According to Yonhap News,
(SEOUL=Yonhap News) South Korea's exports have become less affected by a change in demand from advanced nations since the 2008 global financial crisis amid a structural shift in world trade, a report said Thursday.
According to the findings published by the Bank of Korea (BOK), South Korea's exports responded sensitively to economic cycles of the Group of Seven nations in the 2000-2008 period.
A one percentage-point increase in aggregate demand in G7 countries -- the United States, Canada, Great Britain, Germany, France, Italy and Japan -- pushed up South Korea's outbound shipments to those countries by 2.2 percentage points. Exports to the seven nations account for some 25 percent of South Korea's total overseas sales.
But after the financial crisis, the elasticity decreased by more than half as South Korea's exports rose by 0.9 percentage point when the demand of G7 countries expands by 1 percentage point.
In particular, private consumption and investment in the seven countries have experienced diminishing influence on South Korea's exports before and after the financial crisis.
Exports are the key economic driver of Asia's fourth-largest economy, with outbound shipments contributing to half of its gross domestic product.
"The overall effect of changes in G7 countries' import demand on Korea's exports to them has weakened compared to the pre-crisis period," said Choi Moon-jung, one of the co-authors of the BOK paper. "The eased trade-to-income elasticity has been widely witnessed in world trade. South Korea is not the only country that experiences the weakened relationship between global trade and GDP."
Cyclical factors and shifts in demand composition and global production chains throughout the world are believed to be major reasons for the decreasing elasticity, she added.
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Source: Yonhap News (August 2, 2018)