IDEAS home Printed from https://ideas.repec.org/p/ris/adbiwp/0224.html
   My bibliography  Save this paper

Rebalancing Growth in the Republic of Korea

Author

Listed:
  • Ha, Joonkyung

    (Asian Development Bank Institute)

  • Lee, Jong-Wha

    (Asian Development Bank Institute)

  • Sumulong, Lea

    (Asian Development Bank Institute)

Abstract

The current account surplus of the Republic of Korea (henceforth Korea) increased significantly in the immediate recovery period after the 1997-1998 Asian financial crisis. Since then the surplus has gradually diminished, and from 2006 to 2008, the current account was close to being balanced. Econometric analysis reveals that the effect of exchange rate changes on Korea's trade is not robust during non-crisis periods. Exchange rates only significantly affect trade when observations during crisis periods are included. This suggests that exchange rate adjustments alone will not solve the imbalance issue. Korea's external imbalances are not only caused by external factors; they also reflect internal and policy factors such as: (i) saving-investment imbalances; (ii) export-oriented policies; and (iii) the unbalanced structure of manufacturing and services. These internal imbalances result from domestic distortions and structural imbalances arising from market inefficiencies and public policies. These must be addressed to ensure balanced and sustained economic growth.

Suggested Citation

  • Ha, Joonkyung & Lee, Jong-Wha & Sumulong, Lea, 2010. "Rebalancing Growth in the Republic of Korea," ADBI Working Papers 224, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0224
    as

    Download full text from publisher

    File URL: http://www.adbi.org/files/2010.07.01.wp224.rebalancing.growth.korea.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jong-Wha Lee & Warwick J. McKibbin, 2007. "Domestic Investment And External Imbalances In East Asia," CAMA Working Papers 2007-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
    3. Gian M Milesi-Ferretti & Olivier J Blanchard, 2009. "Global Imbalances; In Midstream?," IMF Staff Position Notes 2009/29, International Monetary Fund.
    4. Mr. Gian M Milesi-Ferretti & Mr. Olivier J Blanchard, 2009. "Global Imbalances: In Midstream?," IMF Staff Position Notes 2009/029, International Monetary Fund.
    5. Soyoung Kim & Jong-Wha Lee, 2007. "Demographic Changes, Saving, and Current Account in East Asia," Asian Economic Papers, MIT Press, vol. 6(2), pages 22-53, Spring/Su.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Di Sanzo Silvestro & Bella Mariano, 2015. "Public debt and growth in the euro area: evidence from parametric and nonparametric Granger causality," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 631-648, July.
    2. Lorenzo Forni & Geremia Palomba & Joana Pereira & Christine Richmond, 2021. "Sovereign debt restructuring and growth [Investment cycles and sovereign debt overhang]," Oxford Economic Papers, Oxford University Press, vol. 73(2), pages 671-697.
    3. Consiglio Andrea & Zenios Stavros A., 2015. "Risk Management Optimization for Sovereign Debt Restructuring," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 181-213, December.
    4. Adam Talbot Jones & Cameron Visser, 2014. "Politics, Economics, and the Debt Ceiling," Economics Bulletin, AccessEcon, vol. 34(2), pages 1222-1228.
    5. Daniel S. Hamermesh, 2017. "Replication in Labor Economics: Evidence from Data, and What It Suggests," American Economic Review, American Economic Association, vol. 107(5), pages 37-40, May.
    6. Joseph E. Stiglitz, 2015. "Reconstructing Macroeconomic Theory to Manage Economic Policy," Palgrave Macmillan Books, in: Éloi Laurent & Jacques Cacheux (ed.), Fruitful Economics, chapter 1, pages 20-56, Palgrave Macmillan.
    7. Gianluigi Pelloni & Marco Savioli, 2014. "Why is Italy doing so badly after doing so well?," Professional Reports 02_14, Rimini Centre for Economic Analysis.
    8. Gianluigi Pelloni & Marco Savioli, 2015. "Why Is Italy Doing So Badly?," Economic Affairs, Wiley Blackwell, vol. 35(3), pages 349-365, October.
    9. repec:rim:rimpre:15_01 is not listed on IDEAS
    10. Baak, SaangJoon, 2012. "Measuring misalignments in the Korean exchange rate," Japan and the World Economy, Elsevier, vol. 24(4), pages 227-234.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gabriel Zucman, 2013. "The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1321-1364.
    2. Evans, Martin, 2013. "Global Imbalances, Risk, and the Great Recession," MPRA Paper 52363, University Library of Munich, Germany.
    3. Garg, Bhavesh & Prabheesh, K.P., 2021. "Testing the intertemporal sustainability of current account in the presence of endogenous structural breaks: Evidence from the top deficit countries," Economic Modelling, Elsevier, vol. 97(C), pages 365-379.
    4. Yongsung Chang & Sun-Bin Kim & Jaewoo Lee, 2013. "Accounting for Global Dispersion of Current Accounts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 477-496, July.
    5. Alberto Martin & Jaume Ventura, 2015. "Financial Reforms and Capital Flows: Insights from General Equilibrium," Central Banking, Analysis, and Economic Policies Book Series, in: Ricardo J. Caballero & Klaus Schmidt-Hebbel (ed.),Economic Policies in Emerging-Market Economies Festschrift in Honor of Vittorio Corbo, edition 1, volume 21, chapter 7, pages 109-137, Central Bank of Chile.
    6. Cubizol, Damien, 2018. "Transition and capital misallocation: the Chinese case," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 88-115.
    7. Shirakawa, M., 2011. "Global imbalances and current account imbalances," Financial Stability Review, Banque de France, issue 15, pages 113-125, February.
    8. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2014. "Sovereigns, Upstream Capital Flows, And Global Imbalances," Journal of the European Economic Association, European Economic Association, vol. 12(5), pages 1240-1284, October.
    9. Yilmaz Akyuz, 2015. "The Global Economic Crisis and Asian Developing Countries: Impact, Policy Response and Medium Term Prospects," Working Papers id:7062, eSocialSciences.
    10. Anna Wong, 2017. "China’s Current Account : External Rebalancing or Capital Flight?," International Finance Discussion Papers 1208, Board of Governors of the Federal Reserve System (U.S.).
    11. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Perri, Fabrizio, 2013. "Global banks and crisis transmission," Journal of International Economics, Elsevier, vol. 89(2), pages 495-510.
    12. Allegret, Jean-Pierre & Couharde, Cécile & Coulibaly, Dramane & Mignon, Valérie, 2014. "Current accounts and oil price fluctuations in oil-exporting countries: The role of financial development," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 185-201.
    13. Dr. Jae-Sung, Lee, 2012. "A Study on APEC¡¯s Economic Cooperations under WTO," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 3(6), pages 55-59, November.
    14. Mr. Romain Ranciere & Mr. Nathaniel A. Throckmorton & Mr. Michael Kumhof & Ms. Claire Lebarz & Mr. Alexander W. Richter, 2012. "Income Inequality and Current Account Imbalances," IMF Working Papers 2012/008, International Monetary Fund.
    15. Garg, Bhavesh & Prabheesh, K.P., 2017. "Drivers of India’s current account deficits, with implications for ameliorating them," Journal of Asian Economics, Elsevier, vol. 51(C), pages 23-32.
    16. Kumhof, Michael & Sokol, Andrej & Rungcharoenkitkul, Phurichai, 2020. "How Does International Capital Flow?," CEPR Discussion Papers 15526, C.E.P.R. Discussion Papers.
    17. Alberola, Enrique & Estrada, Ángel & Viani, Francesca, 2020. "Global imbalances from a stock perspective: The asymmetry between creditors and debtors," Journal of International Money and Finance, Elsevier, vol. 107(C).
    18. Gelman, Maria & Jochem, Axel & Reitz, Stefan & Taylor, Mark P., 2015. "Real financial market exchange rates and capital flows," Journal of International Money and Finance, Elsevier, vol. 54(C), pages 50-69.
    19. Körner, Finn Marten, 2011. "An equilibrium model of 'global imbalances' revisited," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 33/2011, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    20. Joscha Beckmann & Robert L. Czudaj, 2020. "Net Foreign Asset Positions, Capital Flows and GDP Spillovers," Open Economies Review, Springer, vol. 31(2), pages 295-308, April.

    More about this item

    Keywords

    korea economic growth; korea external imbalances; korea trade;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:adbiwp:0224. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ADB Institute (email available below). General contact details of provider: https://edirc.repec.org/data/adbinjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.