The first is about the establishment of foreign policy based on the mid-to-long term growth of the United States. The second is about the establishment of Korea’s growth policy, which is based on fase recovery speed of US. First, the implications for the mid-to-long term foreign policy are as follows. The US is Korea’s second largest export market and has a large impact on the global economy. The Korean economy is still highly dependent on exports. Considering this point, we need to diversify export market, increase export unit price through development of high value-added products, and develop core goods that are less affected by economic fluctuations, Also, it is necessary to establish a so-called two-track strategy to reduce the export dependency of the Korean economy through the revitalization of the domestic market.
  In addition, Korea’s mid-to-long term growth strategy suggestions are as follows. As a result of supply side analyzing of the growth rate of Korea, the recent decline in growth rate caused by productivity decline, decrease of capital accumulation, and low contribution of labor supply. Therefore, it is necessary to implement investment promotion policy similar to productivity improvement and innovation-related policies which are actively promoted by the Obama administration. In addition, the low contribution of labor supply to GDP, despite the long working hours among the OECD countries, is an urgent task to be solved. Finally, implications for national R&D policy for mid-to-long term growth are as follows. Korea’s R&D spending is quantitatively the top among OECD countries. On the other hand, the volatility of R & D spending is high and uncertainty is higher than the US. Uncertainty as a result of increased volatility in R&D expenditure may result in lower efficiency of R&D spending by hindering researchers’ stable research as shown in Chapter 4. In the United States, efforts are being made to secure the permanence of the R&D by enacting the Protecting Americans from Tax Hikes Act (PATH) Act of 2015. In Korea, it is important to benchmark such a system to ensure the sustainability of R&D investment and raise efficiency.
  This study is meaningful to analyze the US economy in terms of supply side and draw implications for the Korean economy. Although there are some articles analyzing the US recovery after the financial crisis, they are all focused on the analysis of the demand side. Furthermore, there are few studies that provide policy implications for Korea. This study provides a new perspective on the recovery of the US economy and mid-and-long term growth by identifying the reasons for the rapid recovery after the financial crisis and the mid-to-long term growth of the US through supply side decomposition. In addition, this study is different from the previous studies because it provides implication of the growth path of US on the Korea economy.
 

 

  Since the financial crisis began in the late 2000s, the tendency of protective trade has been strengthened in the globe. In India, Prime Minister Narendra Modi evaluated the current FTAs of India as non-beneficial to India. The Modi administration has redirected its FTA strategy from the quantitative expansion that the previous administration pursued to the strategy that emphasizes qualitative growth. It is possible that the Modi administration implements protective trade policies directly and indirectly in order to push the 'Make in India' industrial growth policy that seeks to make India a global manufacturing hub. Therefore, negotiations for improving the Korea-India CEPA are likely to be delayed and face various obstacles.
  This study investigates relevant government bodies, institutions and policies on TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary Measures) in India. It also analyzes relevant specific trade concerns to TBT and SPS, and explores the effects of TBT and SPS on exports to India.
  In Chapter 2, this report examines government bodies and institutions related to TBT and SPS and also relevant articles and Mutual Recognition Agreements (MRAs) to the FTAs that India has already signed. India's standards and regulation systems are complex and poorly established, compared to those of advanced countries and hence India has continuously expanded its regulations and has established, revised and supplemented its systems. While most of the FTAs by India deals with TBT and SPS, the Japan-India CEPA and Singapore-India CECA are more detailed, compared to the Korea- India CEPA. On the other hand, India is not yet active to enforce MRAs.
  Chapter 3 analyzes pending specific trade concerns (STCs) on India's TBT and SPS, and especially the STCs on Korea by reviewing WTO's TBT and SPS Committees and STCs from the various trade reports. Most TBT related STCs raised by India were raised by the EU and the US and automobile-related items were the most frequently discussed. Most countries that raised TBT and SPS against India were advanced countries including the US. The most controversial issues were the differences between India's standards and international standards.
  In addition to the qualitative analysis, chapter 4 provides an empirical analysis of the effects of India's TBT and SPS measures on the exports to India of trading partners.
  First, in case of the entire trading countries and industries, the results show that overall India's TBT measures had a positive effect on exports to India while SPS measures are not expected to have much influence. In other words, India's TBT measures have a positive effect on export through the provision of market information and increasing product reliability against expectations.
  Secondly, when the industries are divided into agriculture and manufacturing, the estimates show that TBT has significant positive on exports to India in the manufacturing sector while SPS’s effect is limited. Our empirical results are in line with previous studies. However, the results for SPS were still statistically insignificant.
  Lastly, results of the effects of TBT and SPS on individual industries were disparate. TBT forms a trade barrier for processed primary goods, processed minerals, general machines, and electric machines, while rubber/chemicals and nonmetallic minerals that have high portions of intermediary goods and precision machinery and other manufacturing sectors that have high levels of capital goods gained positive impacts. In the case of SPS, exports of processed primary goods and the paper/lumber industry were expedited as a result of India's SPS measures while exports of the rubber/chemicals industry were blocked.
  This study provides suggestions and policy implications. It is suggested that the creation of a new division exclusive to the TBT and SPS measures on the Agri-food sector, policies in response to the political industrial application of the TBT and SPS, and policies in response to the poor administration systems on the TBT and SPS are needed. Lastly, it is recommended that the Korean government seeks to conclude an MRA with India to invigorate economic cooperation, including merchandise trade, between the two countries.
 

Executive Summary

1. Introduction

2. Academic Literature on China’s Development Finance

3. Chinese Development Finance to Asia

4. Data and Model
4-1. AidData
4-2. Explanatory Variables
4-3. Model

5. Estimation Results
5-1. China’s Aid
5-2. China’s OOF-like Flows

6. Further Discussions on Southeast Asia

7. Conclusion

References  

This paper examines the determinants of China's development finance to developing countries with a focus on Asia from 2000 to 2012. It uses a recent version of China Aid Data, one of the most reliable and publicly available data sources that systematically collect and differentiate different types of China's official development financial flows. This paper differs from previous studies in two aspects that (1) it analyzes a wider range of developing countries, moving beyond earlier research largely limited to Africa; and (2) it examines regional variation in China's motives for development financing. The findings show that China's allocations decision for concessional development flows, or ODA, has mixed motives of humanitarian, commercial and strategic interests. It is noteworthy that China's ODA appears not to be in competition against, but rather in a complementary form to, established donors in this period. Yet substantial regional variation is observed, suggesting different regional dynamics are at work. On the other hand, it is found that China's allocations decision for less-concessional development financing largely follows commercial considerations. This paper also provides detailed discussion of the trends in China's development finance to Southeast Asia, which is an Asian region critical for China's economic and foreign policy interests. The paper ends with a discussion of the implications of possible shift in China's overseas development finance strategy since 2011. 
Keywords: China, Asia, Development Finance, Aid

Executive Summary

1. Introduction 

2. Recent Trend of Anti-Dumping Measures

3. Effect of Anti-Dumping Duties on Import

3-1. Model
3-2. Data
3-3. Estimation Results

4. Survival Analysis of Anti-Dumping Duties

4-1. Introduction
4-2. Model and Data
4-3. Estimation Results

5. Concluding Remarks

References 

This paper studied the effects of anti-dumping measures on the imports to investigate whether the trade restriction effect of an anti-dumping duty is dominant in the US, the EU, China, and India from 1996 to 2015. Our results indicate that a 1% increase in the anti-dumping duties decreases the import of the targeted product by about 0.43~0.51%. The actual statistics, however, show that the total import of the targeted products increased by about 30 percent while an anti-dumping duty was in force. That indicates that an anti-dumping duty is just a temporary import relief.
This paper also investigated whether an anti-dumping duty is terminated in the case that the injury would not be likely to continue or recur if the duty were removed. The increase in market share, MFN tariff rate, and dumping margin turns out to decrease the hazard of termination of an anti-dumping duty, but the increase in value added increases the hazard of termination. Generally speaking, this result indicates that the WTO member countries have regulated the overuse of an anti-dumping measure. It also implies that anti-dumping duties have been used as a tool for trade remedy.
The findings of this paper show that there is a country- and industry-wise heterogeneous characteristic in the effect as well as termination of an anti-dumping duty. To conclude, an anti-dumping duty is not necessarily a protectionist measure if it is effectively controlled by the WTO rules. In this sense, the WTO member countries need to introduce a more transparent mechanism and due process.

Preface

Contributors

Introduction and Overview
Cho Lee-Jay and Lee Chang Jae

Statements by Hosts and Country Representatives

 

Part I. Jilin Province’s Economic Development and Northeast Asia Regional Cooperation in the Context of the Belt and Road Initiative

Part II. Cross-Border Infrastructure and Special Economic Zones in Northeast Asia

Part III. Future Tourism Cooperation in Northeast Asia

Part IV. Building a Northeast Asian Economic Community

Part V. Financial Cooperation in Northeast Asia

Part VI. Energy and Environment in Northeast Asia

Appendix 

The Northeast Asia Economic Forum (NEAEF) is a regional nongovernmental organization created in 1991 to sponsor and facilitate research, networking, and dialogue relevant to the economic and social development of Northeast Asia. The Forum is also committed to promoting understanding and relations among the peoples of Northeast Asia, North America, and Europe.
 NEAEF’s main objective is to conduct research and conference activities aimed at functional economic cooperation such as cross-border energy, transportation and logistics infrastructure development, and capital mobilization. The Forum holds annual conferences, workshops, and seminars for planning, facilitating, coordinating, and implementing international and interdisciplinary solutions to common policy problems. It is the only nongovernmental regional organization in which all the nations of Northeast Asia and the US are consistent and active participants.
 For the year 2016, NEAEF in collaboration with the Korea Institute for International Economic Policy (KIEP), carried out activities aimed at building a Northeast Asian economic community. NEAEF has established the basis of a strong network for functional cooperation, for example, regular discussions among stakeholders on financing cross border infrastructure development. For the year 2016, the goal was to take more concrete steps toward a Northeast Asian economic community including efforts to increase dialogue with North Korea, with a view to future functional cooperation. NEAEF has continued to maintain a cooperative networking approach and exchanges with North Korea regarding the Tumen River Area and North Korean special economic zones.
 This year’s volume titled, Consensus Toward a Northeast Asian Economic Community presents the results of a project implemented in 2016 that includes the planning meeting discussions as well as the presentations and summaries of the 2016 NEAEF Annual Conference in Changchun, China.
 

Contributors

Introduction and Overview

Mark Thoma

Session 1 Trade

China’s Emerging Trade Strategy: Drivers, Influence and Implications for North Pacific Economic Cooperation

Yong Wang

1. Key Drivers of Change in China’s Trade Policy
2. China’s Emerging Trade Policy
3. Why will China Embrace Higher Standard FTAs?
4. Integrate the Belt and Road Initiative and AIIB into China’s Trade Policy
5. Implications for the Global Trade Order and North Pacific Economic Cooperation
References

China’s Belt-Road Initiative and Korea’s Eurasia Initiative

Inkyo Cheong

1. Introduction on Korea’s Eurasia Initiative
2. China’s Belt-Road Initiative
3. Korea’s Nordpolitik and Recent Performance of its Eurasia Initiative
4. Conclusion and Policy Implications

The Trans-Pacific Partnership Agreement High Diplomacy and Low (Domestic) Politics

Claude Barfield

1. Broad Themes and Analytic Frameworks
2. Security/Diplomatic Rationale of Trade Policy
3. The Low Domestic Politics of Trade: Who Wins and Who Loses
4. The Political Problem Areas
5. Concluding Observations

Trade

Comments by Taeho Bark

Strengthening North Pacific Cooperation
Comments by Theresa Greaney

 

Session 2 Macroeconomic Perspectives

Global Economic Problems and Emerging Market Economies’ Macroeconomic Policies

Inchul Kim

1. Introduction 102
2. Global Economic Environment 103
3. Analysis of Global Economic Problems 104
4. Macroeconomic Policies for EMEs 109
5. Conclusion 113

References 114
Economic Conditions in the US and the Uncertain Prospects for Future Economic Growth

Mark Thoma

1. Introduction
2. The Current State of the US Economy
3. Forecast for GDP
4. Risks to Growth
5. Conclusion

References

China’s New Economic Norms

Yijiang Wang

1. Introduction
2. The Slowdown
3. Features of the New Economy
4. Concluding Remarks

The Asian Infrastructure Investment Bank and the Struggle for the East Asian International Order

Ming Wan

1. Introduction
2. The AIIB as an International Financial Institution
3. The AIIB and International Order
4. The AIIB and China
5. Recommendation

Macroeconomic Perspectives for Developed and Emerging Economies

Comments by Michael J. Roberts

1. Introduction
2. Emerging Economies
3. China 200
4. The United States

Macroeconomic Perspectives

Comments by Yoon Je Cho

1. Secular Stagnation
2. China’s Economic Slowdown
3. The Inclusion of RMB in the SDR Basket

Session 3 Finance

Strategies for Currency Convertibility: Korea’s Perspectives

Jang Yung Lee

1. Definition and Accepted Wisdom
2. Benefits and Costs of Convertibility
3. Strategies for Currency Convertibility
4. Countries’ Experiences of Convertibility
5. Conclusion and Policy Suggestions
References

Unconventional Monetary Policy, Spillovers, and Liftoff: Implications for Northeast Asia

Marcus Noland

1. Introduction
2. How We Got Here
3. Spillovers
4. Liftoff
5. Conclusions
References

Exploration of the Prospect of Cooperation between Belt and Road Initiative and TPP in Global Economic Governance

Xiaotong Shan

1. Development Philosophy and Cooperation Approach of Belt and Road Initiative
2. BRI’s Implications for the Global Economy
3. Comparison of Similarities and Differences between the Belt and Road Initiative and TPP
4. Cooperation between the Belt and Road Initiative and TPP for Global Economic Integration
5. Mutual Learning between the Belt and Road Initiative and TPP
6. A Preliminary Study on Cooperation between the Belt and Road Initiative and TPP
7. Conclusion
References

Finance Issues

Comments by Baybars Karacaovali

Session 4 Major Findings and Policy Implications

Monetary Policy Response in Emerging Economies and North Pacific Cooperation

Il Houng Lee

1. Introduction
2. Capital Flows and Impact on Emerging Markets
3. Not Always an Efficient Allocation of Capital Across Borders
4. Synchronization of Interest Rates
5. Unsynchronized Business Cycles
6. Overcoming the Limitations of Monetary Policy
7. Capital Flow Measures
8. Strengthening North Pacific Cooperation

Major Findings and Policy Implications

Comments by Taeho Bark

Conference Program
Program
Participants 

The conference was held on Dec 14-15, 2015 co-organized by the Korea Institute for International Economic Policy (KIEP) and East-West Center (EWC) in Honolulu. Participants from China, Japan, Korea and the United States discussed the economic future of the major North Pacific countries and the importance of economic cooperation among them. Major topics in each session were (1) Trade (2) Macroeconomic Perspectives and (3) Finance. The first topic, "Trade",  related to the China'a trade strategy, China's  Belt-Road Initiative, Korea's Eurasia Initiative, and the Trans-Pacific Partnership Agreement (TPP). The second topic, "Macroeconomic Perspectives", aimed to tackle global or regional economic problems through the understanding of the macreconomic  policies of the emerging market economies, uncertainty in the economic conditions of the United States, China's New Economic Norms, and the struggle of the East Asian International Order. The third topic, "Finance", aimed to provide an analytical perspective over currency convertibility, unconventional monetary policies, and prospect of cooperation between Belt-Road Initiative and TPP in the global economic governance. The conference concluded with the major  findings and policy implications from the earlier sessions, particularily, monetary policy response in emerging economies and the importance of strengthing the North Pacific cooperation were discussed.
 

 

  The emergence of China in the international financial order can be analyzed in three aspects: strengthening its position within the IMF system led by the West, establishing a new financial order through multilateral development banks (MDBs) like the AIIB and NDB, and the internationalization of the renminbi (RMB).
  China has steadily demanded an increase in its share in the IMF.
Following the effectuation of the reform plan in 2016, China became the third largest member of the IMF and the RMB is now included in the SDR basket. China also succeeded in launching the AIIB by formulating a consensus on the necessity for launching an alternative multilateral development bank in Asia where the ADB had a monopoly. On the other hand, RMB internationalization is executed based on a set of internal and external goals: stabilizing inflation and the engine for internal reform, and consolidating the international status of China. As a result, RMB settlements accounted for approximately 2% in world trade, while investment accounted for 16.6% in 2015. However, the RMB still accounts for only 0.6% of the global bond market, and only 1.1% of global foreign reserves. As such, although the internationalization of the RMB has achieved some degree of success, it is hardly keeping up with the extent to which China’s economic power is growing.
  For the China-led financial order to take root, China should continue to pursue further reforms and openness regarding free convertibility, capital accounts, and the exchange rate. China, however, is maintaining a cautious approach. Some of the reasons for this are as follow. First, there are concerns about an outbreak of financial crisis through the opening up of China’s capital account.
  Second, there are fears that there will be an increase of non-performing loans and decrease of interest rate in the event of non-interference by China’s financial authorities. As China also has tried to maintain a managed floating system and to allow capital opening only on an experimental basis, it will not be easy for it to expand its influence in the international financial market in a short period of time. Moreover, as the recent appreciation of the yuan has weakened, the impetus for internationalization of the RMB has weakened.
  The recently launched AIIB, NDB and the Silk Road Fund are financially contributing to China’s national strategy known as “The One Belt, One Road (OBOR)” initiative and the internationalization of the RMB. The AIIB and NDB are different from existing MDBs in that their establishment was mainly aimed at infrastructure investment, and that China holds a significant stake in these banks, as well as in that it plans to raise capital for these banks in yuan, and has established a quicker and easier loan procedure. It is also noteworthy that the AIIB is devoted to transportation and power infrastructure investments in countries along the Belt and Road, while the NDB focuses on renewable energy infrastructure investments in BRICS countries. SCODB, which is to be newly established, focuses on infrastructure investment in Central Asia. The Silk Road Fund, the national fund into which Chinese government bodies such as the State Administration of Foreign Exchange have invested, will act as a dependable fund for OBOR projects by swiftly and boldly making investment decisions. Since both the AIIB and NDB are MDBs, they have to go through certain procedures when reaching financing and investment decisions. However, they lack in internal capabilities such as the know-how to operate international organizations and understanding about the global infrastructure market.
  Therefore, financial support for the OBOR initiative is likely to be led by the Silk Road Fund for the time being, with the AIIB and NDB assisting. But these institutions face considerable challenges in the future, such as difficulties in finding bankable projects in Eurasia, as well as raising funds from domestic and overseas sources. The new financial order led by China will gradually become clearer if the institutions show remarkable progress, and if the internationalization of the RMB gathers momentum from the OBOR initiative.
  Meanwhile, China has realized some achievements in terms of RMB internationalization since 1997, such as the expansion of RMB settlement in world trade and the development of offshore RMB markets. The trade settlement function and the investment currency function of the RMB have also improved. Having been added to the SDR currency basket has elevated the global status of the RMB more than ever. Until recently, however, the Chinese government has prioritized economic growth and export expansion through currency depreciation rather than stabilizing the exchange rate for internationalization. Thus, China is faced with several tasks, such as minimizing the effects that the exchange rate shock accompanying RMB internationalization will have on its domestic economy, as well as responding to the disruption in the reform and opening-up policy caused by external factors, and managing prudent finance regulation and risks related to floating funds flow.
  In any case, the internationalization of the RMB is a national strategy of China, and the relevant system will be improved during its 13th Five-Year Plan. In addition, the countries along the Belt and Road are becoming increasingly clear as a key area of internationalization for the RMB, although discussions are underway to form a yuan currency bloc that will include China mainland, Hong Kong and Taiwan.
  Taking all the three abovementioned aspects together, it will be difficult for China to dramatically change the current international financial order in the short term, when taking into consideration the Chinese financial goals and internal capability, the speed of progress in AIIB’s projects, and the West’s containment policy toward China.
  Korea, however, will have to secure its own national interest by establishing mid- to long-term strategies and specific countermeasures against the new financial order, which is encapsulated in the newly launched international financial institutions and internationalization of the RMB.
  Above all, Korea needs to actively and accurately adopt a bandwagon policy, since China will carefully deal with domestic problems like insufficient financial capacity and the existing order centered on advanced countries. For example, Korea needs to evaluate and preemptively participate in institutions and organizations led by China, as it participated as a founding member of the AIIB. For this, it will be important to establish an organic cooperation system between the government and the private sector. In addition, Korea should pursue a so-called two-track strategy to lead the Northeast Asian Development Initiative while at the same time taking a proactive stance in Southeast Asia, Southwest Asia and Central Asia, where China-led financial order will be expanded. As a concrete measure, it will be necessary to prepare a plan to set up a differentiated offshore RMB hub from Hong Kong and Singapore by issuing a RMB bond through cooperation with Chinese financial institutions. Korea should take the lead in establishing the AIIB Institute and setting it up in Korea. In the mid- to long-term it needs to concentrate on establishing a Korea-led development financial institution which will focus on development in North Korea.
  The launch of the AIIB will be both a challenge and opportunity for Korea. However, the competitiveness and infrastructure market share of Korean companies are evaluated as quite low. Korean construction companies are lacking in financing capacity, technological skills, and business networks. Korean financial companies were evaluated to be lacking in financial advisory and arranging ability, deal-sourcing channels and networks, and in their track record and market reputation. Therefore, it is crucial for Korean companies to improve their competitiveness and work out strategies to expand their business globally in order to grasp business opportunities.
  The construction companies need to strengthen their competitiveness by nurturing professional manpower, enhancing their capacity to gather local information by dispatching overseas personnel, and collaborating with foreign companies. They should try to win orders for projects operated by the AIIB or included in the OBOR initiative, in both upstream and downstream sectors. The government should support the companies by lowering guarantee fees and commission, and by providing timely information on the MDB procurement market and orders.
  For the financial companies, it will be necessary to purchase the AIIB’s initial issuance of bonds, accumulate a track record through co-financing with the AIIB, and expand overseas branches in the six economic corridors of OBOR regions. In addition, they will need to reduce the risk of using guaranteed loans by K-ECA, increasing financing capability by using ODA funds, and establishing a deal sourcing channel with K-ECA. The government also must try to provide support by strengthening overseas financial cooperation, dispatching financial advisors, reorganizing diversified overseas infrastructure investment institutions, and setting up specialized funds.
  As for North Korea, it will be difficult for it to join the new order led by China since North Korea is not a member of the AIIB and the international community continues to level sanctions against it.
However, Korea should consider establishing a development financial institution (Northeast Asia Development Bank) for North Korea’s development and unification costs from a mid- to long-term perspective. Once the North Korean nuclear issue has been resolved, this institution can become a unified Korea-led development institution. It could also lead cooperation with the AIIB in Northeast Asian development, including North Korea.
  In conclusion, the China-led new financial order is still in its infancy. In terms of the OBOR initiative, projects in Southwest Asia are speeding up while projects in Southeast Asia are slowing down. This is because of the expansion of economic power and border disputes in the South China Sea, and neighboring countries are wary of the expansion of China’s influence. In the same vein, China-led financial institutions such as the AIIB and NDB are also hampered by a lack of support from neighboring countries. The internationalization of the RMB is still in its development stage, and it seems premature to discuss the RMB currency bloc, as the Chinese government might establish a more sophisticated strategy for the regional currency order to establish a considerable position in the international monetary order.
  On the other hand, there has been some controversy over the fact that Korea has become overly involved on the Chinese side by joining the AIIB. However, Korea needs to consider its national interests and actively participate in the emergence of a new financial order led by China.
  Korea should discuss policy coordination with China preemptively, especially while China remains in an uneasy situation due to its lack of international financial capability and delays in OBOR projects due to the vigilance of neighboring countries. Ensuring that Korea gains strategic value from the forming of a new financial order will correspond to our national interests. 

Executive Summary

1. Introduction

2. Measure of Inter-Industry Distance

3. The Empirical Analysis
3-1. Model Specification
3-2. Data Description
3-3. Empirical Results

4. Concluding Remarks

References

Appendix 

We propose a new measure of inter-industry ‘distance’. This is constructed a la Antras et al. (2012). While they measure the distance of an industry from its final use ？ what they call ‘downstreamness’ of an industry ？ we measure the distance between a pair of industries. Our proposed index is a measure of input-output linkages between industries that incorporates a ‘distance’ flavor. Our measure distinguishes the number of vertical production stages that an industry’s product goes through until it is finally used by another industry by assigning larger weights to the value of input use with longer production chains.
Hence our measure contains more information on the relation between two industries along the vertical production chain. We use this index to construct an aggregate measure of ‘industry connectedness’ of regions in the U.S. It measures the degree of industrial linkages of a region. We then empirically establish that each region’s labor productivity is positively associated with the ‘industry connectedness’. The result contributes to the large literature of agglomeration economies that the industrial linkage is one of the main sources of agglomeration economies and productivity growth, as emphasized by Marshall (1920). It also suggests that our index can serve as an alternative measure of the industrial linkages.

Keywords: Inter-industry Distance, Regional Growth, Input-Output Linkages
JEL Classification: F43, F63, O11
 

Acknowledgements

Notes on the Contributors

1. Study on the Marine Development Cooperation between China and South Korea
Cao Zhongxiang

Introduction

Body

Conclusions

References

2. Study on the Innovation Driven Industrial Upgrading in Korea
Sheng Chaoxun

Introduction

The Course of Industrial Upgrading Driven by Innovation and

the Main Measures of South Korea

Chinese case: The New Situation and New Characteristics of Innovation Driven Industrial Upgrading in China

Conclusions

References

3. Gravity, Borders, and the Potential for Economic Integration in the Asia Pacific: Evidence from Korea and Russia
Kiril Tochkov

Abstract

Introduction

Methodology

Data

Results

Potential Determinants of the Border Effects

Conclusions

References

4. Korea’s FTA Strategy and its Implications to China
Zhou Mi

Introduction

Body

Conclusions

References

5. Are China’s Exports Crowding Out or Coexisting with Korea’s Exports in the Arab Region?
Nashwa Mostafa Ali Mohamed

Abstact

Introduction

The Performance of Arab Imports

Determinants of Arab Imports Demand Function

Relationship between Chinese and Korean Exports towards Arab Region

The Results

References

6. Free Trade between Korea and Mexico: Obstacles and Advantages
Adolfo Alberto Laborde Carranco

Summary

Introduction

Mexico-South Korea Bilateral Relations (1960-2014)

Economic Relations between Mexico and South Korea

Conclusions

Appendix

References

Mexicon Figures

7. The Role of MIKTA: Understanding Korean and Turkish Perspectives
Selcuk Colako？lu

Introduction

MIKTA: A New Global Initiative

Conclusion

References

8. China-US Bilateral Investment Treaty (BIT)
Xu Man

Introduction

The Interest Demands of the U.S. from the China-US BIT

The Interest Demands of China from China-US BIT

Negative List as the Core Issue and Sticking Point: from the Perspective of Reform and Opening Up

Suggestions on BIT Negotiation Strategy

Conclusion

References 

In 2009, Korea Institute for International Economic Policy (KIEP) launched “Visiting Fellows Program (VFP)” with the view of advancing cross-border exchanges of knowledge, information, insights and expertise.
Since its inception, the VFP has demonstrated that sharing thoughts and ideas through face-to-face contacts and dialogue works as a catalyst for enhancing mutual understanding among scholars and professionals with diverse background.
By successfully implementing the VFP for the past 8 years, KIEP has been motivated to assume the role as a hub for international economic research in the region. As a host of the program, KIEP has many mandates. One of those tasks is to let more people know what has been accomplished through the program and how valuable it is.
In an effort to do so, KIEP has published series of research every year. This volume, the 7th of its series, contains eight research papers contributed by 2015 Visiting Fellows.
Publication owes many debts. Here I acknowledge just a few of them. First of all, I must express my deepest gratitude to the 2015 visiting fellows for their outstanding performances. My special thanks also goes to Ms. RIM Jeewoon and the staffs of the KIEP Publishing Team who worked very hard for the publication of this volume.
The views expressed in this publication are the views of the author and do not necessarily reflect the views or policies of KIEP. KIEP does not guarantee the accuracy of the data included in the publication.

 

[ 대상 ]

Financial Intermediaries, Volatility, and Cross-Border Lending: Empirical Evidence from the Euro Area
RYU DonghanㆍSON Jang Ho

Ⅰ. Introduction

II. Literature Review

III. Econometric Framework and Data Description

IV. Empirical Results

V. Conclusion

References

 

[ 우수상 ]

EU Energy Policy Agenda and European Commission: The Case Study of Energy Union Agenda-Setting Strategy
SOHN Hyodong

Ⅰ. Introduction

II. European Commission and (Energy) Policy Agenda-Setting

III. Case Study of European Commission Agenda Strategy: Energy Union

IV. Discussion and Conclusion

References

 

The KU-KIEP-SBS EU Centre, an education & research consortium sponsored by the European Commission, was established on May 2014 by three partners: Korea Institute for International Economic Policy (KIEP), Korea University, and Seoul Broadcasting System (SBS), The KU-KIEP-SBS EU Centre is dedicated to make contribution to enhancing interest in Europe and to expanding research base in EU area studies.
Therefore, the KU-KIEP-SBS EU Centre hosted “The 2nd KU-KIEP-SBS EU Centre Research Paper Competition on EU Studies” and this book includes two best papers from the competitions. The KU-KIEP-SBS EU Centre will contribute to analyzing issues on European integration, the economic and political dynamics in EU and promoting cooperation between Korea and EU through this research competition.