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Does the sequencing really matter? : The Korean experience in the capital market liberalization

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  • Does the sequencing really matter?
  • Wang, Yunjong
  • The Association of Korean Economic Studies


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Title Does the sequencing really matter?
Similar Titles
Sub Title

The Korean experience in the capital market liberalization

Material Type Articles
Author(English)

Wang, Yunjong

Publisher

[Seoul]:The Association of Korean Economic Studies

Date 2001
Journal Title; Vol./Issue The Journal of the Korean Economy:vol. 2(no. 1)
Pages 33
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Holding AKES

Abstract

The most serious sequencing problem in Korea was to liberalize short-term financing through banks rather than long-term financing, and to underestimate the potential devastating impact on the economy when massive capital inflows have come to reverse. Although long-term capital inflows were rather repressed during the pre-crisis period, it would be an exaggeration to say that short-term capital movements were liberalized greatly. Neither firms nor banks could sell their short-term debt instruments in domestic currency to foreigners. Only liberalized were trade-related financing of firms and short-term foreign currency borrowings of banks. However, financial supervision and appropriate risk management was lacking. Without strengthening banking supervision and enhancing corporate governance, corporate debt crisis will be an inevitable outcome. In this regard, the main lesson of the Korean crisis is not the sequencing problem in the capital market liberalization, but the structural deficiencies as prerequisites of capital market liberalization.