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How Korea's rapid export expansion began in the 1960s : The role of foreign exchange

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Frame of Image  The Role of Foreign Exchange Rate
Jungho Yoo KDI School of Public Policy and Management November 2008
Abstract This paper investigates the reason why Korea’s export suddenly and rapidly expanded in the early 1960s. By doing so, it hopes to throw light on the unresolved issue, whether it was marketliberalizing or interventionist policies that explain Korea’s rapid growth and industrialization. Evidences this paper finds indicate that three devaluations in quick succession in 1960 and 1961that nearly eliminated currency overvaluation were the main reason for the beginning of the rapid export expansion. Curiously, the three devaluations have not been given the attention they deserve. The interventionist, export promotion measures played little role in the beginning. role as part of the incentives for exporters. Also, evidences indicate that the signaling role of foreign exchange rate as a price was much more important than its Regarding the change in Korean government’s development strategy from import substitution to export promotion, it was export expansion that brought about the change, not the other way round. Keywords: Export, Exchange rate, Export Promotion, Import substitution JEL code: O10
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1. Introduction Korea’s exports suddenly began to expand rapidly in the early 1960s, and the rapid expansion continued well into the following decade. It was an important part of the country’s experience of Early studies of
rapid growth and industrialization, a phenomenon often refe
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Title How Korea's rapid export expansion began in the 1960s
Similar Titles
Sub Title

The role of foreign exchange

Material Type Reports
Author(English)

Yoo, Jungho

Publisher

Seoul:KDI School of Public Policy and Management

Date 2008-11
Series Title; No KDI School Working Paper Series / 08-18
Pages 52
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Trade
Holding KDI School of Public Policy and Management

Abstract

This paper investigates the reason why Korea’s export suddenly and rapidly expanded in the early
1960s. By doing so, it hopes to throw light on the unresolved issue, whether it was market-
liberalizing or interventionist policies that explain Korea’s rapid growth and industrialization.
Evidences this paper finds indicate that three devaluations in quick succession in 1960 and 1961that
nearly eliminated currency overvaluation were the main reason for the beginning of the rapid export
expansion. Curiously, the three devaluations have not been given the attention they deserve. The
interventionist, export promotion measures played little role in the beginning. Also, evidences
indicate that the signaling role of foreign exchange rate as a price was much more important than its
role as part of the incentives for exporters. Regarding the change in Korean government’s
development strategy from import substitution to export promotion, it was export expansion that
brought about the change, not the other way round.