The State of the Korean Economy and the Direction of Structural Adjustment

Yoonje Cho
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Yoonje Cho: Sogang University

East Asian Economic Review, 1997, vol. 1, issue 1, 5-43

Abstract: The core problem of Korean economy is that when assets value bubble and the relative price likeThe core problem of Korean economy is that when assets value bubble and the relative price like exchange rate is deformed, the level of income and the power of purchasing in Korea are beyond the basic economical strength of South Korea. Apart from that, due to the fact that when Giant business groups invest in some spheres, they do not expand the profitability of the main, but constantly to expand the social influence of the external scale, it causes the great reduction of investment, on the contrary, the needs of financial and human resources is increasing. So we think that this is the main cause for the interest rate to be higher than the capital earning rate, and for the wages to be higher than the productivity of labor. So, in order to restore economic vitality, the most important thing is to adjust the distorted structure of relative prices, that is, the relative ratio of assets and income, trading goods and the relative prices (for example, exchange rate) of the goods that do not belong to the "trading" category, and etc., this adjustment can only rely on the land, the finance, labor, competition, order and other institutional reforms to achieve the overall vigour. Meanwhile, for the existing loss, which is that bad debt and other financial institutions, the Government should accurately grasp the actual size of the loss-sharing and financial resources to develop a clear plan adjustment to address the current financial market unrest.

Keywords: South Korean Economy; South Korea Economic Development (search for similar items in EconPapers)
JEL-codes: N15 N25 O10 (search for similar items in EconPapers)
Date: 1997
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