Erratum: How US Fiscal and Monetary Policy affect the GDP of Countries with Fixed and Flexible Exchange Rate Regimes: Estimates using Korean Data from 1963 to 2022", (Journal of Economic Integration, 39, 1, (86-106), 10.11130/jei.2024002)

The author made a mistake in the above paper, and he is solely responsible for this mistake - neither the journal nor its referees are to blame. He regrets this mistake and apologizes for it. The mistake was to calculate the RTPLS estimate as (Formula presented) was used as the dependent variable when estimating equation (14). This mistake noticeably changed the empirical estimates, but it did not change the major conclusions of the paper. The only parts of the paper affected by this mistake were the last paragraph of Section 3 and most of Section 4. The corrected text is given below. The RTPLS process was applied four times - once for each of the equations (1) through (4) using the data that corresponds to each individual equation. The RTPLS estimates produced are given in Table 1 and depicted in Figures 5 and 6. All of the RTPLS estimates were significantly different from zero as calculated by equation (15) in Appendix I except for d(Korea’s GDP)/d(US’s M1) in some or all of 1992 to 1993 and 2015 to 2018. These two periods of exceptions are historically interesting. After 31 years of leaders connected with the military, South Korea elected a civilian president in 1992. Also in 1992, South Korea established diplomatic relationships with China for the first time since the Korean war. In 2015, Middle East Respiratory Syndrome (MERS) spiked in South Korea with 186 cases and 38 fatalities. In December 2016, South Korean President, Park Geun-Hye was impeached by the National Assembly. The Constitutional Court upheld this impeachment in March of 2017. She was sentenced to 24 years in prison in 2018. IV. Discussion The numbers given in Table 1 and depicted in Figures 5 and 6 can be interpreted as follows. The value of -30.511 for d(Korea’s GDP)/d(US’s G) in the third quarter of 1962 means that a one million dollar increase in US government consumption was correlated with a drop of 30.511 million won of Korea’s GDP (Korean won/US dollar in 1962 = 125), holding constant Korea’s own fiscal and monetary policy and holding constant US monetary policy. Likewise, a one unit increase in the US money supply index in the third quarter of 1962 was correlated with a 15.786 million won increase in Korea’s GDP, holding constant Korea’s own fiscal and monetary policies and holding constant US government consumption. Because the US money supply index in the third quarter of 1962 was 4.8475, a one unit increase in this index is equivalent to a 20.6 percent increase in the US’s money supply (1/4.8475). The variations in the RTPLS estimates shown in Table 1 and Figures 5 and 6 are due to omitted variables. These omitted variables could include changes in the degree of market power, adjusting terms of trade, changes in the economic size of countries and changes in the degree that countries are connected to the international market, changing nominal rigidities interacting with other changing distortions, and/or inflation shocks (Corsetti and Pesenti, 2001, Benigno and Benigno, 2006, and Obstfeld and Rogoff, 2002). These omitted variables could also include changes in the imperfections of capital markets, changes in how expectations are formed, changes in the policy multipliers of different countries, changes in the degree of capital mobility between countries, and/or changes in the interactions of labor unions across international borders (Carlberg, 2005). Furthermore, some of the RTPLS estimate variation could be due to changing targets for monetary policy in different countries (Berger and Wagner, 2006) or changes in which policy makers can manipulate prices and by how much (Kim, 2023). (Table presented) Most of the forces mentioned in the previous paragraph are likely to change slowly, thus, their influence are likely to be reflected in the general trends shown in Figures 5 and 6. These figures show that d(Korea’s GDP)/d(US Money Supply) and d(Korea’s GDP)/d(US Government Consumption) were on general upward trends from 1962 to 1979. Both of these multipliers plummeted in 1980 immediately after the October 26, 1979 assassination of President Park Chung Hee. Both multipliers then increased between 1981 and 1988 and fell between 1988 and 1992. Although less sustained than the changes mentioned above, both multipliers fell during the world recessions of 1975, 1982, 1991, and 2009. The covid recession of 2019-2020 caused a plummeting of both multipliers. The value of d(Korea’s GDP)/d(US Money Supply) between the third quarter of 2018 and the first quarter of 2020 fell from -11.941 to -50.012 for a 319 percent decline. Meanwhile the value of d(Korea’s GDP)/d(US Government Consumption) fell from 148.92 to 82.038 for a 45 percent decline. Both multipliers were affected by the Asia financial crisis of 1997-1998, which led to Korea floating its currency on December 24, 1997.