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Was Korea's financial crisis self-fulfilling

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  • Was Korea's financial crisis self-fulfilling
  • Park, Won-Am
  • The Association of Korean Economic Studies


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Title Was Korea's financial crisis self-fulfilling
Similar Titles
Material Type Articles
Author(English)

Park, Won-Am

Publisher

[Seoul]:The Association of Korean Economic Studies

Date 2000
Journal Title; Vol./Issue The Journal of the Korean Economy:vol. 1(no. 2)
Pages 24
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Holding AKES

Abstract

The second generation model, which emphasizes multiple equilibria and self-fulfilling expectations, is distinguished from its predecessors, which emphasize market fundamentals and unique equilibrium. However, a sudden outbreak of vulnerability that is triggered by market panic can also be explained by market fundamentals. This study shows that the Korean crisis was largely triggered by real appreciation, excessive lending, and a lack of adequate reserve protection, while expansionary fiscal and monetary policies as well as capital inflows are less central. Tests for self-fulfilling crisis do not support the relationships among market fundamentals before the crisis. The real appreciation due to a weak yen and a strong won, excessive bank lending, and the mismanagement of foreign reserves led to the Korean crisis.