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Finance & Accounting
Pages 4 (1004 words)
South Korea during the Asian Crisis: The IMF and Lessons in Public Finance The Asian Currency Crisis of 1997 also known as the “Asian Crisis” and as the “Asian Financial Crisis” preceded the United States and the current global crisis also known as the “global financial crisis” that started in 2008.
This work looks into the experience of South Korea and identifies a few lessons in public finance. Describing the Asian Crisis as a financial crisis, Heo and Sumwoong reported that South Korea prior to the crisis, “average a growth close to 10% per year” commencing in the early 1960s (490). The authors described the Asian Crisis as a failure of a development paradigm premised on a statist approach that called for a strong government role in the economy (490). Statism or statist pertains to a strong role of the state. In their assessment, Heo and Sumwoong estimated that in 1997, the exchange rate against the dollar “went from below 900 won to the dollar that summer to around 900 won to the dollar the summer to around 1,500 in mid-November” (490). Kwan attributed the financial crisis in South Korea to the South Korean government practice of targeting large conglomerates in Korea known as chaebols and extending to chaebols various types of government assistance and support. According to Kim, the chaebols in both the banking and corporate sectors received a lion’s share of government financial assistance (5). Assistance and guarantees of assistance to the chaebols “led to a rapid rise in industrial concentration but also rendered Korea’s corporate sector and the economy vulnerable to external shocks” (Kim 5). ...
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