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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 25, No. 3, pp.339-366
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2012
Received 17 Nov 2011 Revised 23 Dec 2011 Accepted 24 Dec 2011

The Global Financial Crisis and the Challenges of the Korean Economy

In June Kim
Professor, Department of Economics, Seoul National University, 1 Gwanakro, Gwanak-gu, Seoul 151-746, Korea, Tel: +82-2-880-6389, Fax: +82-2-886-4231 kimij@snu.ac.kr

JEL Classification: F34, G1, G21

Abstract

This paper analyzes why the U.S. financial crisis evolved into a global financial crisis, and why the Great Moderation led to the Great Recession. Then, the U.S. policy responses to the crisis are discussed and are compared with the policy measures prescribed by the IMF on the Korean economy immediately after the 1997 Korean Currency and Banking Crisis. The paper also deals with the sovereign debt crises of the Euro zone to analyze the needs for macro-prudential regulation and supervision. The main focus of this paper, however, is to examine the impacts of the global financial crisis on the Korean economy, to evaluate the macro-policy measures meant to ride out the crisis, and to present the major challenges that Korea will face in the future. Given that internal and external risk factors abound, along with persistent uncertainties in the Korean economy, the policies on securing price, financial, exchange rate, and fiscal stability as well as stable economic growth are recommended.

Keywords:

Global financial crisis, Great Recession, Sovereign debt crisis, Macro-prudential regulation, Macro-policy measures

Acknowledgments

This paper was presented during the 38th International Symposium, “Stability of the Korean Economy in the New World Order” (October 21, 2011), The National Academy of Sciences, Republic of Korea.

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