1. Explaining Korea's Lower Investment Levels after the Crisis
- Author
-
Takuji Kinkyo
- Subjects
Macroeconomics ,Economics and Econometrics ,Sociology and Political Science ,Geography, Planning and Development ,Monetary economics ,Development ,Terms of trade ,Investment (macroeconomics) ,Error correction model ,Return on investment ,Value (economics) ,Financial crisis ,Economics ,Cash flow ,Investment performance - Abstract
Summary This paper examines the reasons for Korea’s lower investment levels after the crisis of 1997–98 through estimation of an error correction model of real investment. The econometric results suggest that the fall in investment rates resulted from a decline in the long-run equilibrium value of investment rates due to a deterioration in terms of trade. They also show that recent investment levels are neither too high nor too low relative to the long-run equilibrium value. The variation in terms of trade seems to have pronounced effects on investment through its effect on corporate profits and cash flows in Korea.
- Published
- 2007