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Development of Business Composite Index in Seoul

Heeseok ParkㆍYoonhyi Jang

The Seoul’s GRDP has increased 1.9 times over the past 20 years from 213 trillion won in 1999 to 411 trillion won in 2019. However, the national share has decreasing by 3.4%P from 25.6% in 1999 to 22.2% in 2019. During the same period, the growth of Seoul’s sub-industry has increased in five industries: ‘Information and Communication’, ‘Financial and Insurance’, ‘Business Service’, ‘Health and Social Welfare Service’ and ‘Real Estate Industry’, but its of ‘Construction Industry’ has showed a declining trend.

The Seoul’s business composite index (CI) is established in two stages. In step 1, a baseline model consisting of 4 variables is established by referring to other local government’s cases. In step 2, an extended model reflecting the characteristics of Seoul’s regional economy is established by adding the consumption and financial sectors to the baseline model. Finally, the Seoul CI is established by comparing the two models with the national CI using cross-correlation analysis and concurrency test. The extended model consists of six indicators based on employment, production, sales, foreign trade, consumption and finance sectors. In detail, the six indicators has used ‘the number of employed person’, ‘the manufacturing production index’, ‘the large-scale retail sales index’, the amount of import’, ‘credit card usage’, and ‘deposit and bank loans’.
As a result of comparing the growth rate of the previous year for each indicator and the trend of the Seoul GRDP converted by month, the Seoul’s CI reflects the changes in the Seoul economy well. However, among the six indicators, the ‘large retail store sales index’ and ‘card usage’ data are available from 2010. For this reason, there are difficulties in calculating the Seoul’s CI of using long-term time series data. Seoul has a consumption-oriented economy. To be able to calculate Seoul’s CI in the future, it is important to continuously generate these two data