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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 22, No. 2, pp.145-179
ISSN: 1225-0279 (Print)
Print publication date 31 May 2009
Received 12 Feb 2009 Revised 08 Jun 2009

Global Financial Crisis and the Korean Economy

In June Kim ; Yeongseop Rhee
Professor, Department of Economics, Seoul National University, Seoul 151- 746, Korea, Tel: +82-2-880-6389, Fax: +82-2-886-4231 kimij@snu.ac.kr
Professor, Department of Economics, Sookmyung University, Hyochangwongil 52, Yongsan-ku, Seoul 140-742, Korea, Tel: +82-2-710-9530, Fax: +82-2-2077-7328 ysrhee@sookmyung.ac.kr

JEL Classification: F34, G1, G21

Abstract

This paper examines why the Korean economy is most suffering from the current U.S. born financial crisis and suggests policies to overcome it with discerning the features of the current crisis from the past one. A notable feature of the current crisis is that excessive securitization by financial institutions and reliance on financial derivatives widens and deepens the crisis much further and makes it difficult to assess the damages from the crisis. Policy suggestions include: The government provide enough liquidity; the government first restructure financial institutions and lead corporate restructuring together with them; macro financial regulation and supervision as well as micro one be emphasized; and a drastic stimulus package be introduced not only to stimulate the economy in recession but also to enlarge the long term growth potential.

Keywords:

Financial crisis, Subprime mortgage, Derivatives transaction, Macro financial regulation and supervision

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