Macroeconomic Impacts of the Korean Financial Crisis: Comparison with the Cross-country Patterns
AbstractThis paper analyzes the macroeconomic adjustment process of the Korean financial crisis in a broad international perspective. In particular, the impacts of the crisis on GDP growth, inflation, current account balance, and employment are analyzed using a crossÂ country data set, which compiled 150 financial crisis episodes from all developing countries that have received conditional financial assistance from the IMF over the period from 1973 to 1994. The cross country patterns show that GDP growth rates sharply drop with the eruption of a crisis but then recover quickly to the preÂcrisis level in two or three years, showing a vÂ pattern of adjustment; inflation and current account deficit exhibit an inverse vÂpattern, but they do not improve to the level of nonÂprogram period; employment growth is most sluggish in the recovery process compared with other macroeconomic variables. We find that the Korean case is in general consistent with these stylized patterns. However, the degree of initial contraction and following recovery has been far greater in Korea than what the crossÂcountry evidence predicts. CrossÂcountry comparison indicates that both the exportÂoriented structure and the swift adjustment of macroeconomic policies contributed to the speedy adjustment of the Korean economy.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The World Economy.
Volume (Year): 25 (2002)
Issue (Month): 4 (04)
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Other versions of this item:
- JongWha Lee & Changyong Rhee, 2000. "Macroeconomic Impacts of the Korean Financial Crisis: Comparison with the Crosscountry Patterns," RCER Working Papers 471, University of Rochester - Center for Economic Research (RCER).
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