The Korean financial crisis: Causes, impact on FDI, and implications for Central Asia

Young Rok Cheong, Kap-Young Jeong and Young-ryeol Park

Global Economic Review, 1998, vol. 27, issue 2, 37-58

Abstract: Through the Asian financial crisis, many key international economic issues have come to the forefront the stability of the international financial system under the IMF, “Asian values”, the universal validity of the Asian Economic Development Model, China's leadership in the regional world economy, Japan's role in the region, and the immunity of Greater China from the current financial crisis. Currently, most Asian countries seem eager to redress structural problems involving the government sector, banking, and corporate governance. In the process of this full scale restructuring, Korea must reevaluate its economic relationship with Central Asia. This paper argues that Korean financial crisis stems basically from the system failure. Furthermore, since a small open economy carries with it intrinsic vulnerabilities, the government should be more careful in securing optimal foreign exchange, opening capital markets based on the economy's absorption capacity. In this respect, the banking industry should be run based on the profitability of capital. Once banking industries are distorted by the practice of government-led policy loans, it is more difficult to correct those customized distortions. The banking industry should play a laglecrv role as the “brain of the economy”, sensing abnormalities of the economy. Moreover, in today's increasingly interdependent global economic system, no single country can solve its problems without close coordination of its policy with the outside world. An early warning system to signal financial instability would help developing economies in modernizing and strengthening their domestic financial institutions and would also work as a supplement to the IMF standby fund. Also, human resource management has proven too important to be neglected. Central Asia could derive lessons from the above Asian “failure”, not the Asian “miracle”, to avoid inappropriate policies and to deepen its economic development.

Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/12265089808449731 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:glecrv:v:27:y:1998:i:2:p:37-58

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RGER20

DOI: 10.1080/12265089808449731

Access Statistics for this article

Global Economic Review is currently edited by Kap-Young Jeong and Taeyoon Sung

More articles in Global Economic Review from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().