Hallyu and Economic Outcomes in Sri Lanka: An ARDL Approach

South Korean popular culture, widely known as Hallyu, has expanded globally and gained increasing prominence in Sri Lanka through K-dramas, K-pop, fashion, cuisine, and language learning. Despite this rapid diffusion, limited empirical research has examined its economic implications within South Asia. This study investigates the long-run and short-run effects of Hallyu-related factors and key macroeconomic variables on Sri Lanka’s economic performance. Using annual data from 2004 to 2023, the analysis employs the Autoregressive Distributed Lag (ARDL) approach, incorporating GDP, FDI, imports from Korea, exchange rates, inflation, and Google Trends data as a proxy for public interest in Korean content. Results reveal a positive association between Hallyu-related factors and Sri Lanka’s economic activity, and the ARDL bounds test confirms long-run cointegration. Long-run estimates identify FDI and imports from Korea as significant drivers of economic growth, whereas inflation exerts a negative effect; exchange rate fluctuations and public interest in Korean content are insignificant in the long run. In the short run, FDI, imports, and Google Trends data positively influence GDP, while exchange rate volatility has a negative impact. The error correction term indicates rapid adjustment toward long-run equilibrium. The findings underscore the potential of Hallyu-driven cultural engagement and strengthened Korea–Sri Lanka economic ties to stimulate growth, offering implications for trade partnerships, cultural cooperation, and sustainable economic development.