Post-Crisis Financial Developments in Korea: Implications for Monetary Policy * (original) (raw)
A rapid macroeconomic turnaround and lingering financial market uncertainties since the Asian Economic Crisis of 1997 are seen as conflicting but consistent indicators of the fundamental weakness still existent in Korea’s financial markets. Drastic changes in firms ' financing strategy, volatile capital movements, and loose financial supervision are some of the examples of inappropriately applied macro measures to a market not yet fully normalized. Given the important role a robust financial sector plays in a developing economy and the limited role of the banking sector in bringing forth a mature market, the missing link for engendering economic efficiency and financial stability in Korea is seen as the absence of a long-term capital market. Heavier reliance on poorly supervised capital markets in the wake of the crisis exaggerated the business cycle and caused a sense of complacency that thwarted institutional reform. As the overall financial market anomalies found posterior t...
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