The restructuring of the Korean economy since 1986 and the onset of the financial crisis

2003 ◽  
Author(s):  
John McKay
Keyword(s):  
Financial Crisis ◽  
Korean Economy

The Korean Economic Adjustment to the World Financial Crisis

2011 ◽  
Vol 10 (1) ◽  
pp. 106-127 ◽  
Author(s):  
Deok Ryong Yoon
Keyword(s):  
Economic Growth ◽  
Financial Crisis ◽  
Foreign Exchange ◽  
Open Economy ◽  
Foreign Exchange Market ◽  
Global Financial Crisis ◽  
Initial Conditions ◽  
Exchange Market ◽  
International Liquidity ◽  
Korean Economy

The global financial crisis hit the Korean economy in two ways. First, the sudden reversal of capital flow dried up the domestic and international liquidity. Second, the global contraction of demand reduced Korea's export by over 40 percent in the fourth quarter of 2008. Consequently, the Korean currency depreciated sharply and the economic growth rate fell drastically. Even though Korea could not prevent the 2008 crisis, it was the first OECD country to escape the negative economic growth zone, possibly because of three reasons. First, Korea might have had better initial conditions than other economies thanks to the reform measures after the 1997–98 Asian financial crisis. Second, the Korean government has had significant experience in dealing with crises. Third, Korea had an international network of cooperation to establish swap arrangements of US$ 90 billion to stabilize foreign exchange market. Even though the Korean economy has become more resilient to future financial crises by learning from the crisis in 1997, the small open economy still has limited capacity to stabilize the financial market. Korea now faces a new issue, which is to learn from the global crisis on how to stabilize the foreign exchange market.

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