Cyclical factors in import demand behavior: the Korean experience

The import demand behavior of Korea and its coexisting cyclical variables have been assessed using a detrending method with structural breaks, similar to that adopted by Perron (1989). The analysis showed that during the post liberalization policy period, income inelasticity reached about 0.4, which implies that exchange rate policies are unlikely to alter the status of Korean imports. Furthermore, the result suggests that the US will bear higher trade deficit than Korea, considering that the two grow at a similar rate.