Analysis of Trade Creation and Trade Diversion Effects Between Korea and South/North Asia

ABSTRACT Korea has established various policies to expand trade between Southern Asia and Northern Asia, and an analysis of the impact of these policies is required. Hence, this study used a gravity model to estimate the impact of trade creation and diversion effects on Southern and Northern Asia, focusing on their trade relationships with Korea. The panel data for this study was collected from 47 countries, which included Korea, Northern Asia, Southern Asia and Korea's top 23 trading partners. Our study makes a significant contribution to the literature as it provides policy implications to support trade policies in South and North Asian countries. While some studies have examined the impact of free trade agreements among Asian countries, few have focused on the regional impact of trade between Southern Asia‐Korea and Northern Asia‐Korea. As such, our results offer valuable insights into the development of trade policies in these regions.