institution. 64 0 obj<>stream 7483 Issued in January 2000 NBER Program(s):International Finance and Macroeconomics. %%EOF 0000001175 00000 n 0000004661 00000 n But such early actions taken 0000002233 00000 n 0000003752 00000 n Finally, the Ministry of Finance and Economy's 4. @��2 1�aP�Y���g��V���l�H3�7@� �. As a result of the financial crisis, currency values, stock markets, and other asset values in many Southeast Asian countries collapsed. About 0000001054 00000 n When the Korean crisis first broke out in November 1997, ... Before the financial crisis, the Korean economy and its form of governance were heralded as one of the most successful examples in capitalist economic history. And at the same time, as we let our exchange rate to increase, our export we rebounded, faced only. This is an example of couple of big conglomerates in Korea, and their effort to reduce the debt equity ratio. Korea's Economic Crisis of 1997. 0000004989 00000 n end of 1997. 0000067491 00000 n Let's take a look at all those side effect and some controversial issues ofthe crisis in the next lecture. from two sources. 1. 0000096837 00000 n 0000000016 00000 n 0000107329 00000 n strategy exceeded 400 % by the end of 1997, and the average ratio for the 30 situation, resulted in the shortage of capital which futher increased the number R����v�.8�10ȁ-� �e8&020V3(3H0� U-8`����:�. expansion in size rather than to earn profits. 0000002413 00000 n Module 13. 0000068582 00000 n }��4l��0 Causes of the Korean Financial Crisis: Lessons for Policy Joon-Ho Hahm, Frederic S. Mishkin NBER Working Paper No. institutions damaged Korea's credibility abroad, leading to foreign capital reserves were nearly depleted, and to prevent the total collapse of the economy, H��VKo�6��W�Q*"F�HJ�S�$-�6����E�L��ȒA����w��lo�- 0000001710 00000 n You will be able to explain how the miracle of the Korean economic development was made possible. endstream endobj 96 0 obj 142 endobj 80 0 obj << /Type /Page /Parent 72 0 R /Resources 81 0 R /Contents 87 0 R /MediaBox [ 0 0 595 842 ] /CropBox [ 0 0 595 842 ] /Rotate 0 >> endobj 81 0 obj << /ProcSet [ /PDF /Text ] /Font << /TT2 83 0 R /TT4 85 0 R /TT6 88 0 R >> /ExtGState << /GS1 90 0 R >> /ColorSpace << /Cs6 86 0 R >> >> endobj 82 0 obj << /Type /FontDescriptor /Ascent 891 /CapHeight 656 /Descent -216 /Flags 34 /FontBBox [ -558 -307 2034 1026 ] /FontName /MDJLDB+TimesNewRoman,Bold /ItalicAngle 0 /StemV 160 /XHeight 0 /FontFile2 92 0 R >> endobj 83 0 obj << /Type /Font /Subtype /TrueType /FirstChar 32 /LastChar 233 /Widths [ 250 0 0 0 500 833 778 180 333 333 0 564 250 333 250 278 500 500 500 500 500 500 500 500 500 500 278 278 0 564 0 444 921 722 667 667 722 611 556 722 722 333 389 722 611 889 722 722 556 0 667 556 611 722 722 944 0 722 611 333 0 333 0 500 0 444 500 444 500 444 333 500 500 278 278 500 278 778 500 500 500 500 333 389 278 500 500 722 500 500 444 0 0 0 0 0 0 0 0 0 0 1000 0 0 0 0 0 0 0 0 0 0 0 333 333 444 444 350 500 1000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 722 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 444 ] /Encoding /WinAnsiEncoding /BaseFont /MDJKOJ+TimesNewRoman /FontDescriptor 84 0 R >> endobj 84 0 obj << /Type /FontDescriptor /Ascent 891 /CapHeight 656 /Descent -216 /Flags 34 /FontBBox [ -568 -307 2028 1007 ] /FontName /MDJKOJ+TimesNewRoman /ItalicAngle 0 /StemV 94 /XHeight 0 /FontFile2 91 0 R >> endobj 85 0 obj << /Type /Font /Subtype /TrueType /FirstChar 32 /LastChar 146 /Widths [ 250 0 0 0 500 1000 0 0 333 333 0 0 250 333 250 0 500 500 500 500 500 500 500 500 500 500 333 0 0 0 0 0 0 722 0 722 722 667 611 0 0 389 0 778 667 944 722 0 611 0 722 556 667 722 0 1000 0 0 0 0 0 0 0 0 0 500 556 444 556 444 333 500 556 278 333 556 278 833 556 500 556 0 444 389 333 556 500 0 500 500 444 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 333 ] /Encoding /WinAnsiEncoding /BaseFont /MDJLDB+TimesNewRoman,Bold /FontDescriptor 82 0 R >> endobj 86 0 obj [ /ICCBased 94 0 R ] endobj 87 0 obj << /Length 1129 /Filter /FlateDecode >> stream Economic Projections 8. It began as a currency crisis when Bangkok unpegged the Thai baht from the U.S. dollar, setting off a series of currency devaluations and massive flights of capital. And in most of the cases, Korean commercial banking sector had BIS ratio well below 8% which was kind of the guideline provided by the IMF. 1997 Asian Financial Crisis I: In the end of 1997, the Korean economy fell into foreign exchange crisis and had to be bailed out by IMF (international monetary fund). society as a whole came to accept the so-called "too-big-to-fail" institutions in an attempt to minimize the effects of a worsening economic Now, let's take a look at how Korean economy has recovered from the crisis by implementing four major reforms. 0000001255 00000 n When companies get into trouble, they create unemployment. equity-financed growth. Us / Search, Korean Economy - The Asian financial crisis, like many other financial crises before and after it, began with a series of asset bubbles. 0000254465 00000 n 0000004330 00000 n flight. With a personal account, you can read up to 100 articles each month for free. The causes of the crisis are identified in four different sectors of the Korean economy: the real sector, the banking sector, the securities market and the foreign exchange market. So we did everything that we can to accumulate foreign exchange, such as increasing export and decreasing import so that we can have current account surplus. trailer << /Size 97 /Info 76 0 R /Root 79 0 R /Prev 211782 /ID[] >> startxref 0 %%EOF 79 0 obj << /Type /Catalog /Pages 73 0 R /Metadata 77 0 R /PageLabels 71 0 R >> endobj 95 0 obj << /S 150 /L 206 /Filter /FlateDecode /Length 96 0 R >> stream H�b```"oV��B ce`a�`@_�,p0Obj�} ҡ�,Þ� l���(;pv01t;0���Qd?�_#Ͼ�}��� �vQ{qeϯ}֪ye�ή��{.,��1C�\Jv큥vBWab���~�%��P����,��V�U��o� �qcg@�k��׵'�5eyP�3-�}�����9��uߓ���Yw�:~��4�3{� government, in turn, implicitly provided insurance against project failures. 3. While the external debt to GDP ratio reached approximately Recovery Measures 5. who was also nearing the end of his term in office, could not provide necessary And all of these effort finally paid off and Korea could recover fairly rapidly from the crisis. Current Situation - Political & Economical 6. JSTOR is part of ITHAKA, a not-for-profit organization helping the academic community use digital technologies to preserve the scholarly record and to advance research and teaching in sustainable ways. 0000002402 00000 n As we create massive bankruptcies right after the crisis, our labor market went into big chaos. possible external liquidity problems. 0000002953 00000 n Such deficiencies in Korea's economic structure were the ABSTRACT The paper examines from a recent historical perspective the changing roles of the state in governing and regulating South Korea's market economy. ©2000-2020 ITHAKA. The 1997–98 Asian financial crisis began in Thailand and then quickly spread to neighbouring economies. Political and Economical History 2. This is the unemployment rate before and after the crisis. Module 13. Great course, because you can learn about different policies and the neccesity to do changes when something is not working, due to nothing is going to be the best forever. It shows that the Korean data is consistent with this explanation of … 0000001379 00000 n But, in July, the … 0000001480 00000 n the government announced that it would seek emergency loan from the It then swept over East and Southeast Asia. Case Study - Financial Crisis of 1997 - South Korea 1. structure and insufficient foreign exchange reserves. occurring in Korea was seen as a part of a regional contagion effect deriving provided by the Korean Embassy. And the key indicator in the financial sector was BIS ratio. Korea's credibility developed into a full-fledged foreign exchange crisis at the 0000002525 00000 n Due to the highly leveraged financial structure, largely driven by However, in this process, many companies who could not cope with this change at the trouble. 0000000788 00000 n 78 0 obj << /Linearized 1 /O 80 /H [ 820 255 ] /L 213470 /E 99665 /N 24 /T 211792 >> endobj xref 78 19 0000000016 00000 n Throughout the 1990s, the structure of the Korean economy has The corporate sector was actually the reason of financial sectors trouble. In 1997, due to the aftereffect of the Asian Financial Crisis, Korea came close to bankruptcy, left with huge debts. Rapid increases in private sector borrowings size of outstanding non-performing bank loans at an astounding speed. 0000001388 00000 n This is an excellent background of Korea's History in economic area. 1997 Asian Financial Crisis I: In the end of 1997, the Korean economy fell into foreign exchange crisis and had to be bailed out by IMF (international monetary fund). become increasingly vulnerable to unfavorable shocks. profits of Korean corporations in 1997. legacies of its past development process. and currency markets. Under such a belief, the business firm's main concern became The crisis originated in Thailand. including both direct borrowings of corporations and bank borrowings to finance © 1999 ANU Press Almost 2 million unemployed people, they get on the street. THE 1997 FINANCIAL CRISIS AND GOVERNANCE: THE CASE OF SOUTH KOREA Kwan S. Kim Working Paper #272 – March 2000. %PDF-1.2 %���� �4z8���z�԰�0nlps�ə3O��9g�̙?a橲*\�frЋ���e\A���C��H�l3u� And by doing so, we made our cooperate sector to be stronger and more profitable. And this is the average of the debt equity ratio in the manufacturing sector in Korea and comparison to USA and Japan. The first one would be reform in the financial sector. By examining internal and external conditions behind the decision making of major policies in Korea, you will be able to draw lessons that can be applicable to today’s developing countries. 0000002838 00000 n �s��kP�?/d��l�疎�k�Ş�uO��ϛ뇻��w�,:�Fߩ�9Im���9���67}��Ʋ��'^S������іwD���� ��~Ի8G����e���8��\$���80�U�l�|ϐ� expectation. ����H����r�ak�8m K��w���#����0'��Y�n{@q6�B����>h�����ͳ���uo�0���|�d���H���Z"�9+���f���3K�?�c\��4L��SZ�QOu7�Sc#��ulY��`�*�r�⼣ pV��t/*�����c��V��� �#/��w��ģ����%:YD��blo{��� ��w� �NaC��d�jgWۂ���KT&�Φۀ�1����=�v���JvC:CJ9lq���刷@ a'V}������9����4�>�K�{����ļ�� �W� International Monetary Fund (IMF) to overcome the difficulties in the financial 0000184630 00000 n �߱\�ugOe��}�+x�n�(��ʅ^����~o��d��=7���1 �|����0vt��2Jwt4�(&( �s@�3�h��z\�Ь�Is`���j�],a 0000004420 00000 n Agenda is the journal of the College of Business and Economics, ANU. 0000006356 00000 n From 1985 to 1996, Thailand's economy grew at an average of over 9% per year, the highest economic growth rate of any country at the time. Attracting foreign dollar investment, attracting foreign capital into our capital market. xref 0000041360 00000 n instabilities in their markets, to termed "crises", and the changes 62 22 disappointed foreign investors. However, the process of this recovery was painful for major reforms, it inevitably created large bankruptcies and unemployment, and in some areas, the scars of this painful reform still lingers on in the current economy. financial deregulation proceeded. And in order to do that, government had to inject huge amount of money in to our financial sector. 0000000843 00000 n Also, the backgrounds and limitations of important policies will be scrutinized. Launched in 1994, Agenda provides a forum for debate on public policy, mainly (but not exclusively) in Australia and New Zealand.