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The Korean financial crisis: Diagnosis, remedies and prospects

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  • O. Yul Kwon

Abstract

Pulling down the curtain on its economic miracle of the last three decades, South Korea suddenly fell into a financial crisis in 1997, and was rescued by the IMF. 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. Underlying the numerous causes identified for the crisis is the failure of the very institutions and economic structure that propelled Korea to its economic success, in adapting to emerging changes in domestic and international environments. The IMF rescue package is therefore intended to remedy the institutional and structural flaws. The Korean economy is at a crossroads. If it complies well with the IMF conditionality, the economy will be revitalized based on a firmer institutional and structural foundation within a few years. If, however, Korea fails to do so, it will remain an IMF recidivist. Although it has made substantial progress, Korea still faces serious challenges for a successful completion of the IMF programme.

Suggested Citation

  • O. Yul Kwon, 1998. "The Korean financial crisis: Diagnosis, remedies and prospects," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 3(3), pages 331-357.
    • Handle: RePEc:taf:rjapxx:v:3:y:1998:i:3:p:331-357
    DOI: 10.1080/13547869808724656
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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. 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.
    3. 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.
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    Cited by:

    1. Leong Liew, 1998. "A political‐economy analysis of the Asian financial crisis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 3(3), pages 301-330.
    2. ., 2010. "Korea's Economic Policy in Transition: Evolution, Assessment and Future Direction," Chapters, in: The Korean Economy in Transition, chapter 1, Edward Elgar Publishing.
    3. Thomas D. Willett & Ekniti Nitithanprapas & Isriya Nitithanprapas & Sunil Rongala, 2004. "The Asian Crises Reexamined," Asian Economic Papers, MIT Press, vol. 3(3), pages 32-87.
    4. ., 2010. "Recent Evolution of the Business Sector: Chaebols and SMEs," Chapters, in: The Korean Economy in Transition, chapter 8, Edward Elgar Publishing.
    5. Hemrit, Wael & Nakhli, Mohamed Sahbi, 2021. "Insurance and geopolitical risk: Fresh empirical evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 320-334.

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