○ Exchange rate uncertainty—a state during which it is difficult to predict how exchange rates will fluctuate, implying not just simple volatility but also uncertainty regarding direction, magnitude, and timing—is negatively impacting all economic activities subject to overseas factors. Furthermore, the industrial structure of Jeonbuk Special Self-Governing Province, centered on traditional manufacturing with small-scale enterprises and a lack of industrial diversification, is particularly vulnerable to economic fluctuations and external shocks, increasing its likelihood of being significantly affected by exchange rate uncertainty. It is, therefore, of the utmost importance to address the impact of such uncertainty on exports from Jeonbuk by preparing effective countermeasures.

○ To analyze this impact, the study first estimated the exchange rate uncertainty using a GARCH model that reflected its time-varying characteristics, with the results showing significant increases during the early 2000s IT bubble burst and credit card crisis, the 2008 financial crisis, the 2020 COVID-19 pandemic, and the 2022 Legoland crisis. Such increases in exchange rate uncertainty raise the risk involved in conducting trade activities, potentially shrinking trade transactions between countries—a situation that is particularly relevant for Asian countries, which heavily rely on the dollar as a settlement currency.

○ To analyze the impact of exchange rate uncertainty on exports more specifically, we applied the DCC-GARCH model, with the results indicating a negative effect on exports from Jeonbuk that intensified as exchange rate uncertainty increased. Notably, during the 2008 financial crisis, exchange rate uncertainty surged sharply with a dramatic increase in the negative impact. Furthermore, while a similar pattern was seen in the impact of exchange rate uncertainty on Gyeongbuk and Gyeongnam, which have comparable industrial structures, Jeonbuk was significantly more affected than other regions. Meanwhile, we used a VAR model to distinguish and analyze the period of the Jeonbuk industrial crisis (July 2017), allowing us to dynamically analyze Jeonbuk’s export response to exchange rate uncertainty shocks. The results showed that across the entire analysis period (January 2000 to July 2025), exchange rate uncertainty negatively impacted exports from Jeonbuk with a three-month lag, with the effect increasing for up to ○ five months before dissipating. In the pre-industrial crisis period (January 2001 to June 2017), exchange rate uncertainty had a significantly larger negative impact on exports from Jeonbuk than in the overall period, with the impact peaking after three months, extending to five months, and then decreasing. In the period after the industrial crisis (July 2017 to July 2025), exchange rate uncertainty consistently had a negative impact, which extended to two months before decreasing.

○ Based on these results, Jeonbuk Special Self-Governing Province must transition its export structure from a focus on parts and intermediate goods to finished products and high-value-added items in order to alleviate price pressure caused by exchange rate uncertainty and increased export price elasticity. Long-term, it should diversify its export industry structure by expanding its export base to new industries, such 

○ as advanced materials, eco-friendly mobility, and biomaterials. Furthermore, it is necessary to diversify export markets by moving away from a China- and Japan-centric focus and exploring emerging markets in Southeast Asia, the Middle East, and Europe. Furthermore, to mitigate exchange rate risks tied to specific currencies, a multi-currency payment system must also be established. Concurrently, active support is needed to enable SMEs, which have low resilience to exchange rate uncertainty, to easily utilize hedging tools. This includes providing exchange rate risk consulting and policy financial support, reducing forward exchange transaction fees in collaboration with the Korea Development Bank and Korea Trade Insurance Corporation, and expanding foreign exchange insurance products.

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