About the Book
This paper looks at the structural changes in the South Korean financial system over the years and how they have influenced the course of development in one of East Asia’s largest economies.
For some 30 years from the early 1960s, a state-led financial system played a key role in propelling Korea’s rapid economic growth by allocating financial resources in line with the government’s industrial policy priorities. However, this system unravelled in the 1990s as the government implemented financial liberalization measures – measures which would give rise to financial fragility culminating in a severe financial crisis in 1997.
After the crisis, still more extensive financial sector deregulation and capital account liberalization were undertaken by the government as part of a sweeping neoliberal economic restructuring programme agreed with the International Monetary Fund (IMF). However, this paper finds that Korea’s economic performance under this post-crisis market-oriented regime has been disappointing, characterized by stagnant growth and worsening poverty and income inequality. Especially marked is a decline in investment levels crucial to catalyzing long-run growth. The volatility of liberalized capital flows has also exposed the Korean economy to a heightened risk of financial shocks, as the recent turmoil triggered by the global financial crisis so vividly illustrates.
The Korean experience examined in this paper amply underscores the dangers of reckless financial liberalization and the consequent need to effectively regulate the financial system and exercise caution in relation to financial market-opening.
About the Author
KANG-KOOK LEE is an Associate Professor at the College of Economics in Ritsumeikan University, Kyoto, Japan.
Contents
- INTRODUCTION
- FROM MIRACLE TO DEBACLE: THE FINANCIAL SYSTEM, ECONOMIC DEVELOPMENT AND THE 1997 FINANCIAL CRISIS
Economic Miracle under Financial and Capital Controls
Financial Liberalization, Opening and the 1997 Crisis
- FINANCIAL OPENING AND LIBERALIZATION AFTER THE FINANCIAL CRISIS
Neoliberal Economic Restructuring and Changes in the Political EconomyRestructuring the Financial Sector after the 1997 Crisis
Post-Crisis Capital Account Liberalization and Financial Opening
Recent Developments in Financial Deregulation
- THE VULNERABLE FINANCIAL SYSTEM AND WEAK ECONOMY IN POST-CRISIS KOREA
Stagnant Growth and Worsening Income Distribution
Investment Decline and Malfunctioning Financial System
Increase in Foreign Investment and Its Problems
Financial Opening and Difficulties in Macroeconomic Policy Management
- RECENT FINANCIAL INSTABILITY IN THE GLOBAL FINANCIAL CRISIS
The Recent Global Financial Crisis and the Korean Economy
Looming Financial Turmoil in Korea
The Government Response and Future Prospects
- CONCLUSIONS
REFERENCES
This product was added to our catalog on Tuesday 28 June, 2011.
