IDEAS home Printed from https://ideas.repec.org/a/bla/worlde/v25y2002i4p539-562.html
   My bibliography  Save this article

Macroeconomic Impacts of the Korean Financial Crisis: Comparison with the Cross-country Patterns

Author

Listed:
  • Jong-Wha Lee
  • Changyong Rhee

Abstract

This 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • 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, April.
  • Handle: RePEc:bla:worlde:v:25:y:2002:i:4:p:539-562
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/links/doi/10.1111/1467-9701.00447
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
    2. Jong-Wha Lee and Changyong Rhee, 1999. "Social Impacts of the Asian Crisis: Policy Challenges and Lessons," Human Development Occasional Papers (1992-2007) HDOCPA-1999-02, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    3. Corbo, Vittorio & Fischer, Stanley, 1995. "Structural adjustment, stabilization and policy reform: Domestic and international finance," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 44, pages 2845-2924 Elsevier.
    4. Louis Dicks-Mireaux & Miguel A Savastano & Adam Bennett & María Vicenta Carkovic S. & Mauro Mecagni & James A John & Susan M Schadler, 1995. "IMF Conditionality; Experience Under Stand-by and Extended Arrangements, Part I: Key Issues and Findings," IMF Occasional Papers 128, International Monetary Fund.
    5. Johnson, Simon & Boone, Peter & Breach, Alasdair & Friedman, Eric, 2000. "Corporate governance in the Asian financial crisis," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 141-186.
    6. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    7. Borensztein, Eduardo & Lee, Jong-Wha, 2002. "Financial crisis and credit crunch in Korea: evidence from firm-level data," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 853-875, May.
    8. Jeffrey D. Sachs, 1985. "External Debt and Macroeconomic Performance in Latin America and East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 523-573.
    9. International Monetary Fund, 1998. "Do IMF-Supported Programs Work? A Survey of the Cross-Country Empirical Evidence," IMF Working Papers 98/169, International Monetary Fund.
    10. Tony Killick, 1995. "Can the IMF Help Low-Income Countries? Experiences with its Structural Adjustment Facilities," The World Economy, Wiley Blackwell, vol. 18(4), pages 603-616, July.
    11. Mohsin S. Khan, 1990. "The Macroeconomic Effects of Fund-Supported Adjustment Programs," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 195-231, June.
    12. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    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. Marcus Noland, 2007. "South Korea's Experience with International Capital Flows," NBER Chapters,in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 481-528 National Bureau of Economic Research, Inc.
    2. José de Gregorio & Jong-Wha Lee, 2004. "Growth and Adjustment in East Asia and Latin America," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2004), pages 69-134, August.
    3. Yung Chul Park & Jong-Wha Lee, 2003. "Recovery and Sustainability in East Asia," NBER Chapters,in: Managing Currency Crises in Emerging Markets, pages 275-320 National Bureau of Economic Research, Inc.
    4. Bernd Hayo & Doh Chull Shin, 2002. "Popular Reaction to the Intervention by the IMF in the Korean Economic Crisis," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(2), pages 89-100.
    5. Bal Gündüz, Yasemin, 2016. "The Economic Impact of Short-term IMF Engagement in Low-Income Countries," World Development, Elsevier, vol. 87(C), pages 30-49.
    6. Siegel, Jordan, 2005. "Can foreign firms bond themselves effectively by renting U.S. securities laws?," Journal of Financial Economics, Elsevier, vol. 75(2), pages 319-359, February.

    More about this item

    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:bla:worlde:v:25:y:2002:i:4:p:539-562. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920 .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.