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The peace effects of inter-Korean trade and the political-economic separation: Analysis of the reciprocal effects of inter-Korean relations and inter-Korean trade

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  • Kim, Kyoochul

Abstract

This paper empirically examines the relationship between inter-Korean trade and inter-Korean relations over the past three decades. It asks two questions: (1) Does inter-Korean trade contribute to improved interKorean relations and peace on the Korean Peninsula? (2) Does improved inter-Korean relations lead to increased inter-Korean trade? The study employs a time-series causal relationship analysis methodology to answer these questions. The findings show that during the progressive government's reign, inter-Korean trade was not impacted by inter-Korean relations. This is due to the implementation of a political-economic separation policy towards North Korea. Moreover, the increase in general trade and processing on commission did enhance inter-Korean relations, reflecting the "inclusive policy" aimed at achieving peace on the Korean Peninsula through interKorean trade. In contrast, during the conservative government's reign, inter-Korean relations had a direct impact on inter-Korean trade, with deteriorating relations leading to a significant decrease in trade. This was due to the implementation of North Korea policies that were linked to politics and the economy.

Suggested Citation

  • Kim, Kyoochul, 2023. "The peace effects of inter-Korean trade and the political-economic separation: Analysis of the reciprocal effects of inter-Korean relations and inter-Korean trade," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 45(3), pages 1-24.
    • Handle: RePEc:zbw:kdijep:278794
    DOI: 10.23895/kdijep.2023.45.3.1
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    References listed on IDEAS

    as
    1. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 865-900.
    2. Jung, Seungho & Lee, Jongmin & Lee, Seohyun, 2021. "The impact of geopolitical risk on stock returns: Evidence from inter-Korea geopolitics," MPRA Paper 108006, University Library of Munich, Germany.
    3. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 865-900.
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    More about this item

    Keywords

    Inter-Korean Trade; Inter-Korean Relations; GDELT; Peace Effect; Political-Economic Separation;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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