Endnotes

¹The data for Korea's export volumes, import volumes, and GDP have been obtained from the Bank of Korea Economic Statistics System (http://ecos.bok.or.kr/EIndex_en.jsp). Real effective exchange rates for Korea, Dubai crude oil prices, and world GDP growth rates have been obtained from Bloomberg, and real effective exchange rates for Japan from the IFS database.

²While a depreciation in the real effective exchange rate increases real exports, the impact of the nominal exchange rate on exports would also depend on the magnitude of exchange rate pass-through, that is, the extent to which exporters change export prices in response to exchange rate.

³We also considered the real effective exchange rate of the Japanese yen as an additional determinant of Korea's exports. The coefficient of Korea's real effective exchange rate, reer, increased to -0.43 in the estimation with the full sample, but remained insignificant in the non-crisis sample.

⁴The Dubai crude oil price was also considered as an additional determinant of Korea's imports. The coefficient of Korea's real effective exchange rate, reer, increased to 0.40 in the estimation with the full sample, but remained insignificant in the non-crisis sample.

⁵The net personal savings rate is the ratio between personal net saving and personal net disposable income. This excludes subsidies, taxes, social burdens and benefits, and other transfers from both gross saving and gross disposable income.

⁶Studies have shown that richer countries tend to save more than poorer countries, and faster-growing countries tend to save more than slower-growing countries. For example, Carroll, Overland, and Weil (2002) have shown that high growth leads to high saving in a habit formation setting where current consumption is determined by past consumption.

⁷A recent study by Park (2008) estimates that the benefits of more actively managing excess reserves are greater than 1% of GDP in many Asian countries.

⁸These figures are for current prices. If constant prices are used, the changes in services' share become even smaller.

⁹Lower productivity growth in the service sector relative to the manufacturing sector has been established since the seminal paper by Baumol (1967). Increasingly unbalanced growth across sectors induces labor force reallocation toward stagnant sectors, which might eventually slow down aggregate GDP growth. The fact that the Korean service industries have had relatively lower productivity growth is therefore not extraordinary. Nonetheless, the labor productivity growth differential between services and manufacturing has been much larger in Korea compared to other industrialized economies (see Lee 2005).

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