## A Reexamination of Korea’s Trade Flows: What Has Changed and What Explains These Changes?

_IMF Working Papers, August 1, 2004_

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## Bibliographic details
- Authors: Kevin C Cheng
- Published: August 1, 2004
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451856576.001

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### Core findings
- Using standard demand-based models, the paper finds that owing to the increasing share of electrical and electronic products (EEPs) in total exports:
  - the income elasticity of the Korean export demand has fallen sharply.
  - the price elasticity of the Korean export demand has risen dramatically.
- An alternative supply-based model attributes the sharp increase in exports of EEPs mainly to Korea's remarkable ability to make technological improvements in their production.
- Reestimation of the standard import equation produces estimates similar to those from previous studies.
- Most imports are industrial inputs and are jointly determined by consumption, fixed investment, and exports.

### Methods and approach
- Primary approaches:
  - Standard demand-based export and import models.
  - An alternative supply-based model focused on technological improvements in EEP production.
- Focus on sectoral composition change: increasing share of electrical and electronic products (EEPs) in total exports.

### Implications and interpretation
- The compositional shift toward EEPs explains the paradoxical changes in elasticities (lower income elasticity, higher price elasticity) observed in demand-based estimates.
- Supply-side technological progress is a key driver of export performance in EEPs, rather than demand-side factors alone.
- Because imports largely consist of industrial inputs, import demand is jointly determined by domestic consumption, fixed investment, and export activity.

### Publication and metadata
- Author: Kevin C Cheng
- Date: August 1, 2004
- Series: Working Paper No. 2004/145
- Issue: 145
- Volume: 2004
- Pages: 24
- DOI: https://doi.org/10.5089/9781451856576.001
- Stock No: WPIEA1452004
- ISBN: 9781451856576
- ISSN: 1018-5941

*Source: IMF Working Papers — "A Reexamination of Korea’s Trade Flows: What Has Changed and What Explains These Changes?", Kevin C Cheng, August 1, 2004.*

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