Date of Award

Spring 5-11-2018

Level of Access Assigned by Author

Open-Access Thesis

Language

English

Degree Name

Master of Arts (MA)

Department

Global Policy

Advisor

Kristin Vekasi

Second Committee Member

Seth Singleton

Third Committee Member

Muhammad Asif Nawaz

Abstract

Through all chapters, this thesis is finding answers to the following questions: Why are political relations and trade important to South Korea? What are current problems that South Korea confronts in political relations and trade? How are political relations of South Korea with the trading partners and North Korea? Does South Korea’s political relations with the four countries have impacts on South Korea’s bilateral trade with the countries? If it does, how does it affect South Korea’s trade? In answering these questions, this thesis demonstrates how South Korea’s political relations influence South Korea’s bilateral trade as well as presents trade relationship between countries still follows political flags.

As an empirical analysis, this research builds on two models, a vector auto-regression (VAR) model and a gravity model. The VAR model is a decent method to find the degree of the impact at different time periods, which meets one of the purposes of this study. As the most common and popular way to estimate relations between politics and trade, the gravity v model assumes that the bilateral trade is proportional to the size of economy, personal income and economic activity in both countries and, in reverse, it decreases with resistance such as physical distance between countries (Herge, Oneal and Russett, 2010; Du et al., 2017). Through this analysis, this study finds that South Korea’s political relationship with China barely affects its bilateral trade with China. On the other hand, South Korea’s political relations with Japan, Russia, and North Korea have certain impacts on its bilateral trade with the countries.

As a result, South Korea’s political relations with China, Japan, Russia, and North Korea do affect South Korea’s trade with these countries. However, the results are mixed, and it is difficult to make absolute statements about how political relations affect trade. The significance of political impacts on trade depends on the trading partner, and there are also differing results for imports and exports. In addition, the results reveal that the magnitude and duration of the impacts are also differentiated by trading partner. Consequently, South Korea’s political relations with the four countries are reflected in South Korea’s trade relations partially or entirely by trading partners, which means there could be other factors to affect South Korea’s trade with the countries. Other potential factors include the importance of the foreign market in South Korea’s exports and imports or specific features of the South Korean industry. These variables could be important potential covariates along with political relations.

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