The Economy and Political Elections in Korea

다국어 초록 (Multilingual Abstract)

The purpose of this dissertation is to examine whether or not the political business cycle exists in Korea. To the author's knowledge, this is the first time such a study has been conducted using Korean data. In this research, I analyze the relationship between various macroeconomic variables and elections (presidential elections, National Assembly elections, local elections, referenda) in Korea between 1963 and 2000.
Since it is generally accepted knowledge that the 1987 presidential election held during President Chun Doo Hwan's term in office might be called the first democratic election in Korean history, it is meaningful to subdivide the time span to accommodate several democratic factors. In consideration of the periodicity of elections, the relevance of democracy to elections, and the importance of the politico-economic relationship, I check for the existence and magnitude of the Political Business Cycle in three different time spans using quarterly data: first, the whole period (1963-2000), second, before democratization (1963-1981), and third, after democratization (1982-2000). I find some evidence of the PBC after Korea was democratized. In this period, the money supply (monetary base) was used to boost the economy before elections. Moreover, the magnitude of the PBC was strong in presidential elections, referenda, and National Assembly elections.
Following this analysis, I concentrate on the after-democratization period (1982-2000). Here, I investigate the existence and magnitude of the PBC using monthly data instead of quarterly data. I also subdivide the entire period by different presidencies: Chun Doo Hwan's presidency (1982-1987), Rho Tae Woo's presidency (1988-1992), Kim Young Sam's presidency (1992-1997), and Kim Dae Jung's presidency (1998-2000). The PBC was found to be strong during Chun Doo Hwan's presidency. Further, the monetary base increased remarkably before the presidential elections. A boom of construction was also found before the National Assembly elections.
To check for the presence of the PBC, I divided the relevant economic variables into two categories: one for economic outcome variables, like GDP growth rate and inflation, and the other for economic instrument variables, such as money supply and government expenditure. This is useful because economic outcomes may not always respond to the original intention of the economic policy makers.
The autoregressive error model, which is based on OLS, is used in this dissertation for purposes of estimation. This procedure initially calculates OLS estimates and then GLS estimates. If these two estimates are different, the error term is regressed again to correct for autocorrelation and heteroskedasticity. Most of data come from the International Monetary Fund's financial series CD-Rom data set.

목차 (Table of Contents)

• ACKNOWLEDGEMENTS = ii
• ABSTRACT = iii
• LIST OF TABLES = v
• LIST OF FIGURES = vii
• TABLE OF CONTENTS = viii
• Chapter 1 Introduction = 1
• 1.1. Motivation = 1
• 1.2. Major questions = 3
• Chapter 2 Literature Review = 5
• 2.1. Brief overview of theories of the business cycle = 5
• 2.2. Brief overview of the political business cycle and the political economy = 6
• 2.3. Literature arguing the existence of the political business cycle = 7
• 2.4. Is the central bank independent or apolitical? Mixed arguments = 13
• 2.5. Literature arguing that the political business cycle does not exist = 15
• 2.6. Literature for Partisan theory rather than the PBC theory = 17
• 2.7. Literature arguing that the economy determines the political election = 18
• Chapter 3 Conceptual Framework = 20
• 3.1. Downs = 20
• 3.2. Nordhaus = 23
• 3.3. Historical background of Korea = 33
• 3.4. Empirical Strategy = 41
• Chapter 4 The Empirical Framework 1 = 46
• 4.1. Model specification = 46
• 4.2. Coverage of elections = 48
• 4.3. Estimation method = 49
• 4.4. Data description = 49
• Chapter 5 Statistical Results and Interpretation 1 = 51
• 5.1. The economy and presidential elections = 51
• 5.2. The economy and National Assembly elections = 58
• 5.3. The economy and local elections = 64
• 5.4. The economy and referenda = 66
• 5.5. Conclusion = 73
• Chapter 6 The Empirical Framework 2 = 74
• 6.1. Model specification = 74
• 6.2. Coverage of elections = 76
• 6.3. Data description = 77
• Chapter 7 Statistical Results and Interpretation 2 = 79
• 7.1. The economy and presidential elections = 79
• 7.2. The Economy and National Assembly elections = 89
• 7.3. Conclusion = 103
• Chapter 8 Summary and Concluding Remarks = 105
• References = 109
• VITA = 113