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From Hermit Kingdom to miracle on the Han: Sources of policy change in Korea's trade transformation

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  • Irwin, Douglas A.

Abstract

In 1960, South Korea's exports were about 1 percent of GDP, and its ability to import depended almost entirely on U.S. aid. After changing its foreign exchange policies in the mid-1960s, Korea's exports surged to more than 10 percent of GDP by the end of the decade. This paper explores the political and economic context (as well as the individual actors) behind the shift in policy that enabled this dramatic export growth to occur. The United States helped initiate the process by withholding financial assistance, pressuring Korea to devalue its currency and reform its foreign exchange regime. The Korean government initially resisted taking these steps but in 1964 it became firmly committed to an export promotion strategy to boost foreign exchange earnings and end its dependence on American aid.

Suggested Citation

  • Irwin, Douglas A., 2025. "From Hermit Kingdom to miracle on the Han: Sources of policy change in Korea's trade transformation," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 47(2), pages 1-36.
    • Handle: RePEc:zbw:kdijep:320442
    DOI: 10.23895/kdijep.2025.47.2.1
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    References listed on IDEAS

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    1. Irwin, Douglas A., 2025. "Trade Policy, Exchange Rates, and the Globalization Surge of the 1990s," The Journal of Economic History, Cambridge University Press, vol. 85(2), pages 303-335, June.
    2. Douglas A. Irwin, 2025. "Trade Policy, Exchange Rates, and the Globalization Surge of the 1990s," NBER Working Papers 33426, National Bureau of Economic Research, Inc.
    3. Charles R. Frank Jr. & Kwang Suk Kim & Larry E. Westphal, 1975. "Foreign Trade Regimes and Economic Development: South Korea," NBER Books, National Bureau of Economic Research, Inc, number fran75-1, June.
    4. Douglas A. Irwin, 2023. "Economic ideas and Taiwan's shift to export promotion in the 1950s," The World Economy, Wiley Blackwell, vol. 46(4), pages 969-990, April.
    5. Kim, Duol & Park, Heejin, 2021. "Biological Living Standards of Korea during the Port-Opening Period, 1876–1910," The Journal of Economic History, Cambridge University Press, vol. 81(2), pages 549-576, June.
    6. Charles R. Frank Jr. & Kwang Suk Kim & Larry E. Westphal, 1975. "Appendices to "Foreign Trade Regimes and Economic Development: South Korea"," NBER Chapters, in: Foreign Trade Regimes and Economic Development: South Korea, pages 245-257, National Bureau of Economic Research, Inc.
    7. Westphal, Larry E, 1990. "Industrial Policy in an Export-Propelled Economy: Lessons from South Korea's Experience," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 41-59, Summer.
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East

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