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441. Exchange Rate Predictability Based on Market Sentiments

Author:
Hyo Sang Kim, Eunjung Kang, Yuri Kim, Seongman Moon, and Huisu Jang
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
It is well-known that exchange rates are difficult to forecast using observed macro-fundamental variables. This discrepancy between economic theory and empirical results is called the Meese and Rogoff puzzle. The purpose of this study is to address this puzzle from a new approach. Rather than pursuing a linkage between macro-fundamentals and exchange rates, we focus on the market sentiment index as a factor that could possibly enhance exchange rate predictability. The analysis folds into three phases. First, we conducted an assessment of the traditional exchange rate predictability model, as well as the augmented traditional model incorporating the market sentiment index. Second, we predicted the exchange rate by applying the market sentiment index, based on the contrarian opinion investment strategy commonly used by foreign exchange dealers. Finally, we analyzed if the machine learning model incorporating both economic fundamentals and market sentiment index could enhance the predictability of the exchange rate.
Topic:
Economics, Markets, and Exchange Rates
Political Geography:
Global Focus

442. The U.S.-China Battle for Semiconductor Supremacy and Reshaping of Global Supply Chain

Author:
Hyung-gon Jeong
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The realization of digital transformation (DX) and the Fourth Industrial Revolution (4IR) has led to the development of new technologies in areas such as AI, big data, metaverse, autonomous vehicles, digital currency, and blockchain technology. While these sectors are expected to continue to grow, major countries including the United States and China are fiercely competing to secure a global supply chain for the semiconductor industry. Built on free trade, the global division of production in the semiconductor industry has driven corporate innovation and technology development. However, the trend of technological nationalism and countries’ efforts to build a value chain within their territory are expected to hurt the global semiconductor industry. The ever-deepening hegemony competition between the U.S. and China in the semiconductor industry could have a profound impact not only on the Korean economy but also on a restructuring of the global semiconductor supply chain. This study analyzes the supply chain structure and risks of the Korean semiconductor industry, along with U.S. and Chinese policies to foster the semiconductor industry, going on to explore corresponding countermeasures.
Topic:
Science and Technology, Supply Chains, Semiconductors, and Competition
Political Geography:
China, Asia, North America, and United States of America

443. Tackling the Challenges of Climate Change Adaptation in Central America: Can Korea Contribute?

Author:
Seungho Lee
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Climate change adaptation has long been established as a regional and national priority in Central American countries. Korea, as a responsible middle power in global governance, should not hesitate to play a more active role in tackling their adaptation challenges. This brief summarizes a number of findings and policy suggestions from Lee et al. (2021), which identifies promising cooperation areas in the field of climate change adaptation between Korea and four Central American countries and proposes cooperation schemes in each area.
Topic:
Climate Change, International Cooperation, Governance, and Adaptation
Political Geography:
Asia, South Korea, and Central America

444. Climate Change Impacts on Agriculture and Conflicts in Sub-Saharan Africa

Author:
Munsu Kang
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study investigates the climate change impacts on agriculture and conflict in sub-Saharan Africa (SSA). SSA is the most vulnerable region responding to the weather shocks such as drought and flood. Furthermore, more than half of population in SSA are engaged in agricultural production that is highly affected by the rainfall pattern and temperature increases. For this reason, disruption of agriculture caused by the weather shock also can increase the probability of conflict such as demonstration and riot. This study focuses on 43 SSA countries after excluded small islands. Using scenario analysis, we find that temperature increases rather than precipitation might affect maize and sorghum production negatively while it is unclear for the rice production. We also find that increases in average temperature and maximum temperature might increase the probability of conflicts even if the effects of climate on riot and demonstration are U-shape pattern while it is reverse U-shape for battle and civilian conflicts.
Topic:
Agriculture, Climate Change, and Conflict
Political Geography:
Africa and Sub-Saharan Africa

445. To Regulate, or Not to Regulate? Subsidies for Foreign Enterprises, Climate Change, and Currency Undervaluation

Author:
Cheon-Kee Lee, Min Ji Kang, and Minjoo Kim
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In response to today’s rapidly changing global trade environment, countries have continued to make changes to their policy objectives and instruments to address new and emerging issues such as supply chain restructuring and reshoring, climate change, and currency undervaluation. To this end subsidies have been playing a particularly important role, and are expected to be used more broadly across different sectors in the coming years. While controversies over government subsidization are likely to continue at the international level, the United States and the European Union have proposed at the domestic level to expand the scope of subsidy regulation and to tighten regulation on newly emerging subsidy types beyond the traditional boundaries set by international trade rules. Among a number of the latest developments on subsidy regulation, this Brief intends to primarily focus on (i) transnational subsidies granted by a government to enterprises active in other foreign countries (“foreign subsidies”); (ii) green subsidies for climate change mitigation; and (iii) subsidies related to currency undervaluation.
Topic:
Climate Change, Business, Currency, Trade, and Subsidies
Political Geography:
Europe, North America, United States of America, and European Union

446. Development of the IT Industry and Structural Transformation: Focused on IT Cooperation with Russia, Kazakhstan and Uzbekistan

Author:
Minhyeon Jeong, Jiyoung Min, and Dongyeon Jeong
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study was designed as a primary study to analyze the economic significance and potential of cooperation with Russia, Kazakhstan and Uzbekistan in the IT sector, and to derive implications for new directions between Korea and the three countries with the advent of the fourth industrial revolution era. The goal of the study is to discuss what the development of the IT industry means for the three economies, examine the characteristics of each country, and gain policy implications on how cooperation with Korea should proceed in the future. To this end, this study is consisted of the following four components. First, the economic significance of IT technology cooperation with Russia, Kazakhstan, and Uzbekistan is viewed from the perspective of structural transformation. Second, the effect of IT cooperation between Korea and Russia on the Russian economy is quantitatively estimated through the analytical framework of structural transformation. Third, to supplement the limitations of theoretical discussions and derive customized cooperation directions for each country, the current status and policies of the IT industry in the three countries are examined in detail. Fourth, IT technology subsectors promising for cooperation between Korea and Russia are identified, from the patent citation analysis and network analysis.
Topic:
Development, Economics, Science and Technology, Industry, and Information Technology
Political Geography:
Russia, Central Asia, Eurasia, Kazakhstan, and Uzbekistan

447. The Impact of Immovable Property Tax on the Macro Economy

Author:
Young Sik Jeong, Eunjung Kang, Jinhee Lee, Kyunghun Kim, and Jeehye Kim
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Since the 2008 global financial crisis, inequality has been increasing worldwide. In particular, wealth (asset) inequality is getting worse than income inequality. And Korea is no exception. This deepening of inequality is more worrisome in that it leads to inequality of opportunity while suppressing movement between classes, which in turn deepens inequality, creating a vicious cycle of inequality. This is a bigger problem than the inequality itself. The international communities are calling for stronger property taxes, including recurrent taxes on immovable property, as part of mitigating inequality and promoting inclusive growth. In Korea, there is heated discussion on property taxes, such as recurrent taxes on immovable property including the comprehensive real estate tax. Therefore, this study aims to investigate policy directions in international organizations and major countries on immovable property tax and examine the effect of property tax on the macro economy. This study examine international comparisons of immovable property tax burdens using OECD data. Next, this study analyzes the effect of immovable property tax on housing prices, inequality, and economic growth. Finally, we suggest policy implications to Korea through this. Based on our results, we present policy implications for Korea.
Topic:
Inequality, Tax Systems, Macroeconomics, and Wealth
Political Geography:
Asia and South Korea

448. Russia’s Energy Strategy in the Northeast Asian Region and New Korea-Russia Cooperation: Focusing on the Natural Gas and Hydrogen Sectors

Author:
Joungho Park, Boogyun Kang, Seok Hwan Kim, Won Soon Kwon, and Andrey Kovsh
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study attempts to identify new directions for energy cooperation between Korea and Russia, focusing on the areas of natural gas and hydrogen. In particular, we derive new directions and tasks for energy cooperation between the two countries, reflecting changes in the international energy environment, such as climate change and decarbonization, which are in full swing at the global level. To this end, this study is consisted of the following four parts. Part II examines the geopolitics of energy coming into the 21st century and Russia’s new energy strategy. Part III conducts an in-depth analysis of the energy cooperation strategies of China and Japan, major Northeast Asian countries, with Russia, and Part IV comprehensively evaluates Korea’s energy strategy and Korea-Russia energy cooperation. In conclusion, Part V presents new plans for Korea-Russia energy cooperation. As a side note, after carrying out this study, the policy environment for energy cooperation with Russia has significantly changed. Russia’s war against Ukraine is expected to change the landscape of global energy and its geopolitics in profound ways. In the midst of these significant changes, it is hoped that this study will serve as a meaningful reference for analyzing and forecasting the global energy dynamics surrounding Russia.
Topic:
International Relations, International Cooperation, Gas, Hydrogen, and Energy
Political Geography:
Russia, Asia, South Korea, and Northeast Asia

449. A Review of the First Decade of the Korea-EU FTA

Author:
Dong-Hee Joe
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Last year marked the tenth anniversary of the Free Trade Agreement (FTA) between the European Union (EU) and Korea, which entered into force in 2011. The EU is the world's largest economy and Korea's third largest trade partner, only after China and the United States. Back when the FTA nego-tiations began in 2007, the EU was Korea's second largest export destination, from which Korea enjoyed the largest surplus. Al-so, more than 35 per cent of Korea's foreign direct investment came from the member states of the EU. Korea is also a major econ-omy and a major trade partner of the EU, especially in Asia. The FTA with Korea was the first case of the EU's “next generation” FTAs, and is considered to have served as a benchmark for the EU's bilateral trade agreements thereafter (Kang 2016). As for Korea, it was the first FTA with a major economy, even before the US, its traditional ally, and China, its closest neighbor. Because of its importance, the Korea-EU FTA has received attention from economics and trade policy. KIEP also took a look at the first decade of its implementation last year (Joe et al. 2021). This Brief introduces some of the findings in Joe et al. (2021), fo-cusing on the impact of the FTA on the bi-lateral economic relationship between the two sides.
Topic:
European Union, Economy, Free Trade, and Trade
Political Geography:
Europe, Asia, and South Korea

450. Internationalization of the Korean Won in the Light of RMB Internationalization

Author:
Hyo Sang Kim, Young Sik Jeong, Ji Young Moon, and Da Young Yang
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
While China has risen to become a global superpower with a growing impact on the world economy, its currency, the Renminbi (RMB), has a limited role in the existing international financial system. China has made significant progress and will continue to push for the internationalization of the RMB, which can disrupt the global financial system, dominated by the US dollar. Under such circumstances, Korea must find a new direction for the internationalization of the Korean Won. The internationalization of the Korean won will provide new opportunities for the economy to take a further step through financial advancement.
Topic:
Economy, Currency, Internationalization, and Financial Development
Political Geography:
China, Asia, and South Korea

451. Income and Consumption Inequality in Latin American Countries

Author:
Sungwoo Hong
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The recent large-scale protests across Latin America show the seriousness of this inequality in the region. Accumulated complaints about poverty, inequality, and the gap between the rich and the poor are the root causes of the massive protests in Chile that broke out in October 2019 and the demonstrations in Colombia that started in April 2021. This brief looks into the following questions: 1) how profound is inequality in Latin America, and has there been no notable change in its pattern over time? 2) Are the current conditions of poverty and inequality and patterns of inequality the same across Latin American countries?
Topic:
Poverty, Income Inequality, Consumption, and Income
Political Geography:
South Asia and Latin America

452. Australia’s Strategic Responses to the US-China Rivalry and Implications to Korea

Author:
Ina Choi, Sunhyung Lee, Jaeho Lee, and So Eun Kim
Publication Date:
08-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
As in other Asia-Pacific countries, boosting trade with China has provided a growth engine for Australia's economy. Australia shared concerns over security threats posed by China’s military expansion, but up until the mid-2010s hard balancing against China did not seem to be an option for Australia. Australia’s recent moves against China, however, signal that Canberra has reset its China policy, with an overhaul of its national security and defense strategy. The shift of Australia’s China policy is an interesting case to explore how the regional order is likely to evolve in the growing US-China competition. Assessing Australia’s recent foreign policy is also relevant to Korea, both in terms of navigating Korea’s relations with the US and China and enhancing strategic ties between Australia and Korea. Against this backdrop, this study unravels Australia’s strategic responses to the changing regional order and draw implications for Korea's foreign policy.
Topic:
Security, Foreign Policy, National Security, Economy, Trade, and Rivalry
Political Geography:
China, South Korea, Australia, Asia-Pacific, and United States of America

453. Korea’s Regional Cooperation and ODA Policy in Asia: Performance and Challenges

Author:
Aila Yoo and Yul Kwon
Publication Date:
08-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The COVID-19 pandemic and ongoing geopolitical conflicts have deteriorated socio-economic conditions all around the world. As developing countries in Asia have made enormous progress in economic and social development based on the stable ground for growth, the development gap within the region has also been expanded. In addition, the region’s socio-economic conditions have become worse after the pandemic. Along with the pandemic crisis, there are several issues that have negatively influenced the region’s sustainable growth, such as climate change and climate-related natural disasters, and conflicts. These multiple crises change the development needs in the region, and cannot be solved through the efforts of any sole country but must be tackled through regional cooperation. While Korea strengthens its strategic approach for regional economic cooperation to expand its partnership with emerging countries and its Official Development Assistance (ODA) volume is highly concentrated in Asia region, Korea still focuses on cooperation with each country based on priority countries’ Country Partnership Strategy (CPS) without any integrated regional cooperation strategy. Strengthening inclusive partnerships would be a key to reduce the development gap in the region, by supporting regional programs such as the ASEAN Connectivity and Mekong Subregion development projects. To improve policy coherence and tackle the region-wide problems, Korea should adopt an integrated regional cooperation approach by reflecting the characteristics of Asia. This study analyzes changes in the socio-economic conditions and development environment in the Asia region and provides policy implications for preparing regional cooperation strategy for Asia.
Topic:
Economics, Regional Cooperation, Partnerships, Economic Cooperation, and COVID-19
Political Geography:
Asia and South Korea

454. Is Korea’s Social Services Employment Increasing Too Fast?

Author:
Dong-Hee Joe
Publication Date:
08-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Employment in social services is on an increasing trend in the developed world. The average among the OECD countries, for instance, was about 43 employments per thousand population, or about 9.1 per cent of total employments, in 2005. In 2020, it has risen as high as 49 employments per thousand population and 10.4 per cent of total employment. In 2016, right before the previous Korean administration was inaugurated in 2017, Korea had 36.3 employments in social services per thousand population, far below the OECD average. Since then, social services employment grew the fastest in Korea among the OECD countries, narrowing its gap from the OECD average. By 2019, for instance, social services em-ployments per thousand population in-creased by 6.3, while the average among the OECD countries was 2.7. Is Korea’s fast increase “natural” or justifiable? As an attempt to shed some light on this issue, KIEP researchers estimated the determinants of the size of social services employment and used the results to compare the observed (i.e., actual) change with the predicted change (Joe et al. 2021 and Joe 2022). This exercise supports Korea’s speed of increase; that is, it was no faster than what is predicted by the estimated models. This Brief summarizes these exercises.
Topic:
Employment, Social Services, and OECD
Political Geography:
Asia and South Korea

455. Leveraging Predeparture Counseling to Support Returning Migrants’ Sustainable Reintegration

Author:
Lucía Salgado
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Migration Policy Institute (MPI)
Abstract:
Across the European Union, assisted voluntary return and reintegration (AVRR) programs have proliferated over the past several decades, amid mounting pressure on policymakers to increase the return rate of migrants without a right to stay in Europe. These programs are considered more cost-effective, humane, and pragmatic from a diplomatic perspective, and ultimately aim to help migrants reintegrate successfully into their communities of origin. Much of the reintegration assistance AVRR programs offer occurs after migrants arrive in their origin countries, but there is growing awareness that kickstarting this support before the return journey can play a decisive role in reintegration outcomes. It can have the dual benefits of helping migrants develop a clearer picture of life after return, and of collecting information that origin-country service providers can use to support them effectively after they arrive. Yet, the potential of predeparture counselling may remain untapped if information gaps between actors in origin and destination countries are not addressed. This policy brief provides an overview of predeparture counseling and information-sharing challenges in European AVRR programs. It then explores strategies for improving the exchange of information and, thus, better leveraging predeparture counseling to support returnees’ sustainable reintegration.
Topic:
International Cooperation, International Organization, Governance, European Union, Borders, Integration, Deportation, and Illegal Immigration
Political Geography:
Europe

456. Humanitarian Pathways for Central Americans: Assessing Opportunities for the Future

Author:
Susan Fratzke and Andrea Tanco
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Migration Policy Institute (MPI)
Abstract:
Since 2015, hundreds of thousands of Central Americans—primarily from El Salvador, Guatemala, and Honduras—have left their home countries due to an intertwined set of factors, including poverty, food insecurity, gang-related violence, and human-rights violations. Many have taken perilous journeys to seek protection in neighboring Mexico and the United States, where the scale and diverse profiles of asylum seekers have challenged the governments’ processing capacity. For most of these Central Americans, traveling by their own means to Mexico or the United States is the only avenue to seek international protection. While refugee resettlement programs allow states to vet and select individuals who have fled their country and are living in another, resettlement has typically been used on a very limited basis in the region. Some policymakers, notably in the United States and Canada, have begun to reconsider the role that resettlement could play in addressing these protection needs. This brief assesses how resettlement and other humanitarian pathways have operated in the region to date, and explores the opportunities and obstacles to scaling up these programs.
Topic:
International Cooperation, International Organization, Migration, Governance, Refugees, Resettlement, and Asylum
Political Geography:
Central America, North America, Mexico, and United States of America

457. Embedding Reintegration Assistance for Returning Migrants in the Local Context: The Role of Referrals

Author:
Ravenna Sohst and Camille Le Coz
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Migration Policy Institute (MPI)
Abstract:
The objectives of European reintegration programs for migrants returning to their countries of origin have expanded in recent years. Reintegration assistance, instead of being delivered as standardized support packages, is increasingly being designed to take into account the multiple dimensions of returnees’ reintegration—economic, social, and psychosocial—and the context of the communities in which they settle. As these programs become more complex, it has also become clear that no one service provider can offer all of the various services necessary to meet returnees’ diverse needs and profiles. One way to broaden the range of supports available to returning migrants and embed reintegration assistance into the local context is to refer returnees to local actors, including government agencies and civil-society organizations. Such referrals, particularly when combined with capacity-building assistance for local partners, can help connect returnees with tailored, long-term support. Yet, there is no consensus across reintegration programs as to how referral mechanisms should be organized, what types of services referral partners should deliver, the level of budget support different actors need, and how their work should be monitored. This policy brief explores the role of referrals in reintegration programming, offering a typology of approaches taken across programs to date. It also discusses common challenges, emerging good practices, and promising next steps to improve the local embeddedness of reintegration assistance.
Topic:
International Cooperation, International Organization, Migration, Governance, Integration, Deportation, Reintegration, Immigration Policy, and Illegal Immigration
Political Geography:
Europe and Global Focus

458. Promoting Evidence-Informed Immigrant Integration Policymaking

Author:
Jasmijn Slootjes
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Migration Policy Institute (MPI)
Abstract:
Across Europe, immigrant integration policy has often been forged in the heat of crisis and driven by political priorities. This can be seen in the response to millions of people fleeing war in Ukraine and to the 2015–16 migration and refugee crisis. Resources and attention are much less frequently devoted to gleaning lessons from integration initiatives and using them to improve policymaking going forward. Yet, pressing labor shortages, strained government budgets, and social cohesion challenges all point to the importance of implementing integration policies that efficiently use limited resources—and that work. This policy brief explores why immigrant integration has fallen behind other policy areas in embracing an evidence culture and suggests ways to remedy this lag. It first examines recent progress and key gaps in this area, and then maps the obstacles that continue to hinder an evidence revolution in integration policy. The brief concludes with recommendations for creating an environment in which evidence-informed integration policymaking can thrive, including through the effective use of pilot projects, targeted funding, stakeholder engagement, and capacity-building initiatives.
Topic:
Migration, Law, European Union, Immigrants, Integration, and Immigration Policy
Political Geography:
Europe

459. Reassessing Recruitment Costs in a Changing World of Labor Migration

Author:
Kate Hooper
Publication Date:
11-2022
Content Type:
Policy Brief
Institution:
Migration Policy Institute (MPI)
Abstract:
Recent years have seen national governments, multilateral organizations, civil society, and private-sector groups take steps to promote the fair and ethical recruitment of migrant workers, including efforts to reduce or eliminate recruitment costs. High recruitment costs can result in workers taking on a financial burden that can only be serviced through high-interest loans or debt bondage, placing them in a more vulnerable position and curtailing the income they can then save or send to loved ones via remittances. Still, progress to address recruitment costs has been uneven to date, and the pandemic has been a major setback. The public-health crisis has seen some existing costs rise or fluctuate wildly and new ones emerge (e.g., fees associated with COVID-19 testing and quarantine), with particularly pronounced effects in low- and middle-skilled sectors and informal employment. This has put working abroad out of reach for some would-be migrants while exposing others who travel abroad for work to new risks. This policy brief explores how the pandemic has affected costs for migrant workers at every stage of their journey, with a focus on new public-health measures and other additional expenses. It also reflects on what these developments mean for future efforts to promote fair and ethical recruitment. The brief is the first publication resulting from a multiyear research partnership between MPI and the SDC’s Thematic Section Migration and Forced Displacement to support the development of global solutions for migration-related challenges.
Topic:
International Cooperation, International Organization, Labor Issues, Governance, Employment, Economy, COVID-19, Recruitment, Immigration Policy, and Recession
Political Geography:
Global Focus

460. Russia’s Ill-Fated Invasion of Ukraine: Lessons in Modern Warfare

Author:
Seth G. Jones
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies
Abstract:
Russia has failed to achieve most of its objectives in Ukraine because of poor military planning, significant logistical problems, low combat readiness, and other deficiencies, which undermined Russian military effectiveness. These and other challenges—including Ukrainian military efforts and Western aid—severely impacted Russian air, ground, cyber, and maritime operations. Russia’s failures will force the Russian military to fundamentally rethink its training practices, organizational structure, culture, logistics, recruitment and retention policies, and planning efforts. Nevertheless, Russia is still attempting a de facto annexation of parts of eastern and southern Ukraine that it controls.
Topic:
Security, Military Strategy, Conflict, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine