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Liberalization of Capital Flows in Korea: Big-Bang or Gradualism?

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  • Dongchul Cho
  • Youngsun Koh

Abstract

Capital market liberalization has become an irreversible trend in Korea since 1992. With the current level of high interest rate in Korea, however, drastic full-scale liberalization would certainly attract a large amount of capital inflows and appreciate the Korean won. This would affect the price competitiveness of Korean products in international markets, which could bring about significant macro-instability in an economy like Korea which relies heavily upon external transactions. Through simulations using a macro-model based on the neoclassical long-run convergence and the Keynesian short-run dynamics, this paper attempts to provide some quantitative assessments of several alternative policy choices including the speed of liberalization.

Suggested Citation

  • Dongchul Cho & Youngsun Koh, 1996. "Liberalization of Capital Flows in Korea: Big-Bang or Gradualism?," NBER Working Papers 5824, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5824
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    1. Sarno,Lucio & Taylor,Mark P., 2003. "The Economics of Exchange Rates," Cambridge Books, Cambridge University Press, number 9780521485845.
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    3. Robert J. Barro & Xavier Sala-i-Martin, 1990. "World Real Interest Rates," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 15-74, National Bureau of Economic Research, Inc.
    4. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
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    Cited by:

    1. Kaminsky, Graciela Laura & Schmukler, Sergio L., 2002. "Short-run pain, long-run gain : the effects of financial liberalization," Policy Research Working Paper Series 2912, The World Bank.

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    More about this item

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F2 - International Economics - - International Factor Movements and International Business

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