Financial liberalisation, financial crisis and the new regime: The Korean experience
| Date | 01 February 1999 |
| Pages | 137-147 |
| Published date | 01 February 1999 |
| DOI | https://doi.org/10.1108/eb025004 |
| Author | Yong‐Doo Cho,Dong‐Won Kim |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 7 Number 2
Financial liberalisation, financial crisis and
the new regime: The Korean experience
Yong-Doo Cho* and Dong-Won Kim
Received (in revised form): 26th March, 1999
*School of East Asian Studies, The University of Sheffield, UK; tel: 0114 222 8415;
e-mail: y.d.cho@sheffield.ac.uk
Yong-Doo Cho DPhil has been a lecturer
in Korean economy and business at the
University of Sheffield since 1995. His
research interests include money and
banking in East Asia, foreign direct invest-
ment of Asian companies in Europe and
corporate governance. He was recently a
consultant for Asian Development Bank for
the project on Corporate Governance in
Asia.
Dong Won Kim PhD is associate professor
of economics at the University of Suwon,
Korea. He has been a special research
fellow at the Korea Institute of Finance
(KIF) and a visiting Scholar at the Salomon
Center,
Stern School of Business, New
York University. He is a member of the
Deliberation Committee for Financial
Development at the Ministry of Finance
and Economy.
ABSTRACT
The financial restructuring measures under the
IMF programme since the financial
crisis
far
exceeded those carried out during the last 10
years in their depth and
coverage.
Starting from
the observation that the financial crisis of late
1991 occurred after the well publicised entry
into the OECD, this paper focuses on the rela-
tionship between the
liberalisation
and opening-
up of the financial market and the unprece-
dented financial crisis in Korea. It deals with
issues raised as the Korean financial regulatory
system moved from a controlled system to a
market oriented system, and it reviews the
policy initiatives of financial regulation and lib-
eration in the period between the early 1980s
and late 1991.
This paper shows the importance of
a
multi-
staged system of information production and
monitoring of
the
economy in the transformation
into a market-oriented system, suggesting that
this transformation can damage the economy if
related policies do not enhance the power of
financial supervision to monitor the moral
hazard behaviour of financial institutions.
INTRODUCTION
Although Korea carried out financial liber-
alisation to meet the requirements for
membership of the Organization for Eco-
nomic Cooperation and Development
(OECD) in 1996, it had to face the unpre-
cedented financial crisis in the following
year, December 1997. What is the relation-
ship between the liberalisation and opening
up of financial markets and the unprece-
dented financial crisis in Korea? If Korean
financial institutions perform worse than
before despite the liberalisation of financial
markets, what are the underlying reasons?
Can the Korean economy be successfully
transformed into a fully market-oriented
system under the IMF economic pro-
gramme? It is recent developments in the
Korean financial market which give rise to
these questions.
This paper will focus on issues raised as
Journal of Financial Regulation
and Compliance, Vol. 7, No 2,
1999,
pp. 137-148
© Henry Stewart Publications,
1358-1988
Page 137
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