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Recovery from a financial crisis: the case of South Korea

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  • Jahyeong Koo
  • Sherry L. Kiser
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    Abstract

    Among the countries that were impacted by the 1997 Asian crisis, South Korea (Korea hereafter) has demonstrated the fastest recovery by blocking its downward spiral. Jahyeong Koo and Sherry Kiser examine the recovery process of financial crises, particularly in Korea, in light of the weak-fundamentals and financial-panic views. Since neither of these views adequately explains Korea’s recovery, the authors look at other phenomena for an explanation. Alternative financial arrangements and labor market adjustments are specifically examined. The authors acknowledge that Korea’s recovery was only possible after it gained control of its exchange-rate crisis. Since the recovery process affirms neither the weak-fundamentals view nor the financial-panic view, Koo and Kiser conclude that containing the downward spiral was a combination of factors working together and that much of Korea’s recovery can be attributed to the creation of alternative funding sources and labor adjustments.

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    File URL: http://www.dallasfed.org/assets/documents/research/efr/2001/efr0104c.pdf
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    Bibliographic Info

    Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

    Volume (Year): (2001)
    Issue (Month): Q IV ()
    Pages: 24-36

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    Handle: RePEc:fip:fedder:y:2001:i:qiv:p:24-36

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    Keywords: Banks and banking - Korea;

    References

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    1. Takatoshi Ito, 1999. "Capital Flows in Asia," NBER Working Papers 7134, National Bureau of Economic Research, Inc.
      • Takatoshi Ito, 2000. "Capital Flows in Asia," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 255-296 National Bureau of Economic Research, Inc.
    2. Eduardo Borensztein & Jong-Wha Lee, 1999. "Credit Allocation and Financial Crisis in Korea," IMF Working Papers 99/20, International Monetary Fund.
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    Cited by:
    1. Yunhee Kim & Jeong-Dong Lee & Almas Heshmati, 2009. "Analysis of Pay Inequality and its Impacts on Growth and Performance in the Korean Manufacturing Industry," TEMEP Discussion Papers 200902, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jan 2009.
    2. Oh, Inha & Heshmati, Almas & Baek, Chulwoo & Lee, Jeong-Dong, 2006. "Comparative Analysis of Firm Dynamics by Size: Korean Manufacturing," Ratio Working Papers, The Ratio Institute 94, The Ratio Institute.
    3. Yongil Jeon & Stephen M. Miller & Paul A. Natke, 2003. "Do Foreign Bank Operations Provide a Stabilizing Influence in Korea?," Working papers, University of Connecticut, Department of Economics 2004-21, University of Connecticut, Department of Economics.
    4. Keisuke Otsu, 2008. "A Neoclassical Analysis of The Korean Crisis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 449-471, April.
    5. Zhang, Zhiwei & Zhang, Wenlang, 2011. "The road to recovery: Fiscal stimulus, financial sector rehabilitation, and potential risks ahead," Journal of Asian Economics, Elsevier, vol. 22(4), pages 311-321, August.
    6. Arturo Antón Sarabia, 2007. "The Financial Accelerator from a Business Cycle Accounting Perspective," Working Papers 2007-06, Banco de México.
    7. Inha Oh & Jeong-Dong Lee & Almas Heshmati & Gyoung-Gyu Choi, 2009. "Evaluation of credit guarantee policy using propensity score matching," Small Business Economics, Springer, Springer, vol. 33(3), pages 335-351, October.
    8. Felipe Larraín & Se Kyu Choi-Ha, 2003. "Recesiones, Apertura y Régimen Cambiario," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 668-678.

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