Paradigm shift in Korean economic policy in the wake of the 1997 financial crisis

Abstract

Paradigm shift in Korean economic policy in the wake of the 1997 financial crisis O. Yul Kwon INTRODUCTION The objective of this chapter is to examine critically a shift in the paradigm of South Korean economic policy in the wake of the 1997 financial crisis. After a successful performance over the last three decades, the South Korean economy (hereafter South Korea will be referred to as Korea) fell into financial crisis in 1997, and was rescued by the IMF. No one would repudiate the fact that the government has played the pivotal role not only as regards the prodigious growth of the Korean economy over the last three decades, but also in the recent developments of the financial crisis and the ensuing restructuring process. Its economic policy has extensively permeated and affected all the factors related to recent economic developments, rendering it of overriding importance. A few burning questions have therefore arisen, including the following. Why did Korean economic policy work well over the three decades of the economic success period? Why should the economic policy that had worked well in the past have suddenly failed, thereby resulting in the financial crisis? How would the Korean policy paradigm change in the wake of the financial crisis? It appears that these questions have not been dealt with systematically and comprehensively.