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This study aims to analyse the impact of the stock market on Korea’s import and export trade, mainly through the MSCI Global and KOSPI indices as stock market proxies, and Korea’s total imports, total exports, import price indices, economic sentiment indices, and business surveys indices as proxies for import and export trade. Using a time-varying vector autoregression (TVP-VAR) model, it was found that the MSCI Global and KOSPI indices have a short-term positive effect on Korea’s total imports and total exports, but the KOSPI has a negative effect on total exports. For price indices, the MSCI Global Index has a positive effect on the import price index, while the KOSPI has a negative effect at a 1-month lag. For the export price index, the MSCI Global Index has a negative impact at 1-month lag but a positive impact at 3-month lag. For the Economic Sentiment Index, both indices have a negative impact at the 1-month lag. For the business survey index, both have a positive impact. In addition, the study analyses data from three different points in time: the US subprime crisis in 2008, the European credit crisis in 2015 and the New Crown epidemic in 2020. The results show that in all three financial events, the MSCI Global Index had a positive impact on Korea’s total exports and imports in the short term, while the KOSPI had a positive impact on total imports and a negative impact on total exports. For the import price index, the MSCI Global Index has a short-term positive impact while the KOSPI has a negative impact. For the export price index, both indices have a negative impact during financial events. For the economic sentiment index, the MSCI Global Index has a negative impact in the first lag and turns to a positive impact in the second lag, while the opposite is true for the KOSPI. Finally, in all three financial events, both indices had a short-term positive impact on the business survey index.
Yu et al. (Tue,) studied this question.