The Relationship between Economic Activity and Telecommunications Service Expenditure

In this paper, we investigate the co-movements of the real GDP cycle and the telecommunications service expenditure cycle over 1980 through 2000 in Korea. We used several appropriate statistical tools to characterize and to compare the co-movements between the two aforementioned variables. The statistics presented in this paper are common, easy to Interpret and capture important visual, descriptive information and the dynamics of data that would be lost if one focused only on the unconditional correlation coefficients of de-trended data. This paper examines four possible characteristics for the co-movements of real GDP and telecommunications service expenditure in Korea. The first is that in low frequency, the cyclical movements in telecommunications service expenditure are very similar to the cyclical movements in real GDP, The second is that in the high frequency, the estimated stationary cyclical telecommunications service expenditure is not closely related to the estimated stationary cyclical real GDP. Third, according to co-spectra analysis, the strong relationships between the variables are found in the mid-term frequency and as such this empirical finding has important implications for telecommunications policy and telecommunications service implementation strategies. Finally, in the short-term period, our empirical results support telecommunications network theories such as path dependence properties, lock-in, positive feedback externality, and network externality.