The causes of the IMF crisis in South Korea. What Experts Say

Hausarbeit , 2011 , 22 Seiten , Note: A

VWL - Finanzwissenschaft

What had happened to Korea, and why did the nation have to face the IMF crisis in 1997 all of a sudden? To see what the causes for the crisis were, analyses from six essays of scholars and experts in the field of economics will be introduced and compared. While they have similar and different views for the causes at the same time, their views can be grouped into two categories: internal factors and external factors. When the Korean currency crisis broke out, the IMF and many scholars focused the whole crisis on Korea’s internal problems. However, there are many other scholars who attribute the causes not only to internal but also to external problems. The experts who see the causes as internal problems think the crisis originated from internal factors of Korea such as policy mistakes, highly leveraged corporate sectors, and banking system. The external factors refer to the external shocks such as contagion effect from South-east financial crisis and appreciation of Japanese yen. Although all the causes for the crisis are closely related with each other, addressing the causes separately would give people better understanding of the context.

On Nov. 1997, Korea faced the IMF crisis, or also known as the financial crisis, which caused severe damage to the Korean economy. The new OECD member was reduced from being the world’s eleventh largest economy to an economy surviving on overnight loans from the international money markets. The won, the Korean currency, fell by more than 50 percent against the US dollar. Also, KOSPI (the Korea Composite Stock Price Index) fell by thirty percent, and the short-term interest rate shot up to forty percent per year. Consequently, on Dec. 1997, Korea called the IMF for rescue, owing $58.3 billion of financial aid. As shown in table 1 and 2 in the appendix 1, Korea had performed continual rapid GDP growth at the rate of 7.8 percent per year in average from 1960 to 1997.

Table of content

Introduction

I. Internal Factors
A. Korean Banks’ Structurally Unsound Method of Lending Money
B. The Government-Bank Relationship
C. A Highly Leveraged Corporate Sector
D. The Development of the High-Cost and Low-profit Economy
E. Macroeconomic Developments before the Crisis
F. Policy Mistakes

II. External Factors
A. An Unfriendly International Environment
B. Contagion Effects from Southeast Asia
C. The Appreciation of Japanese Yen

Conclusion

Appendix

References

• Hochschule: The University of North Carolina at Chapel Hill
• Veranstaltung: Advanced Macroeconomics
• Note: A
• Autor: Juhyuk Park (Autor:in)
• Erscheinungsjahr: 2011
• Seiten: 22
• Katalognummer: V985466
• ISBN (eBook): 9783346342393
• ISBN (Buch): 9783346342409
• Sprache: Englisch
• Schlagworte: south, korea, what, experts