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Rebalancing Growth in the Republic of Korea


  • Ha, Joonkyung

    (Asian Development Bank Institute)

  • Lee, Jong-Wha

    (Asian Development Bank Institute)

  • Sumulong, Lea

    (Asian Development Bank Institute)


The current account surplus of the Republic of Korea (henceforth Korea) increased significantly in the immediate recovery period after the 1997-1998 Asian financial crisis. Since then the surplus has gradually diminished, and from 2006 to 2008, the current account was close to being balanced. Econometric analysis reveals that the effect of exchange rate changes on Korea's trade is not robust during non-crisis periods. Exchange rates only significantly affect trade when observations during crisis periods are included. This suggests that exchange rate adjustments alone will not solve the imbalance issue. Korea's external imbalances are not only caused by external factors; they also reflect internal and policy factors such as: (i) saving-investment imbalances; (ii) export-oriented policies; and (iii) the unbalanced structure of manufacturing and services. These internal imbalances result from domestic distortions and structural imbalances arising from market inefficiencies and public policies. These must be addressed to ensure balanced and sustained economic growth.

Suggested Citation

  • Ha, Joonkyung & Lee, Jong-Wha & Sumulong, Lea, 2010. "Rebalancing Growth in the Republic of Korea," ADBI Working Papers 224, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0224

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    References listed on IDEAS

    1. Jong-Wha Lee & Warwick J. McKibbin, 2007. "Domestic Investment And External Imbalances In East Asia," CAMA Working Papers 2007-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
    3. Gian M Milesi-Ferretti & Olivier J Blanchard, 2009. "Global Imbalances; In Midstream?," IMF Staff Position Notes 2009/29, International Monetary Fund.
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    Cited by:

    1. Di Sanzo Silvestro & Bella Mariano, 2015. "Public debt and growth in the euro area: evidence from parametric and nonparametric Granger causality," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 631-648, July.
    2. Consiglio Andrea & Zenios Stavros A., 2015. "Risk Management Optimization for Sovereign Debt Restructuring," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 181-213, December.
    3. Adam Talbot Jones & Cameron Visser, 2014. "Politics, Economics, and the Debt Ceiling," Economics Bulletin, AccessEcon, vol. 34(2), pages 1222-1228.
    4. Lorenzo Forni & Geremia Palomba & Joana Pereira & Christine J. Richmond, 2016. "Sovereign Debt Restructuring and Growth," IMF Working Papers 16/147, International Monetary Fund.
    5. repec:aea:aecrev:v:107:y:2017:i:5:p:37-40 is not listed on IDEAS
    6. Daniel S. Hamermesh, 2017. "Replication in Labor Economics: Evidence from Data, and What It Suggests," American Economic Review, American Economic Association, vol. 107(5), pages 37-40, May.
    7. Joseph E. Stiglitz, 2014. "Reconstructing Macroeconomic Theory to Manage Economic Policy," NBER Working Papers 20517, National Bureau of Economic Research, Inc.
    8. Gianluigi Pelloni & Marco Savioli, 2014. "Why is Italy doing so badly after doing so well?," Professional Reports 02_14, Rimini Centre for Economic Analysis.
    9. Gianluigi Pelloni & Marco Savioli, 2015. "Why Is Italy Doing So Badly?," Economic Affairs, Wiley Blackwell, vol. 35(3), pages 349-365, October.
    10. repec:rim:rimpre:15_01 is not listed on IDEAS

    More about this item


    korea economic growth; korea external imbalances; korea trade;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

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