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The Effect of Globalization on Growth: Cointegration Analysis for the Sample of South Korea

1. Introduction Globalization is a multidimensional concept which covers economic, political and social fields. This term is generally defined as the integration of countries with outside world in terms of economic, social and politic relations (Açıkgöz and Mert, 2011, 713). Even though globalization concept originated from different disciplines, it is generally considered in economic terms. Globalization expresses a structure in which the integration of the economies of states takes place; capital, management, employment, knowledge, natural resources and their organizations become multinational, and the interdependence increases (Koçdemir, 2000, 154). Economic globalization, on the other hand, represents the liberalization of global capital and labor movement, and increase in multinational companies (Chang and Lee, 2010a, 154). The social dimension of globalization relate to effects on people's lives, work and family life. In addition, social globalization covers the integrity of security, culture and as well as families and communities. The contemporary effects of globalization first started to be seen by the foundation of United Nations after the World War II and Marshall aid (Eroğlu and Albeni, 2002, 23). One of the most important indicators of the development level of a country is economic growth. Globalization can affect growth in different countries in different ways. There are studies which suggest that globalization stimulate economic growth.1 In this context, Stiglitz (2004) states that globalization can be a powerful driving force in promoting economic growth for countries that manage globalization process in a positive way (Stiglitz, 2004, 482). Also, as expressed by Dreher (2006), the net effect of globalization on the welfare of the countries is positive.2 As stated above, besides the positive effects of globalization there are claims that it increases and promotes poverty3, worsens social and environmental conditions4. Studies in the literature show that globalization affects a country’s economic performance in many different ways and channels. Globalization can affect economic growth through technology, financial markets, openness and foreign direct investment (Marginean and Orestean, 2011, 209). The process between globalization and economic growth shall not only be perceived as remodeling of the international economies but also the expansion of national boundaries and to be integrated into a single system of world economy. This integration can also be defined as the learning process which is built on the foundation of strong communication channels at intergovernmental level (Chang et al., 2011, 422). In this respect, the learning process is high significance. Simmons and Elkins (2004) state this learning process as a factor that contributes to successful policy experience regardless of whether it is in any fields of fiscal, financial and economic development. They also state that it is possible to define these factors as the process of network and communication links’ getting ready (Simmons and Elkins, 2004, 175). The research on global integration in the literature often focuses on putting an end to the prevention of free trade in the world. These studies reflect a cohesive stance on environmental and political issues such as climate change, international migration. Based on this literature, globalization is also leading to the emergence of some key issues. For instance, economic and technological changes, the social aspect of life and policy issues are some of them. In other words, economic globalization is based on the emerging commercial behavior but also political and social integration (Chang et al., 2011, 423). In this context, not only economic but also social and politic aspects of globalization pose importance. Economic, social and political dimensions covered by the index of globalization were structurally stated by Dreher (2006) (Dreher, 2006, 1092). Accordingly, the increase in economic integration is moving parallel to the political and social integration in time. In this respect the different dimensions of globalization affect one another. The main objective of this study is to research the long and short-term relationships between growth and globalization considering structural breaks5 in the sample of South Korea. In choosing South Korea as sample, it is due to the fact that this country has similar historical process with Turkey. It is an undeniable fact that there are many lessons to learn for Turkey from South Korea which was appreciated by the world community for its activities especially in the last two decades. 2. Method In the study which covers the period from 1970 to 20126, the relationship between economic (ECO), social (SOC) and globalization as a whole (OVER), and growth (GDP) is researched. 3 different models in this direction were established. Performing logarithmic transformation of expressed sequence models were included in the model. It is intended to reduce the differences between series with logarithmic transformation. GDP (with 2005 constant prices), which is one of the series included in model, was taken from Penn World Table (Version 8.0) prepared by Feenstra et al. (2013), and ECO, SOC and OVER indexes were quoted from KOF Globalization Index7. In this study, structural break test of the dependent variable was performed and then series were subjected to pre-tests, then cointegtration, long term and short term analysis. 3. Results and Discussion As a result of co-integration analysis conducted by Engle and Granger, it was found out that economic, social and all globalization index are co-integrated with growth. Also, in the long-term analysis performed by the dynamic OLS method it was concluded that all three indices affect growth in a positive way. 4. Conclusion According to analysis results, it can be suggested that South Korea significantly benefit from economic, social and globalization as a whole. It is possible to propose that economic, social and integration as a whole with outside world has a significant role in South Korea’s growth.

Anahtar Kelimeler
The Effect of Globalization on Growth: Cointegration Analysis for the Sample of South Korea


Adres :Çankırı Karatekin Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, Uluyazı Kampüsü, Merkez-ÇANKIRI/TÜRKİYE
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