Liberalization of Capital Flows in Korea: Big-Bang or Gradualism?

Working Paper No. 5824 Capital market liberalization has become an irreversible trend in Korea since 1992. With the current level of high interest rate in Korea, however, drastic full-scale liberalization would certainly attract a large amount of capital inflows and appreciate the Korean won. This w...

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Bibliographic Details
Published in:NBER Working Paper Series 1996-11, p.5824
Main Authors: Cho, Dongchul, Koh, Youngsun
Format: Article
Language:English
Subjects:
Economic theory
Liberalization
Online Access:Get full text
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Summary:Working Paper No. 5824 Capital market liberalization has become an irreversible trend in Korea since 1992. With the current level of high interest rate in Korea, however, drastic full-scale liberalization would certainly attract a large amount of capital inflows and appreciate the Korean won. This would affect the price competitiveness of Korean products in international markets, which could bring about significant macro-instability in an economy like Korea which relies heavily upon external transactions. Through simulations using a macro-model based on the neoclassical long-run convergence and the Keynesian short-run dynamics, this paper attempts to provide some quantitative assessments of several alternative policy choices including the speed of liberalization.
ISSN:0898-2937
DOI:10.3386/w5824