The Bank of Korea announced on August 8 that South Korea’s GDP volatility is falling more rapidly than the average of OECD member countries. The GDP volatility is one of those indicators that show the pace of economic growth of a country.
The central bank divided the GDP volatility for 2010 to 2017 by the GDP volatility for 2000 to 2007. The calculated average was 0.9 on the part of 35 OECD member countries while the calculated value stood at 0.5 for South Korea.
The result was 1.5 for Japan, whose economic growth has accelerated since 2010. It was followed by Sweden (1.4), Italy (1.1), Britain (1.0) and the United States (0.8). This means South Korea is currently the weakest in terms of economic vitality.
In South Korea, the volatility of private consumption dropped from 1.02 to 0.53 between the period of 2000 to 2007 and the period of 2010 to 2017. During the same period, that of capital investment fell from 4.46 to 4.19 as well.
The Bank of Korea explained that macroeconomic and microeconomic volatilities tend to simultaneously shrink in the South Korean economy. “In the United States, the propensity to consume and invest increased in the Great Moderation period of the mid-1990s to the late 2000s based on aggressive innovation in the corporate sector that added to expectations for economic expansion,” it said, adding, “On the contrary, South Korean enterprises’ activities for innovation are slowing down these days to cause the GDP volatility to drop.”