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The effects of financial liveralization on effeciency, distribution of income and wealth, and financial stability in Korea, 1990-2010

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Frame of Image nal financial turbulence or improve distributive equity. However, it is almost a matter of faith that such a transition would improve efficiency of the financial system in allocating capital across different firms and industries. In his survey of the literature, Levine (2005) shows that finance has a positive causal effect on growth as it improves the allocation of capital by easing external financing constraints on firms and that countries with more efficient financial systems grow faster1. Financial liberalization could affect economic growth through its positive effects on the quantity of saving and investment and the efficiency of investment. However, the effects of financial reform on saving are shown to be rather ambiguous (Bandiera et al 1998).2 Furthermore, even in a positive case, an increase in domestic savings may or may not lead to a corresponding increase in investment, if some of the savings are exported as was the case in Korea since 1999. On the other hand, the level of savings as a proportion of GDP may fall as a result of financial liberalization, but investment remains unaffected or even increases if the country in question has access to international financial markets to finance its current account deficit. As shown in Figure 7-1, following the 1997 crisis, the ratio of gross investment to GDP had fallen below 25 percent before recovering around 2000, while the progress in financial liberalization in terms of indices 3 and 4 had been on an upward trend 3 .


Full Text
Title The effects of financial liveralization on effeciency, distribution of income and wealth, and financial stability in Korea, 1990-2010
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Material Type Proceedings
Author(English)

Kim, Joon Kyung; Park, Jung Soo; Park, Yung Chul

Publisher

[Sejong],[South Korea] : Korea Development Institute

Date 2017
Event

KDI Conference

Pages 48
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Conditions
Economy < Economic Administration
Economy < Economic System
Holding Korea Development Institute
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