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Macroeconomic performance during the crisis

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Frame of Image conomic aspects of the program since structural elements were integral • While implementation of structural agenda is ongoing, there has been little to add on the macro side of late • Presentation is overweight 1997-98 • 25-30 minutes cannot begin to do justice to the topic • Presentation follows IMF WP/01/154 (Chopra, et al.) on www.imf.org
Origins of the Crisis: Structural Weaknesses were at the Core
• Buildup in short-term debt and foreign currency exposure => liquidity problems • A weak financial system lacking in market discipline => undercapitalization • A highly leveraged corporate sector, which created systemic risks for banks • Poor corporate governance encouraged excessive risk and shielded managers • Macroeconomic imbalances were largely absent
Outbreak of the Crisis
• Several large corporate bankruptcies (7 of top-10) raised doubts about health of banking system. • Devaluation of Thai baht in July 1997 turned market sentiment against region. • Lack of transparency in key financial data (esp. debt and reserves) contributed to uncertainty in markets. • Foreign credit lines dried up and banks had difficulty rolling over short-term external debts. • Korea confronted with “twin crisis”—a banking and a currency crisis =>complicated policy response.
Korea’s Approach to the IMF
• The Government announced it was seeking IMF support on November 22, 1997; the program was approved by the IMF Board on December 3, 1997. • The largest financing package in IMF history
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Full Text
Title Macroeconomic performance during the crisis
Similar Titles
Material Type Proceedings
Author(English)

Gruenwald, Paul F.

Publisher

[Seoul] : Korea Development Institute

Date 2002
Event

KDI/MOFE International Symposium

Pages 33
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Macroeconomics
Economy < Financial Policy
Holding KDI; KDI School
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