The Terms of Trade Facing South Korea with Respect to Its Trade with LDCs and DMEs

This paper examines the terms of trade for South Korea's trade in manufactures with developed and developing countries separately, using primary data for the construction of indices which cover the period 1976-95. During this period, there was no significant trend in South Korea's net barter terms of trade with developed market economies. However, income terms of trade rose, suggesting that South Korea has increased the volumes of her manufactured exports to DMEs without experiencing a fall in their relative price. With regard to trade in manufactures with developing countries , the paper finds a significant increase in South Korea's net barter terms of trade in manufactures and an even greater increase in the income terms of trade. In this case South Korea has seen a relative increase in prices at the same time as she has been able to increase the volume of manufactured exports to developing countries.