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Policy Analyses
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Lessons from Economic Reform in Hungary: Emphasizing the Financial Sector
This research assesses the economic reforms of Hungary, especially focusing on the financial sector, in order to provide a current view of the business climate of the financial sectors in transforming Hungary and also to consider ..
Cheol-Won Lee Date 2003.07.30
Economic reformDownloadContentSummaryThis research assesses the economic reforms of Hungary, especially focusing on the financial sector, in order to provide a current view of the business climate of the financial sectors in transforming Hungary and also to consider various implications for the financial reform process of other countries in Central and Eastern Europe. The findings of the study are expected to provide valuable policy lessons for countries like Bulgaria and Romania which are still suffering from cumulative bad loan problems and need to privatize banks which had become state-owned in the early attempt to restructure financial industry.
Assessing the status of financial sector reform in Hungary will also enable us to understand the challenges and policy tasks countries in the region are facing. (The rest is omitted.) -
Evolving Patterns of Corporate Financing in Korea
Like many other countries in East Asia before the financial crisis of 1997, Korea relied heavily on bank intermediation for corporate financing. The growth-oriented strategy of Korean banks, which neglected profitability and prope..
Haesik Park et al. Date 2003.07.25
Financial cooperationDownloadContentSummaryLike many other countries in East Asia before the financial crisis of 1997, Korea relied heavily on bank intermediation for corporate financing. The growth-oriented strategy of Korean banks, which neglected profitability and proper risk management, resulted in the inefficient allocation of financial resources and allowed Korean firms to have easy access to bank loans. However, the corporate financing patterns of Korea remarkably changed after the crisis. (The rest is omitted.) -
Financial Crisis and the Islam Policy in Malaysia
The Malaysian government introduced the policy of fixed exchange rate and capital control to overcome the financial crisis which occurred in 1997. This report seeks to understand the background and meaning of the implementation of..
Myung-Seok Oh Date 2003.07.10
Financial crisisDownloadContentSummaryThe Malaysian government introduced the policy of fixed exchange rate and capital control to overcome the financial crisis which occurred in 1997. This report seeks to understand the background and meaning of the implementation of this 'unorthodox' recovery plan by locating it in the particular historical and social context of Malaysia. (The rest is omitted.) -
Monetary Cooperation in East Asia: Exchange Rate, Monetary Policy, and Financial Market Issues
The introduction of the euro as a single currency by the European Union has continued to promote growth and stability in Europe. The Asia financial crisis of 1997-1998, and the evolution of the euro zone have drawn greater attent..
Sung Yeung Kwack et al. Date 2003.06.30
Monetary policy, Exchange rateDownloadContentSummaryThe introduction of the euro as a single currency by the European Union has continued to promote growth and stability in Europe. The Asia financial crisis of 1997-1998, and the evolution of the euro zone have drawn greater attention from both policy makers and economic analysts as to the possibility of an East Asian monetary union and what could be done with respect to monetary and exchange rate policy, and financial systems. (The rest is omitted.) -
Macroeconomic Adjustments and the Real Economy in Korea and Malaysia since 1997
This paper aims to review the post-crisis macroeconomic adjustment and the impact of policy responses on the real economy in Korea and Malaysia. While both countries suffered under the Asian financial crisis, their policy response..
Zainal-Abidin Mahani et al. Date 2003.06.25
Monetary policyDownloadContentExecutive Summary
I. Introduction
II. Post-Crisis Macroeconomic Adjustments in Korea and Malaysia
1. Korea
2. Malaysia
III. Policy Responses for Crisis Resolution
1. Policy Responses in Korea
2. Policy Responses in Malaysia
IV. Assessment of the Adjustment Process in Korea and Malaysia
V. Policy Implications
ReferencesSummaryThis paper aims to review the post-crisis macroeconomic adjustment and the impact of policy responses on the real economy in Korea and Malaysia. While both countries suffered under the Asian financial crisis, their policy responses were quite different. Korea sought liquidity assistance from the IMF, which obliged it to comply with the IMF's structural adjustment program, while Malaysia was able to maintain policy independence in the process of crisis resolution. Korea and Malaysia adopted policies at opposite extremes in terms of capital market opening in response to the crisis. For example, Korea drastically liberalized its capital account (but kept a few restrictions of capital outflows by residents) with a free floating exchange rate regime, while Malaysia implemented more stringent capital controls with a return to a fixed exchange rate regime. Despite the different policy stances in terms of capital account and exchange rate regime, the swift change toward an expansionary macroeconomic policy stance helped the two economies recover quickly. The positive role of counter-cyclical macroeconomic policies in the post-crisis recovery raises the question of whether the initial tightening of monetary and fiscal policy was kept high for too long and as a consequence deepened the crisis in Korea. -
Potential Impact of Changes in Consumer Preferences on Trade in the Korean and World Motor Vehicle Industry
In recent years, the United States has accused Korea of having an 'anti-import' bias when it comes to motor vehicles. US maintains that imports of motor vehicles in Korea is 'unusually low' because Korean consumers will not purcha..
Sang-yirl Nam et al. Date 2003.06.25
Trade disputeDownloadContentSummaryIn recent years, the United States has accused Korea of having an 'anti-import' bias when it comes to motor vehicles. US maintains that imports of motor vehicles in Korea is 'unusually low' because Korean consumers will not purchase foreign vehicles due to 'nationalistic' or 'patriotic' reasons. In this paper we look at what would happen if consumers, Korean and worldwide, eliminate their preference for domestic vehicles and judge both domestic and imported vehicles from different sources on equal criteria in terms of substitutability among them. Since tariff barriers for passenger cars in Korea are relatively low at 8%, a traditional approach, which looks at trade liberalization through tariff reduction, is not likely to show a substantial change on trade. To examine the possible consequences of changes in consumer preference on trade, we see what happens when substitution elasticities concerning consumption behavior between domestic and imported motor vehicles are changed in the GTAP model. When the entire world eliminates its discriminatory preference for domestic motor vehicles, motor vehicle industry imports and exports for all countries will increase. In addition, the domestic production and trade balance of the motor vehicle industry, welfare, and GDP will rise or improve for motor vehicle net-exporting countries such as 'Korea,' 'Japan' and 'EU', while the variables for motor vehicle net-importing countries such as 'US,' 'Other Asia' and 'Rest of the World' will fall or worsen. -
The effects of capital outflows from neighboring countries on a home country's terms of trade and real exchange rate: The Case of East Asia
While there is an extensive body of empirical analyses showing that currency crises tend to be regionally concentrated to specific areas and contagious to countries with high levels of trade, there has been insufficient research o..
Sammo Kang Date 2003.06.15
Monetary policy, Exchange rateDownloadContentExecutive Summary
Ⅰ. Introduction
Ⅱ. General equilibrium model of two countries, two periods, and three goods
Ⅲ. Empirical Analysis
1. VAR Impulse Response Analysis
2. Variance Decomposition
Ⅳ. Conclusion
References
Appendix
A. Assumptions used to simplify the model
B. Effect on the price of exportable
C. Effect on the price of importables
D. Effect on the home country's real exchange rate in period 1
E. Effect on the real exchange rate in period 2 in the home countrySummaryWhile there is an extensive body of empirical analyses showing that currency crises tend to be regionally concentrated to specific areas and contagious to countries with high levels of trade, there has been insufficient research on the mechanisms underlying such tendencies. Using a two-country model, we investigate the possibility of a deterioration in the terms of trade and a rise in the real exchange rate of a home country in the case of capital outflows from its trade partner. In addition, an empirical analysis of East Asian countries conclusively shows that some countries conform to the model. If the actual real exchange rates do not rise immediately but remain overvalued, a currency crisis in the home country would become more likely. Generally, neighboring countries trade extensively with one another for reasons like low logistics costs. This paper finds that such patterns of trade can be one reason for a currency crisis being regional -
Dynamics of Open Economy Business Cycle Models: The Case of Korea
A small open economy such as Korea is vulnerable to outside shocks, in particular, world interest rate shocks, exchange rate shocks (or the terms of trade shocks), and foreign productivity shocks. Many researchers have empiricall..
Hyungdo Ahn et al. Date 2003.06.10
Economic developmentDownloadContentExecutive Summary
I. Introduction
II. Business Cycles in Korea
III. Model
IV. Calibration
V. Comparing the second moments
VI. Impulse Responses
1. Productivity shocks
2. Terms of trade (TOT) shock
3. Interest rate and government spending shocks
VII. Conclusion
References
AppendixSummaryA small open economy such as Korea is vulnerable to outside shocks, in particular, world interest rate shocks, exchange rate shocks (or the terms of trade shocks), and foreign productivity shocks. Many researchers have empirically analyzed the effects of these shocks on macroeconomic variables using various time series estimation methods including the VAR. However, there has been an increasing demand for an analysis based on a simulation method using dynamic stochastic general equilibrium (DSGE) models, because the empirical estimation can only provide ad-hoc economic interpretations of the results. (The rest is omitted.) -
The Need for Intraregional Exchange Rate Stability in Emerging East Asian Economies
There are three major reasons why the emerging East Asian market economies need to cooperate to concert their exchange rate policies. (The rest is omitted.)
Jonghwa Cho Date 2003.05.01
Monetary policy, Exchange rateDownloadContentI. Introduction
II. Deepening of Intraregional Trade Relations
III. Rise in Export Competitiveness among East Asian Countries
IV. Intraregional Exchange Rate Fluctuations and Macroeconomic Instability
V. ConclusionSummaryThere are three major reasons why the emerging East Asian market economies need to cooperate to concert their exchange rate policies. (The rest is omitted.) -
China's Economy: Annual Report 2003
This report is the annual report 2003 of China's economy. Chapter I examines recent political trends and prospects. Chapter II looks at China's domestic market and its policy implications. Chapter III reviews the issue of foreign ..
Co-authors Date 2003.04.20
DownloadContentSummaryThis report is the annual report 2003 of China's economy. Chapter I examines recent political trends and prospects. Chapter II looks at China's domestic market and its policy implications. Chapter III reviews the issue of foreign trade and its opening. Industrial trend is the subject of Chapter IV, which specifically looks at IT industry, the textile and electronics industry, the shipbuilding and steel industry, the auto industry, the distribution industry and the supply and demand of energy. China's regional investment environment and its prospects are examined in Chapter V. Current status and prospects to promote economic relations between Korea and Russia are presented in Chapter VI.