Predicting the Interconnection between Trade Balance and Economic Growth in the Textile and Clothing Industry -A VARX Model Approach-

International trade in the clothing industry has contributed significantly to South Korea’s economic development. This study examines the interplay between textile and clothing exports, imports, and gross domestic product (GDP) growth from a macroeconomic perspective using a model with vector autoregressive with exogenous variables (VARX). The findings indicate that GDP growth negatively impacts textile and clothing exports but is positively correlated with imports. Furthermore, GDP growth from one and two years prior negatively affects current exports while positively influencing imports. Macroeconomic indicators, including the consumer price index, private consumption index, and producer price index, significantly impact the textile and clothing trades. By contrast, the won/dollar exchange rate and the Bank of Korea’s base interest rate do not appear to exert any substantial effect. An unexpected impulse from GDP growth strongly affects the status of textile and clothing imports. Predictions for the future indicate stable GDP growth over the next five years, with high volatility anticipated in the clothing industry’s trade balance. This study applies endogenous growth theory to the global clothing trade, yielding theoretical insights, and offers empirical guidance for government agencies wishing to support domestic clothing trade firms.