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Lessons from the 1997 and the 2008 Crises in the Republic of Korea

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  • Lessons from the 1997 and the 2008 Crises in the Republic of Korea
  • Asian Development Bank (ADB)
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Title Lessons from the 1997 and the 2008 Crises in the Republic of Korea
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Material Type Reports
Publisher

Asian Development Bank (ADB)

Date 2012
Series Title; No Economics Working Papers
Language English
File Type Link
Subject Economy < Financial Policy

Abstract

The economy of the Republic of Korea was hit harder than anticipated by the global financial crisis. In the first phase, large capital outflows led to a severe liquidity strain in the foreign exchange market resulting in a rapid depreciation of the exchange rate. Then, in the second phase, the contraction of global demand led to a collapse of exports and a sharp decline in economic activity, raising concerns about a full-fledged financial crisis in the country. This paper describes how the global financial crisis spilled over into the Korean economy and how the government responded to the financial turmoil. It also provides the background and rationale for the Korean government’s decisions to adopt specific policy measures. Based on Korean experiences during the 1997 and the 2008 crises, this paper documents the lessons learned and identifies several important policy issues that might have regional implications for Asia.