This study appraises the current status of Korea’s export-oriented economy, and explores the foreign exchange policy measures that Korea will need to adopt in order to sustain its economic growth.
Korea may have achieved an unprecedented economic growth over the last few decades, but it has fallen into inflation. Additionally, the oil shocks have caused unforeseen disturbances to the international economy. While there are a wide range of measures that Korean policymakers need to take to counter the encroaching difficulties, they need first and foremost to revisit the current foreign exchange policy.
The export-oriented economic structure of Korea is heavily dependent on imports—particularly those of raw materials, oil, and other goods that Korean industries need in order to manufacture their own products. This structure leaves the Korean economy very vulnerable to almost all fluctuations in international economic conditions, causing massive disturbances to exports and foreign exchange in unforeseen situations like the oil shocks. Inflation was a commonplace phenomenon worldwide during the 1970s and the 1980s, when Korea was also increasing exportation. Even the countries forming the Organization for Economic Cooperation and Development could not avoid this inflation.
Brazil, with an economy as export-oriented as ours, is famous for the Brazilian Trotting System, frequently triggering “mini-devaluations” of its currency whenever at the risk of economic danger. Israel, on the other hand, has sought to overcome these risks with a floating exchange system known as the indexation scheme, adhering to market principles.
Korean policymakers and industries need to realize that it is no longer possible to stay the course on maintenance imports. They need to consider starting on development imports, and finding ways for oil money recycling and also borrowing the oil dollars. One way to avoid the problems associated with the devaluation of currencies under the Bretton Woods system is to institutionalize an average exchange rate.
수출주도형 성장경제의 외환정책(Foreign exchange policy in an export-oriented growing economy)
|Series Title; No||연구총서|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade
Economy < Economic System
|Holding||KDI; KDI School|