The Korean Financial Crisis of 1997

Onset, Turnaround, and Thereafter

Kyu-Sung Lee

• Publisher: World Bank
• Year: 2011
• eBook ISBN: 9780821382394
• Topic: Economics
• Subtopic: Economic Conditions
• Index: Economics

This book chronicles how Korea dealt with and overcame the crisis over time. The book is organized into eleven chapters. Chapter one outlines the troubling financial market conditions at home and abroad before the crisis. Chapter two then delves into the origin of the crisis and offers analyses on the shortcomings of the Korean economy and the instability of the international financial system. In chapter three, policy measures the government executed in the wake of the onset of the crisis are described and analyzed. Chapter four probes the steps taken to reduce the risk of sovereign insolvency in the face of the cool market reaction to the initial package of crisis response measures announced by the International Monetary Fund in December 1997. Chapter five describes the background within which the government established the institutional framework necessary for corporate, financial, and labor market restructuring between December 1997 and April 1998. The government efforts to secure additional foreign currency liquidity through the markets and to devise initiatives to counter the massive unemployment are discussed in detail. In chapter six, the situation during May and June 1998 is explored with a focus on the closure of nonviable corporate and financial companies and the efforts to drive down interest rates and revive credit flows. This is followed, in chapter seven, by an analysis of the first phase of financial sector restructuring, which started in the third quarter of 1998, and the measures adopted to shore up potential growth and cope with the pressing problem of unemployment. Chapters eight and nine deal separately with the restructuring of the top five chaebols (the large family-controlled and family-run groups that dominate business in Korea), the economic stimulus packages applied during the fourth quarter of 1998, the efforts to restore financial market stability and economic growth, and the initial phase of foreign exchange liberalization measures, which were implemented during the first half of 1999. Chapter ten then discusses the situation during the second half of 1999, with a particular focus on the collapse of the Daewoo business group, including the steps taken to contain the resulting fallout, as well as measures aimed at expanding the economic recovery. Chapter eleven, the final chapter, offers a diagnosis of the Korean economy, along with an analysis of the policy implications and the responses for the future.

Table of contents

• Contents
• Preface
• About the Author
• Abbreviations
• 1 The Unfolding of the Korean Financial Crisis
• 2 Origin of the Crisis
• 3 Overview of Korea’s Postcrisis Responses
• 4 Initial Responses to the Crisis, December 1997
• 5 Securing Foreign Currency Liquidity and Laying the Groundwork for Reform and Restructuring, December 1997–April 1998
• 6 Restructuring Led by Business Closures and the Push for Lower Interest Rates, May–June 1998
• 7 Completion of First-Phase Restructuring and Policies Aimed at Boosting Potential Growth, July–September 1998
• 8 Getting the Economy Back on Track and Quickening the Pace of Restructuring, October–December 1998
• 9 Restoring Financial Stability and Realizing Positive Economic Growth, January–June 1999
• 10 The Settlement of the Daewoo Shock and the Expanded Economic Recovery, July–December 1999
• 11 Korea’s Economic Renewal: Challenges and Solutions for the Transition to the Next Level
• References and Other Sources
• Index
• Figure
• Tables