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Government intervention or market liberalization: the Korean financial crisis as a case of market failure

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  • Shalendra D. Sharma

    (Department of Politics, University of San Francisco, USA, sharmas@usfca.edu)

Abstract

This paper questions the conventional view that the Korean financial crisis of 1997 was simply the result of pervasive government intervention in the economy. While Korea has had a long history of state involvement, and while state policies did contribute to inefficient resource allocation and inefficiencies, the strategy of market liberalization introduced in the early 1990s hardly performed any better. In fact, this paper illustrates that, although not the immediate trigger of the Korea’s financial and currency meltdown, the poorly sequenced and implemented financial liberalization contributed greatly to the scale and pace of the crisis.

Suggested Citation

  • Shalendra D. Sharma, 2004. "Government intervention or market liberalization: the Korean financial crisis as a case of market failure," Progress in Development Studies, , vol. 4(1), pages 47-57, January.
    • Handle: RePEc:sae:prodev:v:4:y:2004:i:1:p:47-57
    DOI: 10.1191/1464993404ps075oa
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    References listed on IDEAS

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    1. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    2. Chang, Ha-Joon & Park, Hong-Jae & Yoo, Chul Gyue, 1998. "Interpreting the Korean Crisis: Financial Liberalisation, Industrial Policy and Corporate Governance," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 22(6), pages 735-746, November.
    3. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview," NBER Working Papers 6833, National Bureau of Economic Research, Inc.
    4. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part II: The Policy Debate," NBER Working Papers 6834, National Bureau of Economic Research, Inc.
    5. Dong-One Kim & Johngseok Bae & Changwon Lee, 2000. "Globalization and labour rights: the case of Korea," Asia Pacific Business Review, Taylor & Francis Journals, vol. 6(3-4), pages 133-153, January.
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