Abstract
This paper analyzes whether economic growth of the Seoul Metropolitan Area (SMA) has a negative effect on other regional economies in Korea. The cause-effect relationship of economic growth between SMA and other regions in Korea (ROK) is analyzed with respect to regional potential outputs and output gaps. The regional potential output is derived from production function and NAIRU (Non-Accelerating Inflation Rate of Unemployment). The estimated results indicate that there are no significant cause-effect relationships on regional potential output between SMA and ROK. The output gaps, on the other hand, have a positive relationship between the two regions. The net population inflow to SMA increases the output gap of SMA and reduces the output gap of ROK.
JEL Classification: R10, R58
