The Global Financial Crisis and the Korean Economy

The Global Financial Crisis and the Korean Economy

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The world economy fell into a global financial crisis in 2008/9 and is still jittered by its aftershocks. Like other financial crises happened in the world economy, it came as a surprise. In historical perspective, financial crises should be understood as a natural fact of life in the world economy and a more pertinent question that should be posed would be why people so easily forget and do not learn from the historical experience. This book deals with the question in two ways. First, it investigates the frame of mind that distances people from the reality of life. At the heart of it, it argues that there are wrong perceptions on the working of the world economy, in particular, the international financial market. It summarizes them as a€˜the five conventional wisdomsa€™ in the international financial market and, by critically examining them, it draws on a€˜the five financial theoremsa€™, which would provide intellectual pillars for a more realistic understanding of the global financial market. Second, the book examines in detail the case of an emerging market economy that fell into a financial crisis twice in the recent decade. South Korea provides us with an interesting case of emerging market financial crises that came as a€˜surprisesa€™: it faced a financial crisis in 1997/98 after it had been acclaimed as one of a€˜East Asian miracle economiesa€™ and it was again befallen to a crisis during the global financial crisis in 2008/2009 after it was widely regarded as a country that had recovered from the crisis with one of the most successful implementations of the IMF-sponsored reforms. The book attempts to provide the readers with a realistic understanding of emerging market financial crises by interpreting the recent global financial crisis and the Korean crises with some general concepts manifested in a€˜the five financial theoremsa€™. It also tries to draw more general implications for policy management of emerging market economies.Money and time need to be spent on developing ideas and related technologies, introducing or developing equipment, ... In contrast, it is not easy for financiers to take such a long-term view of one project. ... investments when there are easier ways of profiting through investment within the financial sector or through consumption loans. ... According to the Korea Development Bank, the ratio for the manufacturing sector, which was 28.8 percent in 1996, rose to 86.6 percent in 2006.

Title:The Global Financial Crisis and the Korean Economy
Author:Jang-Sup Shin
Publisher:Routledge - 2013-12-04


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