A Study on the Effects among ESG Index, Export Volume and Import Volume between the Federal Republic of Germany and Korea
Authors:   Asia-Europe Perspective Association, Yim Byung-Jin , Kie Seuk-Do 
Published: December 2024

This article examines the mutual effects among ESG(Environmental, Social, and Governance) monthly data, the export volume from the Federal Republic of Germany to Korea, and the import volume from Korea to the Federal Republic of Germany. The focus is on analyzing the relationship between these factors and their potential impact on each other. This study used 158 monthly data from January 31, 2010 to February 28, 2023 for the study on the effects among the ESG monthly data, the Federal Republic export volume and import volume between the Federal Republic of Germany and Korea. A literature review was also conducted to supplement the empirical research method. The stability of the time series was determined using a unit root test on the monthly time series data of the ESG data, the Federal Republic export volume and import volume between the Federal Republic of Germany and Korea. The study also employed the variance decomposition method of prediction error using a VAR model of the monthly time series data of the ESG data, the Federal Republic export volume and import volume between the Federal Republic of Germany and Korea, impact response analysis of the ESG index in Korea, export volume and import volume between the Federal Republic of Germany and Korea for mutual influence analysis among variables. All the monthly time series data analyses of the ESG index in Korea, export volume and import volume between the Federal Republic of Germany and Korea were performed using Eviews version 7.0. The important results of the study on the ESG index in Korea, export volume and import volume between the Federal Republic of Germany and Korea are summarized as follows.
The study yielded several important results. Firstly, stability tests for the level variables of the ESG index in Korea, export volume and import volume between the Federal Republic of Germany and Korea showed instability, whereas stability was observed for the difference variable data. Secondly, an analysis of the data reveal several noteworthy correlations.
There exists a roust and positive correlation of 0.946829 between exports and imports to Germany, signifying a strong interdependence. Furthermore, imports to Germany exhibit a moderate positive correlation of 0.548320 with the Environmental, Social, and Governance(ESG) index, while exports to Germany share the same correlation value of 0.548320 with the ESG index, indicating a moderate positive connection as well. Overall, the correlation between the ESG index and both exports and imports to Germany is measured at 0.539716, representing a moderate positive correlation. Thirdly, the results of the Granger causality test demonstrate significant findings. Specifically, there is evidence of Granger causality between changes in the quantity of imports from and exports to Germany at a significance level of 1%. Furthermore, changes in the ESG index exhibit a Granger causality in relation to changes in exports to Germany at the 5% significance level. Fourthly, an examination of variance decomposition reveals insightful patterns. For exports to Germany, a substantial portion exceeding 87% is explained by inherent factors, emphasizing their self-explanatory nature in forecasting. Imports to Germany, on the other hand, demonstrate a self-explained portion of importance in forecasting of 17% or more. Notably, exports to Germany contribute to over 80% of the variance in imports, underscoring their significant explanatory role. Additionally, the ESG index contributes more than 3% to the variance in exports to Germany. In the context of imports to Germany, the ESG index explains merely 1% of the variance, with the majority of explanatory power originating from exports to Germany. In the variance decomposition of the ESG index, over 96% of its predictive power is self-explained, while exports and imports to Germany contribute more than 2% and 1%, respectively.