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The Korean Economic Adjustment to the World Financial Crisis


  • Deok Ryong Yoon

    (Korea Institute for International Economic Policy, 300-4 Yomgok-dong, Seocho-gu, Seoul 137-747, Korea.)


The global financial crisis hit the Korean economy in two ways. First, the sudden reversal of capital flow dried up the domestic and international liquidity. Second, the global contraction of demand reduced Korea's export by over 40 percent in the fourth quarter of 2008. Consequently, the Korean currency depreciated sharply and the economic growth rate fell drastically. Even though Korea could not prevent the 2008 crisis, it was the first OECD country to escape the negative economic growth zone, possibly because of three reasons. First, Korea might have had better initial conditions than other economies thanks to the reform measures after the 1997-–98 Asian financial crisis. Second, the Korean government has had significant experience in dealing with crises. Third, Korea had an international network of cooperation to establish swap arrangements of US$$ 90 billion to stabilize foreign exchange market. Even though the Korean economy has become more resilient to future financial crises by learning from the crisis in 1997, the small open economy still has limited capacity to stabilize the financial market. Korea now faces a new issue, which is to learn from the global crisis on how to stabilize the foreign exchange market. (c)© 2011 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Deok Ryong Yoon, 2011. "The Korean Economic Adjustment to the World Financial Crisis," Asian Economic Papers, MIT Press, vol. 10(1), pages 106-127, Winter/Sp.
  • Handle: RePEc:tpr:asiaec:v:10:y:2011:i:1:p:106-127

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    References listed on IDEAS

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    7. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
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    1. repec:eee:jeborg:v:142:y:2017:i:c:p:140-163 is not listed on IDEAS
    2. repec:tpr:asiaec:v:16:y:2017:i:2:p:216-242 is not listed on IDEAS
    3. Beckmann, Joscha & Czudaj, Robert, 2017. "Capital flows and GDP in emerging economies and the role of global spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 140-163.
    4. Choi, Jinho & Hur, Joonyoung, 2015. "An examination of macroeconomic fluctuations in Korea exploiting a Markov-switching DSGE approach," Economic Modelling, Elsevier, vol. 51(C), pages 183-199.

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