The Korean experience offers lessons for developing countries. It should be noted however that much has changed in the world today and developing countries would need to adapt these lessons to their local context and political systems.
Policymakers’ understanding of macroeconomic policy matters
Macroeconomic policies should be used for short-term stabilization only rather than for long-term growth. Macroeconomic policies such as monetary, fiscal, and exchange rate policies, reallocate resources between the present and the future, rather than change the economy’s growth path.
Chronic inflation is not a necessary evil for long-term growth. The average growth rate was similar in more than two decades (9.1% in the 1970s versus 9.6% in the 1980s), while the inflation rate was dramatically stabilized (16.5% in the 1970s versus 6.4% in the 1980s). Inflation is always and everywhere a monetary phenomenon, which should be managed by adjusting macroeconomic policies.
Central Banks cannot add real resources by printing money. The more money a central bank supplies, the more resources are transferred from the private to the public sector (inflation tax) with no increase in aggregate resources.
Strengthen institutions that can protect sound macroeconomic policy
The ROK’s experience in the 1970s shows how politically motivated macroeconomic policies could ruin overall economic stability. President Chun drove the stabilization policy in the early 1980s, yet it was an exceptional case in economic history. Most governments, including those in advanced economies, are likely to be affected by shortsighted politics, while macroeconomic policies need to be conducted free from politics. Therefore, in order to ensure that macroeconomic policies can be implemented more soundly, institutions need to be improved.
Communicate with the public
Engage stakeholders early and explain policy changes and initiatives in detail, using plain language. Maintain transparency with the primary goal of building public trust for better governance.
- Building public support for major policy reforms
- Cho, Dongchul; Kang, Young Uck
- Asian Development Bank (Development.Asia)
Building public support for major policy reforms
[Manila] : Asian Development Bank (Development.Asia)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Economic Conditions|
|Holding||Asian Development Bank|