Macroeconomic Impacts of the Korean Financial Crisis: Comparison with the Crosscountry 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 cross 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 precrisis level in two or three years, showing a v pattern of adjustment; inflation and current account deficit exhibit an inverse vpattern, but they do not improve to the level of nonprogram 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 crosscountry evidence predicts. Crosscountry comparison indicates that both the exportoriented structure and the swift adjustment of macroeconomic policies contributed to the speedy adjustment of the Korean economy.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 471.
Length: 40 pages
Date of creation: May 2000
Date of revision:
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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
Other versions of this item:
- Jong-Wha Lee & Changyong Rhee, 2002. "Macroeconomic Impacts of the Korean Financial Crisis: Comparison with the Cross-country Patterns," The World Economy, Wiley Blackwell, vol. 25(4), pages 539-562, 04.
- NEP-ALL-2000-05-16 (All new papers)
- NEP-HIS-2000-05-16 (Business, Economic & Financial History)
- NEP-IFN-2000-05-16 (International Finance)
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