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Recovery from a financial crisis: the case of South Korea

  • Jahyeong Koo
  • Sherry L. Kiser
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    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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    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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    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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